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As filed with the Securities and Exchange Commission on November ___, 1999.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Take to Auction.com, Inc.
(Exact name of registrant as specified in its charter)
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Florida 7389 65-0924433
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
(305) 436-8070
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
Albert Friedman
President and Chief Executive Officer
2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
(305) 436-8070
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Keith Wasserstrom, Esq.
Baker & McKenzie
1200 Brickell Avenue, Suite 1900
Miami, Florida 33131
Facsimile Number: (305) 789-8953
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, please 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(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 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered Proposed Maximum Aggregate Offering Price (1) Amount of Registration Fee
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Common shares, par value $0.001 per share....... $24,000,000 $6,672.00
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(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
amount of the registration fee.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE HAVE FILED A REGISTRATION STATEMENT RELATING TO THESE SECURITIES WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT
SOLICITING OFFERS TO BUY SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
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Subject To Completion, Dated NOVEMBER ______, 1999
2,000,000 Shares
[LOGO]
Take to Auction.com, Inc.
Common Shares
This is an initial public offering of our common shares. We are
offering a maximum of 2,000,000 common shares under this prospectus on a
"best-efforts" basis. We anticipate that the initial public offering price will
be between $10.00 and $12.00 per share.
There is no minimum number of common shares to be sold in this
offering. The offering will be terminated upon the earliest of the sale of all
the common shares, twelve months after the date of this prospectus (unless
extended) or the date on which we decide to close the offering.
Prior to the offering, there has been no public market for the common
shares. We have applied to list our common shares on the Nasdaq National Market
System under the symbol "TTAI".
While we do not plan to do so at this time, we may engage the services
of broker-dealers to assist in selling the common shares. If so, the maximum
commission paid to any such broker-dealer will be 10% of the offering price.
The securities offered by us are speculative and involve a high degree
of risk. You should only invest in our common shares if you can bear the risk of
loss of your entire investment. See "Risk Factors" beginning on page 6 to read
about material factors you should consider before buying these securities.
We will deliver the common shares on or about ______________, 1999.
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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
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Per Share Total
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Initial public offering price........................ $12.00 $24,000,000
The date of this prospectus is , 1999.
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[INSIDE FRONT COVER]
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Step 1 Register Step 6 Spread the Word
Sign-Up and become [Graph] Tell your friends and family
a TaketoAuction(Service Mark) Member about our community
[Graph] [Graph]
Step 2 Select Product Step 5 Collect your Profit
Choose an item from our We handle billing and collection
Online catalog of collectibles and
specialty merchandise
[Graph] [Graph]
Step 3 TaketoAuction(Service Mark) Step 4 SOLD!
With one click send your item to The item is packaged and
auction. No obligation to purchase [Graph] Shipped from our warehouse to
the item if it is not sold at the buyer
auction.
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Prospectus Summary
This summary highlights information about our business and this
offering, but you should read the entire prospectus, including the financial
statements and the notes to those statements appearing elsewhere in this
prospectus, before deciding to purchase our common shares. Unless otherwise
indicated, the terms "we," "us," "our," "Take to Auction" and "Take to
Auction.com" refer to Take to Auction.com, Inc. Unless otherwise specifically
stated, the information in this prospectus reflects a (i) 1,000-for-one
stock-split of our outstanding common shares effected on August 26, 1999 and
(ii) a subsequent 2.326530644-for-one stock split of our outstanding common
shares effected on November 3, 1999. You should carefully consider the
information set forth under the heading "Risk Factors."
Our Business
We are an Internet-based community providing our entrepreneurial
members an online catalog of authentic collectibles and factory-new specialty
merchandise to sell at online auction sites, such as eBay(Service Mark),
FairMarket(Service Mark), Amazon(Service Mark) and Yahoo! (Service Mark). eBay,
FairMarket, Amazon and Yahoo! are registered service marks of eBay Inc.,
FairMarket, Inc., Amazon.com, Inc. and Yahoo! Inc., respectively.
Our members pay an annual membership fee and, at no additional cost,
select merchandise from our Web site that we then list automatically on a
popular online auction site for one week. Our business model is distinct from
and complements the more than [200] online auction sites that serviced over ___
million visitors in October 1999. We intend to develop and expand our online
membership base under the Take to Auction brand by attracting Internet users who
can earn additional income through our Web site. We create Web site affinity by
offering our members the ability to follow their portfolio of merchandise
currently listed on online auction sites and to track their accumulated profits
from completed online auctions. Monthly and annual competitions, category
indices and personalized features are designed to keep members returning to our
Web site.
We are a development stage company, having launched our Web site in
July 1999. We anticipate that our principal sources of revenues will be derived
from membership fees, sale of products and, in the future, fees paid by third
parties for advertising their products and services on our Web site. As our
membership base expands and the volume of merchandise increases, our purchasing
power and economies of scale should enable us to offer a broader array of
merchandise at even better prices.
We believe that our approach will appeal to Web users, create community
affinity and increase user traffic on online auction sites because:
o we provide members with a broad array of merchandise to take to
online auctions;
o members never have to purchase or take possession of the
merchandise;
o members do not have to take complicated steps to list items
online;
o we facilitate transactions by accepting credit cards and checks
and by handling shipping and delivery;
o our service is designed to promote an active membership community
to provide a positive environment for advertising and commerce;
and
o we intend to develop and use our Auction Wizard(Service Mark)
proprietary system to inform members which online auction site is
best suited for their selected item.
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Our Strategy
Our objective is to become a leading Internet-based community offering
a broad array of products and services to our members. Our strategy includes the
following key elements:
o grow the Take to Auction.com community and increase the membership
base;
o promote the Take to Auction.com brand;
o forge business relationships with strategic partners like eBay,
Yahoo! and Amazon to improve brand-name recognition and the
efficiency of our network systems;
o enhance the Take to Auction.com Web site features and
functionality by adding unique content to our membership
community;
o leverage our unique business model; and
o generate revenues from the sale of online advertising.
Our Corporate History
Take to Auction.com, Inc. was incorporated in Florida in June 1999. Our
principal executive offices are located at 2335 N.W. 107th Avenue, Suite 2M-23,
Miami, Florida 33172. Our telephone number is (305) 436-8070, and our Web site
is located at www.taketoauction.com. The information contained on our Web site
is not incorporated by reference into this prospectus.
The Offering
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Common shares offered by
Take to Auction.com.................................. 2,000,000 Shares
Common shares to be outstanding after this offering.. 20,000,000 Shares
Use of proceeds...................................... Fund the development of our network
infrastructure, implement our growth strategy,
launch a targeted advertisement campaign and
for working capital, general administrative and
other expenses. Please see "Use of Proceeds."
Proposed Nasdaq National Market symbol............... "TTAI"
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Summary Financial Data
The following summary of the financial data for our business should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and the
accompanying notes to those statements included elsewhere in this prospectus.
For the period from
June 2, 1999
(date of inception) through
July 31, 1999
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Statement of Operations Data:
Net sales $ --
Operating expenses (23,600)
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Net loss $ (23,600)
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Basic and diluted loss per share $ (0.02)
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Weighted average number of
Common shares outstanding(1) 1,382,171
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(1) Does not include 16,617,829 shares sold subsequent to July 31, 1999.
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July 31, 1999
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Actual Proforma (1) As adjusted (2)
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Balance Sheet Data:
Cash and cash equivalents $ 52,493 $ 1,667,764 $
Working capital 6,834 1,622,105
Total assets 110,704 1,725,975
Shareholders' equity 61,129 1,676,400
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(1) Adjusted to give effect to (i) the stock purchase agreements with SLI.com
Ventures I, Ltd. on August 26, 1999 and Dominion Income Management Corp. on
October 20, 1999 and (ii) the additional shares sold in connection with our
initial capitalization in which the remaining balance of approximately $769,000,
as evidenced by signed promissory notes, will be paid in full by January 2000.
(2) Adjusted to give effect to the sale of the common shares offered by us (at
the assumed initial public offering price of $11.00 per share), and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds."
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We have applied for registration of the service marks Take to
Auction.com, Take to Auction, Take2Auction(Service Mark),
Take2Auction.com(Service Mark) and Auction Wizard (Service Mark) with the U.S.
Patent and Trademark Office. We have also applied for a U.S. patent registration
of our method for providing merchandise to online auction sites. We cannot
assure you that a patent will be issued to us, or, if issued, will provide us
with all of the protections that we have sought. This prospectus also includes
tradenames and trademarks that belong to other companies. Use or display by us
of other parties' trademarks, tradenames or products is not intended to, and
does not imply a relationship with, or endorsement or sponsorship of, Take to
Auction by the trademark or tradename owners. The information on our Web site is
not part of this prospectus.
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Risk Factors
This offering involves a high degree of risk. You should carefully
consider the risks described below and the other information in this prospectus
before you decide to invest in our common shares. If any of the following risks
occur, our business, results of operations or financial condition could be
harmed. This prospectus contains certain forward-looking statements that involve
risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. When used in this prospectus, the words "expect,"
"anticipate," "intend," "hope," "design," "plan" and similar expressions are
intended to identify certain of these forward-looking statements. The cautionary
statements made in this prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this prospectus. Our
actual results could differ significantly from those discussed in this
prospectus. Factors that could cause or contribute to such differences include
those discussed below as well as those discussed elsewhere in this prospectus.
Risks Related to Our Business
Our limited operating history makes it difficult to evaluate our business
We commenced operations in June 1999 and launched our Web site in July
1999. There are no period-to-period comparisons of our operating results from
which to evaluate our performance. An investor in our common shares must
consider the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets such as online commerce. As a
start-up company, among other things, we must successfully:
o establish and grow our membership base;
o establish and maintain commercial relationships with suppliers of
merchandise to increase the number of items listed on our service;
o maintain and enhance our brand and implement and execute our
business and marketing strategy;
o continue to develop and upgrade our technology and information
processing systems;
o provide superior customer service;
o secure adequate financing to fund growth;
o respond effectively to competitive developments and a rapidly
changing market; and
o attract, integrate, retain and motivate qualified personnel.
Our failure to accomplish any of these objectives would harm our
business, financial condition and results of operations.
We have an accumulated deficit, we anticipate that our losses will continue and
we received a going concern opinion from our auditors
We launched our Web site in July 1999 and have sold only a limited
number of membership credits as of the date of this prospectus. We have not
generated any revenues as of July 31, 1999. Therefore, we have not achieved
profitability and expect to incur operating losses for the foreseeable future.
We incurred net losses of approximately $24,000 for the period from June 1999
(inception) through July 31, 1999. We expect to continue to incur significant
operating and capital expenditures and net operating losses arising from initial
development costs, technology improvements and implementation of our business
strategy. Our current and future expense levels are based largely on our
investment plans and estimates of future revenues and are, to a large extent,
fixed. We may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. Accordingly, any significant shortfall in
revenues relative to our planned expenditures would have an immediate harmful
effect on our business, financial condition and results of operations. Further,
as a strategic response to changes in the competitive environment, we may from
time to time make certain pricing, service or
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marketing decisions that could harm our short-term or medium-term financial
condition and results of operations.
We may not achieve profitability. Even if we do so, we may never
sustain or increase profitability on a quarterly or annual basis in the future.
If revenues grow slower than we anticipate, or if operating expenses exceed our
expectations or cannot be adjusted accordingly, our business, financial
condition and results of operations will be harmed. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
We also received an opinion from our independent auditors on our July
31, 1999 financial statements expressing substantial doubt as to our ability to
continue as a going concern as a result of our operating losses during the
development stage and need for substantial amounts of additional funding to
continue our operations.
We face competition from several person-to-person trading Web sites and from
existing online auction sites which may harm our business
We face competition from several companies that provide
person-to-person trading services over the Internet and companies that generate
revenues from online advertising, and we may also face competition from online
auction sites that may provide the Take to Auction concept in the future. Such
sites could attempt to block us from accessing their auction sites in the
future. The market for person-to-person trading over the Internet is new,
rapidly evolving and intensely competitive, and we expect competition to
intensify further in the future. Barriers to entry are relatively low and
current and new competitors can launch new sites at a relatively low cost using
commercially available software. Our competitors include various online
person-to-person auction services that also serve as online clearing houses or
sales and distribution channels and auction sites for manufacturers and
suppliers of a variety of products. We also compete with business-to-consumer
online auction services. All of these competitors have longer operating
histories, larger user bases, longer relationships with consumers, greater brand
or name recognition and significantly greater financial, technical and marketing
resources than we do. Competitive pressures created by any one of these
companies, or by our competitors collectively, could harm our business,
financial condition and results of operations. Please see "Business -
Competition."
We expect to grow rapidly and managing our growth may be difficult
We expect to grow rapidly by expanding our membership base. This growth
is likely to place a significant strain on our resources and systems. To manage
the expected growth of our operations and personnel, we will be required to
improve existing and implement new transaction processing, operational and
financial systems, procedures and controls, and to augment, train and manage our
growing employee base. We also will be required to expand our finance,
administrative and operations staff.
All members of our senior management recently joined us. Our executive
management team has experience in operating business engaged in electronic
commerce. However, due to the relatively short-lived nature of the electronic
commerce industry, it is more difficult to assess and evaluate management in the
electronic commerce industry than it is in other industries. Our new employees
include a number of key managerial, marketing, planning, technical and
operations personnel who have not yet been fully integrated into our company,
and we expect to add additional key personnel in the near future. These
individuals have not previously worked together and, as a result, may not work
together effectively as a team to successfully manage our growth. Please see
"Business - Employees."
We will have broad discretion in allocating the proceeds of this offering
We have allocated a portion of the net proceeds of this offering for
use as working capital. As to such funds, you will be relying on our judgment
and discretion without specific information as to the uses which are proposed to
be made of such funds. Please see "Use of Proceeds."
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If we are unable to adequately assess the demand for merchandise listed on our
Web site, our business would be harmed
We intend to rely on the expertise of our purchasing and marketing
professionals to select and purchase merchandise that is saleable on online
auction sites. Our evaluation of market demand for merchandise will be based on
internal periodic reports that will contain an analysis of the most popular
items sold at major online auction sites and our projections of new consumer
trends. The volume and type of merchandise that we maintain in our inventory
will also be based on these evaluations and projections. The lack of market
acceptance for the items of merchandise selected and purchased by us would
significantly reduce our revenues and, therefore, harm our business, results of
operation and financial condition. Please see "Business - Purchasing and
Inventory."
Difficulties associated with our brand development may harm our ability to
attract members
We believe that our growth will depend on the strengthening of our
brand which is critical to achieving widespread acceptance of Take to
Auction.com, particularly in light of the competitive nature of the online
commerce industry. Promoting and positioning our brand will depend largely on
the success of our marketing efforts and our ability to provide high quality
services. To promote our brand, we will need to increase our marketing budget
and otherwise increase our financial commitment to create and maintain brand
loyalty among users. Brand promotion activities may not yield increased revenues
and any such revenues may not offset the expenses incurred by us in attempting
to build our brand. Further, new users attracted to Take to Auction.com may not
conduct transactions through our Web site on a regular basis. If we fail to
promote and maintain our brand or if we incur substantial expenses in an attempt
to promote and maintain our brand or if our existing or future strategic
relationships fail to promote our brand or increase brand recognition, our
business, financial condition and results of operations would be harmed. Please
see "Business - Take to Auction Strategy."
Because our business model is unproven, we cannot assure you that our revenues
will grow or that we will become profitable
Our business model depends upon our ability to leverage and to expand
our network of members, suppliers, manufacturers, wholesalers and online
advertisers to generate multiple revenue streams. The potential profitability of
this business model is unproven, and to be successful we must, among other
things, develop and market additional products and services to existing members
effectively. Furthermore, we may be forced by competitive pressures, industry
consolidation or otherwise, to change our business model for certain or all of
our members, in which case our financial results could be harmed. Our business
model may not be successful and we may not achieve revenue growth or
profitability.
Many of our prospective online advertising customers, and the online auction
sites that are accessed by our members through our services, are emerging
Internet companies that represent business and credit risks
We expect to derive a significant portion of our revenues from the sale
of membership credits to Web users who want to earn additional income by taking
merchandise to online auction sites. We also plan to generate revenues from the
sale of advertising and navigation services to other Internet companies,
including Web site owners, Internet retailers, Internet portals and regional
Internet Service Providers. Many of these companies have limited operating
histories, are operating at a loss and have limited access to capital. If the
online auction sites or our online advertising customer base experience
financial difficulties or fail to experience commercial success, our business
will suffer.
Our success depends on the success of online auction Web sites, and the market
for online auction sites is developing and depends on the continued growth of
online person-to-person commerce
Our business depends on the continued growth and success of online
auction sites. The growth and popularity of online auctions, if maintained,
should allow us to retain members who are interested in
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making money by taking goods to online auction sites. Online auction sites are
part of a developing market which, like us, depends on the continued growth of
online person-to-person commerce. The market for the sale of goods over the
Internet, particularly through person-to-person trading, is a new and emerging
market. The future revenues and profits of online auction sites and,
consequently, our revenues and profits, are substantially dependent upon the
widespread acceptance and use of the Internet and other online services as a
medium for commerce by consumers. Rapid growth in the use of and interest in the
Web, the Internet and other online services is a recent phenomenon and this
acceptance and use may not continue to develop. A sufficiently broad base of
consumers may not adopt, and continue to use, the Internet as a medium of
commerce. Demand and market acceptance for recently introduced services and
products over the Internet are subject to a high level of uncertainty, and few
proven services and products exist. Growth in our member base relies on
attracting consumers who have historically used traditional means of commerce to
purchase goods and on entrepreneurial individuals who may desire to augment
their income. We will only be successful if these consumers and entrepreneurs
accept and use novel ways of conducting business and exchanging information.
Changes in consumer trends may harm our business
The popularity of certain categories of items, such as toys, dolls and
memorabilia, among consumers may vary over time due to perceived scarcity,
subjective value, and societal and consumer trends in general. A decline in the
popularity of, or demand for, certain collectibles or other specialty items
taken to auction through our service could reduce the overall volume of
transactions on our Web site, resulting in reduced revenues. Certain consumer
"fads" may temporarily inflate the volume of certain types of items provided on
our service, placing a significant strain upon our infrastructure and
transaction capacity. The decline of a "fad" would leave us with a large
inventory of unsaleable goods and could harm our business, financial condition
and results of operations.
Unexpected increases in traffic may stress our systems
We intend to generate a high volume of traffic and transactions on the
Take to Auction.com service. Accordingly, the satisfactory performance,
reliability and availability of our Web site, processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain large numbers of members who take merchandise to online auction sites
while maintaining adequate customer service levels. Our revenues depend on the
number of items listed by us, the number of members that join our service, the
success of our members in completing online auction transactions and our ability
to attract online advertisers. Any system interruptions that result in the
unavailability of our service or reduced member activity would reduce the volume
of items taken to online auction sites and online auction sales completed and
could affect the average selling price of the items. Interruptions of service
may also diminish the attractiveness of our services. The online auction sites
have experienced, and our service will likely experience, periodic system
interruptions, which we believe will continue to occur from time to time. Any
substantial increase in the volume of traffic on our Web site or in the number
of members selecting merchandise to take to online auction sites will require us
to expand and upgrade our technology, transaction processing systems and network
infrastructure. We may be unable to accurately project the rate or timing of
increases, if any, in the use of our service or expand and upgrade our systems
and infrastructure to accommodate such increases in a timely manner. Any failure
to expand or upgrade our systems could harm our business, financial condition
and results of operations. Please see "Business - Operations and Technology."
We may be unable to respond to the rapid technological change in our industry
Our market is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product announcements,
introductions and enhancements and changing customer demands. These market
characteristics are exacerbated by the emerging nature of the Web and the
apparent need of companies from a multitude of industries to offer Web based
products and services. Accordingly, our future success will depend on our
ability to adapt to rapidly changing technologies, to adapt our services to
evolving industry standards and to continually improve the performance, features
and reliability of our service in response to competitive service and product
offerings and evolving
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demands of the marketplace. Our failure to adapt to these changes would harm our
business, financial condition and results of operations. In addition, the
widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes could require substantial
expenditures by us to modify or adapt our services or infrastructure, which
could harm our business, financial condition and results of operations. Please
see "Business - Operations and Technology."
Risks Related to Our Industry
Concerns about Web security pose risks to our entire business
A significant barrier to the public's acceptance of online commerce and
communications is the secure transmission of confidential information over
public networks. We expect that a significant number of buyers of merchandise
auctioned by our members will authorize us to bill their credit card accounts
directly for all transaction fees charged by us. We rely on encryption and
authentication technology licensed from a third party to provide the security
and authentication technology to effect secure transmission of confidential
information, including buyer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the technology used by us
to protect customer transaction data. If any such compromise of our security
were to occur, it could harm our reputation and, therefore, our business,
financial condition and results of operations. Please see "Business-Operations
and Technology."
Our operating results would be harmed if we experience significant credit card
fraud
Under current practices, we are liable for fraudulent credit card
transactions because we do not require a customer's signature to authorize a
transaction. Our failure to adequately control fraudulent credit card
transactions would harm our business, financial condition and results of
operations.
We depend on the continuing development of the Web infrastructure, and the
unavailability of technology to meet the growth in use of the Web for online
commerce may reduce our revenues and profits
The success of our service will depend in large part upon the
development and maintenance of the Web infrastructure, such as a reliable
network backbone with the necessary speed, data capacity and security. We also
depend on timely development of complementary products, such as high speed
modems, for providing reliable Web access and services. Because global commerce
and the online exchange of information is new and evolving, it is difficult to
predict with any assurance whether the Web will prove to be a viable commercial
marketplace in the long-term. The Web has experienced, and is expected to
continue to experience, significant growth in the numbers of users and amount of
traffic. To the extent that the Web continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements of users, the Web
infrastructure may not continue to be able to support the demands placed on it
by this continued growth and the performance or reliability of the Web may be
compromised. The infrastructure or complementary products or services necessary
to make the Web a viable commercial marketplace for the long-term may not be
developed and, even if they are developed, the Web may not become a viable
commercial marketplace for services such as those offered by us. If the
necessary infrastructure, standard or protocols or complementary products,
services or facilities are not developed, or if the Web does not become a viable
commercial marketplace, our business, financial condition and results of
operations will be harmed. Even if the infrastructure, standards or protocols or
complementary products, services or facilities are developed and the Web becomes
a viable commercial marketplace in the long term, we might be required to incur
substantial expenditures in order to adapt our service to changing Web
technologies, which could harm our business, financial condition and results of
operations. Please see "Business - Industry Background."
Legal risks associated with information disseminated through our service may
harm our business
The law relating to the liability of online services companies for
information carried on or disseminated through their services is currently
unsettled. It is possible that claims could be made
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against online services companies under both United States and foreign law for
defamation, libel, invasion of privacy, negligence, copyright or trademark
infringement, or other theories based on the nature and content of the materials
disseminated through their services. Several private lawsuits seeking to impose
such liability upon other online services companies are currently pending. In
addition, legislation has been proposed that imposes liability for or prohibits
the transmission over the Internet of certain types of information. The
imposition upon us and other online service providers of potential liability for
information carried on or disseminated through their services could require us
to implement measures to reduce our exposure to such liability, which may
require us to expend substantial resources and/or to discontinue certain service
offerings. In addition, the increased attention focused upon liability issues as
a result of these lawsuits and legislative proposals could impact the growth of
Internet use. We do not carry liability insurance. Any costs not covered by
insurance incurred by us as a result of such liability or asserted liability
could harm our business, financial condition and results of operations. Please
see "Business-Government Regulation" and " - Privacy Policy."
Governmental regulation and legal uncertainties relating to the Web could
increase our costs of transmitting data and increase our legal and regulatory
expenditures and could decrease our membership base
Government regulation of communications and commerce on the Internet
varies greatly from country to country. Some countries, such as the United
States, have not adopted many laws and regulations to specifically regulate
online commerce. Due to the increasing popularity and use of the Internet and
other online services, it is possible that a number of laws and regulations may
be adopted with respect to the Internet or other online services covering issues
such as user privacy, freedom of expression, pricing, content and quality of
products and services, taxation, advertising, intellectual property rights,
enforceability of contracts and information security. Because our services are
accessible worldwide, and we facilitate sales of goods to users worldwide, any
jurisdiction in which our services can be accessed or are used may seek to
impose its laws on us and to enforce those laws in proceedings in those
countries, where we could be forced to defend ourselves. Please see "Business
- -Government Regulation."
The imposition of sales and other taxes on our business or on products we offer
to our members and on Internet services generally could impair the growth of
electronic commerce
We do not collect sales or other similar taxes with respect to goods
sold through our service. However, one or more states or countries may seek to
impose sales tax collection obligations on out-of-state companies which engage
in or facilitate online commerce, and a number of proposals have been made at
the Federal, state and local level, as well as in foreign jurisdictions, that
would impose additional taxes on the sale of goods and services through the
Internet. In addition, a bill was introduced in the U.S. Congress in July 1999
that would impose a 5% Federal tax on sales by a merchant over the Internet that
are not otherwise taxable. These proposals, if adopted, could substantially
impair the growth of electronic commerce, and could harm our opportunity to
derive financial benefit from such activities. Moreover, a successful assertion
by one or more states or any foreign country that we should collect sales or
other taxes on the exchange of merchandise on our system could harm our
business, financial condition and results of operations. Please see "Business -
Government Regulations."
International barriers may increase our costs and risks of doing business
Because we facilitate sales of goods to users worldwide, we may be
subject to significant costs and risks with respect to potentially complex
regulatory requirements, export and import restrictions, customs clearance,
currency exchange controls, and tariffs and other trade barriers.
We may be subject to liability for products whose sale we facilitate
Buyers of our products may sue us if they are harmed by any of the
products whose sales we facilitate. Although we do not manufacture these
products, we are exposed to potential liability. Liability claims could require
us to spend significant time and money in litigation or to pay significant
damages,
11
<PAGE>
which could harm our business, financial condition and results of operations.
Although we intend to disclaim all warranties and to rely on the manufacturers
to fulfill their warranty obligations, we cannot be certain that such
disclaimers will always be held valid by courts or regulatory authorities or
that the manufacturers will be able to fulfill their warranty obligations.
Please see "Business - Product and Service Warranties."
Our failure to protect our intellectual property rights could harm our
brand-building efforts and ability to compete effectively
We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success, and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. We have applied for registration of the service marks
Take to Auction.com, Take to Auction, Take2Auction (Service Mark) and
Take2Auction.com (Service Mark) with the U.S. Patent and Trademark Office. We
have also applied for a U.S. patent registration of our method for providing
merchandise to online auction sites. The patent may not be issued to us, or, if
issued, it may not provide us with all of the protections that we have sought.
Please see "Business--Intellectual Property Rights."
We have entered into confidentiality and invention assignment
agreements with our employees and contractors, and nondisclosure agreements with
parties with which we conduct business to limit access to and disclosure of our
proprietary information. These contractual arrangements or the other steps taken
by us to protect our intellectual property may be insufficient to prevent
misappropriation of our technology and may not deter independent third-party
development of similar technologies. To date, we have not been notified that our
technologies infringe the proprietary rights of third parties, but third parties
may claim infringement by us with respect to past, current or future
technologies. We expect that participants in our markets will be increasingly
subject to infringement claims as the number of services and competitors in our
industry segment grows. Any such claim, whether meritorious or not, could be
time-consuming, result in costly litigation, cause service upgrade delays or
require us to enter into royalty or licensing agreements. These royalty or
licensing agreements might not be available on terms acceptable to us. As a
result, any such claim could harm our business, financial condition and results
of operations. Please see "Business--Intellectual Property Rights."
Year 2000 complications may disrupt our operations and harm our business
Many currently installed computer systems and software products are
coded to accept only two-digit entries in the date code field and cannot
reliably distinguish between dates beginning on January 1, 2000 and dates prior
to the year 2000. Many companies' software and computer systems may need to be
upgraded or replaced to correctly process dates beginning in 2000 and to comply
with the "Year 2000" requirements. We have reviewed our internal programs and
have determined that there are no significant Year 2000 issues within our
systems or services. However, we utilize third party equipment and software that
may not be Year 2000 compliant. Failure of such third-party equipment or
software to properly process dates for the year 2000 and thereafter could
require us to incur unanticipated expenses to remedy any problems, which could
harm our business, financial condition and results of operations. Year 2000
problems would also decrease our reputation for reliability when we are trying
to grow the membership base. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations Year 2000 Compliance."
Risks Related to this Offering
Since we have no underwriter there is a greater risk that no market will develop
for our common shares
Lack of underwriter, broker-dealer or placement agent participation in
the offering is likely to increase the risk that no market for our securities
will develop upon completion of this offering. Because we have not engaged the
services of an underwriter, the independent due diligence review of our affairs
and business strategy, which would ordinarily be performed by an underwriter,
has not been performed.
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<PAGE>
None of our directors or officers have any experience in making a direct public
stock offering. The absence of an underwriter could harm our ability to sell the
common shares. Please see "Plan of Distribution."
We arbitrarily determined the offering price
The public offering price should not be regarded as an indicator of
value or of any future market price of our common shares. The $10.00 to $12.00
offering price range for the common shares was arbitrarily determined by our
management in consultation with our financial advisors and was set at a level
substantially in excess of the price recently paid by management and other
investors for their common shares in recent private placements. The price bears
no relationship to our assets, book value, net worth or other economic or
recognized criteria of value.
We may not be able to obtain or maintain a listing on the NASDAQ, so you may not
be able to sell your shares easily
Because we may not be able to obtain or maintain a listing on the
NASDAQ National Market System, your shares may be difficult or impossible to
sell. Trading in our common shares, if any, is intended to be conducted on the
NASDAQ National Market System after the initial offering period. However, if we
are unable to qualify for this listing, we believe that our common shares will
trade on the over-the-counter market in the so-called "pink sheets" or the OTC
Bulletin Board, which was established for securities that do not meet the NASDAQ
listing requirements. Consequently, selling your common shares would be more
difficult because smaller quantities of common shares could be bought and sold,
transactions could be delayed, and coverage of us by securities analysts and
news media may be reduced. These factors could result in lower prices and larger
spreads in the bid and ask price for our common shares.
Broker-dealers may be unable to sell our common shares because of the low price
Although we intend to be listed on the NASDAQ National Market System,
we cannot assure you that we will be able to qualify and obtain this listing.
Because our common shares may only be sold on the over-the-counter market,
certain rules which apply will make it more difficult for you to sell your
common shares. Since our common shares may not be listed on the NASDAQ and/or
any stock exchange in the future, it may become subject to Rule 15g-9 under the
Securities and Exchange Act of 1934, as amended. That rule imposes additional
sales practice requirements on broker-dealers that sell low-priced securities to
persons other than established customers and institutional accredited investors.
For transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to sale. Consequently, the
rule may affect the ability of broker-dealers to sell our common shares and may
affect the ability of holders to sell common shares in the secondary market.
We may be unable to sell shares in some states due to blue sky regulations
If we are unable to list our shares on the NASDAQ National Market
System, we must register the common shares in any state where we desire to sell
our common shares. We must also register our officers and directors as broker
dealers in any state in which we seek to sell our common shares or seek an
exemption to such registration. If a registration of the common shares in
various states is not approved, it will not be possible for us to sell the
common shares. We intend to use our best efforts to register in every state
where we believe there is a significant market for our common shares. Should any
or all common share registrations not be approved, this would prohibit us from
selling the common shares offered for sale in such jurisdictions, would make it
more difficult for you to sell your common shares and could adversely affect the
overall success of this offering.
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<PAGE>
Possible volatility of our stock price could harm our shareholders
The stock markets in general, and the market for Internet-related and
technology companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. The trading prices of many technology stocks are
at or near historical highs and reflect valuations substantially above
historical levels. These trading prices and valuations may not be sustained.
These broad market and industry factors may harm the market price of our common
shares, regardless of our operating performance. Market fluctuations, as well as
general political and economic conditions such as recession or interest rate or
currency rate fluctuations, may also harm the market price of our common shares.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted against
the company. This litigation, if instituted, could result in substantial costs
and a diversion of management's attention and resources, which would harm our
business, financial condition and results of operations.
Control by principal shareholders, executive officers and directors could harm
our shareholders
Upon completion of this offering, our executive officers and directors
and greater-than-five-percent shareholders will, in the aggregate, own
approximately 42% of the outstanding common shares. Further, our bylaws provide
for a classified board of directors which is controlled by our founders. As a
result, these persons, acting together, will have the ability to control most,
if not all, matters submitted to shareholders and directors for approval
(including the election and removal of directors and officers and any merger,
consolidation or sale of all or substantially all of our assets) and to control
our management and affairs. Accordingly, this concentration of ownership may
have the effect of delaying, deferring or preventing a change in our control,
impede a merger, consolidation, takeover or other business combination involving
us or discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain our control, which in turn could harm the market price of
our common shares. Please see "Management."
Shares eligible for public sale after this offering could harm our stock price
Sales of substantial amounts of common shares (including shares issued
upon the exercise of outstanding options) in the public market after this
offering could harm the market price of our common shares. These sales also
might make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deem appropriate. In addition to the
common shares we are offering, as of the date of this prospectus, there will be
18,000,000 common shares outstanding, all of which are "restricted securities"
under the Securities Act of 1933, as amended. None of the restricted securities
will be available for sale in the public market until expiration of applicable
holding periods under Rule 144 under the Securities Act and our right to
repurchase unvested shares. In addition, as of the date of this prospectus,
there were outstanding options to purchase 1,006,225 common shares, none of
which were immediately exercisable or exercisable within 60 days of the date of
this prospectus. None of the shares issuable upon the exercise of options will
be able to be sold in the public market, however, immediately after this
offering, we intend to register approximately 2,442,857 common shares subject to
outstanding options and reserved for issuance under our stock option and
purchase plans. Please see "Shares Eligible for Future Sale."
We will need to raise additional capital which may affect our shareholders, and
our business will be harmed if we are unable to obtain additional capital
We currently anticipate that if this offering is fully subscribed the
net proceeds of this offering, together with our available funds, will be
sufficient to meet our anticipated needs for working capital, capital
expenditures and business expansion through at least the next 12 months.
Thereafter, we will need to raise additional funds. We may need to raise
additional funds sooner in order to fund more rapid expansion, to develop new or
enhanced services or products, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. If additional funds are
raised through the issuance of equity or convertible debt securities, your
percentage ownership will be reduced, you may
14
<PAGE>
experience additional dilution and these securities may have rights, preferences
and privileges senior to those of the common shares. Additional financing may
not be available on terms favorable to us or at all. If we are unable to engage
an underwriter or are unable to list the shares of common stock on the NASDAQ
National Market System, it may be more difficult to raise additional funds. If
adequate funds are not available or are not available on acceptable terms, we
may not be able to fund our expansion, take advantage of unanticipated
acquisition opportunities, develop or enhance services or products or respond to
competitive pressures. Our inability to raise additional capital could harm our
business, financial condition and results of operations. Please see
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Liquidity and Capital Resources."
You will incur immediate and substantial dilution and may face further dilution
The initial public offering price of the common shares paid by you is
substantially higher than the net tangible book value per outstanding share of
our common shares. Purchasers of the common shares in this offering will suffer
immediate and substantial dilution of $____ per share in the net tangible book
value of the common shares from the initial public offering price, assuming an
initial public offering price of $11.00 per share. To the extent that
outstanding options to purchase our common shares are exercised, there may be
further dilution. Please see "Dilution."
No Minimum Offering
This offering is being made on a "best efforts basis," and there is no
minimum number of shares which must be sold in this offering. Therefore we can
give no assurances that any or all of the shares being offered will be sold. In
the event that this offering is not fully subscribed, we may not be able to
carry out our business plans. Your subscription to purchase shares is
irrevocable. Please see "Terms of the Offering."
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<PAGE>
Forward Looking Statements; Market Data
This prospectus contains certain "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 such
forward-looking statements as a result of factors more fully described in this
section and elsewhere in this prospectus. We undertake no obligation to update
publicly any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
This prospectus contains market data related to Take to Auction.com and
the Internet. This data has been included in the studies published by the
Internet market research firms of International Data Corporation and Forrester
Research, Inc. This market data includes projections that are based on a number
of assumptions. These assumptions include that:
o the number of people online and the total number of hours spent
online will increase significantly over the next five years;
o the use of online auction sites will increase;
o Internet security and privacy concerns will be adequately
addressed; and
o no catastrophic failure of the Internet will occur.
If any one or more of these assumptions turns out to be incorrect, actual
results may differ significantly from the projections based on these
assumptions.
Use of Proceeds
At an assumed initial public offering price of $11.00 per share, we
estimate that the net proceeds to us from the sale of the common shares will be
approximately $_____ million. As of the date of this prospectus, we have not
made any specific expenditure plans with respect to the proceeds of this
offering. Therefore, we cannot specify with certainty the particular uses for
the net proceeds to be received upon completion of this offering. Accordingly,
our management will have broad discretion in the application of the net
proceeds. We do, however, intend to use a portion of the net proceeds currently
intended for general corporate purposes to fund the development of our network
infrastructure, implement our growth strategy, launch a targeted advertisement
campaign, for working capital, general administrative and other expenses. We
have no present plans or commitments and are not currently engaged in any
negotiations with respect to any transactions that are material. Pending such
uses, we intend to invest the net proceeds from this offering in short-term,
interest-bearing, investment-grade securities. Please see "Risk Factors - Risks
Related to this Offering - We will likely need to raise additional capital which
may affect shareholders, and our business will be harmed if we are unable to
obtain additional capital."
Dividend Policy
We have not declared or paid any cash dividends on our capital stock.
We presently intend to retain future earnings, if any, to finance the expansion
of our business and fund operating losses and do not anticipate paying any cash
dividends in the foreseeable future.
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<PAGE>
Capitalization
The following table sets forth our capitalization of as of July 31,
1999:
o on an actual basis;
o on a pro forma basis to reflect (i) the stock purchase agreements
with SLI.com Ventures I, Ltd. on August 26, 1999 and Dominion
Income Management Corp. on October 20, 1999 and (ii) the
additional common shares sold in connection with our initial
capitalization in which the remaining balance of approximately
$769,000, as evidenced by signed promissory notes, will be paid in
full by January 2000; and
o on an as adjusted basis to reflect the estimated net proceeds from
the sale of the common shares offered by us after deducting the
estimated offering expenses payable by us. Please see "Use of
Proceeds."
You should read this information together with our financial statements and the
accompanying notes to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
July 31, 1999
------------------------------------------
(in thousands)
Actual Pro forma As adjusted
------ --------- -----------
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock, $0.001 par value,
10,000,000 shares authorized, no
shares issued and outstanding actual,
pro forma and as adjusted $ --- $ --- $
Common stock, $0.001 par value,
50,000,000 shares authorized,
1,382,171 shares issued and
outstanding actual; 18,000,000 shares
issued and outstanding pro forma;
20,000,000 shares issued and
outstanding as adjusted 1,382 18,000
Additional paid-in capital 83,347 1,682,000
Accumulated deficit (23,600) (23,600)
-------- ---------- ----------
Total stockholders' equity 61,129 1,676,400
-------- ---------- ----------
Total stockholders' equity $ 61,129 $1,676,400
======== ========== ==========
</TABLE>
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<PAGE>
Dilution
Our net tangible book value as of July 31, 1999 was approximately
$61,000 or $0.04 per common share. Net tangible book value per share represents
the amount of total tangible assets less total liabilities, divided by the
number of common shares outstanding.
After giving effect to the sale of common shares offered by us at an
assumed initial public offering price of $11.00 per share, and the application
of the estimated net proceeds therefrom, our net tangible book value as of July
31, 1999, would have been approximately $______ million or $_____ per common
share. This represents an immediate increase in net tangible book value of
$______ per share to existing shareholders and an immediate dilution of $_____
per share to new shareholders purchasing common shares in this offering. The
following table illustrates this dilution:
Assumed initial public offering price per share $11.00
Net tangible book value per share prior to this
offering $ 0.04
Increase per share attributable to new shareholders ----
Net tangible book value per share after this offering -----
Total net tangible book value dilution per share to
new shareholders $
======
The following table summarizes as of October 31, 1999, on the pro forma
basis described above, the number of common shares purchased from us, the total
consideration paid to us and the average price per share paid by existing
shareholders and by investors purchasing common shares in this offering (before
deducting the estimated offering expenses):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------- -------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............. 18,000,000 90.0% $ 1,700,000 7.2% $ 0.09
New investors...................... 2,000,000 10.0 22,000,000 92.8 11.00
---------- ----- ------------ ----- -------
Total.............................. 20,000,00 100.0% $ 23,700,000 100.0% $ 1.19
========= ===== ============ ===== =======
</TABLE>
The foregoing discussion and tables assume no exercise of any stock
options outstanding as of October 31, 1999. As of the date of this prospectus,
there were options outstanding to purchase a total of 1,006,225 common shares
with a weighted average exercise price of $0.41 per share. To the extent that
any of these options are exercised, there will be further dilution to new public
investors. Please see "Capitalization," "Management - Employee Benefit Plans"
and Note 6 of Notes to Financial Statements.
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<PAGE>
Selected Financial Data
The following selected financial data should be read in conjunction
with, and are qualified by reference to, the financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus. The statement of
operations data are derived from, and are qualified by reference to, the audited
financial statements of Take to Auction.com included elsewhere in this
prospectus.
For the period
From June 2, 1999
(date of inception)
through July 31, 1999
---------------------
Statement of Operations Data:
Operating expenses
General and administrative $ 17,311
Web site development expenses 6,289
----------
Total operating expenses 23,600
----------
Net loss $ (23,600)
==========
Basic and diluted loss per share $ (0.02)
==========
Weighted average number of common
shares outstanding (1) 1,382,171
==========
(1) Does not include 16,617,829 shares sold subsequent to July 31, 1999.
<TABLE>
<CAPTION>
Balance Sheet Data: July 31, 1999
-------------------------------------------------
Actual Pro forma (1) As Adjusted (2)
<S> <C> <C> <C>
Cash and cash equivalents $ 52,493 $ 1,667,764 $
Working capital 6,834 1,622,105
Total assets 110,704 1,725,975
Shareholders' equity 61,129 1,676,400
</TABLE>
(1) Adjusted to give effect (i) the stock purchase agreements with SLI.com
Ventures I, Ltd. on August 26, 1999 and Dominion Income Management Corp. on
October 20, 1999 and (ii) the additional shares sold in connection with our
initial capitalization in which the remaining balance of approximately $769,000,
as evidenced by signed promissory notes, will be paid in full by January 2000.
(2) Adjusted to give effect to the sale of the common shares offered by us (at
the assumed initial public offering price of $11.00 per share) and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds."
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<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion of our financial condition and results of
operations are based upon and should be read in conjunction with our financial
statements and their related notes included elsewhere in this prospectus.
Overview
Take to Auction.com, Inc. was formed as a Florida corporation in June
1999 and operates its online service under the name of "Take to Auction.com".
We are a development stage company, having launched our Web site in
July 1999. Our operations for the period from June 2, 1999 through July 31, 1999
were primarily limited to organizing our company, raising operating capital,
hiring initial management and employees and refining our business model. In July
1999, we also began to target potential customers and to build and promote our
interactive-based community and brand through word-of-mouth and repeat business
marketing efforts.
We anticipate that substantially all of our revenues will come from
memberships purchased by our members, sales of product and in the future fees
paid by third parties for online advertising. We charge no fees to buyers of
online merchandise on online auction sites. We believe that word-of-mouth and
repeat business from existing members are the most effective means of
implementing our growth strategy. Members purchase membership credits to enable
them to select an item to take to an online auction site. Each annual membership
credit costs $100.00 and allows a member to take one item priced at less than
$100.00 from our Web site to an online auction site for one week. By
accumulating multiple credits, the member will be eligible to list multiple
items or items that have greater value. The number of membership credits and,
consequently, our revenues depend upon our member's interest in listing multiple
items at one time or seeking more valuable merchandise.
Our rate of expense growth will follow revenue growth and will be
primarily driven by increases in membership and by the volume of successful
online transactions completed by existing members. In the short term, we intend
to increase our expenses significantly in an effort to maintain a high level of
revenue growth.
Results of Operations
General and administrative expenses. General and administrative expenses,
amounting to $17,311, consisted of general corporate expenses. General and
administrative expenses will increase as we expand our staff and incur
additional costs to support the growth of the business.
Web site development expenses. Web site development expenses consist
principally of expenses for developing our Web site, network operations and
systems and telecommunications infrastructure. Web site development expenses
were $6,289. This amount reflects the initial cost related to developing our Web
site. Web site development expenses are expected to increase as we develop our
new fully integrated Web site which will facilitate our operations.
Income taxes. We were incorporated in June 1999 and have not yet filed a
federal income tax return or a State of Florida income tax return. Our 1999
fiscal year will end on December 31, 1999. We expect to have operating losses
for the foreseeable future and do not expect to have any federal or state income
tax liability until we are profitable and have utilized our operating loss carry
forwards.
Net loss. As a result of the factors discussed above, primarily relating to
the general corporate expenses incurred in our start up activities, our net loss
totaled $23,600 for the period from June 2, 1999 through July 31, 1999. We
expect to incur net losses for the foreseeable future.
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Liquidity and Capital Resources
Our principal capital requirements are acquiring merchandise and
maintaining and improving our web site.
We used $28,922 in our operating activities for the period from June 2,
1999 through July 31, 1999. This was the result of a net loss of $23,600, and an
increase in other assets, accounts payable and accrued expenses. Our financing
activities for the period from June 2, 1999 through July 31, 1999, amounting to
$81,415, related to proceeds received from our initial capitalization. We
concluded our $1 million initial capitalization on August 26, 1999. As of
October 31, 1999, we have received a total of approximately $231,000 and the
balance, in the amount of approximately $769,000, is payable on demand and
evidenced by signed promissory notes. On August 26, 1999, we sold to SLI.com
Ventures I, Ltd., 368,421 common shares for a total purchase price of $350,000.
On October 20, 1999, we sold to Dominion Income Management Corp., 368,421 common
shares for a total purchase price of $350,000.
We believe that funds generated from operations and the net proceeds of
this offering will be sufficient to finance our current and anticipated
operations for at least 12 months after this offering. Our long-term capital
requirements beyond this period will depend on numerous factors, including, but
not limited to, the following:
o The ability to expand our member base;
o The cost of upgrades to our Web site; and
o The level of expenditures for sales and marketing and other
factors.
If the funds from this offering and our revenues are insufficient to
fund the activities in the short or long term, we would need to raise additional
funds by incurring debt or through public or private offerings of our capital
stock. We may not be able to do either on terms favorable to us, if at all.
Year 2000 Compliance
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. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
State of Readiness
We have made a preliminary assessment of the Year 2000 readiness of our
operating financial and administrative systems, including the hardware and
software that support our systems. Our assessment plan consists of:
o quality assurance testing of our internally developed proprietary
software;
o contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly
related to the delivery of our services to our users to assess
their Year 2000 readiness;
o contacting vendors of third-party systems to assess their Year
2000 readiness;
o assessing repair or replacement requirements; and
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<PAGE>
o implementing repair or replacement procedures.
We have developed testing procedures for all software and other systems
that we believe might be affected by Year 2000 issues. Since third parties
developed and currently support many of the systems that we use, a significant
part of this effort has been and will be to ensure that these third-party
systems are Year 2000 compliant. We have already received assurances that 80% of
the existing third-party software and 100% of the existing hardware is Year 2000
compliant through a combination of representations by these third parties
regarding their products' Year 2000 compliance, as well as specific testing of
these systems. We plan to confirm the remaining 20% of software within the first
2 weeks of November as well as recheck our in-house software by the end of
November. Until such testing is completed and such vendors and providers are
contacted, we will not be able to completely evaluate whether our systems will
need to be revised or replaced.
Costs
We expect to incur an additional $10,000 in connection with
identifying, evaluating and addressing Year 2000 compliance issues. Most of our
expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees and consultants in the
evaluation process and Year 2000 compliance matters generally. Such expenses, if
higher than anticipated, could harm our business, financial condition and
results of operations.
Risks
We are not currently aware of any Year 2000 compliance problems
relating to our systems that would harm our business, financial condition and
results of operations, without taking into account our efforts to avoid or fix
such problems. We may discover Year 2000 compliance problems in our systems that
will require substantial revision. In addition, third-party software, hardware
or services incorporated into our material systems may need to be revised or
replaced, all of which could be time-consuming and expensive. Our failure to fix
or replace our internally developed proprietary software or third-party
software, hardware or services on a timely basis could result in lost revenues,
increased operating costs, the loss of customers and other business
interruptions, any of which could harm our business, financial condition and
results of operations. Moreover, the failure to adequately address Year 2000
compliance issues in our internally developed proprietary software could result
in claims of mismanagement, misrepresentation or breach of contract and related
litigation, which could be costly and time-consuming to defend.
We are heavily dependent on a significant number of third-party vendors
to provide both network services and equipment. A significant Year 2000-related
disruption of the network, services or equipment that third-party vendors
provide to us could cause our members and visitors to consider seeking alternate
providers or cause an unmanageable burden on our technical support, which in
turn could harm our business, financial condition and results of operations.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be Year 2000 compliant. The failure by such entities to be Year 2000
compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our customers, decrease the use of
the Internet or prevent users from accessing our Web site which could harm our
business, financial condition and results of operations.
Contingency Plan
As discussed above, we are engaged in an ongoing Year 2000 assessment
and have not yet developed any contingency plans. The results of our Year 2000
simulation testing and the responses received from third-party vendors and
service providers will be taken into account in determining the nature and
extent of any contingency plans.
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Business
Take to Auction.com
We are an Internet-based community providing our entrepreneurial
members an online catalog of authentic collectibles and factory-new specialty
merchandise to sell at online auction sites, such as eBay(Service Mark),
FairMarket(Service Mark), Amazon(Service Mark) and Yahoo! (Service Mark). Our
members pay an annual membership fee and, at no additional cost, select
merchandise from our Web site that we then list automatically on a popular
online auction site for one week. Our business model is distinct from and
complements the more than [200] online auction sites that we believe serviced
over ____ million visitors in October 1999. We intend to develop and expand our
online membership base under the Take to Auction brand by attracting Internet
users who can earn additional income through our Web site. We create significant
Web site affinity by offering our members the ability to follow their portfolio
of merchandise currently listed on online auction sites and to track their
accumulated profits from completed online auctions. Monthly and annual
competitions, category indices and personalized features will keep members
returning to our Web site.
We are a development stage company, having launched our Web site in
July 1999. We anticipate that our principal sources of revenues will be derived
from membership fees, sales of products and, in the future, fees paid by third
parties for advertising their products and services on our Web site. As our
membership base expands and the volume of merchandise increases, our purchasing
power and economies of scale should enable us to offer a broader array of
merchandise at even better prices.
Industry Background
The Internet has emerged as a global medium enabling millions of people
worldwide to share information, communicate and conduct business electronically.
It also provides businesses with an attractive means of selling and marketing
their products. International Data Corporation, or IDC, estimates that the
number of Web users worldwide will grow to approximately 508 million by the year
2003. This growth is expected to be driven by the large and growing number of
PCs installed in homes and offices, the decreasing cost of PCs, easier, faster
and cheaper access to the Internet, improvements in network infrastructure, the
proliferation of Internet content and the increasing familiarity and acceptance
of the Internet by businesses and consumers. The Internet has a number of unique
characteristics that differentiate it from traditional media: users communicate
or access information without geographic or temporal limitations; users access
dynamic and interactive content on a real-time basis; and users communicate and
interact instantaneously with a single individual or with entire groups of
individuals. As a result of these characteristics, Web usage is expected to
continue to grow.
The growing adoption of the Web represents an opportunity for
businesses to conduct commerce over the Internet. IDC estimates that the total
value of commerce over the Internet will increase to approximately $1 trillion
worldwide by the year 2003.
Online auction sites like eBay pioneered person-to-person trading of a
wide range of goods over the Internet using an efficient and entertaining
auction format and has grown into the largest and most popular person-to-person
trading community on the Internet. We believe that there are currently over
[200] online auction sites on the Internet. Online auction services permit
sellers to list items for sale, buyers to bid for and purchase items of interest
and all auction users to browse through listed items from any place in the world
at any time. Online auction sites offer buyers a large selection of new and used
items that can be difficult and costly to find through traditional means such as
classified advertisements, collectibles shows, garage sales and flea markets or
through intermediaries, such as auction houses and local dealer shops. Online
auction sites also enable sellers to reach a larger number of potential buyers
more cost-effectively than traditional person-to-person trading forums. However,
the volume of activity on existing online auction sites is subject to some of
the following limitations:
o Sellers on online auction sites own the listed merchandise and
must pay all listing fees assessed by certain online auction
sites;
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o Sellers of products own a limited supply of merchandise to place
on online auction sites;
o If the online auction of an item is unsuccessful, the seller
continues to own the item;
o Sellers of products are responsible for the collection of the
purchase price and the delivery of the merchandise to buyers;
o Sellers do not know the buyer so they are unsure whether the buyer
will pay for the merchandise;
o Sellers do not have an automatic and secure payment system;
o Buyers must rely on the sellers to make sure that the items
purchased are in good condition and are actually delivered;
o The process of listing an item on an online auction site is
limited to Internet savvy users;
o Sellers can earn a profit only after deducting the price paid by
them for the merchandise; and
o Sellers select online auction sites without any information about
the potential success of selling the item on any particular online
auction site.
The Take to Auction.com Solution
We intend to capitalize on the success of online auction sites by
supplying these online auction markets with many categories of collectibles and
factory-new specialty merchandise. Using our purchasing expertise, our
management believes that it can supply entrepreneurial members with items to be
brought to auction.
We believe that the Take to Auction concept will appeal to Web users,
create community affinity and increase user traffic on online auction sites for
the following reasons:
We intend to provide members with a broad array of merchandise to take to online
auctions
While a typical seller has limited items to place for auction, we
intend to provide our members with a broad array of merchandise from which to
make a selection. In addition to providing single items, we also expect to offer
bundled items of merchandise from time to time to lower the reserve price of
each item and, therefore, improve the chances of a successful online auction.
Members never have to purchase or take possession of the merchandise
Unlike traditional auction settings where sellers place their own items
up for auction, our members enter our Web site, browse through a product catalog
and select an item to be listed at an online auction site. If the item does not
sell, the item returns to our electronic warehouse automatically without the
member incurring any expenses. There is no additional cost to the member and,
therefore, no risk to have items listed at an online auction site because the
minimum bid prices always cover the value of the merchandise. The spread
constitutes a member's profit.
Members do not have to take complicated steps to list items online
To list an item on a traditional online auction site, often a digital
photograph of the item must be taken by the seller and then fitted according to
the required layout of the online auction site. Information about the seller and
the particular item must be entered into the system. We facilitate the auction
process because, once a member registers, the only thing he or she has to do is
select an item from our product catalog and choose from a drop down menu the
auction site where he or she desires to place the item. Once an item is selected
and the member has chosen the online auction site, we automatically register the
member and the item's specifications on the online auction site, providing
membership information and photograph and a description of the item.
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We facilitate transactions by accepting credit cards and checks and by handling
shipping and delivery
Buyers of our merchandise have the ability to pay by credit card or
electronic check protected by security services such as VeriSign, Inc. and SSL
Security Systems. This payment medium is not offered by online auction sites
because a typical seller is small and, therefore, not equipped to have a credit
card processing system or the ability to receive an electronic check. We also
package and ship the merchandise to the buyer.
Our service is designed to promote an active membership community to provide a
positive environment for advertising and commerce
We intend to encourage active participation in our community and offer
a number of programs to increase levels of participation. We intend to provide
our members with a personalized auction tracking page which will advise members
of the status of their current auctions, as well as a status report of the sales
completed and profits earned to date. Monthly and annual competitions, category
indices and other personalized features will also be designed to keep members
returning to our Web site.
We believe that all of these features will appeal to advertisers and
consumers because advertisers will be able to specifically target their
advertisements based upon the information members provide us in their
applications and by tracking merchandise taken by our members to other auction
sites. Additionally, the banner ads and hyperlinks will not require a member to
leave our Web site in order to visit an advertiser or sponsor's Web site.
Auction Wizard(Service Mark)
We are developing the Auction Wizard(Service Mark) to increase the
chance of a successful auction. The Auction Wizard proprietary software will be
designed to identify the most appropriate online auction forum for each item
taken to auction by a member. We believe that demographics vary among the
leading online auction sites. Amazon(Service Mark), for example, has a more
affluent following than eBay(Service Mark) or Yahoo!(Service Mark). Our
proprietary system will be designed to identify the most appropriate auction
site for each item. By suggesting these sites, we expect to increase the success
rate of our members in online auctions.
Take to Auction Strategy
Our objective is to become a leading Internet based community offering
a broad array of products and services to our members. Our strategy includes the
following key elements:
Grow the Take to Auction community and increase the membership base
Because we intend to derive a large portion of our revenues from the
sale of membership credits, our success depends on our ability to grow our
membership base. We intend to use "word-of-mouth" referrals and targeted
marketing to buyers of our merchandise posted on online auction sites to expand
our membership community.
Promote the Take to Auction brand
We believe that building greater awareness of our brand within and
beyond the Take to Auction.com community is critical to maintain and expand our
user base and promote online advertising revenues. We believe that controlled
growth of the Take to Auction.com community and brand will maximize customer
satisfaction and promote our brand. All merchandise listed by us on online
auction sites will contain a banner which provides hyperlink access to our Web
site. We also intend to use a portion of the proceeds from the offering to
launch an advertising campaign to increase our membership base.
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Forge business relationships with online auction sites and other strategic
partners to improve brand-name recognition and the efficiency of our network
systems
We intend to form strategic alliances with online auction sites to
improve our "brand name" recognition and the performance and efficiency of our
network systems. We believe that alliances with online auction sites will
improve brand name recognition by enabling our members to benefit from enhanced
services provided by online auction sites, including special recognition in the
"featured auctions" Web page of online auction sites and allowing us to place
our banner in each auction posted by us on behalf of our members. We believe
that strategic alliances with online auction sites will improve the efficiency
and performance of our network systems by enabling us to interface directly with
the online auction systems instead of simulating a standard manual posting. By
interfacing directly with online auction sites, we hope to accelerate the
information throughput, avoid errors caused by previously unannounced protocol
changes, reduce personnel and maximize our Web site's processing power.
Leverage our unique business model
We believe that our business model provides a number of competitive
advantages. We have a unique appeal to entrepreneurial Web users because we can
provide them with the means to earn additional income at no additional risk
other than the amounts members pay for membership credits. Given our estimated
volume of activity and the variety of merchandise available to take to online
auction sites, we expect to purchase merchandise at a greater discount, thereby
increasing the potential profits of the member.
Enhance the Take to Auction.com Web site features and functionality by adding
unique content to our membership
We intend to update and enhance the features and functionality of our
Web site frequently to continue to improve the user's trading experience by
introducing features such as new category-specific content. For example, we
intend to provide a real time confirmation of a completed auction to our members
and to the buyer. We will continue to provide system response and transaction
processing time by investing in our infrastructure to accommodate additional
users, content and online auction sites. We believe that our format and Web site
encourage users and members to return on a frequent basis to review the
inventory of items available to them, to check the status of on-going auctions
and to track their historical success. The regular rotation of merchandise also
encourages customers to revisit the site frequently. Further, we anticipate that
our online advertising customers will benefit from our ability to provide
targeted marketing opportunities.
Generate revenues from the sale of online advertising
We intend to generate a portion of our revenues from online advertising
by leveraging our user database to enable Internet retailers to advertise their
products to our members. Our system provides these retailers with information
about the spending habits of our members based on information supplied by each
member at the time of registration. Further, the services we intend to provide
to our members, including our stock portfolio tracking system and auction
portfolio tracking page, we believe, will foster community affinity by
encouraging our members to spend more time on our Web site. These factors, we
believe, will appeal to Internet retailers that desire to advertise their
products because we can provide them with the opportunity for a relatively
captive audience.
The Take to Auction Service
Our platform is an Internet-based community supplying merchandise to
entrepreneurial members through an online catalog of collectibles and
factory-new specialty merchandise. The following describes our purchase and sale
process:
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What can be taken to auction
Our service will offer our members numerous product categories. We
expect the number of product categories to grow in the future. Each category
below has numerous subcategories. Merchandise is available individually or as
bundled items.
Current product categories include:
Antiques Books, Magazines
Dolls, Figurines Watches
Collectibles Jewelry, Gemstones
Coins Toys
Memorabilia Electronics
Registration
Members purchase membership credits to enable them to select an item to
take to an online auction site. Each annual membership credit costs $100.00,
which allows a member to take one item priced at under $100.00 from our Web site
to an online auction site for one week. In addition, as a member purchases
additional membership credits, the member will be eligible to list multiple
items or items that have greater value and/or are more difficult to find. The
number of membership credits and, consequently, our revenues depend upon our
members' interest in listing multiple items at one time or more valuable items.
Selecting an Item
With the purchase of one membership credit, a member can access our
site and select an item from our fully automated catalog which permits the
member to post merchandise on an online auction site. Members select items based
on the number of their membership credits. Members can increase their selling
power by purchasing additional credits. Additional credits allow members to list
multiple items simultaneously or items of greater value, always based on the
number of accumulated credits.
Taking an item to auction
Members can take an item they choose to an online auction site by
clicking on the item. This will cause a drop-down menu to list the popular
online auction sites to which members can choose to take the selected
merchandise. By highlighting and clicking on the online auction site, the item,
with its description and reference information (including minimum bids for
opening price and member information), is transferred to the auction site
automatically. Our domain name and the member's user name are displayed on the
online auction site to identify to potential buyers that a Take to Auction.com
member is placing the item on the online auction site. Our personalized Web
address ensures member anonymity and informs potential bidders that the item is
backed by the Take to Auction brand name.
Selling an item at auction
Once the item is listed on an auction site, buyers from around the
world may bid on the item according to the rules of the selected online auction
site, usually 24 hours a day, seven days a week.
How transactions are completed
At the end of an auction period, if a bid meets or exceeds the minimum
price, the online auction site automatically notifies the buyer and the member
via e-mail and the buyer can then consummate the transaction through Take to
Auction.com. The member does not take possession of the item being sold and is
not responsible for the collection of the buyer's payment for the item. We
arrange for the shipment and payment collection for the item. We accept
electronic checks and credit cards. We charge the buyer handling and shipping
fees for the merchandise.
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Communications with the winning bidder
With the delivery of the merchandise, the winning bidder receives a
letter thanking him or her for purchasing an item from us, inviting the buyer to
join Take to Auction.com and explaining of our services.
Marketing and Advertising
To promote the Take to Auction.com brand and to attract traffic and new
members, we currently employ "word-of-mouth" and targeted promotional marketing
efforts to attract new members. We intend to use a portion of the proceeds from
this offering to expand our marketing department and to target specific Web
users with traditional and web-based marketing programs.
We believe that "word-of-mouth" referrals, or viral dissemination, is
the most effective means to attract new members because referrals by existing
members lend credibility to our service and brand name by demonstrating to
potential members that other individuals have successfully used our service.
With the variety of online person-to-person trading services available today,
Web users have grown weary of the opportunities presented to them on the
Internet and may be reluctant to join online communities that promise
money-making opportunities. Further, we believe that we would impair the quality
of our service and the level of customer satisfaction if we embark on a
high-profile advertising campaign that generates attention in the short-term,
placing too great a burden on our existing infrastructure. We believe that we
can only achieve sustainable growth by proving to potential users that others
have benefited from our services and their experience was very satisfactory
through positive feedback on the online auctions. Likewise, we believe that the
marketing of our services to buyers of Take to Auction merchandise on online
auction sites will be effective because buyers know from experience that the
Take to Auction.com service works. Please see "Risk Factors - Unexpected
increases in traffic may stress our systems."
Customer Support
We will provide customer service and support. We will offer customer
support through a toll-free telephone number and an e-mail address which are
monitored by our staff from 9:00 a.m. to 5:00 p.m., from Monday through Friday.
Most customer support inquiries will be handled via e-mail, with customer
inquiries typically being answered within 24 hours after submission. We also
will offer an online tutorial for new Take to Auction.com users.
Operations and Technology
We are operating our first generation user interface and transaction
processing system that is based on internally-developed proprietary software.
Our system currently handles all aspects of the Take to Auction process
including notification of members via e-mail when they initially register for
the service, confirmation of the selection of the merchandise to take to
auction, registration of the item on an online auction site and notification to
our selling member and the buyer upon the successful completion of an auction.
The system maintains member registration information, billing accounts, current
auctions and historical listings. All data are regularly archived to a data
warehouse. Complete listings of all items for sale are generated on a daily
basis. The system sends electronic invoices to all buyers of merchandise sold by
our members via e-mail immediately after auction.
Our system has been designed around industry standard architectures and
has been designed to reduce downtime in the event of outages or catastrophic
occurrences. Our service is designed to be available 24 hours a day, seven days
a week, subject to a short maintenance period for a few hours during one night
per week. Our system hardware is hosted at a third party facility in Cary, North
Carolina, which provides redundant communications lines and emergency power
backup. Our system consists of one database running SQL relational database
management systems and a suite of Pentium-based Microsoft(Trademark) Internet
servers running on the Windows NT operating system. Our Internet servers also
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utilize VeriSign, Inc, and SSL digital certificates for authentication. We have
a load balancing system with redundant servers to provide for fault tolerance.
We signed a contract effective as of September 23, 1999 with
USInternetworking, or USi, a developer of Web sites, for the development of our
second generation user interface. We have scheduled the launch of this new
system for January 2000. The two main reasons for the upgrade of the system are
fault tolerance and scalability. We expect to reduce the probability of system
failure by being hosted on multiple Sun E250 servers in USi's Annapolis,
Maryland, enterprise data center with a load balancing system and redundant
backup systems in place. Due to the amount of data that must be stored and the
expected volume of transactions we expect to experience, we will replace our
current Microsoft SQL database server with Oracle's 8i database server which
will also allow for better scalability. We have chosen Broadvision for the
application interface, because of its robust and flexible qualities, which will
allow us to add useful features like targeted advertisement banners. We also
intend to use Netscape(Trademark) Enterprise Web servers running on UNIX Solaris
2.6 operating systems.
Purchasing and Inventory
Purchasing
Our management has an aggregate of over 90 years experience in sourcing
products for the resale market. Many of the items of merchandise posted at our
Web site will be purchased by us from several manufacturers and wholesalers in
the open market. Because the types of products listed on our Web site are
generally available from a large number of wholesalers and manufacturers, we
believe that we can leverage our management's purchasing expertise to obtain
better prices for these products by purchasing them in the open market.
Therefore, we have not entered, and do not expect to enter, into any medium- or
long-term supply agreements with any manufacturers or wholesalers of products.
Also, because of the broad array of products we intend to carry and since we do
not have a catalog, the need to carry specific items is minimal. If an item is
not readily available to us, we may choose to discontinue the item or suspend it
temporarily from our product offerings. We may, however, enter into strategic
alliances with some manufacturers from time to time to source unique merchandise
to be listed on our Web site. Please see "Certain Relationships - Exito
Enterprises Sourcing Arrangement."
Inventory
We believe that we will be able to maintain an adequate inventory of
merchandise, which we will purchase from wholesalers and suppliers in the open
market, to meet projected demand. Currently, our inventory will be maintained in
our warehouse in Miami, Florida. We believe that our inventory will be adequate
to meet the projected demand of our members and potential buyers. Effective
November 3, 1999, we entered into a six-month service agreement to outsource our
warehouse and distribution functions. This service agreement includes order
processing, inventory management, warehousing, fulfillment and shipping of
product. This agreement will automatically renew for successive one-year terms.
Product and Service Warranties
When buyers purchase our merchandise on online auction sites, we pass
on to these buyers the warranties made by the manufacturers of the merchandise.
We do not provide and assertively disclaim separate additional warranties.
Competition
We face competition from several companies that provide
person-to-person trading services and companies that generate revenues from
online advertising. We also may face competition from online auction sites that
may provide the Take to Auction service in the future. The market for
person-to-person trading over the Internet is new, rapidly evolving and
intensely competitive, and we expect competition to intensify further in the
future. Barriers to entry are relatively low, and current and new competitors
can
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launch new sites at a relatively low cost using commercially available software.
Our competitors include various online person-to-person auction services that
also serve as online clearing houses or sales and distribution channels and
auction sites for manufacturers and suppliers of a variety of products,
including First Auction(Trademark) (the auction site for Internet Shopping
Network, a wholly-owned subsidiary of the Home Shopping Network) and Ubid, Inc.,
an online auction site of surplus electronic and computer products. We also
compete with business-to-consumer online auction services such as Onsale and
Surplus Auction. We face competition from a number of large online communities
and services that have expertise in developing online commerce and in
facilitating online person-to-person interaction. Certain of these competitors,
including eBay(Service Mark), FairMarket(Service Mark), Amazon.com(Service
Mark), AOL(Service Mark), Microsoft(Service Mark) and Yahoo! (Service Mark),
currently offer a variety of business-to-consumer trading services and
classified ad services, and certain of these companies may introduce
person-to-person trading to their large user populations. Other large companies
with strong brand recognition and experience in online commerce, such as Cendant
Corporation, QVC and large newspaper or media companies may also seek to compete
in the online auction market. Competitive pressures created by any one of these
companies, or by our competitors collectively, could harm our business,
financial condition and results of operations.
We believe that the principal competitive factors in our market are
volume and selection of goods, population of buyers and sellers, community
cohesion and interaction, customer service, reliability of delivery and payment
by users, brand recognition, Web site convenience and accessibility, price,
quality of search tools and system reliability. Most of our current and
potential competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing,
technical and other resources than us. In addition, other online trading
services may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as the use of Internet and other online services increases. Therefore,
certain of our competitors may be able to devote greater resources to marketing
and promotional campaigns, adopt more aggressive pricing policies or may try to
attract traffic by offering services for free and devote substantially more
resources to Web site and systems development than us. Increased competition may
result in reduced operating margins, loss of market share and diminished value
in our brand. We may be unable to compete successfully against current and
future competitors. Further, as a strategic response to changes in the
competitive environment, we may, from time to time, make certain pricing,
service or marketing decisions or acquisitions that could harm our business,
financial condition and results of operations. New technologies and the
expansion of existing technologies may increase the competitive pressures on us
by enabling existing and potential competitors to offer a lower-cost service.
Certain Web-based applications that direct Internet traffic to certain Web sites
may channel users to trading services that compete with us. In addition,
companies that control access to transactions through network access or Web
browsers could promote our competitors or charge us substantial fees for
inclusion. Any and all of these events could harm our business, financial
condition and results of operations. Please see "Risk Factors - We face
competition from several person-to-person Web sites and from existing online
auction sites which may harm our business."
Intellectual Property
We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. We have also entered into confidentiality and invention
assignment agreements with our employees and contractors, and nondisclosure
agreements with our suppliers and strategic partners to limit access to and
disclosure of our proprietary information. These contractual arrangements or the
other steps taken by us to protect our intellectual property may be insufficient
to prevent misappropriation of our technology or to deter independent
third-party development of similar technologies. We pursue the registration of
our trademarks and service marks in the U.S. and internationally. We have
applied for a U.S. patent registration of our proprietary system for taking
merchandise to online auction sites. This patent may not be issued to us or, if
issued, may not provide us with all of the protections that we have sought. We
have also applied for the registration of the service marks "Take2Auction" and
"Take2Auction.com." Effective trademark, service mark, copyright and trade
secret protection may not be available in every country in which our services
are made available online.
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We may license in the future certain of our proprietary rights, such as
trademarks or copyrighted material, to third parties. We also rely on certain
technologies that we license from third parties, such as Microsoft, the
suppliers of key database technology, the operating system and specific hardware
components for the Take to Auction service.
Privacy Policy
We believe that issues relating to privacy and use of personal
information relating to Internet users are becoming increasingly important as
the Internet and its commercial use grow. We have adopted a detailed privacy
policy that outlines how we use information concerning our members and the
extent to which other registered members may have access to this information.
Members must acknowledge and agree to this policy when registering for the Take
to Auction service. We do not sell or rent any personally identifiable
information about our users to any third party. We use information about our
members for internal purposes only in order to improve our marketing and
promotional efforts, to statistically analyze site usage, and to improve
content, product offerings and site layout.
Government Regulation
Government regulation of communications and commerce on the Internet
varies greatly from country to country. Some countries, such as the United
States, have not adopted many laws and regulations to specifically regulate
online communications and commerce. Due to the increasing popularity and use of
the Internet and other online services, however, it is possible that a number of
laws and regulations may be adopted with respect to the Internet or other online
services covering issues such as user privacy, freedom of expression, pricing,
content and quality of products and services, taxation, advertising,
intellectual property rights, enforceability of contracts, and information
security. Because our services are accessible worldwide, and we facilitate sales
of goods to users worldwide, any jurisdiction in which our services can be
accessed or are used may seek to impose its laws on us and to enforce those laws
in proceedings in those countries, where we could be forced to defend ourselves.
Although sections of the Communications Decency Act of 1996, or CDA,
that, among other things, proposed to impose criminal penalties on anyone
distributing "indecent" material to minors over the Internet, were held to be
unconstitutional by the U.S. Supreme Court, other provisions of the CDA remain
in effect. Moreover, in an effort to remedy the deficiencies found by the
Supreme Court in the CDA, Congress passed the Child Online Protection Act, or
COPA. COPA is currently subject to court challenge, and we do not know whether
COPA will be upheld. Moreover, other laws on this subject have been and are
likely to continue to be proposed and enacted by the legislatures of the various
states. The nature of legislation on this subject and the manner in which it may
be interpreted and enforced cannot be fully determined and, therefore, such
legislation could subject us and/or our customers to potential liability, which
in turn could harm our business, financial condition and results of operations.
The adoption of any such laws or regulations might also decrease the rate of
growth of Internet use, which in turn could decrease the demand for our service
or increase the cost of doing business or in some other manner harm our
business, financial condition and results of operations. In addition,
applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy is uncertain. The vast majority of such laws were
adopted prior to the advent of the Internet and related technologies and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies.
Some countries have enacted laws or regulations that limit the use of
personal user information gathered online or require online services to
establish privacy policies. The European Union recently enacted its own privacy
regulations. Several U.S. states have also proposed legislation that would
impose such limits. The Federal Trade Commission has also initiated action
against at least one online service regarding the manner in which personal
information is collected from users and provided to third parties. Changes to
existing laws or the passage of new laws intended to address these issues,
including some recently proposed changes, could create uncertainty in the
marketplace that could reduce demand for our services or increase the cost of
doing business as a result of litigation costs or increased service
31
<PAGE>
delivery costs, or could in some other manner harm our business, financial
condition and results of operations.
In addition, because our services are accessible worldwide and we
facilitate sales of goods to users worldwide, other jurisdictions may claim that
we are required to qualify to do business as a foreign corporation in a
particular state or foreign country. We are qualified to do business in one
state in the United States. Our failure to qualify as a foreign corporation in a
jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in our inability to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to our business could harm our business, financial condition and
results of operations.
Several telecommunications companies have asked the U.S. Federal
Communications Commission to regulate Internet service providers and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees and universal service obligations on these companies.
Imposition of such fees or obligations could increase the cost of transmitting
data over the Internet, which would reduce Internet usage and harm our business,
financial condition and results of operations.
In addition, numerous states, including the State of California, have
regulations regarding the manner in which "auctions" may be conducted and the
liability of "auctioneers" in conducting such auctions. We do not believe that
such regulations, which were adopted prior to the advent of the Internet, govern
the operations of our business nor have any claims been filed by any state
implying that we are subject to such legislation. However, a state may attempt
to impose these regulations upon us in the future and this imposition may harm
our business, financial condition and results of operations. Please see "Risk
Factors - Governmental regulation and legal uncertainties relating to the Web
could increase our costs of transmitting data and increase our legal and
regulatory expenditures and could decrease our membership base."
Employees
As of October 31, 1999, we had eight employees, including our President
and Chief Executive Officer, Chief Financial Officer, Chief Technology Officer
and two executive officers in charge of marketing and merchandising,
respectively. We have never had a work stoppage, and no employees are
represented under collective bargaining agreements. We consider our relations
with our employees to be good. Please see "Management - Employment
Arrangements."
Facilities
Our principal administrative, marketing and product development
facilities are located in approximately 2,000 square feet of leased office space
in Miami, Florida. Currently, we are lessees under a one year lease expiring in
August 2000. We have an option to terminate the lease after February __, 2000.
Our monthly lease payment during the initial term of this lease is approximately
$2,000. The lease provides for automatic and successive renewal terms of equal
duration. We believe that our current facilities will be adequate to meet our
current needs.
Legal Proceedings
We are not a party to any legal proceedings.
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<PAGE>
Management
Executive Officers and Directors
The following table sets forth certain information regarding our
executive officers and directors.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ilia Lekach....................... 50 Chairman of the Board of Directors and Class II Director
Horacio Groisman.................. 46 Vice-Chairman of the Board of Directors and Class III Director
Albert Friedman................... 26 President, Chief Executive Officer and Class III Director
Mitchell Morgan................... 29 Vice-President, Chief Financial Officer and Class II Director
Jonathan Geller................... 23 Chief Technology Officer and Class I Director
Lucien Lallouz.................... 54 Executive Vice President of Marketing
Hugo Calemczuk.................... 48 Senior Vice President of Merchandising and Class I Director
Garrick Hileman................... 26 Class I Director
</TABLE>
Each director will hold office until their term expires and until his
or her successor at an annual meeting of shareholders is elected and qualified
or until his or her earlier resignation or removal. Each officer serves at the
discretion of the board of directors.
Ilia Lekach has been our chairman of the board and a Class II director
since October 1999. Mr. Lekach is a co-founder of Perfumania, Inc. and was
Perfumania, Inc.'s chairman of the board and chief executive officer from its
incorporation in 1988 until his resignation in April 1994. In October 1998, Mr.
Lekach was reappointed Perfumania, Inc.'s chairman of the board and chief
executive officer. Mr. Lekach served as chairman of the board of L. Luria & Son,
Inc., a South Florida-based catalog retailer from January 1997 through August
1997. Mr. Lekach also serves as chairman of the board and chief executive
officer of Parlux Fragrances, Inc., a publicly traded manufacturer of fragrance
and related products since 1990.
In August 1996 ORM Inc., and its affiliates, of which Mr. Lekach is a
principal, purchased a controlling interest in L. Luria & Son, Inc., a catalog
retailer with serious financial problems. On August 13, 1997, L. Luria & Son,
Inc. filed for relief under Chapter 11 of the Bankruptcy Code and has since been
liquidated.
Dr. Horacio Groisman served as our chairman of the board of directors
from August 1999 until October 1999 and has been a Class III director since
August 1999. Since October 1999, Dr. Groisman has served as vice-chairman of our
board of directors. Dr. Groisman has been a practicing physician since 1984,
after having received specialty training at Georgetown University. Since June
1994, Dr. Groisman has been President of Otolaryngology, Head and Neck
Associates, in Miami, Florida. From January 1997 to December 1997, Dr. Groisman
was President and Chief of Staff of Cedars Medical Center in Miami, Florida.
Since January 1991, Dr. Groisman has been Chief of Services at Cedars Medical
Center. In addition, Dr. Groisman has been a director of Perfumania, Inc. since
March 1999.
Albert Friedman has been our president and chief executive officer and
a director since July 1999 and a Class III director since August 1999. Prior to
joining us, Mr. Friedman served as chief operating officer, interim chief
financial officer and director of Perfumania.com from its inception in January
1999 until June 1999. From April 1998 until January 1999, Mr. Friedman was
president of Corporate Communications Solutions, Inc., an investment banking
firm. From January 1997 until April 1998, Mr. Friedman was executive vice
president and chief financial officer of L. Luria & Son, Inc., a catalog
showroom, where Mr. Friedman also served as a director. From June 1996 to
December 1996, Mr. Friedman served as an analyst for ORM, Inc., an
investment-banking boutique. From June 1994 to
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<PAGE>
June 1996, Mr. Friedman was Vice President of Art and Precision, Inc., a
manufacturer and distributor of fine jewelry.
On August 13, 1997, L. Luria & Son, Inc. filed for relief under Chapter
11 of the Bankruptcy Code and was liquidated. Mr. Friedman was the senior
officer in charge of managing the liquidation process of L. Luria & Son, Inc.
Mitchell Morgan has been our vice-president, chief financial officer
and a Class II director since August 1999. From January 1994 to August 1999, Mr.
Morgan held various positions in PriceWaterhouseCoopers, LLP, most recently as
business assurance manager. Mr. Morgan holds a degree in accounting from the
University of Florida. Mr. Morgan is a Certified Public Accountant.
Jonathan Geller has been our chief technology officer and a Class I
director since October 1999. From January 1998 until September 1999, Mr. Geller
was co-founder of Jackpot S.A, Lima Peru, a privately owned company specializing
in the development of Web pages, providing high bandwidth Internet connections
and custom Web applications, where he served as chief executive officer. From
May 1995 to August 1995, in addition to his several internships, Mr. Geller
co-founded Serious Fun, Inc., an online casino Web site that he designed. From
January 1994 until December 1997, Mr. Geller attended college at North Carolina
State University where he graduated with a degree in Industrial Engineering.
Lucien Lallouz has been our executive vice president of marketing since
July 1999. From June 1994 until May 1999, Mr. Lallouz was vice president of
marketing of Modern Art Cafe, an art-themed restaurant. From 1992 to 1994, Mr.
Lallouz was the director of marketing and licensing for the Piccasso Estate and
SPADEM, a company that retains certain intellectual property rights of French
artists. From 1985 until 1992, Mr. Lallouz was director of marketing and
licensing for Creative Fragrances, Inc. From 1980 until 1985, Mr. Lallouz was
director of marketing and licensing for Pierre Cardin's Maxim de Paris brand.
Hugo Calemczuk has been our senior vice president of merchandising and
a Class I director since August 1999. Mr. Calemczuk has been President of Exito
Enterprises, a distributor of watches and electronics, since its founding in
1987. From 1984 to 1987, Mr. Calemczuk was President of Levimar, a distributor
of duty-free merchandise, including watches, jewelry, perfumes, electronics and
collectibles.
Garrick Hileman has been a Class I director of our company since
November 1999. Mr. Hileman has been a director of ZeroDotNet since September
1999. ZeroDotNet is an Internet venture capital firm based in San Francisco,
California. Mr. Hileman specializes in business development, start-up financing,
merger and acquisition analysis and management at ZeroDotNet. From August 1996
until August 1999, he was employed at Montgomery Securities where he worked both
in the financial services group, as a corporate financial analyst, and in the
financial services equity research area. He received his B.A. in Business
Administration from the University of Washington in 1996.
Classified Board of Directors
Our board of directors is divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
board of directors will be elected each year. These provisions, together with
provisions of our amended and restated articles of incorporation and bylaws,
allow the board of directors to fill vacancies or increase the size of the board
of directors, and may deter or hinder a shareholder from removing incumbent
directors and filling such vacancies with its own nominees in order to gain
control of the board.
Our board has resolved that Mr. Hugo Calemczuk, Jonathan Geller and
Garrick Hileman will serve as Class I Directors whose terms expire at the 2000
annual meeting of shareholders. Mr. Lekach and Mr. Morgan will serve as Class II
directors whose terms expire at the 2001 annual meeting of shareholders. Mr.
Friedman and Dr. Groisman will serve as Class III directors whose terms expire
at the 2002 annual meeting of shareholders.
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<PAGE>
Board Committees
The audit committee of our board of directors consists of ___________
and _________. The audit committee reviews our financial statements and
accounting practices, makes recommendations to the board of directors regarding
the selection of independent auditors and reviews the results and scope of the
audit and other services provided by our independent auditors. The compensation
committee of our board of directors consists of _____________ and Dr. Horacio
Groisman. The compensation committee makes recommendations to the board of
directors concerning salaries and incentive compensation for our officers and
employees and administers our employee benefit plans. As of the date of this
prospectus, our board of directors has performed all functions of the
compensation and audit committees.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee of the board of
directors was at any time since our formation an officer or employee of ours.
Ilia Lekach, our chairman of the board of directors, and Horacio Groisman, our
vice-chairman of the board of directors, serve as members of the board of
directors of Perfumania, Inc. There is no business relationship between us and
Perfumania, Inc.
Director Compensation
Our independent directors receive cash compensation in the amount of
$2,500 and options to purchase 1,500 common shares per year for their services
as directors, and are reimbursed for their reasonable expenses for attending our
board of directors and board committee meetings. Directors compensation is paid
at the end of each year.
Employment Arrangements
In August 1999, each of Messrs. Albert Friedman, President, Chief
Executive Officer and director, Mitchell Morgan, Vice President, Chief Financial
Officer and director, Hugo Calemczuk, Senior Vice-President of Merchandising and
director, and Lucien Lallouz, Executive Vice-President of Marketing, entered
into executive employment agreements with Take to Auction.com. Each agreement
has a term of three years unless terminated earlier for cause, death, disability
or upon a change in control of Take to Auction.com. Mr. Friedman and Mr.
Lallouz' agreements provide for an initial base salary of $125,000. Mr. Morgan's
agreement provides for an initial base salary of $120,000. Mr. Calemczuk's
agreement provides for an initial base salary of $60,000. The above salaries are
subject to annual increases equal to the greater of 5% or the annual increase in
the consumer price index plus other annual increases, if any, as determined by
the Compensation Committee in its sole discretion. In addition, Mr. Friedman,
Mr. Lallouz, Mr. Calemczuk and Mr. Morgan were granted non-qualified stock
options to purchase 174,490, 174,490, 174,490 and 145,408 common shares,
respectively, one third of which vest on each of the first, second and third
anniversaries of the agreements.
In October 1999, Jonathan Geller, our chief technology officer, entered
into an executive employment agreement with Take to Auction.com. The agreement
has a term of three years and provides for an initial base salary of $120,000
subject to annual increases equal to the greater of 5% or the annual increase in
the consumer price index. In addition, Mr. Geller was granted non-qualified
stock options to purchase 162,857 common shares, one third of which vest on each
of the first, second and third anniversaries of the agreement.
In the event any of these individuals terminate the agreement (i)
within 180 days from the date a person acquires the beneficial ownership of 20
percent or more of the then outstanding common shares or 20 percent or more of
the voting power, or (ii) pursuant to certain transactions (including a merger
or a sale of substantially all the assets) approved by the shareholders, they
will be entitled to receive severance compensation in the amount of 200 percent
of their annual base salary.
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<PAGE>
Executive Compensation
We commenced operations in June 1999, and no individual employed by us,
including our President and Chief Executive officer, has been awarded, paid or
earned salary and bonus in excess of $100,000 since our inception. From July 31,
1999 through October 31, 1999, our President and Chief Executive Officer has
earned approximately $31,000 from us.
Option Grants from June 2, 1999 to October 31, 1999
The following table sets forth grants of stock options to our president
and chief executive officer and our four most highly compensated executive
officers, other than our president and chief executive officer, from inception
to October 31, 1999. We have never granted any stock appreciation rights. The
weighted average exercise price of each option is equal to $0.41 per share. The
potential realizable value is calculated based upon the term of the option at
its time of grant (seven years). It is calculated assuming that the value of
common shares on the date of our initial public offering appreciates at the
indicated annual rate compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for the
appreciated stock price. These numbers are calculated based on the requirements
of the Securities and Exchange Commission and do not reflect our estimate of
future stock price growth.
<TABLE>
<CAPTION>
Option Grants
------------------------------------------------------------------- Potential Realizable
Percentage of Value at Assumed Annual
Number of Total Options Rates of Stock Price
Securities Granted to Appreciation for Option
Underlying Employees in Exercise Price Term (1) (2)
Options Fiscal Year per Share Expiration ------------------------
Name Granted (#) (%)(1) ($/Sh) Date 5%($) 10%($)
- ---- ----------- ------ ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Albert Friedman 174,490 20.98% $0.41 08/01/06 $100,256 $138,846
Mitchell Morgan 145,408 17.48 0.41 08/01/06 83,547 115,705
Lucien Lallouz 174,490 20.98 0.41 08/01/06 100,256 138,846
Hugo Calemczuk 174,490 20.98 0.41 08/01/06 100,256 138,846
Jonathan Geller 162,857 19.58 0.41 10/01/06 93,572 129,590
</TABLE>
(1) Potential realizable value is based on the assumption that the common share
price appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the option term. The amounts have been
calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, a named Executive Officer
may realize will depend on the excess of the shares on the date of
exercise.) Accordingly, there is no assurance that the value realized will
be at or near the potential realizable value as calculated in the table
(2) These options have a term of seven years from the date of grant.
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<PAGE>
The following table provides certain summary information concerning
stock options held as of October 31, 1999 by our President and Chief Executive
Officer and our four most highly compensated executive officers, other than our
President and Chief Executive Officer. No options have been exercised as of
October 31, 1999 by any of the officers. The value of unexercised in-the-money
options at October 31, 1999 is based on the value of the common shares at the
date of this offering.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Name Options at October 31, 1999 (#) October 31, 1999
- ---- ------------------------------- ----------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Albert Friedman 0 174,490 --- ---
Mitchell Morgan 0 145,408 --- ---
Lucien Lallouz 0 174,490 --- ---
Hugo Calemczuk 0 174,490 --- ---
Jonathan Geller 0 162,857 --- ---
</TABLE>
Employee Benefit Plans
1999 Stock Option Plan
In August 1999, the Board adopted the 1999 Stock Option Plan, or Option
Plan. At that time, 2,442,857 common shares were reserved for issuance under the
Option Plan. Shares covered by any option granted under the Option Plan which
expires unexercised become available again for grant under the Option Plan. As
of October 31, 1999, options to purchase 1,006,225 common shares were
outstanding with a weighted average exercise price of $0.41 per share, and
1,436,632 shares were available for future grants.
SIMPLE IRA Plan
We sponsor the Take to Auction.com, Inc. SIMPLE IRA Plan, a defined
contribution plan provided pursuant to the requirements of the Internal Revenue
Code of 1986, as amended. All employees eligible to participate may enter the
SIMPLE IRA Plan as of the first day of any month. Participants may make pre-tax
contributions to the SIMPLE IRA Plan subject to a statutorily prescribed annual
limit. We will make matching contributions, not to exceed 3% of a participant's
annual compensation, to the SIMPLE IRA Plan. Each participant is fully vested in
their account, including the participant's contributions, our matching
contribution and the investment earnings thereon. Contributions by the
participants or by us to the SIMPLE IRA Plan, and the income earned on such
contributions, are generally not taxable to the participants until withdrawn.
Contributions by us are generally deductible by us when made. The participant's
and our contributions are held in an IRA. We have not made any matching
contributions to the SIMPLE IRA Plan as of October 31, 1999.
Indemnification of Officers and Directors
Section 607.0850 of the Florida Business Corporation Act, or FBCA,
permits, in general, a Florida corporation to indemnify any person who was or is
a party to any action or proceeding by reason of the fact that he or she was a
director or officer of the corporation, or served another entity in any capacity
at the request of the corporation, against liability incurred in connection with
such proceeding including the estimated expenses of litigating the proceeding to
conclusion and the expenses actually and reasonably
37
<PAGE>
incurred in connection with the defense or settlement of such proceeding,
including any appeal thereof, if such person acted in good faith for a purpose
he or she reasonably believed to be in, or not opposed to, the best interest of
the corporation and, in criminal actions or proceedings, additionally had no
reasonable cause to believe that his or her conduct was unlawful. Section
607.0850(6) of the FBCA permits the corporation to pay such costs or expenses in
advance of a final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount as
and to the extent required by statute. Section 607.0850 of the FBCA provides
that the indemnification and advancement of expense provisions contained in the
FBCA shall not be deemed exclusive of any rights to which a director or officer
seeking indemnification or advancement of expenses may be entitled.
Our amended and restated articles of incorporation provide, in general,
that we shall indemnify, to the fullest extent permitted by Section 607.0850 of
the FBCA, any and all persons whom it shall have the power to indemnify under
that section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said section. Our amended and restated
articles of incorporation also provide that the indemnification provided for
therein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions taken in his or her
official capacity and as to acts in another capacity while holding such office.
In accordance with that provision of our amended and restated articles
of incorporation, we shall indemnify any officer or director (including officers
and directors serving another corporation, partnership, joint venture, trust, or
other enterprise in any capacity at our request) made, or threatened to be made,
a party to an action or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he or she was serving in any of those
capacities against judgments, fines, amounts paid in settlement and reasonable
expenses (including attorney's fees) incurred as a result of such action or
proceeding. Indemnification would not be available if a judgment or other final
adjudication adverse to such director or officer establishes that (i) his or her
acts were committed in bad faith or were the result of active and deliberate
dishonesty or (ii) he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled.
Prior to the completion of this offering, we intend to enter into
indemnification agreements with each of our current directors and officers to
give these directors and officers additional contractual assurances regarding
the scope of the indemnification set forth in our amended and restated articles
of incorporation and bylaws and to provide additional procedural protections. At
present, there is no pending litigation or proceeding involving a director,
officer or employee of Take to Auction.com regarding which indemnification is
sought, nor are we aware of any threatened litigation that may result in claims
for indemnification.
With approval of our board of directors, upon completion of this
offering we expect to obtain directors' and officers' liability insurance.
38
<PAGE>
Certain Transactions
Since our inception in June 1999, there has not been nor is there
currently proposed any transaction or series of similar transactions to which we
were or are to be a party in which the amount involved exceeds $60,000 and in
which any director, executive officer or holder of more than 5% of our common
shares had or will have a direct or indirect interest other than (i)
compensation arrangements, which are described where required under "Management"
and (ii) the transactions described below.
Sales of Securities
Since our inception, we have made the following sales of our common
shares to our officers, directors and beneficial owners of 5% or more of all
outstanding common shares that were not registered under the Securities Act. The
common shares issued and listed hereunder were split on a 1,000-to-1 basis on
August 26, 1999 and split on a 2.326530644-for-1 basis on November 3, 1999.
On August 26, 1999, we sold an aggregate of 6,999 common shares under
Rule 506, Regulation D, promulgated under the Securities Act, at a purchase
price of $142.86 per share to certain sophisticated and accredited investors,
including the following officers, directors and beneficial owners of 5% or more
of our issued and outstanding common shares, at a price of $142.86 per common
share: (i) Dr. Groisman purchased 700 shares; (ii) Mr. Friedman purchased 489
shares; (iii) Mr. Calemczuk purchased 490 shares; (iv) Pacific Investments, a
company owned by Mr. Ilia Lekach, purchased 1,960 common shares and (v)
Magdalena Zafir purchased 700 common shares. Messrs. Groisman and Calemczuk have
served as directors of Take to Auction.com since August 1999. Mr. Friedman has
been our President, Chief Executive Officer and director since July 1999. Mr.
Calemczuk has been our Senior Vice-President of Merchandising since August 1999.
The common shares issued under the private placement were split on a 1,000-for-1
basis on August 26, 1999 and split on a 2.326530644-for-1 basis on November 3,
1999.
Stock Options Issued to Directors and Officers
On August 25, 1999, Messrs. Friedman, Lallouz and Calemczuk, were
awarded options to purchase 174,490 common shares each pursuant to employment
agreements with Take to Auction.com. On August 25, 1999, Mr. Groisman was
awarded options to purchase 174,490 common shares. On August 25, 1999, Mr.
Mitchell Morgan, our Vice-President and Chief Financial Officer was awarded
options to purchase 145,408 common shares. On October 1, 1999, Mr. Jonathan
Geller, our Chief Technology Officer was awarded options to purchase 162,857
common shares. All options issued to the above named officers and directors have
a weighted average exercise price of $0.41 per share. All of such options vest
equally over a three year period commencing one year from the date they were
granted.
Exito Enterprises Sourcing Arrangement
From time to time, we purchase merchandise from Exito Enterprises or
Exito, a distributor of watches and electronics. Hugo Calemczuk, our senior
vice-president of merchandising and a director, is the president and majority
shareholder of Exito. Although we have purchased approximately $18,600 of
merchandise from Exito as of October 31, 1999, we intend to purchase more items
of merchandise from Exito in the future if the terms and conditions of such
proposed purchases are acceptable to us. All purchases from Exito are made in
the open market and all such transactions are at "arms-length" on terms and at
prices we could readily get elsewhere.
Employment agreements between us and our officers and directors
Pursuant to employment agreements between Take to Auction.com and each
of Messers. Friedman, Morgan, Calemczuk, Lallouz and Geller, our executive
officers and directors, we have agreed
39
<PAGE>
to pay an initial annual base salary to them in the amount of $125,000,
$120,000, $60,000, $125,000 and $120,000, respectively.
40
<PAGE>
Principal Shareholders
The following table sets forth certain information known to us with
respect to the beneficial ownership of our common shares as of October 31, 1999
by (i) each shareholder known by us to be the beneficial owner of more than 5%
of our common shares, (ii) each director of Take to Auction.com and (iii) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
Common Shares Beneficially Common Shares Beneficially
Owned Before the Owned After
Offering(2) the Offering(2)
----------- ---------------
Name of Beneficial Owner (1) Number Percentage(3) Number Percentage(3)
- ---------------------------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C>
Horacio Groisman (3) 1,628,571 9.05% 1,628,571 8.14%
Albert Friedman (3) 1,140,000 6.33% 1,140,000 5.70%
Mitchell H. Morgan (4) 0 (*) 0 (*)
Hugo Calemczuk (3) 1,140,000 6.33% 1,140,000 5.70%
Magdalena Zafir 1,628,571 9.05% 1,628,571 8.14%
Pacific Investments (5) 4,560,000 25.33% 4,560,000 22.80%
Jonathan Geller (6) 0 (*) 0 (*)
Executive Officers and directors as a 8,468,572 47.05% 8,468,572 42.34%
group (7 persons)
</TABLE>
- -------------
* Represents beneficial ownership of less than 1%.
(1) Unless otherwise noted, the address of each shareholder is our address,
which is 2335 N.W. 107th Avenue Suite 2M-23, Miami, Florida 33172.
(2) Percentage of ownership is based on 18,000,000 shares outstanding as of
October 31, 1999 prior to the offering and 20,000,000 shares after the
offering. Common shares subject to options currently exercisable or
exercisable within 60 days of October 31, 1999 are deemed outstanding for
the purpose of computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
ownership of any other person. No options issued by us to date are
exercisable within 60 days of October 31, 1999. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
(3) Does not include options to purchase 174,890 shares granted to each of
Messrs. Groisman, Friedman and Calemczuk on August 25, 1999, one third of
which vest on the first, second and third anniversary of the date of grant.
(4) Does not include options to purchase 145,408 common shares, granted to Mr.
Morgan on August 25, 1999, one third of which vest on the first, second and
third anniversary of the date of grant.
(5) The address of this shareholder is 2335 NW 107th Avenue 2M-23, Miami,
Florida 33172. Ilia Lekach, our Chairman of the Board of Directors, owns
100 percent of the issued and outstanding shares of common stock of Pacific
Investments.
(6) Does not include options to purchase 162,857 common shares, granted to Mr.
Geller on October 1, 1999, one third of which vest on the first, second and
third anniversary of the date of grant.
41
<PAGE>
Description Of Capital Stock
Our authorized capital stock consists of 50 million common shares,
$0.001 par value per share, and 10 million preferred shares, $0.001 par value
per share. As of October 31, 1999, there were outstanding 18,000,000 common
shares held of record by 27 shareholders and options to purchase 1,006,225
common shares. As of October 31, 1999, there were no issued and outstanding
preferred shares.
Common Shares
Subject to preferences that may apply to preferred shares outstanding
at the time, the holders of our outstanding common shares are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as the board of directors may from time to time determine. Each
shareholder is entitled to one vote for each common share held on all matters
submitted to a vote of shareholders. Cumulative voting for the election of
directors is not provided for in our amended and restated articles of
incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The holders of common
shares are not entitled to preemptive rights and are not subject to conversion
or redemption. Upon a liquidation, dissolution or winding-up of Take to
Auction.com, the assets legally available for distribution to shareholders are
distributable ratably among the holders of the common shares and any
participating preferred shares outstanding at that time after payment of
liquidation preferences, if any, on any outstanding preferred shares and payment
of other claims of creditors. Each outstanding common share is, and all common
shares to be outstanding upon completion of this offering will be, fully paid
and nonassessable.
Preferred Shares
We are authorized to provide for the issuance of preferred shares in
one or more series, to establish from time to time the number of shares to be
included in each such series, to fix the rights, preferences and privileges of
the shares of each wholly unissued series and any qualifications, limitations or
restrictions thereon, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the shareholders. Our board of directors
may authorize the issuance of preferred shares with voting or conversion rights
that could significantly affect your voting power or your other rights. The
issuance of preferred shares, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of Take
to Auction.com and may harm the market price of the common shares and the voting
and other rights of the holders of common shares. We have no current plans to
issue any preferred shares.
Certain Anti-Takeover Effects of Certain Provisions of Florida law and the Take
to Auction.com's Amended and Restated Articles of Incorporation and Bylaws
Provisions
Some provisions of Florida law and of our amended and restated articles
of incorporation and amended and restated bylaws, which provisions are
summarized in the following paragraphs, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
shareholder might consider it in its best interest, including those attempts
that might result in a premium over the market price for the shares held by
shareholders.
Classified Board of Directors
According to our amended and restated articles of incorporation and
amended and restated bylaws, our board of directors is divided into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the board of directors will be elected each year.
These provisions, when coupled with the provision authorizing the board of
directors to fill vacant directorships or increase the size of the board of
directors, may deter a shareholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by such removal with its own nominees.
42
<PAGE>
Authorized But Unissued Shares
The authorized but unissued common shares and preferred stock are
available for future issuance without shareholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued common shares
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. Such attempts may have resulted in a premium over the market price
for the shares held by shareholders.
Anti-Takeover Provisions under Florida law
We are subject to several anti-takeover provisions under Florida law
that apply to public corporations organized under Florida law unless the
corporation has elected to opt out of those provisions in its articles of
incorporation or its bylaws. We have not elected to opt out of these provisions.
The FBCA prohibits the voting of shares in a publicly held Florida
corporation that are acquired in a "control share acquisition" unless the board
of directors approves the control share acquisition or the holders of a majority
of the corporation's voting shares approve the granting of voting rights to the
acquiring party. A "control share acquisition" is defined as an acquisition that
immediately thereafter entitles the acquiring party, directly or indirectly, to
vote in the election of directors within any of the following ranges of voting
power:
o 1/5 or more but less than 1/3;
o 1/3 or more but less than a majority;
o a majority or more; or
o There are some exceptions to the "control share acquisition"
rules.
The FBCA also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless:
o the transaction is approved by a majority of disinterested
directors before the person becomes an interested shareholder;
o the corporation has not had more than 300 stockholders of record
during the past three years;
o the interested shareholder has owned at least 80% of the
corporation's outstanding voting shares for at least five years;
o the interested shareholder is the beneficial owner of at least
90% of the voting shares (excluding shares acquired directly from
the corporation in a transaction not approved by a majority of
the disinterested directors);
o consideration is paid to the holders of the corporation's shares
equal to the highest amount per share paid by the interested
shareholder for the acquisition of the corporation's shares in
the last two years or the fair market value of the shares, and
other specified conditions are met; or
o the transaction is approved by the holders of two-thirds of the
company's voting shares other than those owned by the interested
shareholder.
An "interested shareholder" is defined as a person who, together with
affiliates and associates, beneficially owns more than 10% of a company's
outstanding voting shares. The FBCA defines "beneficial ownership" in more
detail.
43
<PAGE>
Transfer Agent And Registrar
The Transfer Agent and Registrar for our common shares is American
Stock Transfer & Trust Company. Its address is 40 Wall Street, New York, New
York 10005, and its telephone number is (212) 936-5100.
Listing
We have applied to list our common shares on the Nasdaq National Market
under the trading symbol "TTAI".
44
<PAGE>
Shares Eligible For Future Sale
Prior to this offering, there has been no market for our common shares,
and therefore a significant public market for the common shares may not develop
or be sustained after this offering. Future sales of substantial amounts of
common shares (including shares issued upon exercise of outstanding options) in
the public market after this offering could harm market prices prevailing from
time to time and could impair our ability to raise additional capital through
the sale of our equity securities. As described below, no shares currently
outstanding will be available for sale immediately after this offering due to
certain contractual and other restrictions on resale.
Upon completion of this offering, we will have outstanding 20,000,000
common shares, assuming no exercise of the outstanding options. Of these shares,
the 2,000,000 shares sold in this offering will be freely tradable without
restriction under the Securities Act unless purchased by "affiliates" of Take to
Auction.com as that term is defined in Rule 144 under the Securities Act. The
remaining shares held by existing shareholders are subject to lock-up agreements
generally providing that, with certain limited exceptions, the shareholder will
not (i) offer to sell, sell, contract to sell, pledge or otherwise dispose of
any common shares owned of record or beneficially prior to the offering or any
securities convertible into or exchangeable for such common shares, (ii)
establish a "put equivalent position" with respect to such common shares within
the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as
amended, or (iii) publicly announce an intention to take any of the actions set
forth in (i) or (ii) for a period of 180 days following the date of the final
prospectus for this offering. As a result of these lock-up agreements,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144 and 144(k), none of these shares will be saleable until 180 days after
the date of the final prospectus. Beginning 180 days after the date of the final
prospectus, _________ of these shares will be eligible for sale in the public
market, although a portion of such shares will be subject to certain volume
limitations pursuant to Rule 144. The 18,000,000 restricted shares will become
eligible for sale from time to time thereafter upon expiration of applicable
holding periods under Rule 144 under the Securities Act and our right to
repurchase unvested shares.
In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares for at least one year
(nobody in our case has held shares for more than one year) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of (i) 1% of the number of common shares then outstanding (which will
equal approximately shares immediately after this offering) or (ii) the average
weekly trading volume of the common shares during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about Take to
Auction.com. Under Rule 144(k), a person who is not deemed to have been an
affiliate of Take to Auction.com at any time during the three months preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
two years, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Immediately after this offering, we intend to file a registration
statement under the Securities Act covering common shares subject to outstanding
options under the Option Plan. Based on the number of shares subject to
outstanding options at October 31, 1999 and currently reserved for issuance
under all such plans, such registration statement would cover approximately
2,442,857 shares. This registration statement will automatically become
effective upon filing. Accordingly, shares registered under such registration
statement will be available for sale in the open market immediately after the
180-day lock-up agreements expire. Also beginning six months after the date of
this offering, certain holders of common shares will be entitled to certain
rights with respect to registration of such common shares for offer and sale to
the public. See "Description of Capital Stock--Registration Rights."
45
<PAGE>
Plan of Distribution
We are offering a maximum of 2,000,000 of our common shares through our
officers and directors on a "best-efforts" basis. This offering will end upon
the earliest of the sale of all the shares of common stock, twelve months after
the date of this prospectus (unless extended) or the date on which we decide to
close the offering.
This offering will be managed by us without any underwriter. Our
officers and directors will receive no sales commissions or other compensation,
except for reimbursement of expenses actually incurred for such activities. In
connection with their efforts, they will rely on the safe harbor provisions of
the Securities and Exchange Act of 1934. Generally speaking, this rule provides
an exemption from the broker-dealer registration requirements of the Securities
and Exchange Act of 1934 for associated persons of an issuer. Our officers and
directors will use their best efforts to find purchasers for the common shares.
Investors should be aware that while this offering is being conducted
through our officers and directors, we retain the right to utilize the services
of broker-dealers who are members of the National Association of Securities
Dealers, Inc., or NASD. We reserve the right to pay commissions for sales made
by broker-dealers in an amount not to exceed 10% of the sales price. Before the
involvement of any broker-dealers in the offering, we must obtain a no objection
position from the NASD for any compensation arrangements. Any broker-dealers
that sell securities in this offering may be deemed an underwriter as defined in
Section 2(11) of the Securities Act. We will amend the prospectus and the
registration statement of which it is a part to identify any selected
broker-dealers at such time as such broker-dealers sells 5% or more of the
offering.
Penny Stock Rules
Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq system, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules.
Since we are offering the common shares without the participation of an
underwriter, our offering price of between $10.00 and $12.00 per share has not
been determined by negotiation with an underwriter, as is customary in most
offerings, and instead has been set arbitrarily by us. Investors are therefore
subject to an increased risk that the price of the common shares which have been
arrived at arbitrarily is not an indication of our value or net worth.
46
<PAGE>
Legal Matters
The validity of the issuance of the common shares offered hereby will
be passed upon for us by Baker & McKenzie, Miami, Florida.
Experts
The financial statements included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to our ability to continue as a going concern),
and have been so included in reliance upon the report of such firm given upon
their authority 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 under the Securities Act with respect to the
common shares offered hereby. This prospectus does not contain all of the
information set forth in the registration statement and accompanying exhibits
and schedule. For further information with respect to us and our common shares,
we refer you to the registration statement and the accompanying exhibits and
schedule. Statements contained in this prospectus regarding the contents of any
contract or any other document to which we refer are not necessarily complete.
In each instance, we refer you to the copy of such contract or other document
filed as an exhibit to the registration statement, and each statement is
qualified in all respects by that reference. Copies of the registration
statement and the accompanying exhibits and schedule may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C. or obtained at prescribed rates from the Public Reference
Section of the Securities and Exchange Commission, at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Securities and Exchange Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants, such as us, that file electronically with the
Securities and Exchange Commission. The address of this Web site is http:
//www.sec.gov.
47
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Balance Sheet as of July 31, 1999......................................................................... F-3
Statement of Operations for the period from June 2, 1999
(date of inception) through July 31, 1999.............................................................. F-4
Statement of Changes in Shareholders' Equity for the period from June 2, 1999
(date of inception) through July 31, 1999.............................................................. F-5
Statement of Cash Flows for the period from June 2, 1999
(date of inception) through July 31, 1999.............................................................. F-6
Notes to Financial Statements............................................................................. F-7
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and
Shareholders of Take to Auction.com, Inc.
We have audited the accompanying balance sheet of Take to Auction.com, Inc. (a
development stage enterprise), (the "Company") as of July 31, 1999 and the
related statements of operations, changes in shareholders' equity and cash flows
for the period from June 2, 1999 (date of inception) through July 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 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 audit provides 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 Take to Auction.com, Inc. (a
development stage enterprise) as of July 31, 1999, and the results of its
operations and its cash flows for the period from June 2, 1999 (date of
inception) through July 31, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a development stage
enterprise engaged in developing and marketing an internet-based community to
sell merchandise at online auction sites. As discussed in Note 2 to the
financial statements, the Company has incurred losses since inception, and its
ability to successfully complete its development program and, ultimately, obtain
profitable operations is dependent upon future events, including completing
product development, verifying market acceptance, achieving a level of
memberships adequate to support the Company's cost structure and obtaining
adequate financing to fulfill its development activities, which raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Deloitte & Touche LLP
Miami, Florida
August 26, 1999
(October 1, 1999 as to Note 5 and November 3, 1999 as to Note 7)
F-2
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Balance Sheet
July 31, 1999
-------------
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 52,493
Inventory ................................................... 3,916
---------
Total current assets ...................................... 56,409
Other assets ................................................ 54,295
---------
Total assets .............................................. $ 110,704
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ....................... $ 49,575
---------
Total current liabilities ............................... 49,575
Commitments and Contingencies (Note 5).........................
Shareholders' equity:
Preferred shares, $0.001 par value, 10 million shares
authorized, no shares issued and outstanding ............. --
Common shares $0.001 par value, 50 million shares
authorized, 1,382,171 shares issued and outstanding ..... 1,382
Additional paid-in capital .................................. 83,347
Accumulated deficit ......................................... (23,600)
---------
Total shareholders' equity ................................ 61,129
---------
Total liabilities and shareholders' equity ................ $ 110,704
=========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Statement of Operations
For the period from
June 2, 1999
(date of inception)
through
July 31, 1999
-------------
Operating expenses:
General and administrative expenses .................... $ 17,311
Web site development expenses .......................... 6,289
-----------
Total operating expenses ........................... 23,600
-----------
Net loss ................................................. $ (23,600)
===========
Basic and diluted loss per common share .................. $ (0.02)
===========
Weighted average number of common shares
outstanding ............................................ 1,382,171
===========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Statement of Changes in Shareholders' Equity
For the Period From June 2, 1999 (date of inception)
Through July 31, 1999
<TABLE>
<CAPTION>
Common shares Additional
------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 2, 1999 (date of
inception) .......................... 594 $ 1 $ 84,728 $ -- $ 84,729
Stock splits (see Note 7) ........... 1,381,577 1,381 (1,381) -- --
Net loss for the period from June 2,
1999 (date of inception) through July
31, 1999 ............................ -- -- -- (23,600) (23,600)
--------- --------- --------- --------- ---------
Balance at July 31, 1999 ............ 1,382,171 $ 1,382 $ 83,347 $(23,600) $ 61,129
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
For the period from
June 2, 1999
(date of inception)
through
July 31, 1999
-------------
Cash flows from operating activities:
Net loss ................................................ $(23,600)
Change in operating assets and liabilities:
Inventory ............................................... (602)
Other assets ............................................ (54,295)
Accounts payable and accrued expenses ................... 49,575
--------
Net cash used in operating activities ............... (28,922)
--------
Cash flows from financing activities:
Proceeds from issuance of common shares ................. 81,415
--------
Net cash provided by financing activities ........... 81,415
--------
Net increase in cash and cash equivalents ................. 52,493
Cash and cash equivalents at beginning of
period .................................................. --
--------
Cash and cash equivalents at end of period ................ $ 52,493
========
Supplemental disclosures of cash flow information:
o No amounts were paid for interest or income taxes for the period
from June 2, 1999 (date of inception) through July 31, 1999.
Supplemental schedule of cash and noncash investing and financing activities:
o During the period from June 2, 1999 (date of inception) through
July 31, 1999, a shareholder of the Company contributed inventory
amounting to approximately $3,300.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
Note 1. Nature of Operations:
Take to Auction.com, Inc. (the "Company") was incorporated in the State
of Florida on June 2, 1999. The Company is a development stage enterprise
intending to operate in the internet-based community providing its
entrepreneurial members with an online catalog of authentic collectibles and
factory-new specialty merchandise to sell at online auction sites. The Company
is in the process of developing its network infrastructure and implementing
various growth strategies.
Note 2. Significant Accounting Policies:
Significant accounting policies and practices used by the Company in
the preparation of the accompanying financial statements are as follows:
Basis of presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the financial
statements, the Company has been in operations for less than one year and
incurred a net loss of $23,600 during the period from June 2, 1999 (date of
inception) through July 31, 1999. In addition, the Company has not yet completed
product development or verified market acceptance.
These factors, among others, may indicate that the Company will be
unable to continue as a going concern for a reasonable period of time. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. The Company's continuation as a going concern is
dependent upon future events, including completing product development,
verifying market acceptance, achieving a level of memberships adequate to
support the Company's cost structure and obtaining adequate financing to fulfill
its development activities to successfully operate in the internet-based
community. The Company is in the process of filing an initial public offering,
the proceeds of which will be used toward its development activities. However,
there can be no assurance that such offering will be successful or that the
ultimate proceeds will prove to be adequate.
Effective August 26, 1999, the Company declared a share dividend of an
aggregate of 593,497 common shares, $0.001 par value, immediately payable to its
shareholders of record in order to effect the equivalent of a 1,000-for-1 stock
split to increase the number of common shares outstanding from 594 shares to
594,091 shares. On November 3, 1999, the Company declared a share dividend of an
aggregate of 788,080 common shares, $0.001 par value, immediately payable to its
shareholders of record in order to effect the equivalent of a 2.326530644-for-1
stock split to increase the number of common shares outstanding from 594,091
shares to 1,382,171 shares. Shareholders' equity has been restated by giving
retroactive recognition to the stock splits in prior periods by reclassifying
from additional paid in capital to common stock the par value of the additional
shares arising from the splits. All applicable share and per share data have
been adjusted for the stock splits.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of
F-7
<PAGE>
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Basic and Diluted Net Loss Per Share
Basic and diluted net loss per share is computed by dividing the net
loss available to common shareholders for the period by the weighted average
number of common shares outstanding for the period. The calculation of basic and
diluted net loss per share excludes common shares issuable upon exercise of
employee stock options as the effect of the exercise would be antidilutive.
Revenue recognition
Revenues from membership fees are deferred at the time of billing and
are recognized ratably over the term of annual membership. Revenues related to
auction sales are recognized at the time that the product is shipped to the
highest bidder.
Web site development expenses
Web site development expenses consist principally of expenses incurred
for the development of the Company's web site and are expensed as incurred.
Income taxes
The Company utilizes the asset and liability method of accounting for
deferred income taxes. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial statement and tax
bases of assets and liabilities using tax rates in effect for the year in which
the differences are expected to reverse. A valuation allowance is established
when it is more likely than not that some or all of the deferred tax assets will
not be realized.
Inventory
Inventory, consisting of finished goods, is stated at the lower of cost
or market, cost being determined based on a moving average cost basis which
approximates the first-in, first-out method. The cost of inventory includes
product cost and freight charges.
Simple IRA Plan
The Company sponsors the Take to Auction.com, Inc. SIMPLE IRA Plan, a
defined contribution plan provided pursuant to the requirements of the Internal
Revenue Code of 1986, as amended. All employees eligible to participate may
enter the SIMPLE IRA Plan as of the first day of any month. Participants may
make pre-tax contributions to the SIMPLE IRA Plan subject to a statutorily
prescribed annual limit. The Company is required to make matching contributions,
not to exceed 3% of a participant's annual compensation, to the SIMPLE IRA Plan.
Each participant is fully vested in their account, including the participant's
contributions, the Company's matching contribution and the investment earnings
thereon. Contributions by the participants or by the Company to the SIMPLE IRA
Plan, and the income earned on such contributions, are generally not taxable to
the participants until withdrawn. Contributions by the Company are generally
deductible by the Company when made. The participant's and the Company's
contributions are held in an IRA. The Company has not made any matching
contributions to the SIMPLE IRA Plan as of July 31, 1999.
F-8
<PAGE>
Note 3. Income Taxes:
The income tax provision differs from the amount obtained by applying
the statutory Federal income tax rate to pretax income as follows:
Period from
June 2, 1999
(date of inception)
to July 31, 1999
----------------
Benefit at Federal statutory rates ............ $ 8,024
State income taxes, net of Federal benefit..... 857
-------
8,881
Valuation allowance ........................... (8,881)
-------
$ --
=======
The primary components of temporary differences which give rise to the
Company's net deferred tax assets at July 31, 1999 are as follows:
July 31, 1999
-------------
Deferred tax assets:
Net operating losses carryforward..... $ 8,881
-------
Total deferred tax assets ............ 8,881
Valuation allowance .................. (8,881)
-------
$ --
=======
The Company provides a valuation allowance against deferred tax assets
if, based on the weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized. The Company has
established a valuation allowance against deferred tax assets of $8,881 at July
31, 1999.
The Company has Federal and State net operating loss carryforwards of
approximately $9,000 both of which will begin to expire in the year 2019.
Note 4. Related Party Transaction:
During the period from June 2, 1999 (date of inception) to July 31,
1999, a shareholder of the Company contributed inventory amounting to
approximately $3,300 as a reduction in his Stock Subscription Receivable.
Note 5. Commitments and Contingencies:
Effective August 25, 1999, the Company entered into employment
agreements with four executives for a three year initial term. On October 1,
1999, the Company entered into an Employment Agreement with another executive
for a three year term. The aggregate annual base salaries are $550,000. A total
of 1,006,225 options to purchase common shares were granted (843,368 options
were granted on August 26, 1999 and 162,857 options were granted on October 1,
1999) at a weighted average exercise price equal to $0.41 per share. These
Options vest over a three-year period from the date of grant. Upon a change of
control of the Company (as defined in the agreements), the executives will be
entitled to receive severance compensation in the amount of 200 percent of their
annual base salaries.
Note 6. Stock Option Plan:
Effective August 1999, the Company adopted the 1999 Stock Option Plan
(the "Option Plan"). Officers, key employees and nonemployee consultants may be
granted stock options, stock appreciation
F-9
<PAGE>
rights, stock awards, performance shares and performance units under the Option
Plan. The Company has reserved 2,442,857 common shares for issuance under the
Option Plan, subject to further antidilution adjustments.
The Company will grant 1,500 non-qualified stock options to each
non-employee director nominee of the Company. The options will allow such
directors to purchase the common shares at an exercise price equal to the
contemplated initial public offering (the "Offering") price. These options will
have a term of ten years and vest on the date of grant.
Prior to establishment of a Compensation Committee (the "Committee") of
the Board of Directors, the Option Plan will be administered by the Board of
Directors of the Company. The Board of Directors or the Committee will be
authorized to determine, among other things, the key employees to whom, and the
time at which, options and other benefits are to be granted, the number of
shares subject to each option, the applicable vesting schedule and the exercise
price. The Board of Directors or the Committee will also determine the treatment
to be afforded to a participant in the Option Plan in the event of termination
of employment for any reason, including death, disability or retirement. Under
the Option Plan the maximum term of an incentive stock option is seven years and
the maximum term of a nonqualified stock option is seven years.
The Board of Directors has the power to amend the Option Plan from time
to time. Shareholder approval of an amendment is only required to the extent
that it is necessary to maintain the Option Plan's status as a protected plan
under applicable securities laws or the Option Plan's status as a qualified plan
under applicable tax laws.
Options to purchase an aggregate of 1,006,225 shares have been granted
under the Option Plan to employees of the Company at a weighted average exercise
price equal to $0.41 per share. These options have a life of seven years and
vest over a three-year term.
Statement of Financial Accounting Standards No. 123, Accounting for
Stock Based Compensation ("SFAS No. 123"), encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company will measure compensation expense for the stock
plan using the intrinsic value method prescribed by Accounting Principal Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25").
Accordingly, compensation expense for qualified and non-qualified employee stock
options granted under the Option Plan is equal to the difference between the
fair market value of the stock at the date of grant and the amount an employee
must pay to acquire the stock.
Note 7. Subsequent Events:
Effective August 26, 1999, the Company declared a share dividend of an
aggregate of 593,497 common shares, $0.001 par value, to its shareholders of
record in order to effect the equivalent of a 1,000-for-1 stock split to
increase the number of common shares outstanding from 594 shares to 594,091
shares. On November 3, 1999, the Company declared a share dividend of an
aggregate of 788,080 common shares, $0.001 par value, immediately payable to its
shareholders of record in order to effect the equivalent of a 2.326530644-for-1
stock split to increase the number of common shares outstanding from 594,091
shares to 1,382,171 shares.
The Company concluded its $1 million initial capitalization on August
26, 1999, of which $84,729 was received by July 31, 1999. All shares issued
subsequent to July 31, 1999, in connection with the initial capitalization, will
be given effect to the 1,000-for-1 and the 2.326530644-for-1 stock splits. As of
October 31, 1999, the Company received an additional $146,433 towards the stock
subscription receivable, representing 2,384,718 shares on a post split basis.
The remaining balance of $768,838, which would represent 12,518,825 shares on a
post split basis, is payable on demand and evidenced by signed promissory notes.
F-10
<PAGE>
Subsequent to the initial capitalization, the Company sold 1,714,286
common shares for $700,000.
On August 16, 1999, the Company entered into a one year operating lease
for its corporate headquarters. Monthly rent payments are approximately $2,000.
On August 25, 1999 the Company's shareholders approved an increase in
the number of authorized common shares from 7,500 shares to 50 million shares
and a reduction in the par value per share of common stock from $1 to $0.001.
The Company also authorized 10 million shares, par value $0.001 per share, of
preferred stock.
Effective September 23, 1999, the Company entered into a 60 month
service agreement with a software and network provider to develop and host the
Company's web site. The Company paid an initial fee of $40,000 and will pay 60
equal monthly service fee payments of $41,000 commencing on December 15, 1999
through December 14, 2004 (the "Initial Period"). This operating lease agreement
automatically renews for successive 12 month periods on the same terms and
conditions as initially agreed, unless either party provides the other party
with a notice of termination 30 days prior to the end of the Initial Period or
any annual renewal period.
On October 29, 1999, the Company entered into an agreement with
ZeroDotNet, Inc. ("ZeroDotNet") to provide financial advisory and strategic
planning services to the Company. The term of the agreement is one year. The
Company is to pay a $350,000 retainer fee to ZeroDotNet as compensation for
services rendered under this agreement.
Effective November 3, 1999, the Company entered into a six-month
service agreement to outsource its warehouse and distribution functions. This
service agreement includes order processing, inventory management, warehousing,
fulfillment and shipping of product. The Company paid an initial implementation
fee of $38,500 in connection with this agreement and the agreement will
automatically renew for successive one-year terms.
F-11
<PAGE>
[INSIDE OF BACK COVER]
[Artwork]
<PAGE>
<TABLE>
<S> <C>
============================================================ ============================================================
You should rely only on the information contained in this 2,000,000 Shares
prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell, and seeking offers to
buy, common shares only in jurisdictions where offers and
sales are permitted. The information contained in this
prospectus is accurate only as of the date of this Take to Auction.com, Inc.
prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common shares.
--------------- Common Shares
TABLE OF CONTENTS
Page
Prospectus Summary..................................
Risk Factors........................................
Forward Looking Statements; Market Data.............
Use of Proceeds..................................... ----------------------------
Dividend Policy ....................................
Corporate Information...............................
Capitalization...................................... P R O S P E C T U S
Dilution............................................
Selected Financial Data.............................
Management's Discussion and Analysis of ----------------------------
Financial Condition and Results of
Operations........................................
Business............................................
Management..........................................
Certain Transactions................................
Principal Shareholders..............................
Description of Capital Stock........................
Shares Eligible for Future Sale.....................
Plan of Distribution................................
Legal Matters.......................................
Experts.............................................
Additional Information..............................
Index to Financial Statements....................... F-1
Until , 1999 (25 days after the date of this
prospectus), all dealers that buy, sell or trade our common , 1999
shares, whether or not participating in this offering, may
be required to deliver a prospectus.
============================================================ ============================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by
Take to Auction.com in connection with the registration of the common shares
hereunder. All of the amounts shown are estimates, except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market filing fee.
Securities and Exchange Commission registration fee $6,672.00
NASD filing fee [_________]
Nasdaq National Market filing fee. *
Accounting fees and expenses. *
Legal fees and expenses. *
Road show expenses. *
Printing and engraving expenses *
Blue sky fees and expenses *
Transfer agent and registrar fees and expenses *
Miscellaneous *
Total
$--------
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850 of the Florida Business Corporation Act (the "FBCA")
permits, in general, a Florida corporation to indemnify any person who was or is
a party to any action or proceeding by reason of the fact that he or she was a
director or officer of the corporation, or served another entity in any capacity
at the request of the corporation, against liability incurred in connection with
such proceeding including the estimated expenses of litigating the proceeding to
conclusion and the expenses, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof, if
such person acted in good faith, for a purpose he or she reasonably believed to
be in, or not opposed to, the best interest of the corporation and, in criminal
actions or proceedings, in addition had non reasonable cause to believe that his
or he conduct was unlawful. Section 607.0850(6) of the FBCA permits the
corporation to pay in advance of a final disposition of such action or
proceeding upon receipt of any undertaking by or on behalf of the director or
officer to prepay such amount as, and to the extent, required by statute.
Section 607.0850 of the FBCA provides that the indemnification and advancement
of expense provisions contained in the FBCA shall not be deemed exclusive of any
rights to which a director or officer seeking indemnification or advancement of
expenses may be entitled.
Our Amended and Restated Articles of Incorporation provide, in general,
that we shall indemnify, to the fullest extent permitted by Section 607.0850 of
the FBCA, any and all persons whom we shall have the power to indemnify under
said section from and against any and all of the expenses, liabilities or other
matters referred to in, or covered by, said section. The Amended and Restated
Articles of Incorporation also provide that the indemnification provided for
therein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions taken in his or her
official capacity and as to acts in another capacity while holding such office.
II-1
<PAGE>
In accordance with our Amended and Restated Articles of Incorporation,
we shall indemnify any officer or director (including officers and directors
serving another corporation, partnership, joint venture, trust, or other
enterprise in any capacity at the company's request) made, or threatened to be
made, a party to an action or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he or she was
serving in any of those capacities against judgments, fines, amounts paid in
settlement and reasonable expenses (including attorney's fees) incurred as a
result of such action or proceeding. Indemnification would not be available if a
judgment or other final adjudication adverse to such director or officer
establishes that (i) his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty or (ii) he or she personally gained
in fact a financial profit or other advantage to which he or she was not legally
entitled.
We intend to enter into Indemnification Agreements with each of our
current directors and officers to give these directors and officers additional
contractual assurances regarding the scope of the indemnification set forth in
our Amended and Restated Articles of Incorporation and to provide additional
procedural protections. At present, there is no pending litigation or proceeding
involving a director, officer or employee of Take to Auction.com regarding which
indemnification is sought, nor are we aware of any threatened litigation that
may result in claims for indemnification.
The indemnification provision in our Amended and Restated Articles of
Incorporation, Amended and Restated Bylaws and the Indemnification Agreements
entered into between us and each of our directors and officers may be
sufficiently broad to permit indemnification of our directors and officers for
liabilities arising under the Securities Act.
We, with approval by our Board of Directors, expect to obtain
directors' and officers' liability insurance.
See also the undertakings set out in response to Item 17.
We refer you to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Exhibit
Document Number
-------- ------
<S> <C>
Amended and Restated Articles of Incorporation as currently in effect 3.01
Amended and Restated Bylaws as currently in effect 3.02
Form of Indemnification Agreement to be entered into by Registrant with each of its
directors and executive officers 10.06
Registrant's 1999 Stock Option Plan and related documents 10.07
</TABLE>
* To be supplied by amendment.
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities
sold by us since our inception on June 2, 1999.
<TABLE>
<CAPTION>
Number of Aggregate Purchase Price(2)
Name of Purchasers Date of Sale Title of Securities Securities*(1) and Form of Consideration
- ------------------ ------------ ------------------- ------------ -------------------------
<S> <C> <C> <C> <C>
Albert Friedman 7/10/99 Common Stock 2,327 $ 142.86/Cash & Promissory Note
Pacific Investments 8/26/99 Common Stock 4,560,000 $ 280,005.60/Cash & Promissory Note
Horacio Groisman 8/26/99 Common Stock 1,628,571 $ 100,002.001/Cash & Promissory Note
Magdelena Zafir 8/26/99 Common Stock 1,628,571 $ 100,002.001/Cash & Promissory Note
Albert Friedman 8/26/99 Common Stock 1,137,673 $ 69,858.54/Cash & Promissory Note
Hugo Calemczuk 8/26/99 Common Stock 1,140,000 $ 70,001.40/Cash & Promissory Note
Pesia Leder 8/26/99 Common Stock 814,287 $ 50,001.00/Cash & Promissory Note
Sharon Lallouz 8/26/99 Common Stock 651,429 $ 40,000.80/Cash & Promissory Note
Maurice Alcavez 8/26/99 Common Stock 651,429 $ 40,000.80/Cash & Promissory Note
Dr. Michelle Fisher 8/26/99 Common Stock 244,286 $ 15,000.30/Cash & Promissory Note
Nadine Lallouz 8/26/99 Common Stock 244,286 $ 15,000.30/Cash & Promissory Note
Zouhir Beidoun 8/26/99 Common Stock 488,571 $ 30,000.60/Cash & Promissory Note
Isaac Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash & Promissory Note
David Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash & Promissory Note
Jassi Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash & Promissory Note
The Joseph Trust 8/26/99 Common Stock 325,714 $ 20,000.40/Cash & Promissory Note
(Issac Shalom)
Hannah Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash & Promissory Note
Rachmil Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash & Promissory Note
Dr. Bernard Weinbach 8/26/99 Common Stock 162,857 $ 10,000.20/Cash & Promissory Note
Mayi De La Vega 8/26/99 Common Stock 162,857 $ 10,000.20/Cash & Promissory Note
Glenn Gopman 8/26/99 Common Stock 162,857 $ 10,000.20/Cash & Promissory Note
Israel Lewin 8/26/99 Common Stock 162,857 $ 10,000.20/Cash & Promissory Note
Alice Lekach 8/26/99 Common Stock 162,857 $ 10,000.20/Cash & Promissory Note
Andrea Koplowitz 8/26/99 Common Stock 162,857 $ 10,000.20/Cash & Promissory Note
Gabriel Groisman 8/26/99 Common Stock 81,429 $ 5,000.10/Cash & Promissory Note
Melissa Groisman 8/26/99 Common Stock 81,429 $ 5,000.10/Cash & Promissory Note
SLI.com Venture I, Ltd. 8/26/99 Common Stock 857,143 $ 350,000 Cash
Dominion Income Mgmt. 10/20/99 Common Stock 857,143 $ 350,000 Cash
---------
18,000,000
</TABLE>
*On June 6, 1999 we sold 100 shares of Common Stock to Sharon J. Lallouz who
transferred the common shares back to us on July 10, 1999.
(1) Assumes 1,000 for 1 stock split effective August 26, 1999 and 2.326530644
for 1 stock split effective November 3, 1999.
(2) Assumes pre-split calculation of $142.86 per share.
No common shares were issued to Registrant's officers, directors, employees and
consultants pursuant to the exercise of stock options granted under the Option
Plan.
All other sales were made in reliance on Section 4(2) of the Securities
Act and/or Regulation D promulgated under the Securities Act. These sales were
made without general solicitation or advertising. Each purchaser was a
sophisticated investor with access to all relevant information necessary to
evaluate the investment and represented to the Registrant that the shares were
being acquired for investment.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
EXHIBIT
NUMBER
------
3.01 Amended and Restated Articles of Incorporation as currently
in effect.
3.02 Amended and Restated Bylaws as currently in effect.
4.01 Form of Specimen Certificate for common shares.*
5.01 Opinion of Baker & McKenzie regarding legality of the
securities being registered.*
10.01 Executive Employment Agreement between Registrant and Albert
Friedman dated August __, 1999.
10.02 Executive Employment Agreement between Registrant and
Mitchell H. Morgan dated August __, 1999.
10.03 Executive Employment Agreement between Registrant and Lucien
Lallouz dated August __, 1999.
10.04 Executive Employment Agreement between Registrant and Hugo
Calemczuk dated August __, 1999.
10.05 Office Lease between Miami Freezone Corporation, a Florida
corporation, and the Registrant dated August 4, 1999.
10.06 Form of Indemnification Agreement to be entered into by
Registrant with each of its directors and executive
officers.
10.07 Registrant's 1999 Stock Option Plan and related documents.
10.08 Stock Purchase Agreement between Registrant and SLI.com
Venture I, Ltd. dated August 26, 1999.
10.09 Stock Purchase Agreement between Registrant and Dominion
Income Management dated October 20, 1999.
10.10 IMap Agreement between Registrant and US internetworking,
Inc. dated September 23, 1999.
23.01 Consent of Baker & McKenzie (included in Exhibit 5.01).*
23.02 Consent of Deloitte & Touche LLP.
24.01 Power of Attorney (see Page II-6 of this Registration
Statement).
27.01 Financial Data Schedule.
* To be supplied by amendment.
II-4
<PAGE>
(b) Financial statement schedules.
No financial statement schedules are provided because the information
called for is not required or is shown either in the financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Take to
Auction.com pursuant to the provisions described under Item 14 above, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Take to Auction.com of expenses incurred or paid by a director, officer or
controlling person of Take to Auction.com 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, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by Take to Auction.com pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the securities act of 1933, as amended,
Take to Auction.com has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of Miami,
state of Florida, on the 17th day of November, 1999.
Take to Auction.com, Inc.
By: /s/ Albert Friedman
-------------------------------
Albert Friedman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Albert Friedman and Mitchel H. Morgan,
and each of them, his or her true and lawful attorneys-in-fact and agents with
full power of substitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act, and all post-effective amendments thereto,
and to file the same, with all exhibits thereto and all 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
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their substitute or
substitutes, may lawfully do or cause to be done or 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.
Name Title Date
- ---- ----- ----
Principal Executive Officer
/s/ Albert Friedman President, Chief Executive November 17, 1999
- --------------------------- Officer and Director
Albert Friedman
Principal Financial Officer
and Principal Accounting
Officer
/s/ Mitchell Morgan Vice President, November 17, 1999
- --------------------------- Chief Financial Officer
Mitchell Morgan and Director
/s/ Jonathan Geller Chief Technology November 17, 1999
- --------------------------- Officer and Director
Jonathan Geller
II-6
<PAGE>
/s/ Lucien Lallouz Executive Vice President of November 17, 1999
- --------------------------- Marketing
Lucien Lallouz
/s/ Hugo Calemczuk Senior Vice President of November 17, 1999
- --------------------------- Merchandising and Director
Hugo Calemczuk
ADDITIONAL DIRECTORS
/s/ Horacio Groisman Director November 17, 1999
- ---------------------------
Horacio Groisman
/s/ Ilia Lekach Director November 17, 1999
- ---------------------------
Ilia Lekach
/s/ Garrick Hileman Director November 17, 1999
- ---------------------------
Garrick Hileman
II-7
Exhibit 3.01
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TAKE TO AUCTION.COM, INC.
(Original Articles of Incorporation
filed with the Secretary of State of
the State of Florida on June 2, 1999)
Pursuant to Sections 607.1003, 607.1006 and 607.1007 of the Florida
Business Corporation Act (the "FBCA"), the Articles of Incorporation of the
undersigned corporation are hereby amended and restated in their entirety as
follows:
ARTICLE 1
NAME
The name of the corporation (the "Corporation") is: TAKE TO
AUCTION.COM, INC.
ARTICLE 2
PURPOSE
The general purpose for which the corporation is organized is to
transact any or all lawful business permitted under the FBCA and the laws of
Florida and the United States of America.
ARTICLE 3
PRINCIPAL OFFICE; REGISTERED OFFICE
The address of the principal office of the Corporation and the mailing
address of the Corporation is 2335 NW 107th Avenue, Suite 2M-23, Miami, Florida
33172. The address of the registered office is Corporation Service Company, 1201
Hays Street, Tallahassee, Florida 32301.
<PAGE>
ARTICLE 4
CAPITAL STOCK
The total number of shares of stock the Corporation shall have
authority to issue is (i) 50,000,000 shares of Common Stock, $.001 par value per
share ("Common Stock"), and (ii) 10,000,0000 shares of Preferred Stock, $.001
par value per share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions in
respect of each class of capital stock of the Corporation.
A. Common Stock
1. General. The voting, dividend and liquidation rights
of the holders of the Common Stock are subject to and
qualified by the rights of the holders of the
Preferred Stock of any series as may be designated by
the Board of Directors upon any issuance of the
Preferred Stock of any series.
2. Voting. The holders of Common Stock are entitled to
one vote for each share held at all meetings of
shareholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. Dividends. Dividends shall be declared and paid on
the Common Stock from funds lawfully available
therefor as and when determined by the Board of
Directors and subject to any preferential dividend
rights of any then outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of
the Corporation, whether voluntary or involuntary,
all of the assets of the Corporation available for
distribution to its shareholders shall be distributed
ratably among the holders of the Preferred Stock, if
any, and Common Stock, subject to any preferential
rights of any then outstanding Preferred Stock.
B. Preferred Stock
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed in this Section B
of Article 4 and/or in the resolution or resolutions providing for the issue of
such series adopted by the Board of Directors of the Corporation as hereinafter
provided. Any shares of Preferred Stock which may be redeemed, purchased or
acquired by the Corporation may be reissued except as otherwise provided by law.
Different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purposes of voting by classes unless
expressly provided.
Authority is hereby granted to the Board of Directors from time to time
to issue the Preferred Stock in one or more series, and in connection with the
creation of any such series, by resolution or resolutions providing for the
issuance of the shares thereof, to determine and fix
2
<PAGE>
such voting powers, full or limited, or no voting powers, and such designations,
preferences, powers and relative participating, optional or other special rights
and qualifications, limitations, or restrictions thereof including, without
limitation dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be stated and expressed in such votes, all to
the full extent now or hereafter permitted by the FBCA. Without limiting the
generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as provided in this Article 4, no vote of the holders
of the Preferred Stock or Common Stock shall be a prerequisite to the issuance
of any shares of any series of Preferred Stock authorized by and complying with
the conditions of the Articles of Incorporation, the right to enjoy such vote
being expressly waived by all present and future holders of the capital stock of
the Corporation. The resolutions providing for issuance of any series of
Preferred Stock may provide that such resolutions may be amended by subsequent
resolutions adopted in the same manner as the preceding resolutions. Such
resolutions shall be effective upon adoption, without the necessity of any
filing, with the Secretary of State of the State of Florida or otherwise.
ARTICLE 5
BOARD OF DIRECTORS
A. Number and Term of Directors. The Corporation's Board of Directors
shall consist of not less than three nor more than twelve members, with the
exact number to be fixed from time to time in the manner provided in the
Corporation's bylaws. No decrease in the number of directors shall have the
effect of shortening the term of any incumbent director. The Board of Directors
shall be divided into three classes. The number of directors elected to each
class shall be as nearly equal in number as possible. Each director in the first
class shall be elected to an initial term expiring at the next ensuing annual
meeting of shareholders, each director in the second class shall be elected to
an initial term expiring at the annual meeting of shareholders held one year
thereafter and each director in the third class shall be elected to an initial
term expiring at the annual meeting of shareholders held one year thereafter, in
each case until his or her successor is duly elected and qualified or until his
or her earlier resignation, death, incapacity or removal from office. The
Corporation will use its best efforts to have an uneven number of directors on
the Corporation's Board after the third class of directors is elected. Upon the
expiration of the successor directors of each class shall be elected for a full
term of three years, to serve until their successors are duly elected and
qualified or until their earlier resignation, death, incapacity or removal from
office. The Board of Directors shall apportion any increase or decrease in the
number of directors among the classes as nearly equal in number as possible.
B. Vacancies. Whenever any vacancy on the Board of Directors shall
occur due to death, resignation, retirement, disqualification, removal, increase
in the number of directors, or otherwise, a majority of the remaining directors
in office, although less than a quorum of the Board of Directors, may fill the
vacancy for the balance of the unexpired term of the vacant directorship, at
which time a successor or successors shall be duly elected by provisions these
articles and the Corporation's bylaws, only the remaining directors of the
Corporation shall have the authority, in accordance with the procedure stated
herein and in the Corporation's bylaws, to
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fill any vacancy that arises on the Board of Directors.
C. Removal. A director may be removed from office prior to the
expiration of his or her term: (i) only for cause; and (ii) only upon the
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote for the election of directors.
D. Amendments. Notwithstanding anything contained in these Articles of
Incorporation to the contrary, this Article 5 shall not be altered, amended or
repealed except by an affirmative vote of at least two-thirds of the outstanding
shares of capital stock of the Corporation entitled to vote for the election of
directors.
ARTICLE 6
LIMITATION ON DIRECTOR LIABILITY
A director shall not be personally liable to the Corporation or the
holders of shares of capital stock for monetary damages for breach of fiduciary
duty as a director, except (i) for any breach of the duty of loyalty of such
director to the Corporation or such holders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 607.0831 of the FBCA, or (iv) for any transaction from
which such director derives an improper personal benefit. If the FBCA is
hereafter amended to authorize the further or broader elimination or limitation
of the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the FBCA, as so amended. No repeal or modification of this Article 6 shall
adversely affect any right of or protection afforded to a director of the
Corporation existing immediately prior to such repeal or modification.
ARTICLE 7
INDEMNIFICATION
The Corporation shall indemnify and advance expenses to, and may
purchase and maintain insurance on behalf of, its officers and directors to the
fullest extent permitted by law as now or hereafter in effect. Without limiting
the generality of the foregoing, the By-laws may provide for indemnification and
advancement of expenses to officers, directors, employees and agents on such
terms and conditions as the Board of Directors may from time to time deem
appropriate or advisable.
ARTICLE 8
BY-LAWS
Only an affirmative vote of the holders of a majority of the issued and
outstanding shares of the Corporation's capital stock entitled to vote shall
have the power to adopt, amend or repeal the By-laws of the Corporation or any
part thereof.
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ARTICLE 9
AMENDMENT
These Amended and Restated Articles of Incorporation may be altered,
amended or repealed by the shareholders of the Corporation in accordance with
the applicable provisions of Florida law; provided, further, that Article 5
hereof may only be altered, amended or replaced in accordance with Article 5D
hereof.
ARTICLE 10
SHAREHOLDERS
A. No Preemptive Rights. Unless otherwise provided by resolution of the
Board of Directors of Directors of the Corporation, no shareholder shall have
preemptive rights to acquire securities of the Corporation.
B. Quorum; Vote Required. The presence, in person or by proxy, of the
holders of one-third (1/3) of the shares entitled to vote shall constitute a
quorum. The approval of the holders of a majority of the issued and outstanding
shares entitled to vote shall be required for any action by or of the
shareholders.
IN WITNESS WHEREOF, the undersigned has executed these Amended and
Restated Article of Incorporation on August 25, 1999.
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
---------------------------
Albert Friedman, President
ACKNOWLEDGMENT:
Having been named to accept service of process for the above-stated corporation,
at the place designated in this certificate, I hereby accept the appointment as
registered agent and agree to act in this capacity. I further agree to comply
with the provisions of all statutes relating to the proper and complete
performance of my duties, and I am familiar with and accept the obligations of
my position as registered agent.
Dated this 25 day of August, 1999
Corporation Service Company
/s/ Laura R. Dunlap
--------------------------------
Laura R. Dunlap, as its agent
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CERTIFICATE
RE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TAKE TO AUCTION.COM, INC.
TAKE TO AUCTION.COM, INC., a Florida corporation (the "Corporation"),
hereby certifies, pursuant to and in accordance with Section 607.1007 of the
Florida Business Corporation Act (the "Act") for the purpose of filing its
Amended and Restated Articles of Incorporation with the Department of State of
the State of Florida, that:
1. The name of the Corporation is TAKE TO AUCTION.COM, INC.
2. The Corporation's Amended and Restated Articles of
Incorporation attached hereto (the "Restated Articles")
contain certain amendments to the Corporation's Articles of
Incorporation, including provisions for: (i) the increment of
the number of authorized shares of common stock from 7,500
shares to 50,000,000 shares; (ii) the change of the par value
of each share of common stock from $1.00 to $.001 par value
per share; and (iii) the creation of a new class of capital
stock consisting of 10,000,000 shares of Preferred Stock $.001
par value per share.
3. The Restated Articles contain certain amendments to the
Corporation's Articles of Incorporation which require
shareholder approval, and the Restated Articles were
unanimously adopted, approved and recommended for shareholder
approval by the Corporation's Board of Directors, and approved
by the sole shareholder of the Corporation, by the unanimous
written consent of the sole director and sole shareholder of
the Corporation dated August 25, 1999, the number of votes
cast being sufficient for approval.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
August 25, 1999.
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
-------------------------
Name: Albert Friedman
Title: President
Exhibit 3.02
AMENDED AND RESTATED
BY-LAWS
OF
TAKE TO AUCTION.COM, INC.
ARTICLE I
Offices
Section 1. Registered Office. The initial registered office of Take to
Auction.com, Inc., a Florida corporation (the "Corporation"), shall be located
in the City of Miami, State of Florida.
Section 2. Other Offices. The Corporation may also have offices at such other
places, either within or without the State of Florida, as the Board of Directors
of the Corporation (the "Board of Directors") may from time to time determine or
as the business of the Corporation may require.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meetings. All annual meetings of the shareholders of the
corporation for the election of directors and for such other business as may
properly come before the meeting shall be held (i) on the fourth Friday of May
of each calendar year at 10:00 a.m., Eastern time, or on such other date or at
such other time as may be fixed, from time to time, by the Board of Directors,
and (ii) at such place, within or without the State of Florida, as may be
designated by or on behalf of the Board of Directors and stated in the notice of
meeting or in a duly executed waiver of notice thereof.
Section 2. Special Meetings. Except as otherwise required by law and subject to
the rights of the holders of the Preferred Stock, special meetings of
shareholders of the Corporation may be called only by (i) the Board pursuant to
a resolution approved by a majority of the entire Board, (ii) the Corporation's
Chief Executive Officer or (iii) the holders of at least one-third of the
outstanding shares of capital stock of the Corporation. Special meetings of
shareholders may be held at such time and date, and at such place, within or
without the State of Florida, as shall be designated by the Board of Directors
and set forth in the notice of meeting required pursuant to Section 3 of this
Article. Notwithstanding anything contained in these Bylaws to the contrary,
this Article II, Section 2 shall not be altered, amended or repealed except by
an affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote at a shareholders' meeting duly called
for such purpose. Only such business as is set forth in the notice of a special
meeting may be transacted at such Special Meeting.
Section 3. Notice. A written notice of each meeting of shareholders shall be
given to each shareholder entitled to vote at the meeting, at the address as it
appears on the stock transfer records of the Corporation, not less than ten (10)
nor more than sixty (60) days before the date of the meeting, by or at the
direction of the President, the Secretary or the officer or persons calling
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the meeting. The notice so given shall state the date, time and place of the
meeting and, in the case of a special shareholders' meeting, the purpose or
purposes for which the meeting is called.
Section 4. Waiver of Notice. Shareholders may waive notice of any meeting before
or after the date and time specified in the written notice of meeting. Any such
waiver of notice must be in writing, be signed by the shareholder entitled to
the notice and be delivered to the Corporation for inclusion in the appropriate
corporate records. Neither the business to be transacted at, nor the purpose of,
any shareholders' meeting need be specified in any written waiver of notice.
Attendance of a person at a shareholders' meeting shall constitute a waiver of
notice of such meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting.
Section 5. Record Date. For the purpose of determining shareholders entitled to
notice of or to vote at a shareholders' meeting, to demand a special meeting, to
act by written consent or to take any other action, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days nor,
in the case of a shareholders' meeting, less than ten (10) days, prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a shareholders' meeting, then the record
date for such shall be the close of business on the day before the first notice
is delivered to shareholders.
Section 6. Quorum. A majority of the shares entitled to vote on a matter,
represented in person or by proxy, shall constitute a quorum for action on that
matter at a meeting of shareholders. If a quorum is not present or represented
at a meeting of shareholders, the holders of a majority of the shares
represented, and who would be entitled to vote at a meeting if a quorum were
present, may adjourn the meeting from time to time. Once a quorum has been
established at a shareholders' meeting, the subsequent withdrawal of
shareholders, so as to reduce the number of shares entitled to vote at the
meeting below the number required for a quorum, shall not affect the validity of
any action taken at the meeting or any adjournment thereof.
Section 7. Voting. If a quorum is present, action on a matter, other than the
election of directors, shall be approved if the votes cast by the shareholders
represented at the meeting and entitled to vote on the subject matter favoring
the action exceeds the votes cast opposing the action, unless a greater number
of affirmative votes or voting by classes is required by Florida law or by the
Articles of Incorporation. Directors shall be elected by plurality vote in
accordance with Article III, Section 3 of these Bylaws. Each outstanding share
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, unless otherwise provided under the Articles of Incorporation (or
any resolution authorizing any class or series of Preferred Stock) or under
Florida law.
Section 8. Proxies. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for him by signing an
appointment form, either personally or by his attorney-in-fact. An appointment
of proxy is effective when received by the Secretary or other officer or agent
authorized to tabulate votes.
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Section 9. No Shareholder Action Without A Meeting. Any action required or
permitted to be taken by the shareholders of the Corporation shall be taken at a
duly called annual or special meeting of such holders and may not be taken by
any consent in writing by such holders. Notwithstanding anything contained in
these Bylaws to the contrary, this Article II, Section 9 shall not be altered,
amended or repealed except by an affirmative vote of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote at a
shareholders' meeting duly called for such purpose.
Section 10. Advance Notice of Shareholder Proposed Business at Annual Meeting.
At an annual meeting of the shareholders, 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 either (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 shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than sixty (60) days nor more than ninety (90) days prior
to the meeting; provided, however, that in the event that less than seventy (70)
days' notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must be so received
not later than the close of business on the tenth (10th) day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder 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 record address of the shareholder
proposing such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the shareholder, and (iv) any material interest
of the shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Article II, Section 10; provided, however, that
nothing in this Article II, Section 10 shall be deemed to preclude discussion by
any shareholder of any business properly brought before the annual meeting in
accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Article II, Section
10, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
Notwithstanding anything contained in the Bylaws to the contrary, this
Article II, Section 10 shall not be altered, amended or repealed except by an
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote thereon.
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ARTICLE III
Directors
Section 1. Powers. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
under the direction of, the Board of Directors. Directors must be individuals
who are at least 18 years of age but need not be residents of Florida or
shareholders of the Corporation.
Section 2. Compensation. Directors of the Corporation who also serve as officers
or members of management ("employee directors") shall serve as directors without
compensation. Non-employee directors of the Corporation shall be entitled to
receive such compensation and benefits as is from time to time determined by the
Board. The employee directors may be paid their expenses, if any, and the
non-employee directors may be paid a fee and expenses, if any, of attendance at
each meeting of the Board of Directors or of any committee. No such payments
shall preclude any director from serving in any other capacity and receiving
compensation therefor.
Section 3. Number, Election & Term. The Corporation's Board shall consist of not
less than three nor more than twelve members, with the exact number to be fixed
from time to time in accordance with a resolution adopted by a majority of the
entire Board. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. The Board shall be divided into
three classes. The number of directors elected to each class shall be as nearly
equal in number as possible. Each director in the first class shall be elected
to an initial term expiring at the next ensuing annual meeting of shareholders,
each director in the second class shall be elected to an initial term expiring
at the annual meeting of shareholders held one year thereafter and each director
in the third class shall be elected to an initial term expiring at the annual
meeting of shareholders held one year thereafter, in each case until his or her
successor is duly elected and qualified or until his or her earlier resignation,
death, incapacity or removal from office. The Corporation will use its best
efforts to have an uneven number of directors on the Corporation's Board after
the third class of directors is elected. Upon the expiration of the initial
terms of office for each class of directors, the successor directors of each
class shall be elected for a full term of three years, to serve until their
successors are duly elected and qualified or until their earlier resignation,
death, incapacity or removal from office. The Board shall apportion any increase
or decrease in the number of directors among the classes as nearly equal in
number as possible.
Section 4. Vacancies. Whenever any vacancy on the Board shall occur due to
death, resignation, retirement, disqualification, removal, increase in the
number of directors, or otherwise, a majority of the remaining directors in
office, although less than a quorum of the Board, may fill the vacancy for the
balance of the unexpired term, at which time a successor or successors shall be
duly elected by the shareholders and qualified. Notwithstanding the provisions
of any other Article hereof, only the remaining directors of the Corporation
shall have the authority, in accordance with the procedure stated herein, to
fill any vacancy that arises on the Board.
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Section 5. Removal of Directors. A director may be removed from office prior to
the expiration of his or her term: (i) only for cause; and (ii) only upon the
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote for the election of directors.
Section 6. Quorum and Voting. A majority of the number of directors fixed by or
in accordance with these Bylaws shall constitute a quorum for the transaction of
business at any meeting of directors. If a quorum is present when a vote is
taken, the affirmative vote of a majority of the directors present shall be the
act of the Board of Directors.
Section 7. Deemed Assent. A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless (i) the director
objects at the beginning of the meeting (or promptly upon his arrival) to the
holding of the meeting or transacting specified business at the meeting, or (ii)
the director votes against or abstains from the action taken.
Section 8. Committees. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members an
executive committee, a compensation committee, an audit committee and one or
more other committees each of which must have at least two members and, to the
extent provided in the designating resolution, shall have and may exercise all
the authority of the Board of Directors, except such authority as may be
reserved to the Board of Directors under Florida law.
(a) Executive Committee. The Board of Directors by resolution
may designate one or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all powers and authority of the Board of Directors in the management of
the business and affairs of the Corporation, except where action of the Board of
Directors is required by statute.
(b) Other Committees. The Board of Directors may by resolution
create other committees for such terms and with such powers and duties as the
board shall deem appropriate.
(c) Organization of Committees. The chairman of all committees
of the Board of Directors shall be chosen by the members thereof. Each committee
shall elect a secretary, who shall be either a member of the committee or the
secretary of the Company. The chairman of each committee shall preside at all
meetings of such committee.
(d) Meetings. Regular meetings of each committee may be held
without the giving of notice if a day of the week, a time, and a place shall
have been established by the committee for such meetings. Special meetings (and,
if the requirements of the preceding sentence have not been met, regular
meetings) shall be called as provided in Section 9 with respect to notices of
special meetings of the Board of Directors.
(e) Quorum and Manner of Acting. A majority of the members of
each committee shall be present either in person or by telephone, radio,
television, or similar means of
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communication, at each meeting of such committee in order to constitute a quorum
for the transaction of business. The act of a majority of the members so present
at a meeting at which a quorum is present shall be the act of such committee.
The members of each committee shall act only as a committee, and shall have no
power or authority, as such, by virtue of their membership on the committee.
(f) Action by Written Consent. Any action required or
permitted to be taken by any committee may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all the
members of the committee.
(g) Record of Committee Action; Reports. Each committee shall
maintain a record, which need not be in the form of complete minutes, of the
action taken by it at each meeting, which record shall include the date, time
and place of the meeting, the names of the members present and absent, the
action considered, and the number of votes cast for and against the adoption of
the action considered. All action by each committee shall be reported to the
Board of Directors at its meeting next succeeding such action, such report to be
in sufficient detail as to enable the board to be informed of the conduct of the
Corporation's business and affairs since the last meeting of the board.
(h) Removal. Any member of any committee may be removed from
such committee, either with or without cause, at any time by resolution adopted
by a majority of the whole Board of Directors at any meeting of the board.
(i) Vacancies. Any vacancy in any committee shall be filled by
the Board of Directors in the manner prescribed by these Bylaws.
Section 9. Meetings. Regular and special meetings of the Board of Directors
shall be held at the principal place of business of the Corporation or at any
other place, within or without the State of Florida, designated by the person or
persons entitled to give notice of or otherwise call the meeting. Meetings of
the Board of Directors may be called by the President or by any two directors.
Members of the Board of Directors (and any committee of the Board) may
participate in a meeting of the Board (or any committee of the Board) by means
of a conference telephone or similar communications equipment through which all
persons participating may simultaneously hear each other during the meeting;
participation by these means constitutes presence in person at the meeting.
Section 10. Notice of Meetings. Regular meetings of the Board of Directors may
be held without notice of the date, time, place or purpose of the meeting, so
long as the date, time and place of such meetings are fixed generally by the
Board of Directors. Special meetings of the Board of Directors must be preceded
by at least two (2) days' written notice of the date, time and place of the
meeting. The notice need not describe either the business to be transacted at or
the purpose of the special meeting.
Section 11. Waiver of Notice. Notice of a meeting of the Board of Directors need
not be given to a director who signs a waiver of notice either before or after
the meeting. Attendance of a
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director at a meeting shall constitute a waiver of notice of that meeting and a
waiver of any and all objections to the place of the meeting, the time of the
meeting and the manner in which it has been called or convened, except when a
director states, at the beginning of the meeting or promptly upon arrival at the
meeting, any objection to the transaction of business because the meeting is not
lawfully called or convened. The waiver of notice need not describe either the
business to be transacted at or the purpose of the special meeting.
Section 12. Director Action Without a Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors (or a committee of the Board)
may be taken without a meeting if the action is taken by the written consent of
all members of the Board of Directors (or of the committee of the Board). The
action must be evidenced by one or more written consents describing the action
to be taken and signed by each director (or committee member), which consent(s)
shall be filed in the minutes of the proceedings of the Board. The action taken
shall be deemed effective when the last director signs the consent, unless the
consent specifies otherwise.
Section 13. Shareholder Nominations for Director Candidates. Only persons who
are nominated in accordance with the following procedures 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 shareholders by or at
the direction of the Board of Directors by any nominating committee or person
appointed by the Board of Directors or by any shareholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Article III, Section 13. 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. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than seventy (70) days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the date on
which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such shareholder's notice to the
Secretary shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the persons, (iii) the class and number of shares of capital stock
of the Corporation which are beneficially owned by the person, (iv) the consent
of each nominee to serve as a director of the Corporation if so elected, and (v)
any other information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Rule 14a under
the Securities Exchange Act of 1934, as amended; and (b) as to the shareholder
giving the notice, (i) the name and record address of shareholder, and (ii) the
class and number of shares of capital stock of the Corporation which are
beneficially owned by the shareholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as
director of the Corporation. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein.
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The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 14. Amendments. Notwithstanding anything contained in the Bylaws to the
contrary, this Article III shall not be altered, amended or repealed except by
an affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote thereon.
ARTICLE IV
Officers
Section 1. Enumeration of Officers. The officers of the Corporation shall
consist of a, President, Secretaries, Chief Financial Officer, Chief Technology
Officer and a Treasurer, and if elected by the Board of Directors by resolution,
a Chairman. Such other officers and assistant officers and agents as may be
deemed necessary or desirable may be appointed by the Board of Directors. Any
two or more offices may be held by the same person.
Section 2. Duties. The officers of the Corporation shall have the following
duties:
The Chairman of the Board of Directors. The Chairman shall
preside at all meetings of the board of directors and shareholders. The Chairman
shall supervise the carrying out of the policies adopted or approved by the
Board of Directors, and shall assist the Board of Directors in formulating,
evaluating, developing and overseeing the implementation of the short- and
long-term goals of the Corporation, subject to the direction and control of the
Board of Directors. The Chairman shall have all powers and perform all duties
commonly incident to the office of chairman of the board of directors. The
Chairman shall also have and may exercise such further powers and duties as from
time to time may be conferred upon, or assigned to, him by the Board of
Directors not inconsistent with these Bylaws. Absent a Board of Director
resolution to the contrary, the Chairman shall be the chief executive officer of
the Corporation.
The President and Chief Executive Officer. The President and
Chief Executive Officer of the Corporation, if designated or appointed, shall be
the principal executive officer of the Corporation, with general executive
powers and duties regarding the Corporation, subject to these Bylaws, subject to
the direction of the Chairman and subject to the direction and control of the
Board of Directors. The President and Chief Executive Officer shall have general
and active management of the day-to-day business, operations and affairs of the
Corporation, subject to the direction of the Chairman. The President and Chief
Executive Officer shall report to the Chairman and, at meetings of the Board of
Directors, to the Board of Directors, and shall see to it that all properly
authorized directions of the Chairman and all orders and resolutions of the
Board of Directors are implemented and carried into effect. Subject to the
foregoing the President and Chief Executive Officer shall have all powers and
perform all duties commonly incident to the office of chief executive officer of
the Corporation. The President and Chief Executive Officer shall also have and
may exercise such further powers and duties as from time
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to time may be conferred upon, or assigned to, him by the Board of Directors not
inconsistent with these Bylaws. Absent a Board of Director resolution to the
contrary, the Chairman shall be the chief executive officer of the Corporation.
The President and Chief Executive Officer shall have the authority, in the name
and on behalf of the Corporation, to enter into leases, contracts and
commitments in the ordinary course of the Corporation's business. In the absence
or disability of the Chairman, the Chief Executive Officer shall preside at
meetings of shareholders and, if a director, shall preside at meetings of the
Board of Directors.
Each Vice President, if any, shall have such powers and perform such
duties as the Board of Directors shall from time to time designate. In the
absence or disability of the President, a Vice President specifically designated
by the vote of the Board of Directors shall have the powers and shall exercise
the duties of the President.
The Secretary shall have custody of and shall maintain all of the
corporate records (except the financial records), shall record the minutes of
all meetings of the shareholders and the Board of Directors, shall authenticate
records of the Corporation, shall send all notices of meetings and shall perform
such other duties as are prescribed by the Board of Directors or the President,
under whose supervision he shall be.
The Chief Financial Officer. The Chief Financial Officer shall be
responsible for maintaining the financial integrity of the Corporation, shall
prepare the financial plans for the Corporation and shall monitor the financial
performance of the Corporation and its subsidiaries, as well as performing such
other duties as may be prescribed by the Board, the Chairman of the Board, the
Chief Executive Officer or the President.
The Chief Technology Officer. The Chief Technology Officer shall be
responsible for software and web site product development, establishment of
technology standards for the Corporation's products and services, and
development of strategic plans in connection with the establishment, maintenance
and improvement of the Corporation's network infrastructure, as well as
performing such other duties as may be prescribed by the Board, the Chairman of
the Board, the Chief Executive Officer or the President.
The Chief Operating Officer. The Chief Operating Officer shall be the
chief operating officer of the Corporations, and shall have the primary
responsibility for the management of the operations of the business of the
Corporation.
The Treasurer shall have custody of all corporate funds, securities and
financial records, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositaries as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render an
account of all his transactions as treasurer and of the financial condition of
the Corporation at regular meetings of the Board or when the Board of Directors
so requests. The Treasurer shall also perform such other duties as are
prescribed by the Board of Directors.
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Each Assistant Secretary and Assistant Treasurer, if any, shall be
appointed by the Board of Directors and shall have such powers and shall perform
such duties as shall be assigned to them by the Board of Directors.
Section 3. Resignation of Officer. An officer may resign at any time by
delivering notice to the Corporation. The resignation shall be effective upon
receipt, unless the notice specifies a later effective date acceptable to the
Board. If the resignation is effective at a later date and the Corporation
accepts the future effective date, the Board of Directors may fill the pending
vacancy before the effective date provided the Board of Directors provides that
the successor officer does not take office until the future effective date.
Section 4. Removal of Officer. The Board of Directors may remove any officer at
any time with or without cause.
Section 5. Compensation. The compensation of officers shall be fixed from time
to time at the discretion of the Board of Directors. The Board of Directors may
enter into employment agreements with any officer of the Corporation.
ARTICLE V
Stock Certificates
Section 1. Issuance. Every holder of shares in this Corporation shall be
entitled to have a certificate representing all shares to which he is entitled.
No certificate shall be issued for any share until the consideration therefor
has been fully paid.
Section 2. Form. Certificates representing shares in this Corporation shall be
signed by the President and the Secretary of the Corporation, or any other
officer so designated by the Board of Directors.
Section 3. Legends for Preferences and Restrictions on Transfer. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided by law, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each shareholder 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.
A written restriction on the transfer or registration of transfer of a
security of the Corporation, if permitted by law and noted conspicuously on the
certificate representing the security may be enforced against the holder of the
restricted security or any successor or
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transferee of the holder including an executor, administrator, trustee, guardian
or other fiduciary entrusted with like responsibility for the person or estate
of the holder. Unless noted conspicuously on the certificate representing the
security, a restriction, even though permitted by law, is ineffective except
against a person with actual knowledge of the restriction. If the Corporation
issues any shares that are not registered under the Securities Act of 1933, as
amended, and registered or qualified under the applicable state securities laws,
the transfer of any such shares shall be restricted substantially in accordance
with the following legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT
HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF
COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED."
Section 4. Facsimile Signatures. Any and all signatures on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon such certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of the issue.
Section 5. Registered Shareholders. The Corporation shall be entitled to treat
the holder of record of shares as the holder in fact and, except as otherwise
provided by the laws of Florida, shall not be bound to recognize any equitable
or other claim to or interest in the shares.
Section 6. Transfer of Shares. Shares of the Corporation shall be transferred on
its books only after the surrender to the Corporation or the transfer agent of
the share certificates duly endorsed by the holder of record or
attorney-in-fact. If the surrendered certificates are canceled, new certificates
shall be issued to the person entitled to them, and the transaction recorded on
the books of the Corporation.
Section 7. Lost, Stolen or Destroyed Certificates. If a shareholder claims to
have lost or destroyed a certificate of shares issued by the Corporation, a new
certificate shall be issued upon delivery to the Corporation of an affidavit of
that fact by the person claiming the certificate of stock to be lost, stolen or
destroyed, and, at the discretion of the Board of Directors, upon the deposit of
a bond or other indemnity as the Board reasonably requires.
ARTICLE VI
Distributions
The Board of Directors may, in its sole judgment and discretion, from
time to time authorize and declare, and the Corporation may pay, distributions
on its outstanding shares in
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cash, property or its own shares, unless the distribution, after giving it
effect, would result in (i) the Corporation being unable to pay its debts as
they become due in the usual course of business, or (ii) a violation of
applicable law.
ARTICLE VII
Corporate Records
The Corporation shall keep as permanent records minutes of all meetings
of its shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors in place of the Board of
Directors on behalf of the Corporation. The Corporation shall also maintain
accurate accounting records and a record of its shareholders in a form that
permits preparation of a list of the names and addresses of all shareholders in
alphabetical order by class of shares showing the number and series of shares
held by each.
ARTICLE VIII
Indemnification of Officers,
Directors, Employees and Agents
Section 1. Indemnification. The Corporation shall, and does hereby, indemnify
and hold harmless to the fullest extent permitted or authorized by current or
future legislation or current or future judicial or administrative decisions
(but, in the case of any such future legislation or decisions, only to the
extent that it permits the Corporation to provide broader indemnification rights
than permitted prior to such legislation or decisions), each person (including
here and hereinafter, the heirs, executors, administrators, personal
representatives or estate of such person) who was or is a party, or is
threatened to be made a party, or was or is a witness, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), from, against and in respect
of any liability (which for purposes of this Article shall include any judgment,
settlement, penalty or fine) or cost, charge or expense (including attorneys'
fees and expenses) asserted against him or incurred by him by reason of the fact
that such indemnified person (1) is or was a director or officer of the
Corporation or (2) is or was an employee or agent of the Corporation as to whom
the Corporation has agreed in writing to grant such indemnity or (3) is or was
serving, at the request of the Corporation, as a director, officer, employee or
trustee of another corporation, partnership, joint venture, trust or other
enterprise (including serving as a fiduciary of an employee benefit plan) or is
or was serving as an agent of such other corporation, partnership, joint
venture, trust or other enterprise, in each case, as to whom the Corporation has
agreed in writing to grant such indemnity. Each director, officer, employee or
agent of the Corporation as to whom indemnification rights have been granted
under this Section 1 of this Article shall be referred to as an "Indemnified
Person".
Notwithstanding the foregoing, except as specified in Section 3 of this
Article, the
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<PAGE>
Corporation shall not be required to indemnify an Indemnified Person in
connection with a Proceeding (or any part thereof) initiated by such Indemnified
Person unless the authorization for such Proceeding (or any part thereof) was
not denied by the Board of Directors of the Corporation within sixty (60) days
after receipt of notice thereof from such Indemnified Person stating his intent
to initiate such Proceeding and only then upon such terms and conditions as the
Board of Directors may deem appropriate.
Section 2. Advance of Costs, Charges and Expenses. Costs, charges and expenses
(including attorneys' fees and expenses) incurred by an officer or director who
is an Indemnified Person in defending a Proceeding shall be paid by the
Corporation, to the fullest extent permitted or authorized by current or future
legislation or current or future judicial or administrative decisions (but, in
the case of any such future legislation or decisions, only to the extent that it
permits the Corporation to provide broader rights to advance costs, charges and
expenses than permitted prior to such legislation or decisions), in advance of
the final disposition of such Proceeding, upon receipt of an undertaking by or
on behalf of the Indemnified Person to repay all amounts so advanced in the
event that it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article. The Corporation
may, upon approval of the Indemnified Person, authorize the Corporation's
counsel to represent such person in any Proceeding, whether or not the
Corporation is a party to such Proceeding. Such authorization may be made by the
Chairman of the Board, unless he is a party to such Proceeding, or by the Board
of Directors by majority vote, including directors who are parties to such
Proceeding.
Section 3. Procedure For Indemnification. Any indemnification or advance under
this Article shall be made promptly and in any event within forty-five (45) days
upon the written request of the Indemnified Person. The right to indemnification
or advances as granted by this Article shall be enforceable by the Indemnified
Person in any court of competent jurisdiction, if the Corporation denies such
request under this Article, in whole or in part, or if no disposition thereof is
made within forty-five (45) days. Such Indemnified Person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification or advances, 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 that
the claimant has not met the standard of conduct, if any, required by current or
future legislation or by current or future judicial or administrative decisions
for indemnification (but, in the case of any such future legislation or
decisions, only to the extent that it does not impose a more stringent standard
of conduct than permitted prior to such legislation or decision), but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or any committee thereof, its
independent legal counsel, and its shareholders) 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, if any, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors or any committee thereof, its
independent legal counsel, or its shareholders) 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.
Section 4. Rights Not Exclusive; Contract Right; Survival. The indemnification
provided by
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<PAGE>
this Article shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions in such person's
official capacity and as to actions in another capacity while holding such
office, and shall continue as to an Indemnified Person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors, administrators, personal representatives and estate of such
person. All rights to indemnification and advances under this Article shall be
deemed to be a contract between the Corporation and each Indemnified Person who
serves or served in such capacity at any time while this Article is in effect
and, as such, are enforceable against the Corporation. Any repeal or
modification of this Article or any repeal or modification of relevant
provisions of Florida's corporation law or any other applicable laws shall not
in any way diminish these rights to indemnification of or advances to such
Indemnified Person, or the obligations of the Corporation arising hereunder, for
claims relating to matters occurring prior to such repeals or modification.
Section 5. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including serving as a
fiduciary of an employee benefit plan), with respect to any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article or the
applicable provisions of Florida law.
Section 6. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify and hold harmless, and make advances
to, each Indemnified Person as to costs, charges and expenses (including
attorneys' fees), liabilities, judgments, fines and amounts paid in settlement
with respect to any Proceeding, including any action by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article that shall not have been invalidated and as otherwise permitted by
applicable law.
ARTICLE IX
Miscellaneous
Section 1. Corporate Seal. The corporate seal of the Corporation shall be
circular in form and shall include the name and jurisdiction of incorporation of
the Corporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end on December
31 of each calendar year, unless otherwise fixed by resolution of the Board of
Directors.
Section 3. Checks. All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the Corporation
shall be signed by the President, the Treasurer or such other officer(s) or
agent(s) of the Corporation as shall be determined from time to time by
resolution of the Board of Directors.
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ARTICLE X
Amendment
The Board shall have the power to adopt, amend or repeal the Bylaws or
any part hereof. Certain provisions of the Bylaws, as stated herein, may not be
altered, amended or repealed except by the affirmative vote of at least
two-thirds of the outstanding shares of capital stock of the Corporation
entitled to vote at a shareholders' meeting duly called for such purpose. Except
for such provisions requiring a two-thirds vote to alter, amend or repeal, the
Bylaws may be altered, amended or repealed, and new bylaws may be adopted, by
the shareholders upon the affirmative vote of at least a majority of the
outstanding shares of capital stock of the Corporation entitled to vote at a
shareholders' meeting duly called for such purpose. Notwithstanding anything
contained in these Bylaws to the contrary, this Article X shall not be altered,
amended or repealed except by an affirmative vote of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote at a
shareholders' meeting duly called for such purpose.
15
Exhibit 10.01
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement"), by and among
Take to Auction.com, Inc., a Florida corporation (the "Company") and Albert
Friedman ("Employee"), is hereby entered into as of this 25 day of August, 1999.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby employs Employee as President and Chief Executive Officer of the Company.
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of such position and will report directly to the Board.
Employee hereby accepts this employment upon the terms and conditions herein
contained and, subject to Section 1(b) hereof, agrees to devote Employee's full
business time, attention and efforts to promote and further the business of the
Company. Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(b) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of Section 4 hereof.
2. TERM. The Company employs Employee for a period commencing the date hereof
and ending on the third anniversary of the date hereof (the "Term"), subject to
termination prior to such date pursuant to Section 5 hereof. Sixty (60) days
prior to the end of the Term (or any renewal term), either the Company or
Employee may give notice to the other of its determination not to renew this
Agreement. If a notice of non-renewal is not delivered, this Agreement will
automatically continue in effect for successive one (1) year renewal terms
subject to termination prior to such date pursuant to Section 5 hereof. If such
notice of non-renewal is given by any party, then Employee's employment will
terminate at the end of such term (or on such other date as the parties mutually
agree).
3. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. The base salary payable hereunder to Employee shall
equal $125,000 per year, payable on a regular basis in accordance with the
Company's standard payroll
<PAGE>
procedures but not less than monthly. The annualized base salary shall be
adjusted annually by the greater of five percent (5%) of the base salary or the
increase in an amount determined at the discretion of the Compensation Committee
of the Board of Directors.
(b) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance plans that
the Company may have in effect from time to time. The benefits provided to
Employee under this clause (i) shall be at least equal to such benefits provided
to executives or employees in similar positions at the Company.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the performance of
Employee's services pursuant to this Agreement. All reimbursable expenses shall
be appropriately documented in reasonable detail by Employee upon submission of
any request for reimbursement, and in a format and manner consistent with the
Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites (including, but not limited to, participation in the Company's
Long-Term Incentive Plan) as may be available to or deemed appropriate for
Employee by the Board and participation in all other Company-wide employee
benefits as available from time to time. Employee shall be entitled to four
weeks of vacation per year in addition to all Federal and religious holidays.
4. NON-COMPETITION AND NON-SOLICITATION.
(a) Employee acknowledges that during the course of Employee's
employment Employee will receive confidential and proprietary information from
and concerning the Company. Employee also acknowledges that the Company will
make substantial investments in the development of the Company's goodwill and in
Employee's professional development. The capital expended to develop this
goodwill directly benefits Employee and should continue to do so in the event
that the relationship between the Company and Employee is terminated. Likewise,
the Company has conferred and will confer a direct economic benefit on Employee.
Employee agrees that the Company is entitled to protect these business interests
and investments and to prevent Employee from using or taking advantage of the
foregoing economic benefits to the Company's detriment.
(b) Employee agrees that, except for services and duties performed for
or on behalf of the Company according to this Agreement, Employee will not,
during the period of Employee's employment with the Company, and for a period
(the "Restricted Period") of one (1) year immediately following the termination
of Employee's employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation, association,
enterprise, venture or business of whatever nature:
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<PAGE>
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, lender or in a managerial capacity, whether as an
employee, independent contractor, agent, consultant or advisor or as a sales
representative, in any online auction facilitation or similar business in direct
competition with those aspects of the business of the Company or any subsidiary
of the Company, with which Employee has had any involvement, within United
States of America, Canada and all other countries in which customers of the
Company have access to the world wide web (the "Territory");
(ii) solicit any person who is, at that time, or who has been
within one (1) year prior to that time, an employee of the Company for the
purpose or with the intent of enticing such employee away from or out of the
employ of the Company;
(iii) solicit any person or entity which is, at that time, or
which has been within one (1) year prior to that time, a customer, vendor,
distributor, service provider or supplier of the Company for the purpose of
soliciting or selling products or services in direct competition with those
aspects of the business of the Company or any subsidiary of the Company with
which Employee has had any involvement, within the Territory; or
(iv) solicit any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor or potential competitor,
which candidate was, to Employee's knowledge, either called upon by the Company
or for which the Company made an acquisition analysis, for the purpose of
acquiring such entity. Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit Employee from acquiring as an investment not more than
two percent (2%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter.
(c) In recognition of the substantial nature of such potential damages
and the difficulty of measuring economic losses to the Company as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to the Company for which they would have no other
adequate remedy, Employee agrees that in the event of breach by Employee of the
foregoing covenant, the Company shall be entitled to specific performance of
this provision and injunctive and other equitable relief.
(d) It is agreed by the parties that the foregoing covenants in this
Section 4 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of the Company and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Company throughout the term of this Agreement, whether before or after
the date of termination of the employment of Employee. For example, if, during
the term of this Agreement, the Company engages in new and different online
auction facilitation activities, or establishes new locations for its current
activities or business and Employee is involved with providing such new online
auction facilitation services, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within the United
States of America through the term of this Agreement.
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<PAGE>
(e) All of the covenants in this Section 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. Further, this
Section 4 shall survive the termination of this Agreement and the termination of
Employee's employment with the Company. It is specifically agreed that the
period of one (1) year following termination of employment stated at the
beginning of this Section 4, during which the agreements and covenants of
Employee made in this Section 4 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 4.
5. TERMINATION; RIGHTS ON TERMINATION. This Agreement and Employee's employment
may be terminated for any one of the following causes:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate, heirs or
other descendants or representatives.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company Employee's base salary at the rate then in effect,
payable at the Company's regular and customary intervals for the payment of
salaries as then in effect, less any amounts Employee might receive under the
Company's disability insurance policy, if any, for whatever time period is
remaining under the Term or for six (6) months, whichever amount is less.
(c) CAUSE. The Company may, in its sole and absolute discretion,
terminate the employment of Employee hereunder immediately upon after delivery
of written notice to Employee, or at such later time as the Company may specify
in such notice, for "Cause." As used in this Agreement "Cause" includes, but is
not limited to, the following: (1) Employee's willful and material breach of
this Agreement; (2) Employee's gross negligence in the performance, or
intentional nonperformance, (continuing for ten (10) days after receipt of
written notice of need to cure) of any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty or fraud, whether
or not with respect to the business or affairs of the Company,
-4-
<PAGE>
which affects the operations, property or reputation of the Company; (4)
Employee's conviction of a felony crime; (5) chronic alcohol or illegal drug
abuse by Employee; (6) Employee's willful injury to any independent contractor,
employee or agent of the Company, or to any other person in the course of
Employee's performance of services for the Company; or (7) If Employee sexually
harasses any employee, agent or contractor of the Company or commits any act
which otherwise creates an offensive work environment for employees, agents or
contractors of the Company.
The Company shall not be limited to termination as a remedy for any
damaging, injurious, improper or illegal act by Employee, but may also seek
damages, injunction, or such other remedy as the Company may deem appropriate
under the circumstances. If Employee's employment is terminated for Cause,
Employee agrees to vacate the Company's offices on or before the effective date
of the termination and to return and deliver to the Company at such time all
Company property. In the event of a termination for Cause, as enumerated above,
Employee shall have no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
provided the Company does not have Cause to terminate Employee pursuant to (c)
above, Employee may, without Cause, terminate this Agreement and Employee's
employment, effective ninety (90) days after written notice is provided to the
Company. Employee may only be terminated without Cause by the Company during the
Term hereof if such termination is approved by a majority of the members of the
Board. Should Employee be terminated by the Company without Cause during the
Term, Employee shall be entitled to receive from the Company one (1) year's base
salary (at Employee's then current base) payable over the course of the year
following such termination. The severance compensation shall be paid in
accordance with the Company's standard payroll procedures but not less than
monthly. If Employee resigns or otherwise terminates Employee's employment
without cause pursuant to this Section 5(d), Employee shall receive no severance
compensation.
(e) TERMINATION BY EXECUTIVE FOR GOOD REASON OR UPON CHANGE IN CONTROL.
Upon the termination of the Employee's employment hereunder by the Employee (i)
for "Good Reason", as specified in Section 5(e)(B) hereof, or (ii) within 180
days after the occurrence of a "Change in Control" as specified in Section
5(e)(A) hereof, the Company shall (i) continue to pay to the Employee the base
salary through the effective date of termination specified in such notice and
(ii) pay to the Employee, in a lump sum, an amount equal to 200% of the annual
base salary prevailing on the date of such termination. In addition, upon such
termination, all options to purchase shares of the Company's common stock, if
any, shall accelerate and become immediately exercisable.
(A) For purposes of this Agreement, a "Change in Control"
shall mean:
(i) The acquisition (other than by or from the
Company), at any time after the date hereof, by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the
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Company's then outstanding voting securities entitled to vote generally in the
election of directors (together with such common stock, "Voting Securities"); or
(ii) Approval by the shareholders of the Company of
(x) a reorganization, merger or consolidation with respect to which persons who
were the shareholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (y) a liquidation or dissolution of the Company or (z) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
(B) For purposes of this Agreement, "Good Reason" shall mean:
(i) The assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 1 of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(ii) Any failure by the Company to comply with any of
the provisions of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(iii) The Company's requiring the Employee to be
based at any office or location other than within a 25 mile radius of the
Company's offices in Miami, Florida, except for travel reasonably required in
connection with the performance of the Employee's responsibilities hereunder; or
(iv) Any purported termination by the Company of the
Employee's employment other than as expressly permitted by this Agreement.
(f) Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above. All
other rights and obligations of the Company and Employee under this Agreement
shall cease as of the effective date of termination, except that the Company's
obligations under Section 10 hereof and Employee's obligations under Section 4,
8, 9 and 11 hereof shall survive such termination in accordance with their
terms. Further, unless Employee and the Company otherwise agree in writing, upon
termination of this Agreement for any reason,
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Employee will immediately resign from all director, officer or other positions
held with the Company.
(g) If termination of Employee's employment arises out of the Company's
failure to pay Employee the amounts to which he is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined pursuant to the provisions of Section 16 below, the Company shall pay
all amounts and damages to which Employee may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Employee to enforce Employee's rights hereunder.
Further, none of the provisions of Section 4 hereof shall apply in the event
this Agreement is terminated as a result of a material breach by the Company.
6. PARTICIPATION IN STOCK OPTION PLAN.
The Employee shall be granted an option (the "Option") to purchase
75,000 shares of the Company's Common Stock, par value $.001 per share ("Common
Stock"), at an exercise price of $___, the fair market value of the Company's
common stock on __________ __, 1999. The Option may be exercised, in whole or in
part, in accordance with the following vesting schedule: (i) 25,000 shares of
Common Stock shall vest one year after the signing of this Agreement, (ii)
25,000 shares of Common Stock shall vest two years after the signing of this
Agreement, and (iii) 25,000 shares of Common Stock shall vest three years after
the signing of this Agreement. The Option shall expire seven (7) years from the
date hereof (the "Expiration Date"), and must be exercised, if at all, in whole
or in part, on or before the Expiration Date. The Option Agreement will be in
substantially the form of Exhibit A attached hereto.
7. PURCHASE RIGHT ON EMPLOYEE'S STOCK AND OPTIONS.
(a) Irrevocable Option to Purchase. Upon (i) the death or Retirement of
Employee, (ii) the Company's termination of Employee's employment with the
Company by reason of Employee's Disability pursuant to the provisions of Section
5(b) (a "Disability Termination") or for any other reason except a termination
for Cause pursuant to the provisions of Section 5(c) (a "Non-Cause
Termination"), or (iii) the termination of Employee's employment with the
Company by Employee for any reason other than a termination which follows less
than six months service to the Company or is effected upon less than 90 days'
prior written notice to the Company of such termination (hereinafter, a "Proper
Employee Termination"), then the Company shall have the exclusive and
irrevocable right and option, exercisable in the sole judgment and discretion of
the Board, to purchase and acquire from Employee, or from Employee's Estate, all
of Employee's shares of Company capital stock ("Stock") (if any) and all of
Employee's options or rights to purchase Stock ("Options") (if any) in
accordance with the terms and conditions provided in this Section 7. Employee or
Employee's Estate hereby irrevocably and unconditionally agrees to transfer
Employee's Stock and Employee's Options on the terms and conditions set forth in
this Section 7.
(b) Purchase Price. The purchase price to be paid for any Stock to be
acquired under this Section 7 shall be the fair market value of such Stock as of
the last day of the calendar month immediately preceding the date of death or
termination of employment as described in Section
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7(a) hereof. The purchase price to be paid for Employee's Options to be acquired
under this Section 7 shall be the fair market value of the Stock for which
Employee's Options are exercisable (the "Vested Options" as of the last day of
the calendar month immediately preceding the date of death or termination of
employment as described Section 7(a) hereof), less an amount equal to the
exercise price of Employee's Options in respect of such Stock. In each case, the
fair market value of the Stock shall be determined in good faith by the Board
(not taking into account any discount for non-voting nature (if applicable),
minority interest or restriction on transferability) and, if Employee or
Employee's Estate does not object to such determination in a writing delivered
to and received by the Company within ten (10) business days of the Company's
delivery of such determination to such party, such Board' determination shall be
conclusive and binding upon Employee or Employee's Estate, as the case may be,
for all purposes hereunder. If Employee or Employee's Estate makes a timely
(i.e., within the 10 business days) written objection to the determination of
fair market value made by the Board, the determination of such fair market value
of the Stock shall be submitted to an investment banking or valuation firm
selected by the Board after consultation with Employee or Employee's Estate (the
"Primary Investment Firm"), whose fees and expenses shall be shared equally by
the Company, on the one hand, and Employee or Employee's Estate, on the other
hand. If Employee and the Company agree in advance in writing to the selection
of the Primary Investment Firm, then such Primary Investment Firm's
determination shall be conclusive and binding upon Employee or Employee's
Estate, as the case may be, for all purposes hereunder. If Employee and the
Company do not agree in advance in writing to the selection of the Primary
Investment Firm, then the Primary Investment Firm shall determine the fair
market value of the Stock promptly following its selection by the Board; if,
following such determination of fair market value by such Firm, either the
Company or Employee or Employee's Estate objects to such determination in a
writing delivered to the other party within ten (10) business days of receipt
thereof, the Company and Employee or Employee's Estate shall mutually agree to a
second investment banking or valuation firm (the "Secondary Investment Firm"),
who shall make a determination of such fair market value of the Stock and whose
fees and expenses shall be paid by the person objecting to the determination
made by the Primary Investment Firm. If such valuation by the Secondary
Investment Firm is procured, it shall be delivered to the other party, and the
average of the fair market values as determined by the Primary Investment Firm
and the Secondary Investment Firm shall be the fair market value for purposes of
this Section 7 and shall be conclusive and binding on all parties for all
purposes hereof.
(c) Upon termination of Employee for Cause, the Company shall have the
right and option to acquire Employee's Stock for the Net Book Value per share of
such Stock, based upon the Company's latest audited financial statements. All of
Employee's Options shall be terminated, expired, void and of no further force or
effect.
(d) Employee must deliver stock certificates representing his Stock to
the Company within five business days of a demand in writing to such effect. If
Employee fails to so deliver the stock certificates, the Company may mail a
check for the purchase price or the net book value purchase price of such Stock
to Employee's last known address and cancel such Stock on the books and records
of the Company and such Stock shall have no further force or effect. In the case
of a negative net book value, no purchase price need be delivered before
canceling the Stock.
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8. COMPANY PROPERTY; INVENTIONS.
(a) All records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, and other property delivered to or
compiled by Employee by or on behalf of the Company or their representatives,
vendors, or customers which pertain to the business of the Company shall be and
remain the property of the Company, as the case may be, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials, and other similar data pertaining to the
business, activities, or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
(b) Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of Employee's employment by the Company. Employee hereby
assigns and agrees to assign all of Employee's interests therein to the Company
or its nominee. Whenever requested to do so by the Company, Employee shall
execute any and all applications, assignments, or other instruments that the
Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
9. CONFIDENTIALITY AND PROPRIETARY INFORMATION.
(a) Acknowledgment. Employee acknowledges and agrees that in the course
of rendering services to the Company and its customers, Employee will have
access to and will become acquainted with confidential and proprietary
information about the professional, business and financial affairs of the
Company, its affiliates and its vendors, suppliers and customers, and that
Employee may have contributed to or may in the future contribute to such
information. Employee further recognizes that Employee is being employed as a
key employee, that the Company is engaged in a highly competitive business, and
that the success of the Company in the marketplace and business depends upon its
goodwill and reputation for integrity, quality and dependability. Employee
recognizes that in order to guard the legitimate interests of the Company it is
necessary for the Company to protect all such confidential and proprietary
information, goodwill and reputation.
(b) Proprietary Information. In the course of Employee's service to the
Company, Employee may have access to confidential know-how, business documents
or information, marketing data, client lists and trade secrets which are
confidential. Such information shall hereinafter be called "Proprietary
Information" and shall include any and all items enumerated in the preceding
sentence which come within the scope of the business activities of the Company
as to which Employee has had or may have access, whether previously existing,
now existing or arising hereafter, whether or not conceived or developed by
others or by Employee alone or with others during the period of his service to
the Company, and whether or not conceived or developed during regular working
hours. "Proprietary Information" shall not include any information which is in
the public domain during the period of service by Employee or becomes
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public thereafter, provided such information is not in the public domain as a
consequence of disclosure by Employee in violation of this Agreement.
(c) Fiduciary Obligations. Employee agrees and acknowledges that the
Proprietary Information is of critical importance to the Company and a violation
of this Section 8 will seriously and irreparably impair and damage the Company's
business. Employee therefore agrees, while he is an employee of the Company and
at all times thereafter, to keep all Proprietary Information strictly
confidential.
(d) Non-Disclosure. Except as required by law or order of any court or
governmental entity or in connection with the proper performance of his duties
hereunder, Employee shall not disclose, directly or indirectly (except as
required by law), any Proprietary Information to any person other than (a) the
Company, (b) persons who are authorized employees of the Company at the time of
such disclosure, (c) such other persons, including prospective investors or
lenders, to whom Employee has been instructed to make disclosure by the
Company's Board, or (d) Employee's counsel, so long as such counsel agrees to
keep all Proprietary Information confidential (in the case of clauses (b) and
(c), only to the extent required in the course of Employee's service to the
Company). Upon any termination of Employee's employment hereunder, Employee
shall deliver to the Company all notes, letters, documents, tapes, discs,
recorded data and records which may contain Proprietary Information which are
then in Employee's possession or control and shall not retain, use, or make any
copies, summaries or extracts thereof.
10. INDEMNIFICATION. In the event Employee is made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against
Employee), by reason of the fact that Employee is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including reasonable attorneys' fees), judgments, fines, and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit, or proceeding, the
Company agrees to engage competent legal representation, and Employee agrees to
use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and the Company shall pay all
reasonable attorneys' fees of such separate counsel. Further, while Employee is
expected at all times to use Employee's best efforts to faithfully discharge his
duties under this Agreement, Employee cannot be held liable to the Company for
errors or omissions made in good faith where Employee has not exhibited gross,
willful and wanton negligence and misconduct or performed criminal and
fraudulent acts which materially damage the business of the Company.
11. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of Employee's duties hereunder will not violate
or be a breach of any agreement with a former employer, client, or any other
person or entity. Further, Employee agrees to indemnify the Company for any
claim, including but not limited to attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
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hereafter come to have against the Company based upon or arising out of any
noncompetition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
Employee has and will continue to truthfully disclose to the Company
the following matters, whether occurring, at any time during the five (5) years
immediately preceding the date of this Agreement or at any time during the term
of this Agreement:
(1) any criminal complaint, indictment or criminal
proceeding in which Employee is named as a defendant;
(2) any allegation, investigation, or proceeding,
whether administrative, civil or criminal, against Employee by any
licensing authority or industry association; and
(3) any allegation, investigation or proceeding,
whether administrative, civil, or criminal, against Employee for
violating professional ethics or standards, or engaging in illegal,
immoral or other misconduct (of any nature or degree), relating to the
business of the Company.
12. ASSIGNMENT; BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding on Employee and the Company and Employee's and the Company's
respective heirs, personal representatives, successors and assigns; provided,
however, that Employee shall have no right to assign Employee's rights or duties
under this contract to any other person. In the event of the sale, merger or
consolidation of the Company, Employee specifically agrees that the Company may
assign the Company's rights and obligations hereunder to the Company's
successor, assign or purchaser. In addition, and in any event, the Company may,
at any time, assign the Company's rights and obligations under this Agreement to
any person that is an affiliate of the Company or to any person which, after any
such assignment, employs at least 50% of the employees employed by the Company
immediately prior to the assignment.
13. COMPLETE AGREEMENT; AMENDMENTS. This Agreement supersedes any other
agreements or understandings, written or oral, among the Company and Employee,
and Employee has no oral representations, understandings or agreements with the
Company or any of its officers, directors, or representatives covering the same
subject matter as this Agreement. This written Agreement is the final, complete,
and exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement, and it cannot be varied,
contradicted, or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This written Agreement may not be later modified except
by a written instrument signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a written
instrument signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
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To the Company: Take to Auction.com, Inc.
2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
Attention: Board of Directors
To Employee: Albert Friedman
________________________
________________________
Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or, in any other case, when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this Section 14.
15. SEVERABILITY. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. Employee and
the Company agree and acknowledge that the provisions of Sections 4 and 9 are
material and of the essence to this Agreement. If the scope of any restriction
or covenant contained therein should be or become too broad or extensive to
permit enforcement thereof to its fullest extent, then such restriction or
covenant shall be enforced to the maximum extent permitted by law, and Employee
hereby consents and agrees that (a) it is the parties intention and agreement
that the covenants and restrictions contained therein be enforced as written,
and (b) in the event a court of competent jurisdiction should determine that any
restriction or covenant contained therein is too broad or extensive to permit
enforcement thereof to its fullest extent, the scope of any such restriction or
covenant may be modified accordingly in any judicial proceeding brought to
enforce such restriction or covenant, but should be modified to permit
enforcement of the restrictions and covenants contained herein to the maximum
extent the court, in its judgment, will permit.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement or Employee's employment with the Company (or any
termination thereof) shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Broward County, Florida, in
accordance with the rules of the American Arbitration Association then in
effect. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The prevailing party shall receive and the unsuccessful party
shall pay the reasonable fees and expenses of any arbitration proceeding in
connection with this Agreement.
17. GOVERNING LAW. This Agreement shall in all respects be construed according
to the laws of the State of Florida.
18. HEADINGS. The paragraph headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define, or limit the extent
or intent of the Agreement or of any part hereof.
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19. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute but one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement as of the date first above written.
The Company:
TAKE TO AUCTION.COM, INC.
By: /s/ Mitchell Morgan
-----------------------------------------
Name: Mitchell Morgan
Title: Vice President and Chief Financial Officer
Employee:
/s/ Albert Friedman
-------------------------------------------
Albert Friedman
Exhibit 10.02
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This Amended and Restated Executive Employment Agreement ("Restated
Agreement"), by and between Take to Auction.com, Inc., a Florida corporation
(the "Company"), and Mitchell Morgan ("Employee"), is made and effective as of
the 25th day of August, 1999.
Recitals
The Company and Employee entered into an Executive Employment Agreement
dated August 25, 1999 (the "Original Agreement") which provided for, among other
things, a stock option of 50,000 shares of common stock, par value $.001. The
Company and Employee now wish to amend and restate the Original Agreement to
reflect an increase in the options due to an additional option grant and the
latest stock split by terminating the Original Agreement and replacing the same
with the terms and conditions set forth below as of the date first written
above.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) Subject to the terms and conditions of this Restated Agreement, the
Company hereby employs Employee as Vice President and Chief Financial Officer of
the Company of the Company. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of such position and
will report directly to the President and Chief Executive Officer. Employee
hereby accepts this employment upon the terms and conditions herein contained
and, subject to Section 1(b) hereof, agrees to devote Employee's full business
time, attention and efforts to promote and further the business of the Company.
Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(b) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of Section 4 hereof.
2. TERM. The Company employs Employee for a period commencing the date hereof
and ending on the third anniversary of the date hereof (the "Term"), subject to
termination prior to
<PAGE>
such date pursuant to Section 5 hereof. Sixty (60) days prior to the end of the
Term (or any renewal term), either the Company or Employee may give notice to
the other of its determination not to renew this Restated Agreement. If a notice
of non-renewal is not delivered, this Restated Agreement will automatically
continue in effect for successive one (1) year renewal terms subject to
termination prior to such date pursuant to Section 5 hereof. If such notice of
non-renewal is given by any party, then Employee's employment will terminate at
the end of such term (or on such other date as the parties mutually agree).
3. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. The base salary payable hereunder to Employee shall
equal $120,000 per year, payable on a regular basis in accordance with the
Company's standard payroll procedures but not less than monthly. The annualized
base salary shall be adjusted annually by the greater of five percent (5%) of
the base salary or the increase in an amount determined at the discretion of the
Compensation Committee of the Board of Directors.
(b) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance plans that
the Company may have in effect from time to time. The benefits provided to
Employee under this clause (i) shall be at least equal to such benefits provided
to executives or employees in similar positions at the Company.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the performance of
Employee's services pursuant to this Restated Agreement. All reimbursable
expenses shall be appropriately documented in reasonable detail by Employee upon
submission of any request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites (including, but not limited to, participation in the Company's
Long-Term Incentive Plan) as may be available to or deemed appropriate for
Employee by the Board and participation in all other Company-wide employee
benefits as available from time to time. Employee shall be entitled to four
weeks of vacation per year in addition to all Federal and religious holidays.
4. NON-COMPETITION AND NON-SOLICITATION.
(a) Employee acknowledges that during the course of Employee's
employment Employee will receive confidential and proprietary information from
and concerning the Company. Employee also acknowledges that the Company will
make substantial investments in the development of the Company's goodwill and in
Employee's professional development. The capital expended to develop this
goodwill directly benefits Employee and should continue to do so in the event
that the relationship between the Company and Employee is terminated.
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Likewise, the Company has conferred and will confer a direct economic benefit on
Employee. Employee agrees that the Company is entitled to protect these business
interests and investments and to prevent Employee from using or taking advantage
of the foregoing economic benefits to the Company's detriment.
(b) Employee agrees that, except for services and duties performed for
or on behalf of the Company according to this Restated Agreement, Employee will
not, during the period of Employee's employment with the Company, and for a
period (the "Restricted Period") of one (1) year immediately following the
termination of Employee's employment under this Restated Agreement, for any
reason whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation,
association, enterprise, venture or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, lender or in a managerial capacity, whether as an
employee, independent contractor, agent, consultant or advisor or as a sales
representative, in any online auction facilitation or similar business in direct
competition with those aspects of the business of the Company or any subsidiary
of the Company, with which Employee has had any involvement, within United
States of America, Canada and all other countries in which customers of the
Company have access to the world wide web (the "Territory");
(ii) solicit any person who is, at that time, or who has been
within one (1) year prior to that time, an employee of the Company for the
purpose or with the intent of enticing such employee away from or out of the
employ of the Company;
(iii) solicit any person or entity which is, at that time, or
which has been within one (1) year prior to that time, a customer, vendor,
distributor, service provider or supplier of the Company for the purpose of
soliciting or selling products or services in direct competition with those
aspects of the business of the Company or any subsidiary of the Company with
which Employee has had any involvement, within the Territory; or
(iv) solicit any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor or potential competitor,
which candidate was, to Employee's knowledge, either called upon by the Company
or for which the Company made an acquisition analysis, for the purpose of
acquiring such entity. Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit Employee from acquiring as an investment not more than
two percent (2%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter.
(c) In recognition of the substantial nature of such potential damages
and the difficulty of measuring economic losses to the Company as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to the Company for which they would have no other
adequate remedy, Employee agrees that in the event of breach by Employee of the
foregoing covenant, the Company shall be entitled to specific performance of
this provision and injunctive and other equitable relief.
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(d) It is agreed by the parties that the foregoing covenants in this
Section 4 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Restated
Agreement and the current plans of the Company and Employee that such covenants
be construed and enforced in accordance with the changing activities, business
and locations of the Company throughout the term of this Restated Agreement,
whether before or after the date of termination of the employment of Employee.
For example, if, during the term of this Restated Agreement, the Company engages
in new and different online auction facilitation activities, or establishes new
locations for its current activities or business and Employee is involved with
providing such new online auction facilitation services, then Employee will be
precluded from soliciting the customers or employees of such new activities or
business or from such new location and from directly competing with such new
business within the United States of America through the term of this Restated
Agreement.
(e) All of the covenants in this Section 4 shall be construed as an
agreement independent of any other provision in this Restated Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Restated Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of such covenants. Further, this
Section 4 shall survive the termination of this Restated Agreement and the
termination of Employee's employment with the Company. It is specifically agreed
that the period of one (1) year following termination of employment stated at
the beginning of this Section 4, during which the agreements and covenants of
Employee made in this Section 4 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 4.
5. TERMINATION; RIGHTS ON TERMINATION. This Restated Agreement and Employee's
employment may be terminated for any one of the following causes:
(a) DEATH. The death of Employee shall immediately terminate this
Restated Agreement with no severance compensation due to Employee's estate,
heirs or other descendants or representatives.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Restated
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Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company Employee's base salary at the rate then in effect,
payable at the Company's regular and customary intervals for the payment of
salaries as then in effect, less any amounts Employee might receive under the
Company's disability insurance policy, if any, for whatever time period is
remaining under the Term or for six (6) months, whichever amount is less.
(c) CAUSE. The Company may, in its sole and absolute discretion,
terminate the employment of Employee hereunder immediately upon after delivery
of written notice to Employee, or at such later time as the Company may specify
in such notice, for "Cause." As used in this Restated Agreement "Cause"
includes, but is not limited to, the following: (1) Employee's willful and
material breach of this Restated Agreement; (2) Employee's gross negligence in
the performance, or intentional nonperformance, (continuing for ten (10) days
after receipt of written notice of need to cure) of any of Employee's material
duties and responsibilities hereunder; (3) Employee's willful dishonesty or
fraud, whether or not with respect to the business or affairs of the Company,
which affects the operations, property or reputation of the Company; (4)
Employee's conviction of a felony crime; (5) chronic alcohol or illegal drug
abuse by Employee; (6) Employee's willful injury to any independent contractor,
employee or agent of the Company, or to any other person in the course of
Employee's performance of services for the Company; or (7) If Employee sexually
harasses any employee, agent or contractor of the Company or commits any act
which otherwise creates an offensive work environment for employees, agents or
contractors of the Company.
The Company shall not be limited to termination as a remedy for any
damaging, injurious, improper or illegal act by Employee, but may also seek
damages, injunction, or such other remedy as the Company may deem appropriate
under the circumstances. If Employee's employment is terminated for Cause,
Employee agrees to vacate the Company's offices on or before the effective date
of the termination and to return and deliver to the Company at such time all
Company property. In the event of a termination for Cause, as enumerated above,
Employee shall have no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
provided the Company does not have Cause to terminate Employee pursuant to (c)
above, Employee may, without Cause, terminate this Restated Agreement and
Employee's employment, effective ninety (90) days after written notice is
provided to the Company. Employee may only be terminated without Cause by the
Company during the Term hereof if such termination is approved by a majority of
the members of the Board. Should Employee be terminated by the Company without
Cause during the Term, Employee shall be entitled to receive from the Company
one (1) year's base salary (at Employee's then current base) payable over the
course of the year following such termination. The severance compensation shall
be paid in accordance with the Company's standard payroll procedures but not
less than monthly. If Employee resigns or otherwise terminates Employee's
employment without cause pursuant to this Section 5(d), Employee shall receive
no severance compensation.
(e) TERMINATION BY EXECUTIVE FOR GOOD REASON OR UPON CHANGE IN CONTROL.
Upon the termination of the Employee's employment hereunder by the Employee (i)
for "Good Reason", as specified in Section 5(e)(B) hereof, or (ii) within 180
days
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after the occurrence of a "Change in Control" as specified in Section 5(e)(A)
hereof, the Company shall (i) continue to pay to the Employee the base salary
through the effective date of termination specified in such notice and (ii) pay
to the Employee, in a lump sum, an amount equal to 200% of the annual base
salary prevailing on the date of such termination. In addition, upon such
termination, all options to purchase shares of the Company's common stock, if
any, shall accelerate and become immediately exercisable.
(A) For purposes of this Restated Agreement, a "Change in
Control" shall mean:
(i) The acquisition (other than by or from the
Company), at any time after the date hereof, by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors (together with such common stock, "Voting Securities"); or
(ii) Approval by the shareholders of the Company of
(x) a reorganization, merger or consolidation with respect to which persons who
were the shareholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (y) a liquidation or dissolution of the Company or (z) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
(B) For purposes of this Restated Agreement, "Good Reason"
shall mean:
(i) The assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 1 of this Restated Agreement, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(ii) Any failure by the Company to comply with any of
the provisions of Section 3 of this Restated Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(iii) The Company's requiring the Employee to be
based at any office or location other than within a 25 mile radius of the
Company's offices in Miami, Florida, except for
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travel reasonably required in connection with the performance of the Employee's
responsibilities hereunder; or
(iv) Any purported termination by the Company of the
Employee's employment other than as expressly permitted by this Restated
Agreement.
(f) Upon termination of this Restated Agreement for any reason provided
above, Employee shall be entitled to receive all compensation earned and all
benefits and reimbursements due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above. All other rights and obligations of the Company and Employee under this
Restated Agreement shall cease as of the effective date of termination, except
that the Company's obligations under Section 10 hereof and Employee's
obligations under Sections 4, 8, 9 and 11 hereof shall survive such termination
in accordance with their terms. Further, unless Employee and the Company
otherwise agree in writing, upon termination of this Restated Agreement for any
reason, Employee will immediately resign from all director, officer or other
positions held with the Company.
(g) If termination of Employee's employment arises out of the Company's
failure to pay Employee the amounts to which he is entitled under this Restated
Agreement or as a result of any other material breach of this Restated Agreement
by the Company, as determined pursuant to the provisions of Section 16 below,
the Company shall pay all amounts and damages to which Employee may be entitled
as a result of such breach, including interest thereon and all reasonable legal
fees and expenses and other costs incurred by Employee to enforce Employee's
rights hereunder. Further, none of the provisions of Section 4 hereof shall
apply in the event this Restated Agreement is terminated as a result of a
material breach by the Company.
6. PARTICIPATION IN STOCK OPTION PLAN.
The Employee shall be granted an option (the "Option") to purchase
145,408 shares of the Company's Common Stock , par value $.001 per share
("Common Stock"), at an exercise price of $0.41 (the fair market value of the
Company's common stock on the date of grant). The Option may be exercised, in
whole or in part, in accordance with the following vesting schedule: (i)
48,469.33 shares of Common Stock shall vest one year after the signing of this
Restated Agreement, (ii) 48,469.33 shares of Common Stock shall vest two years
after the signing of this Restated Agreement, and (iii) 48,469.33 shares of
Common Stock shall vest three years after the signing of this Restated
Agreement. The Option shall expire seven (7) years from the date hereof (the
"Expiration Date"), and must be exercised, if at all, in whole or in part, on or
before the Expiration Date. The Option Agreement will be in substantially the
form of Exhibit A attached hereto.
7. PURCHASE RIGHT ON EMPLOYEE'S STOCK AND OPTIONS.
(a) Irrevocable Option to Purchase. Upon (i) the death or Retirement of
Employee, (ii) the Company's termination of Employee's employment with the
Company by reason of Employee's Disability pursuant to the provisions of Section
5(b) (a "Disability Termination") or
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for any other reason except a termination for Cause pursuant to the provisions
of Section 5(c) (a "Non-Cause Termination"), or (iii) the termination of
Employee's employment with the Company by Employee for any reason other than a
termination which follows less than six months service to the Company or is
effected upon less than 90 days' prior written notice to the Company of such
termination (hereinafter, a "Proper Employee Termination"), then the Company
shall have the exclusive and irrevocable right and option, exercisable in the
sole judgment and discretion of the Board, to purchase and acquire from
Employee, or from Employee's Estate, all of Employee's shares of Company capital
stock ("Stock") (if any) and all of Employee's options or rights to purchase
Stock ("Options") (if any) in accordance with the terms and conditions provided
in this Section 7. Employee or Employee's Estate hereby irrevocably and
unconditionally agrees to transfer Employee's Stock and Employee's Options on
the terms and conditions set forth in this Section 7.
(b) Purchase Price. The purchase price to be paid for any Stock to be
acquired under this Section 7 shall be the fair market value of such Stock as of
the last day of the calendar month immediately preceding the date of death or
termination of employment as described in Section 7(a) hereof. The purchase
price to be paid for Employee's Options to be acquired under this Section 7
shall be the fair market value of the Stock for which Employee's Options are
exercisable (the "Vested Options" as of the last day of the calendar month
immediately preceding the date of death or termination of employment as
described Section 7(a) hereof), less an amount equal to the exercise price of
Employee's Options in respect of such Stock. In each case, the fair market value
of the Stock shall be determined in good faith by the Board (not taking into
account any discount for non-voting nature (if applicable), minority interest or
restriction on transferability) and, if Employee or Employee's Estate does not
object to such determination in a writing delivered to and received by the
Company within ten (10) business days of the Company's delivery of such
determination to such party, such Board' determination shall be conclusive and
binding upon Employee or Employee's Estate, as the case may be, for all purposes
hereunder. If Employee or Employee's Estate makes a timely (i.e., within the 10
business days) written objection to the determination of fair market value made
by the Board, the determination of such fair market value of the Stock shall be
submitted to an investment banking or valuation firm selected by the Board after
consultation with Employee or Employee's Estate (the "Primary Investment Firm"),
whose fees and expenses shall be shared equally by the Company, on the one hand,
and Employee or Employee's Estate, on the other hand. If Employee and the
Company agree in advance in writing to the selection of the Primary Investment
Firm, then such Primary Investment Firm's determination shall be conclusive and
binding upon Employee or Employee's Estate, as the case may be, for all purposes
hereunder. If Employee and the Company do not agree in advance in writing to the
selection of the Primary Investment Firm, then the Primary Investment Firm shall
determine the fair market value of the Stock promptly following its selection by
the Board; if, following such determination of fair market value by such Firm,
either the Company or Employee or Employee's Estate objects to such
determination in a writing delivered to the other party within ten (10) business
days of receipt thereof, the Company and Employee or Employee's Estate shall
mutually agree to a second investment banking or valuation firm (the "Secondary
Investment Firm"), who shall make a determination of such fair market value of
the Stock and whose fees and expenses shall be paid by the person objecting to
the determination made by the Primary Investment Firm. If such valuation by the
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<PAGE>
Secondary Investment Firm is procured, it shall be delivered to the other party,
and the average of the fair market values as determined by the Primary
Investment Firm and the Secondary Investment Firm shall be the fair market value
for purposes of this Section 7 and shall be conclusive and binding on all
parties for all purposes hereof.
(c) Upon termination of Employee for Cause, the Company shall have the
right and option to acquire Employee's Stock for the Net Book Value per share of
such Stock, based upon the Company's latest audited financial statements. All of
Employee's Options shall be terminated, expired, void and of no further force or
effect.
(d) Employee must deliver stock certificates representing his Stock to
the Company within five business days of a demand in writing to such effect. If
Employee fails to so deliver the stock certificates, the Company may mail a
check for the purchase price or the net book value purchase price of such Stock
to Employee's last known address and cancel such Stock on the books and records
of the Company and such Stock shall have no further force or effect. In the case
of a negative net book value, no purchase price need be delivered before
canceling the Stock.
8. COMPANY PROPERTY; INVENTIONS.
(a) All records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, and other property delivered to or
compiled by Employee by or on behalf of the Company or their representatives,
vendors, or customers which pertain to the business of the Company shall be and
remain the property of the Company, as the case may be, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials, and other similar data pertaining to the
business, activities, or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
(b) Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of Employee's employment by the Company. Employee hereby
assigns and agrees to assign all of Employee's interests therein to the Company
or its nominee. Whenever requested to do so by the Company, Employee shall
execute any and all applications, assignments, or other instruments that the
Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
9. CONFIDENTIALITY AND PROPRIETARY INFORMATION.
(a) Acknowledgment. Employee acknowledges and agrees that in the course
of rendering services to the Company and its customers, Employee will have
access to and will become acquainted with confidential and proprietary
information about the professional, business and financial affairs of the
Company, its affiliates and its vendors, suppliers and customers, and
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<PAGE>
that Employee may have contributed to or may in the future contribute to such
information. Employee further recognizes that Employee is being employed as a
key employee, that the Company is engaged in a highly competitive business, and
that the success of the Company in the marketplace and business depends upon its
goodwill and reputation for integrity, quality and dependability. Employee
recognizes that in order to guard the legitimate interests of the Company it is
necessary for the Company to protect all such confidential and proprietary
information, goodwill and reputation.
(b) Proprietary Information. In the course of Employee's service to the
Company, Employee may have access to confidential know-how, business documents
or information, marketing data, client lists and trade secrets which are
confidential. Such information shall hereinafter be called "Proprietary
Information" and shall include any and all items enumerated in the preceding
sentence which come within the scope of the business activities of the Company
as to which Employee has had or may have access, whether previously existing,
now existing or arising hereafter, whether or not conceived or developed by
others or by Employee alone or with others during the period of his service to
the Company, and whether or not conceived or developed during regular working
hours. "Proprietary Information" shall not include any information which is in
the public domain during the period of service by Employee or becomes public
thereafter, provided such information is not in the public domain as a
consequence of disclosure by Employee in violation of this Restated Agreement.
(c) Fiduciary Obligations. Employee agrees and acknowledges that the
Proprietary Information is of critical importance to the Company and a violation
of this Section 8 will seriously and irreparably impair and damage the Company's
business. Employee therefore agrees, while he is an employee of the Company and
at all times thereafter, to keep all Proprietary Information strictly
confidential.
(d) Non-Disclosure. Except as required by law or order of any court or
governmental entity or in connection with the proper performance of his duties
hereunder, Employee shall not disclose, directly or indirectly (except as
required by law), any Proprietary Information to any person other than (a) the
Company, (b) persons who are authorized employees of the Company at the time of
such disclosure, (c) such other persons, including prospective investors or
lenders, to whom Employee has been instructed to make disclosure by the
Company's Board, or (d) Employee's counsel, so long as such counsel agrees to
keep all Proprietary Information confidential (in the case of clauses (b) and
(c), only to the extent required in the course of Employee's service to the
Company). Upon any termination of Employee's employment hereunder, Employee
shall deliver to the Company all notes, letters, documents, tapes, discs,
recorded data and records which may contain Proprietary Information which are
then in Employee's possession or control and shall not retain, use, or make any
copies, summaries or extracts thereof.
10. INDEMNIFICATION. In the event Employee is made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against
Employee), by reason of the fact that Employee is or was performing services
under this Restated Agreement, then the Company shall indemnify Employee against
all expenses (including reasonable attorneys' fees), judgments,
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fines, and amounts paid in settlement, as actually and reasonably incurred by
Employee in connection therewith. In the event that both Employee and the
Company are made a party to the same third-party action, complaint, suit, or
proceeding, the Company agrees to engage competent legal representation, and
Employee agrees to use the same representation, provided that if counsel
selected by the Company shall have a conflict of interest that prevents such
counsel from representing Employee, Employee may engage separate counsel and the
Company shall pay all reasonable attorneys' fees of such separate counsel.
Further, while Employee is expected at all times to use Employee's best efforts
to faithfully discharge his duties under this Restated Agreement, Employee
cannot be held liable to the Company for errors or omissions made in good faith
where Employee has not exhibited gross, willful and wanton negligence and
misconduct or performed criminal and fraudulent acts which materially damage the
business of the Company.
11. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and warrants to the
Company that the execution of this Restated Agreement by Employee and his
employment by the Company and the performance of Employee's duties hereunder
will not violate or be a breach of any agreement with a former employer, client,
or any other person or entity. Further, Employee agrees to indemnify the Company
for any claim, including but not limited to attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company based upon or arising out of any
noncompetition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Restated
Agreement.
Employee has and will continue to truthfully disclose to the Company
the following matters, whether occurring, at any time during the five (5) years
immediately preceding the date of this Restated Agreement or at any time during
the term of this Restated Agreement:
(1) any criminal complaint, indictment or criminal
proceeding in which Employee is named as a defendant;
(2) any allegation, investigation, or proceeding,
whether administrative, civil or criminal, against Employee by any
licensing authority or industry association; and
(3) any allegation, investigation or proceeding,
whether administrative, civil, or criminal, against Employee for
violating professional ethics or standards, or engaging in illegal,
immoral or other misconduct (of any nature or degree), relating to the
business of the Company.
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12. ASSIGNMENT; BINDING EFFECT. This Restated Agreement shall inure to the
benefit of and be binding on Employee and the Company and Employee's and the
Company's respective heirs, personal representatives, successors and assigns;
provided, however, that Employee shall have no right to assign Employee's rights
or duties under this contract to any other person. In the event of the sale,
merger or consolidation of the Company, Employee specifically agrees that the
Company may assign the Company's rights and obligations hereunder to the
Company's successor, assign or purchaser. In addition, and in any event, the
Company may, at any time, assign the Company's rights and obligations under this
Restated Agreement to any person that is an affiliate of the Company or to any
person which, after any such assignment, employs at least 50% of the employees
employed by the Company immediately prior to the assignment.
13. COMPLETE AGREEMENT; AMENDMENTS. This Restated Agreement supersedes any other
agreements or understandings, written or oral, among the Company and Employee,
and Employee has no oral representations, understandings or agreements with the
Company or any of its officers, directors, or representatives covering the same
subject matter as this Restated Agreement. This written Restated Agreement is
the final, complete, and exclusive statement and expression of the agreement
between the Company and Employee and of all the terms of this Restated
Agreement, and it cannot be varied, contradicted, or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Restated
Agreement may not be later modified except by a written instrument signed by a
duly authorized officer of the Company and Employee, and no term of this
Restated Agreement may be waived except by a written instrument signed by the
party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Take to Auction.com, Inc.
2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
Attention: President
To Employee: Mitchell Morgan
13802 SW 83rd Avenue
Miami, Florida 33158
Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or, in any other case, when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this Section 14.
15. SEVERABILITY. If any portion of this Restated Agreement is held invalid or
inoperative, the other portions of this Restated Agreement shall be deemed valid
and operative and, so far as is reasonable and possible, effect shall be given
to the intent manifested by the portion held invalid or inoperative. Employee
and the Company agree and acknowledge that the provisions of Sections 4 and 9
are material and of the essence to this Restated Agreement. If the
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scope of any restriction or covenant contained therein should be or become too
broad or extensive to permit enforcement thereof to its fullest extent, then
such restriction or covenant shall be enforced to the maximum extent permitted
by law, and Employee hereby consents and agrees that (a) it is the parties
intention and agreement that the covenants and restrictions contained therein be
enforced as written, and (b) in the event a court of competent jurisdiction
should determine that any restriction or covenant contained therein is too broad
or extensive to permit enforcement thereof to its fullest extent, the scope of
any such restriction or covenant may be modified accordingly in any judicial
proceeding brought to enforce such restriction or covenant, but should be
modified to permit enforcement of the restrictions and covenants contained
herein to the maximum extent the court, in its judgment, will permit.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Restated Agreement or Employee's employment with the
Company (or any termination thereof) shall be settled exclusively by
arbitration, conducted before a panel of three (3) arbitrators in Broward
County, Florida, in accordance with the rules of the American Arbitration
Association then in effect. A decision by a majority of the arbitration panel
shall be final and binding. Judgment may be entered on the arbitrators' award in
any court having jurisdiction. The prevailing party shall receive and the
unsuccessful party shall pay the reasonable fees and expenses of any arbitration
proceeding in connection with this Restated Agreement.
17. GOVERNING LAW. This Restated Agreement shall in all respects be construed
according to the laws of the State of Florida.
18. HEADINGS. The paragraph headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define, or limit the extent
or intent of the Restated Agreement or of any part hereof.
19. COUNTERPARTS. This Restated Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Restated Agreement as of the date first above written.
The Company:
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
----------------------------
Name: Albert Friedman
Title: President
Employee:
/s/ Mitchell Morgan
------------------------------
Mitchell Morgan
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Exhibit 10.03
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement"), by and among
Take to Auction.com, Inc., a Florida corporation (the "Company") and Lucien
Lallouz ("Employee"), is hereby entered into as of this 25 day of August, 1999.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby employs Employee as Executive Vice President of Marketing of the Company.
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of such position and will report to the President and
Chief Executive Officer of the Company. Employee hereby accepts this employment
upon the terms and conditions herein contained and, subject to Section 1(b)
hereof, agrees to devote Employee's full business time, attention and efforts to
promote and further the business of the Company. Employee shall faithfully
adhere to, execute and fulfill all policies established by the Company.
(b) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of Section 4 hereof.
2. TERM. The Company employs Employee for a period commencing the date hereof
and ending on the third anniversary of the date hereof (the "Term"), subject to
termination prior to such date pursuant to Section 5 hereof. Sixty (60) days
prior to the end of the Term (or any renewal term), either the Company or
Employee may give notice to the other of its determination not to renew this
Agreement. If a notice of non-renewal is not delivered, this Agreement will
automatically continue in effect for successive one (1) year renewal terms
subject to termination prior to such date pursuant to Section 5 hereof. If such
notice of non-renewal is given by any party, then Employee's employment will
terminate at the end of such term (or on such other date as the parties mutually
agree).
3. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. The base salary payable hereunder to Employee shall
equal $125,000 per year, payable on a regular basis in accordance with the
Company's standard payroll
<PAGE>
procedures but not less than monthly. The annualized base salary shall be
adjusted annually by the greater of five percent (5%) of the base salary or the
increase in an amount determined at the discretion of the Compensation Committee
of the Board of Directors.
(b) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance plans that
the Company may have in effect from time to time. The benefits provided to
Employee under this clause (i) shall be at least equal to such benefits provided
to executives or employees in similar positions at the Company.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the performance of
Employee's services pursuant to this Agreement. All reimbursable expenses shall
be appropriately documented in reasonable detail by Employee upon submission of
any request for reimbursement, and in a format and manner consistent with the
Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites (including, but not limited to, participation in the Company's
Long-Term Incentive Plan) as may be available to or deemed appropriate for
Employee by the Board and participation in all other Company-wide employee
benefits as available from time to time. Employee shall be entitled to four
weeks of vacation per year in addition to all Federal and religious holidays.
4. NON-COMPETITION AND NON-SOLICITATION.
(a) Employee acknowledges that during the course of Employee's
employment Employee will receive confidential and proprietary information from
and concerning the Company. Employee also acknowledges that the Company will
make substantial investments in the development of the Company's goodwill and in
Employee's professional development. The capital expended to develop this
goodwill directly benefits Employee and should continue to do so in the event
that the relationship between the Company and Employee is terminated. Likewise,
the Company has conferred and will confer a direct economic benefit on Employee.
Employee agrees that the Company is entitled to protect these business interests
and investments and to prevent Employee from using or taking advantage of the
foregoing economic benefits to the Company's detriment.
(b) Employee agrees that, except for services and duties performed for
or on behalf of the Company according to this Agreement, Employee will not,
during the period of Employee's employment with the Company, and for a period
(the "Restricted Period") of one (1) year immediately following the termination
of Employee's employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation, association,
enterprise, venture or business of whatever nature:
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(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, lender or in a managerial capacity, whether as an
employee, independent contractor, agent, consultant or advisor or as a sales
representative, in any online auction facilitation or similar business in direct
competition with those aspects of the business of the Company or any subsidiary
of the Company, with which Employee has had any involvement, within United
States of America, Canada and all other countries in which customers of the
Company have access to the world wide web (the "Territory");
(ii) solicit any person who is, at that time, or who has been
within one (1) year prior to that time, an employee of the Company for the
purpose or with the intent of enticing such employee away from or out of the
employ of the Company;
(iii) solicit any person or entity which is, at that time, or
which has been within one (1) year prior to that time, a customer, vendor,
distributor, service provider or supplier of the Company for the purpose of
soliciting or selling products or services in direct competition with those
aspects of the business of the Company or any subsidiary of the Company with
which Employee has had any involvement, within the Territory; or
(iv) solicit any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor or potential competitor,
which candidate was, to Employee's knowledge, either called upon by the Company
or for which the Company made an acquisition analysis, for the purpose of
acquiring such entity. Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit Employee from acquiring as an investment not more than
two percent (2%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter.
(c) In recognition of the substantial nature of such potential damages
and the difficulty of measuring economic losses to the Company as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to the Company for which they would have no other
adequate remedy, Employee agrees that in the event of breach by Employee of the
foregoing covenant, the Company shall be entitled to specific performance of
this provision and injunctive and other equitable relief.
(d) It is agreed by the parties that the foregoing covenants in this
Section 4 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of the Company and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Company throughout the term of this Agreement, whether before or after
the date of termination of the employment of Employee. For example, if, during
the term of this Agreement, the Company engages in new and different online
auction facilitation activities, or establishes new locations for its current
activities or business and Employee is involved with providing such new online
auction facilitation services, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within the United
States of America through the term of this Agreement.
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(e) All of the covenants in this Section 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. Further, this
Section 4 shall survive the termination of this Agreement and the termination of
Employee's employment with the Company. It is specifically agreed that the
period of one (1) year following termination of employment stated at the
beginning of this Section 4, during which the agreements and covenants of
Employee made in this Section 4 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 4.
5. TERMINATION; RIGHTS ON TERMINATION. This Agreement and Employee's employment
may be terminated for any one of the following causes:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate, heirs or
other descendants or representatives.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company Employee's base salary at the rate then in effect,
payable at the Company's regular and customary intervals for the payment of
salaries as then in effect, less any amounts Employee might receive under the
Company's disability insurance policy, if any, for whatever time period is
remaining under the Term or for six (6) months, whichever amount is less.
(c) CAUSE. The Company may, in its sole and absolute discretion,
terminate the employment of Employee hereunder immediately upon after delivery
of written notice to Employee, or at such later time as the Company may specify
in such notice, for "Cause." As used in this Agreement "Cause" includes, but is
not limited to, the following: (1) Employee's willful and material breach of
this Agreement; (2) Employee's gross negligence in the performance, or
intentional nonperformance, (continuing for ten (10) days after receipt of
written notice of need to cure) of any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty or fraud, whether
or not with respect to the business or affairs of the Company,
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which affects the operations, property or reputation of the Company; (4)
Employee's conviction of a felony crime; (5) chronic alcohol or illegal drug
abuse by Employee; (6) Employee's willful injury to any independent contractor,
employee or agent of the Company, or to any other person in the course of
Employee's performance of services for the Company; or (7) If Employee sexually
harasses any employee, agent or contractor of the Company or commits any act
which otherwise creates an offensive work environment for employees, agents or
contractors of the Company.
The Company shall not be limited to termination as a remedy for any
damaging, injurious, improper or illegal act by Employee, but may also seek
damages, injunction, or such other remedy as the Company may deem appropriate
under the circumstances. If Employee's employment is terminated for Cause,
Employee agrees to vacate the Company's offices on or before the effective date
of the termination and to return and deliver to the Company at such time all
Company property. In the event of a termination for Cause, as enumerated above,
Employee shall have no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
provided the Company does not have Cause to terminate Employee pursuant to (c)
above, Employee may, without Cause, terminate this Agreement and Employee's
employment, effective ninety (90) days after written notice is provided to the
Company. Employee may only be terminated without Cause by the Company during the
Term hereof if such termination is approved by a majority of the members of the
Board. Should Employee be terminated by the Company without Cause during the
Term, Employee shall be entitled to receive from the Company one (1) year's base
salary (at Employee's then current base) payable over the course of the year
following such termination. The severance compensation shall be paid in
accordance with the Company's standard payroll procedures but not less than
monthly. If Employee resigns or otherwise terminates Employee's employment
without cause pursuant to this Section 5(d), Employee shall receive no severance
compensation.
(e) TERMINATION BY EXECUTIVE FOR GOOD REASON OR UPON CHANGE IN CONTROL.
Upon the termination of the Employee's employment hereunder by the Employee (i)
for "Good Reason", as specified in Section 5(e)(B) hereof, or (ii) within 180
days after the occurrence of a "Change in Control" as specified in Section
5(e)(A) hereof, the Company shall (i) continue to pay to the Employee the base
salary through the effective date of termination specified in such notice and
(ii) pay to the Employee, in a lump sum, an amount equal to 200% of the annual
base salary prevailing on the date of such termination. In addition, upon such
termination, all options to purchase shares of the Company's common stock, if
any, shall accelerate and become immediately exercisable.
(A) For purposes of this Agreement, a "Change in Control"
shall mean:
(i) The acquisition (other than by or from the
Company), at any time after the date hereof, by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the
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Company's then outstanding voting securities entitled to vote generally in the
election of directors (together with such common stock, "Voting Securities"); or
(ii) Approval by the shareholders of the Company of
(x) a reorganization, merger or consolidation with respect to which persons who
were the shareholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (y) a liquidation or dissolution of the Company or (z) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
(B) For purposes of this Agreement, "Good Reason" shall mean:
(i) The assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 1 of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(ii) Any failure by the Company to comply with any of
the provisions of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(iii) The Company's requiring the Employee to be
based at any office or location other than within a 25 mile radius of the
Company's offices in Miami, Florida, except for travel reasonably required in
connection with the performance of the Employee's responsibilities hereunder; or
(iv) Any purported termination by the Company of the
Employee's employment other than as expressly permitted by this Agreement.
(f) Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above. All
other rights and obligations of the Company and Employee under this Agreement
shall cease as of the effective date of termination, except that the Company's
obligations under Section 10 hereof and Employee's obligations under Sections 4,
8, 9 and 11 hereof shall survive such termination in accordance with their
terms. Further, unless Employee and the Company otherwise agree in writing, upon
termination of this Agreement for any reason,
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Employee will immediately resign from all director, officer or other positions
held with the Company.
(g) If termination of Employee's employment arises out of the Company's
failure to pay Employee the amounts to which he is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined pursuant to the provisions of Section 16 below, the Company shall pay
all amounts and damages to which Employee may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Employee to enforce Employee's rights hereunder.
Further, none of the provisions of Section 4 hereof shall apply in the event
this Agreement is terminated as a result of a material breach by the Company.
6. PARTICIPATION IN STOCK OPTION PLAN.
The Employee shall be granted an option (the "Option") to purchase
75,000 shares of the Company's Common Stock, par value $.001 per share ("Common
Stock"), at an exercise price of $___, the fair market value of the Company's
common stock on __________ __, 1999. The Option may be exercised, in whole or in
part, in accordance with the following vesting schedule: (i) 25,000 shares of
Common Stock shall vest one year after the signing of this Agreement, (ii)
25,000 shares of Common Stock shall vest two years after the signing of this
Agreement, and (iii) 25,000 shares of Common Stock shall vest three years after
the signing of this Agreement. The Option shall expire seven (7) years from the
date hereof (the "Expiration Date"), and must be exercised, if at all, in whole
or in part, on or before the Expiration Date. The Option Agreement will be in
substantially the form of Exhibit A attached hereto.
7. PURCHASE RIGHT ON EMPLOYEE'S STOCK AND OPTIONS.
(a) Irrevocable Option to Purchase. Upon (i) the death or Retirement of
Employee, (ii) the Company's termination of Employee's employment with the
Company by reason of Employee's Disability pursuant to the provisions of Section
5(b) (a "Disability Termination") or for any other reason except a termination
for Cause pursuant to the provisions of Section 5(c) (a "Non-Cause
Termination"), or (iii) the termination of Employee's employment with the
Company by Employee for any reason other than a termination which follows less
than six months service to the Company or is effected upon less than 90 days'
prior written notice to the Company of such termination (hereinafter, a "Proper
Employee Termination"), then the Company shall have the exclusive and
irrevocable right and option, exercisable in the sole judgment and discretion of
the Board, to purchase and acquire from Employee, or from Employee's Estate, all
of Employee's shares of Company capital stock ("Stock") (if any) and all of
Employee's options or rights to purchase Stock ("Options") (if any) in
accordance with the terms and conditions provided in this Section 7. Employee or
Employee's Estate hereby irrevocably and unconditionally agrees to transfer
Employee's Stock and Employee's Options on the terms and conditions set forth in
this Section 7.
(b) Purchase Price. The purchase price to be paid for any Stock to be
acquired under this Section 7 shall be the fair market value of such Stock as of
the last day of the calendar month immediately preceding the date of death or
termination of employment as described in paragraph
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7(a) hereof. The purchase price to be paid for Employee's Options to be acquired
under this Section 7 shall be the fair market value of the Stock for which
Employee's Options are exercisable (the "Vested Options" as of the last day of
the calendar month immediately preceding the date of death or termination of
employment as described Section 7(a) hereof), less an amount equal to the
exercise price of Employee's Options in respect of such Stock. In each case, the
fair market value of the Stock shall be determined in good faith by the Board
(not taking into account any discount for non-voting nature (if applicable),
minority interest or restriction on transferability) and, if Employee or
Employee's Estate does not object to such determination in a writing delivered
to and received by the Company within ten (10) business days of the Company's
delivery of such determination to such party, such Board' determination shall be
conclusive and binding upon Employee or Employee's Estate, as the case may be,
for all purposes hereunder. If Employee or Employee's Estate makes a timely
(i.e., within the 10 business days) written objection to the determination of
fair market value made by the Board, the determination of such fair market value
of the Stock shall be submitted to an investment banking or valuation firm
selected by the Board after consultation with Employee or Employee's Estate (the
"Primary Investment Firm"), whose fees and expenses shall be shared equally by
the Company, on the one hand, and Employee or Employee's Estate, on the other
hand. If Employee and the Company agree in advance in writing to the selection
of the Primary Investment Firm, then such Primary Investment Firm's
determination shall be conclusive and binding upon Employee or Employee's
Estate, as the case may be, for all purposes hereunder. If Employee and the
Company do not agree in advance in writing to the selection of the Primary
Investment Firm, then the Primary Investment Firm shall determine the fair
market value of the Stock promptly following its selection by the Board; if,
following such determination of fair market value by such Firm, either the
Company or Employee or Employee's Estate objects to such determination in a
writing delivered to the other party within ten (10) business days of receipt
thereof, the Company and Employee or Employee's Estate shall mutually agree to a
second investment banking or valuation firm (the "Secondary Investment Firm"),
who shall make a determination of such fair market value of the Stock and whose
fees and expenses shall be paid by the person objecting to the determination
made by the Primary Investment Firm. If such valuation by the Secondary
Investment Firm is procured, it shall be delivered to the other party, and the
average of the fair market values as determined by the Primary Investment Firm
and the Secondary Investment Firm shall be the fair market value for purposes of
this Section 7 and shall be conclusive and binding on all parties for all
purposes hereof.
(c) Upon termination of Employee for Cause, the Company shall have the
right and option to acquire Employee's Stock for the Net Book Value per share of
such Stock, based upon the Company's latest audited financial statements. All of
Employee's Options shall be terminated, expired, void and of no further force or
effect.
(d) Employee must deliver stock certificates representing his Stock to
the Company within five business days of a demand in writing to such effect. If
Employee fails to so deliver the stock certificates, the Company may mail a
check for the purchase price or the net book value purchase price of such Stock
to Employee's last known address and cancel such Stock on the books and records
of the Company and such Stock shall have no further force or effect. In the case
of a negative net book value, no purchase price need be delivered before
canceling the Stock.
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8. COMPANY PROPERTY; INVENTIONS.
(a) All records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, and other property delivered to or
compiled by Employee by or on behalf of the Company or their representatives,
vendors, or customers which pertain to the business of the Company shall be and
remain the property of the Company, as the case may be, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials, and other similar data pertaining to the
business, activities, or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
(b) Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of Employee's employment by the Company. Employee hereby
assigns and agrees to assign all of Employee's interests therein to the Company
or its nominee. Whenever requested to do so by the Company, Employee shall
execute any and all applications, assignments, or other instruments that the
Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
9. CONFIDENTIALITY AND PROPRIETARY INFORMATION.
(a) Acknowledgment. Employee acknowledges and agrees that in the course
of rendering services to the Company and its customers, Employee will have
access to and will become acquainted with confidential and proprietary
information about the professional, business and financial affairs of the
Company, its affiliates and its vendors, suppliers and customers, and that
Employee may have contributed to or may in the future contribute to such
information. Employee further recognizes that Employee is being employed as a
key employee, that the Company is engaged in a highly competitive business, and
that the success of the Company in the marketplace and business depends upon its
goodwill and reputation for integrity, quality and dependability. Employee
recognizes that in order to guard the legitimate interests of the Company it is
necessary for the Company to protect all such confidential and proprietary
information, goodwill and reputation.
(b) Proprietary Information. In the course of Employee's service to the
Company, Employee may have access to confidential know-how, business documents
or information, marketing data, client lists and trade secrets which are
confidential. Such information shall hereinafter be called "Proprietary
Information" and shall include any and all items enumerated in the preceding
sentence which come within the scope of the business activities of the Company
as to which Employee has had or may have access, whether previously existing,
now existing or arising hereafter, whether or not conceived or developed by
others or by Employee alone or with others during the period of his service to
the Company, and whether or not conceived or developed during regular working
hours. "Proprietary Information" shall not include any information which is in
the public domain during the period of service by Employee or becomes
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public thereafter, provided such information is not in the public domain as a
consequence of disclosure by Employee in violation of this Agreement.
(c) Fiduciary Obligations. Employee agrees and acknowledges that the
Proprietary Information is of critical importance to the Company and a violation
of this Section 8 will seriously and irreparably impair and damage the Company's
business. Employee therefore agrees, while he is an employee of the Company and
at all times thereafter, to keep all Proprietary Information strictly
confidential.
(d) Non-Disclosure. Except as required by law or order of any court or
governmental entity or in connection with the proper performance of his duties
hereunder, Employee shall not disclose, directly or indirectly (except as
required by law), any Proprietary Information to any person other than (a) the
Company, (b) persons who are authorized employees of the Company at the time of
such disclosure, (c) such other persons, including prospective investors or
lenders, to whom Employee has been instructed to make disclosure by the
Company's Board, or (d) Employee's counsel, so long as such counsel agrees to
keep all Proprietary Information confidential (in the case of clauses (b) and
(c), only to the extent required in the course of Employee's service to the
Company). Upon any termination of Employee's employment hereunder, Employee
shall deliver to the Company all notes, letters, documents, tapes, discs,
recorded data and records which may contain Proprietary Information which are
then in Employee's possession or control and shall not retain, use, or make any
copies, summaries or extracts thereof.
10. INDEMNIFICATION. In the event Employee is made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against
Employee), by reason of the fact that Employee is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including reasonable attorneys' fees), judgments, fines, and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit, or proceeding, the
Company agrees to engage competent legal representation, and Employee agrees to
use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and the Company shall pay all
reasonable attorneys' fees of such separate counsel. Further, while Employee is
expected at all times to use Employee's best efforts to faithfully discharge his
duties under this Agreement, Employee cannot be held liable to the Company for
errors or omissions made in good faith where Employee has not exhibited gross,
willful and wanton negligence and misconduct or performed criminal and
fraudulent acts which materially damage the business of the Company.
11. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of Employee's duties hereunder will not violate
or be a breach of any agreement with a former employer, client, or any other
person or entity. Further, Employee agrees to indemnify the Company for any
claim, including but not limited to attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
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hereafter come to have against the Company based upon or arising out of any
noncompetition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
Employee has and will continue to truthfully disclose to the Company
the following matters, whether occurring, at any time during the five (5) years
immediately preceding the date of this Agreement or at any time during the term
of this Agreement:
(1) any criminal complaint, indictment or criminal
proceeding in which Employee is named as a defendant;
(2) any allegation, investigation, or proceeding,
whether administrative, civil or criminal, against Employee by any
licensing authority or industry association; and
(3) any allegation, investigation or proceeding,
whether administrative, civil, or criminal, against Employee for
violating professional ethics or standards, or engaging in illegal,
immoral or other misconduct (of any nature or degree), relating to the
business of the Company.
12. ASSIGNMENT; BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding on Employee and the Company and Employee's and the Company's
respective heirs, personal representatives, successors and assigns; provided,
however, that Employee shall have no right to assign Employee's rights or duties
under this contract to any other person. In the event of the sale, merger or
consolidation of the Company, Employee specifically agrees that the Company may
assign the Company's rights and obligations hereunder to the Company's
successor, assign or purchaser. In addition, and in any event, the Company may,
at any time, assign the Company's rights and obligations under this Agreement to
any person that is an affiliate of the Company or to any person which, after any
such assignment, employs at least 50% of the employees employed by the Company
immediately prior to the assignment.
13. COMPLETE AGREEMENT; AMENDMENTS. This Agreement supersedes any other
agreements or understandings, written or oral, among the Company and Employee,
and Employee has no oral representations, understandings or agreements with the
Company or any of its officers, directors, or representatives covering the same
subject matter as this Agreement. This written Agreement is the final, complete,
and exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement, and it cannot be varied,
contradicted, or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This written Agreement may not be later modified except
by a written instrument signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a written
instrument signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
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To the Company: Take to Auction.com, Inc.
2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
Attention: President
To Employee: Lucien Lallouz
_____________________________
_____________________________
Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or, in any other case, when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this Section 14.
15. SEVERABILITY. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. Employee and
the Company agree and acknowledge that the provisions of Sections 4 and 9 are
material and of the essence to this Agreement. If the scope of any restriction
or covenant contained therein should be or become too broad or extensive to
permit enforcement thereof to its fullest extent, then such restriction or
covenant shall be enforced to the maximum extent permitted by law, and Employee
hereby consents and agrees that (a) it is the parties intention and agreement
that the covenants and restrictions contained therein be enforced as written,
and (b) in the event a court of competent jurisdiction should determine that any
restriction or covenant contained therein is too broad or extensive to permit
enforcement thereof to its fullest extent, the scope of any such restriction or
covenant may be modified accordingly in any judicial proceeding brought to
enforce such restriction or covenant, but should be modified to permit
enforcement of the restrictions and covenants contained herein to the maximum
extent the court, in its judgment, will permit.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement or Employee's employment with the Company (or any
termination thereof) shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Broward County, Florida, in
accordance with the rules of the American Arbitration Association then in
effect. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The prevailing party shall receive and the unsuccessful party
shall pay the reasonable fees and expenses of any arbitration proceeding in
connection with this Agreement.
17. GOVERNING LAW. This Agreement shall in all respects be construed according
to the laws of the State of Florida.
18. HEADINGS. The paragraph headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define, or limit the extent
or intent of the Agreement or of any part hereof.
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19. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute but one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement as of the date first above written.
The Company:
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
-------------------------
Name: Albert Friedman
Title: President
Employee:
/s/ Lucien Lallouz
---------------------------
Lucien Lallouz
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Exhibit 10.04
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement"), by and among
Take to Auction.com, Inc., a Florida corporation (the "Company") and Hugo
Calemczuk ("Employee"), is hereby entered into as of this 25 day of August,
1999.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby employs Employee as Senior Vice President of Merchandising of the
Company. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of such position and will report to the
President and Chief Executive Officer of the Company. Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
Section 1(b) hereof, agrees to devote Employee's full business time, attention
and efforts to promote and further the business of the Company. Employee shall
faithfully adhere to, execute and fulfill all policies established by the
Company.
(b) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of Section 4 hereof.
2. TERM. The Company employs Employee for a period commencing the date hereof
and ending on the third anniversary of the date hereof (the "Term"), subject to
termination prior to such date pursuant to Section 5 hereof. Sixty (60) days
prior to the end of the Term (or any renewal term), either the Company or
Employee may give notice to the other of its determination not to renew this
Agreement. If a notice of non-renewal is not delivered, this Agreement will
automatically continue in effect for successive one (1) year renewal terms
subject to termination prior to such date pursuant to Section 5 hereof. If such
notice of non-renewal is given by any party, then Employee's employment will
terminate at the end of such term (or on such other date as the parties mutually
agree).
3. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. The base salary payable hereunder to Employee shall
equal $60,000 per year, payable on a regular basis in accordance with the
Company's standard payroll
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procedures but not less than monthly. The annualized base salary shall be
adjusted annually by the greater of five percent (5%) of the base salary or the
increase in an amount determined at the discretion of the Compensation Committee
of the Board of Directors.
(b) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance plans that
the Company may have in effect from time to time. The benefits provided to
Employee under this clause (i) shall be at least equal to such benefits provided
to executives or employees in similar positions at the Company.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the performance of
Employee's services pursuant to this Agreement. All reimbursable expenses shall
be appropriately documented in reasonable detail by Employee upon submission of
any request for reimbursement, and in a format and manner consistent with the
Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites (including, but not limited to, participation in the Company's
Long-Term Incentive Plan) as may be available to or deemed appropriate for
Employee by the Board and participation in all other Company-wide employee
benefits as available from time to time. Employee shall be entitled to four
weeks of vacation per year in addition to all Federal and religious holidays.
4. NON-COMPETITION AND NON-SOLICITATION.
(a) Employee acknowledges that during the course of Employee's
employment Employee will receive confidential and proprietary information from
and concerning the Company. Employee also acknowledges that the Company will
make substantial investments in the development of the Company's goodwill and in
Employee's professional development. The capital expended to develop this
goodwill directly benefits Employee and should continue to do so in the event
that the relationship between the Company and Employee is terminated. Likewise,
the Company has conferred and will confer a direct economic benefit on Employee.
Employee agrees that the Company is entitled to protect these business interests
and investments and to prevent Employee from using or taking advantage of the
foregoing economic benefits to the Company's detriment.
(b) Employee agrees that, except for services and duties performed for
or on behalf of the Company according to this Agreement, Employee will not,
during the period of Employee's employment with the Company, and for a period
(the "Restricted Period") of one (1) year immediately following the termination
of Employee's employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation, association,
enterprise, venture or business of whatever nature:
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(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, lender or in a managerial capacity, whether as an
employee, independent contractor, agent, consultant or advisor or as a sales
representative, in any online auction facilitation or similar business in direct
competition with those aspects of the business of the Company or any subsidiary
of the Company, with which Employee has had any involvement, within United
States of America, Canada and all other countries in which customers of the
Company have access to the world wide web (the "Territory");
(ii) solicit any person who is, at that time, or who has been
within one (1) year prior to that time, an employee of the Company for the
purpose or with the intent of enticing such employee away from or out of the
employ of the Company;
(iii) solicit any person or entity which is, at that time, or
which has been within one (1) year prior to that time, a customer, vendor,
distributor, service provider or supplier of the Company for the purpose of
soliciting or selling products or services in direct competition with those
aspects of the business of the Company or any subsidiary of the Company with
which Employee has had any involvement, within the Territory; or
(iv) solicit any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor or potential competitor,
which candidate was, to Employee's knowledge, either called upon by the Company
or for which the Company made an acquisition analysis, for the purpose of
acquiring such entity. Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit Employee from acquiring as an investment not more than
two percent (2%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter.
(c) In recognition of the substantial nature of such potential damages
and the difficulty of measuring economic losses to the Company as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to the Company for which they would have no other
adequate remedy, Employee agrees that in the event of breach by Employee of the
foregoing covenant, the Company shall be entitled to specific performance of
this provision and co-injunctive and other equitable relief.
(d) It is agreed by the parties that the foregoing covenants in this
Section 4 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of the Company and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Company throughout the term of this Agreement, whether before or after
the date of termination of the employment of Employee. For example, if, during
the term of this Agreement, the Company engages in new and different online
auction facilitation activities, or establishes new locations for its current
activities or business and Employee is involved with providing such new online
auction facilitation services, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within the United
States of America through the term of this Agreement.
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(e) All of the covenants in this Section 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. Further, this
Section 4 shall survive the termination of this Agreement and the termination of
Employee's employment with the Company. It is specifically agreed that the
period of one (1) year following termination of employment stated at the
beginning of this Section 4, during which the agreements and covenants of
Employee made in this paragraph 4 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 4.
5. TERMINATION; RIGHTS ON TERMINATION. This Agreement and Employee's employment
may be terminated for any one of the following causes:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate, heirs or
other descendants or representatives.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company Employee's base salary at the rate then in effect,
payable at the Company's regular and customary intervals for the payment of
salaries as then in effect, less any amounts Employee might receive under the
Company's disability insurance policy, if any, for whatever time period is
remaining under the Term or for six (6) months, whichever amount is less.
(c) CAUSE. The Company may, in its sole and absolute discretion,
terminate the employment of Employee hereunder immediately upon after delivery
of written notice to Employee, or at such later time as the Company may specify
in such notice, for "Cause." As used in this Agreement "Cause" includes, but is
not limited to, the following: (1) Employee's willful and material breach of
this Agreement; (2) Employee's gross negligence in the performance, or
intentional nonperformance, (continuing for ten (10) days after receipt of
written notice of need to cure) of any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty or fraud, whether
or not with respect to the business or affairs of the Company,
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which affects the operations, property or reputation of the Company; (4)
Employee's conviction of a felony crime; (5) chronic alcohol or illegal drug
abuse by Employee; (6) Employee's willful injury to any independent contractor,
employee or agent of the Company, or to any other person in the course of
Employee's performance of services for the Company; or (7) If Employee sexually
harasses any employee, agent or contractor of the Company or commits any act
which otherwise creates an offensive work environment for employees, agents or
contractors of the Company.
The Company shall not be limited to termination as a remedy for any
damaging, injurious, improper or illegal act by Employee, but may also seek
damages, injunction, or such other remedy as the Company may deem appropriate
under the circumstances. If Employee's employment is terminated for Cause,
Employee agrees to vacate the Company's offices on or before the effective date
of the termination and to return and deliver to the Company at such time all
Company property. In the event of a termination for Cause, as enumerated above,
Employee shall have no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
provided the Company does not have Cause to terminate Employee pursuant to (c)
above, Employee may, without Cause, terminate this Agreement and Employee's
employment, effective ninety (90) days after written notice is provided to the
Company. Employee may only be terminated without Cause by the Company during the
Term hereof if such termination is approved by a majority of the members of the
Board. Should Employee be terminated by the Company without Cause during the
Term, Employee shall be entitled to receive from the Company one (1) year's base
salary (at Employee's then current base) payable over the course of the year
following such termination. The severance compensation shall be paid in
accordance with the Company's standard payroll procedures but not less than
monthly. If Employee resigns or otherwise terminates Employee's employment
without cause pursuant to this Section 5(d), Employee shall receive no severance
compensation.
(e) TERMINATION BY EXECUTIVE FOR GOOD REASON OR UPON CHANGE IN CONTROL.
Upon the termination of the Employee's employment hereunder by the Employee (i)
for "Good Reason", as specified in Section 5(e)(B) hereof, or (ii) within 180
days after the occurrence of a "Change in Control" as specified in Section
5(e)(A) hereof, the Company shall (i) continue to pay to the Employee the base
salary through the effective date of termination specified in such notice and
(ii) pay to the Employee, in a lump sum, an amount equal to 200% of the annual
base salary prevailing on the date of such termination. In addition, upon such
termination, all options to purchase shares of the Company's common stock, if
any, shall accelerate and become immediately exercisable.
(A) For purposes of this Agreement, a "Change in Control"
shall mean:
(i) The acquisition (other than by or from the
Company), at any time after the date hereof, by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the
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Company's then outstanding voting securities entitled to vote generally in the
election of directors (together with such common stock, "Voting Securities"); or
(ii) Approval by the shareholders of the Company of
(x) a reorganization, merger or consolidation with respect to which persons who
were the shareholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (y) a liquidation or dissolution of the Company or (z) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
(B) For purposes of this Agreement, "Good Reason" shall mean:
(i) The assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 1 of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(ii) Any failure by the Company to comply with any of
the provisions of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(iii) The Company's requiring the Employee to be
based at any office or location other than within a 25 mile radius of the
Company's offices in Miami, Florida, except for travel reasonably required in
connection with the performance of the Employee's responsibilities hereunder; or
(iv) Any purported termination by the Company of the
Employee's employment other than as expressly permitted by this Agreement.
(f) Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above. All
other rights and obligations of the Company and Employee under this Agreement
shall cease as of the effective date of termination, except that the Company's
obligations under Section 10 hereof and Employee's obligations under Section 4,
8, 9 and 11 hereof shall survive such termination in accordance with their
terms. Further, unless Employee and the Company otherwise agree in writing, upon
termination of this Agreement for any reason,
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Employee will immediately resign from all director, officer or other positions
held with the Company.
(g) If termination of Employee's employment arises out of the Company's
failure to pay Employee the amounts to which he is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined pursuant to the provisions of Section 16 below, the Company shall pay
all amounts and damages to which Employee may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Employee to enforce Employee's rights hereunder.
Further, none of the provisions of Section 4 hereof shall apply in the event
this Agreement is terminated as a result of a material breach by the Company.
6. PARTICIPATION IN STOCK OPTION PLAN.
The Employee shall be granted an option (the "Option") to purchase
75,000 shares of the Company's Common Stock, par value $.001 per share ("Common
Stock"), at an exercise price of $___, the fair market value of the Company's
common stock on __________ __, 1999. The Option may be exercised, in whole or in
part, in accordance with the following vesting schedule: (i) 25,000 shares of
Common Stock shall vest one year after the signing of this Agreement, (ii)
25,000 shares of Common Stock shall vest two years after the signing of this
Agreement, and (iii) 25,000 shares of Common Stock shall vest three years after
the signing of this Agreement. The Option shall expire seven (7) years from the
date hereof (the "Expiration Date"), and must be exercised, if at all, in whole
or in part, on or before the Expiration Date. The Option Agreement will be in
substantially the form of Exhibit A attached hereto.
7. PURCHASE RIGHT ON EMPLOYEE'S STOCK AND OPTIONS.
(a) Irrevocable Option to Purchase. Upon (i) the death or Retirement of
Employee, (ii) the Company's termination of Employee's employment with the
Company by reason of Employee's Disability pursuant to the provisions of Section
5(b) (a "Disability Termination") or for any other reason except a termination
for Cause pursuant to the provisions of Section 5(c) (a "Non-Cause
Termination"), or (iii) the termination of Employee's employment with the
Company by Employee for any reason other than a termination which follows less
than six months service to the Company or is effected upon less than 90 days'
prior written notice to the Company of such termination (hereinafter, a "Proper
Employee Termination"), then the Company shall have the exclusive and
irrevocable right and option, exercisable in the sole judgment and discretion of
the Board, to purchase and acquire from Employee, or from Employee's Estate, all
of Employee's shares of Company capital stock ("Stock") (if any) and all of
Employee's options or rights to purchase Stock ("Options") (if any) in
accordance with the terms and conditions provided in this Section 7. Employee or
Employee's Estate hereby irrevocably and unconditionally agrees to transfer
Employee's Stock and Employee's Options on the terms and conditions set forth in
this Section 7.
(b) Purchase Price. The purchase price to be paid for any Stock to be
acquired under this Section 7 shall be the fair market value of such Stock as of
the last day of the calendar month immediately preceding the date of death or
termination of employment as described in Section
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7(a) hereof. The purchase price to be paid for Employee's Options to be acquired
under this Section 7 shall be the fair market value of the Stock for which
Employee's Options are exercisable (the "Vested Options" as of the last day of
the calendar month immediately preceding the date of death or termination of
employment as described Section 7(a) hereof), less an amount equal to the
exercise price of Employee's Options in respect of such Stock. In each case, the
fair market value of the Stock shall be determined in good faith by the Board
(not taking into account any discount for non-voting nature (if applicable),
minority interest or restriction on transferability) and, if Employee or
Employee's Estate does not object to such determination in a writing delivered
to and received by the Company within ten (10) business days of the Company's
delivery of such determination to such party, such Board' determination shall be
conclusive and binding upon Employee or Employee's Estate, as the case may be,
for all purposes hereunder. If Employee or Employee's Estate makes a timely
(i.e., within the 10 business days) written objection to the determination of
fair market value made by the Board, the determination of such fair market value
of the Stock shall be submitted to an investment banking or valuation firm
selected by the Board after consultation with Employee or Employee's Estate (the
"Primary Investment Firm"), whose fees and expenses shall be shared equally by
the Company, on the one hand, and Employee or Employee's Estate, on the other
hand. If Employee and the Company agree in advance in writing to the selection
of the Primary Investment Firm, then such Primary Investment Firm's
determination shall be conclusive and binding upon Employee or Employee's
Estate, as the case may be, for all purposes hereunder. If Employee and the
Company do not agree in advance in writing to the selection of the Primary
Investment Firm, then the Primary Investment Firm shall determine the fair
market value of the Stock promptly following its selection by the Board; if,
following such determination of fair market value by such Firm, either the
Company or Employee or Employee's Estate objects to such determination in a
writing delivered to the other party within ten (10) business days of receipt
thereof, the Company and Employee or Employee's Estate shall mutually agree to a
second investment banking or valuation firm (the "Secondary Investment Firm"),
who shall make a determination of such fair market value of the Stock and whose
fees and expenses shall be paid by the person objecting to the determination
made by the Primary Investment Firm. If such valuation by the Secondary
Investment Firm is procured, it shall be delivered to the other party, and the
average of the fair market values as determined by the Primary Investment Firm
and the Secondary Investment Firm shall be the fair market value for purposes of
this Section 7 and shall be conclusive and binding on all parties for all
purposes hereof.
(c) Upon termination of Employee for Cause, the Company shall have the
right and option to acquire Employee's Stock for the Net Book Value per share of
such Stock, based upon the Company's latest audited financial statements. All of
Employee's Options shall be terminated, expired, void and of no further force or
effect.
(d) Employee must deliver stock certificates representing his Stock to
the Company within five business days of a demand in writing to such effect. If
Employee fails to so deliver the stock certificates, the Company may mail a
check for the purchase price or the net book value purchase price of such Stock
to Employee's last known address and cancel such Stock on the books and records
of the Company and such Stock shall have no further force or effect. In the case
of a negative net book value, no purchase price need be delivered before
canceling the Stock.
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8. COMPANY PROPERTY; INVENTIONS.
(a) All records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, and other property delivered to or
compiled by Employee by or on behalf of the Company or their representatives,
vendors, or customers which pertain to the business of the Company shall be and
remain the property of the Company, as the case may be, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials, and other similar data pertaining to the
business, activities, or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
(b) Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of Employee's employment by the Company. Employee hereby
assigns and agrees to assign all of Employee's interests therein to the Company
or its nominee. Whenever requested to do so by the Company, Employee shall
execute any and all applications, assignments, or other instruments that the
Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
9. CONFIDENTIALITY AND PROPRIETARY INFORMATION.
(a) Acknowledgment. Employee acknowledges and agrees that in the course
of rendering services to the Company and its customers, Employee will have
access to and will become acquainted with confidential and proprietary
information about the professional, business and financial affairs of the
Company, its affiliates and its vendors, suppliers and customers, and that
Employee may have contributed to or may in the future contribute to such
information. Employee further recognizes that Employee is being employed as a
key employee, that the Company is engaged in a highly competitive business, and
that the success of the Company in the marketplace and business depends upon its
goodwill and reputation for integrity, quality and dependability. Employee
recognizes that in order to guard the legitimate interests of the Company it is
necessary for the Company to protect all such confidential and proprietary
information, goodwill and reputation.
(b) Proprietary Information. In the course of Employee's service to the
Company, Employee may have access to confidential know-how, business documents
or information, marketing data, client lists and trade secrets which are
confidential. Such information shall hereinafter be called "Proprietary
Information" and shall include any and all items enumerated in the preceding
sentence which come within the scope of the business activities of the Company
as to which Employee has had or may have access, whether previously existing,
now existing or arising hereafter, whether or not conceived or developed by
others or by Employee alone or with others during the period of his service to
the Company, and whether or not conceived or developed during regular working
hours. "Proprietary Information" shall not include any information which is in
the public domain during the period of service by Employee or becomes
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public thereafter, provided such information is not in the public domain as a
consequence of disclosure by Employee in violation of this Agreement.
(c) Fiduciary Obligations. Employee agrees and acknowledges that the
Proprietary Information is of critical importance to the Company and a violation
of this Section 8 will seriously and irreparably impair and damage the Company's
business. Employee therefore agrees, while he is an employee of the Company and
at all times thereafter, to keep all Proprietary Information strictly
confidential.
(d) Non-Disclosure. Except as required by law or order of any court or
governmental entity or in connection with the proper performance of his duties
hereunder, Employee shall not disclose, directly or indirectly (except as
required by law), any Proprietary Information to any person other than (a) the
Company, (b) persons who are authorized employees of the Company at the time of
such disclosure, (c) such other persons, including prospective investors or
lenders, to whom Employee has been instructed to make disclosure by the
Company's Board, or (d) Employee's counsel, so long as such counsel agrees to
keep all Proprietary Information confidential (in the case of clauses (b) and
(c), only to the extent required in the course of Employee's service to the
Company). Upon any termination of Employee's employment hereunder, Employee
shall deliver to the Company all notes, letters, documents, tapes, discs,
recorded data and records which may contain Proprietary Information which are
then in Employee's possession or control and shall not retain, use, or make any
copies, summaries or extracts thereof.
10. INDEMNIFICATION. In the event Employee is made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against
Employee), by reason of the fact that Employee is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including reasonable attorneys' fees), judgments, fines, and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit, or proceeding, the
Company agrees to engage competent legal representation, and Employee agrees to
use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and the Company shall pay all
reasonable attorneys' fees of such separate counsel. Further, while Employee is
expected at all times to use Employee's best efforts to faithfully discharge his
duties under this Agreement, Employee cannot be held liable to the Company for
errors or omissions made in good faith where Employee has not exhibited gross,
willful and wanton negligence and misconduct or performed criminal and
fraudulent acts which materially damage the business of the Company.
11. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of Employee's duties hereunder will not violate
or be a breach of any agreement with a former employer, client, or any other
person or entity. Further, Employee agrees to indemnify the Company for any
claim, including but not limited to attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
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hereafter come to have against the Company based upon or arising out of any
noncompetition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
Employee has and will continue to truthfully disclose to the Company
the following matters, whether occurring, at any time during the five (5) years
immediately preceding the date of this Agreement or at any time during the term
of this Agreement:
(1) any criminal complaint, indictment or criminal
proceeding in which Employee is named as a defendant;
(2) any allegation, investigation, or proceeding,
whether administrative, civil or criminal, against Employee by any
licensing authority or industry association; and
(3) any allegation, investigation or proceeding,
whether administrative, civil, or criminal, against Employee for
violating professional ethics or standards, or engaging in illegal,
immoral or other misconduct (of any nature or degree), relating to the
business of the Company.
12. ASSIGNMENT; BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding on Employee and the Company and Employee's and the Company's
respective heirs, personal representatives, successors and assigns; provided,
however, that Employee shall have no right to assign Employee's rights or duties
under this contract to any other person. In the event of the sale, merger or
consolidation of the Company, Employee specifically agrees that the Company may
assign the Company's rights and obligations hereunder to the Company's
successor, assign or purchaser. In addition, and in any event, the Company may,
at any time, assign the Company's rights and obligations under this Agreement to
any person that is an affiliate of the Company or to any person which, after any
such assignment, employs at least 50% of the employees employed by the Company
immediately prior to the assignment.
13. COMPLETE AGREEMENT; AMENDMENTS. This Agreement supersedes any other
agreements or understandings, written or oral, among the Company and Employee,
and Employee has no oral representations, understandings or agreements with the
Company or any of its officers, directors, or representatives covering the same
subject matter as this Agreement. This written Agreement is the final, complete,
and exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement, and it cannot be varied,
contradicted, or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This written Agreement may not be later modified except
by a written instrument signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a written
instrument signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
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<PAGE>
To the Company: Take to Auction.com, Inc.
2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
Attention: President
To Employee: Hugo Calemczuk
____________________________
____________________________
Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or, in any other case, when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this Section 14.
15. SEVERABILITY. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. Employee and
the Company agree and acknowledge that the provisions of Sections 4 and 9 are
material and of the essence to this Agreement. If the scope of any restriction
or covenant contained therein should be or become too broad or extensive to
permit enforcement thereof to its fullest extent, then such restriction or
covenant shall be enforced to the maximum extent permitted by law, and Employee
hereby consents and agrees that (a) it is the parties intention and agreement
that the covenants and restrictions contained therein be enforced as written,
and (b) in the event a court of competent jurisdiction should determine that any
restriction or covenant contained therein is too broad or extensive to permit
enforcement thereof to its fullest extent, the scope of any such restriction or
covenant may be modified accordingly in any judicial proceeding brought to
enforce such restriction or covenant, but should be modified to permit
enforcement of the restrictions and covenants contained herein to the maximum
extent the court, in its judgment, will permit.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement or Employee's employment with the Company (or any
termination thereof) shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Broward County, Florida, in
accordance with the rules of the American Arbitration Association then in
effect. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The prevailing party shall receive and the unsuccessful party
shall pay the reasonable fees and expenses of any arbitration proceeding in
connection with this Agreement.
17. GOVERNING LAW. This Agreement shall in all respects be construed according
to the laws of the State of Florida.
18. HEADINGS. The paragraph headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define, or limit the extent
or intent of the Agreement or of any part hereof.
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<PAGE>
19. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute but one
and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement as of the date first above written.
The Company:
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
----------------------------
Name: Albert Friedman
Title: President
Employee:
/s/ Hugo Calemczuk
------------------------------
Hugo Calemczuk
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Exhibit 10.05
COMMERCIAL LEASE AGREEMENT
LESSOR
MIAMI FREE ZONE CORPORATION
2305 N.W. 107TH Avenue
Miami, Florida 33172
Tel: (305) 591-4300
Fax: (305) 591-1808
LESSEE
TAKE TO AUCTION.COM, INC.
Mr. Albert Friedman
President & Chief Executive Office
2335 N.W. 107th Avenue, Box 40
Miami, Florida 33172
<PAGE>
LEASE AGREEMENT
THIS AGREEMENT OF LEASE is made and executed as of this 4th day of
August 1999, by and between MIAMI FREE ZONE CORPORATION, with its principal
office at 2305 N.W. 107th Avenue, Miami, Florida 33172 (the Lessor) and Take to
Auction.Com, Inc., with its principal office at 2335 N.W. 107 Avenue, Miami,
Florida 33172, (the Lessee).
WITNESSETH
WHEREAS, Lessor is the licensee under a grant from the United States
Department of Commerce to the Greater Miami Foreign-Trade Zone, Inc., of the
privilege of establishing, operating and maintaining a foreign-trade zone upon
certain real property situated in Dade County, Florida, the legal description of
which is provided in Exhibit "A" attached hereto and incorporated herein by
reference.
NOW THEREFORE, the Lessor and Lessee agree as follows:
ARTICLE I - PREMISES
A. In consideration of the payment of rents and other charges provided
for herein and the performance of the covenants hereinafter set forth, the
Lessor hereby leases to the Lessee, and Lease hereby rents from Lessor, those
certain premises (the "Premises") described in Exhibit "A," attached hereto and
made a part hereof, and containing approximately 2,138 square foot of Floor Area
as illustrated in Exhibit "A", attached hereto and made a part hereof and
identified as pertaining to this Lease Agreement by the signatures or initials
of Lessor and Lessee. The street address of the Zone, of which the Premises is a
part, is 2335 N.W. 107th Avenue, Miami, Florida 33172. Lessor and Lessee
acknowledge that the Premises may be under construction or remodeling at the
date on which the Lease is executed.
B. Lessee is further granted the non-exclusive right in common with
other tenants of the Zone to use, and to permit its customers to use, public or
common lobbies, parking areas, roadways, hallways, stairways, escalators,
elevators and sanitary facilities in or adjacent to the Zone; provided, however,
that upon receipt of notice duly given by Lessor, such rights shall be subject
to reasonable rules and regulations from time to time established by Lessor.
Lessor may from time to time, upon giving notice thereof of Lessee, alter,
substitute and, as required by circumstances, proscribe the use of any one or
more of the subject areas or facilities.
Lessor expressly reserves the right, at Lessor's sole cost and
expense, to remove Lessee from the Premises and to relocate Lessee in some other
space of Lessor's choosing of approximately the same dimensions and size within
the Zone, which other space shall be decorated by Lessor at Lessor's expense.
Lessor shall have the right, in Lessor's sole discretion, to use such
decorations and materials from the existing Premises, or other materials, so
that the
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space in which Lessee is relocated shall be comparable in its interior design
and decoration to the Premises from which the Lessee is removed; provided
however, that if the Lessor exercises its election to remove and relocate Lessee
in other space within the Zone, which is at that time leasing for a higher rate
of Base Rent, then Lessee shall not be required to pay the differences between
the Base Rent of the Premises and the higher Base rent of the space in which
Lessee is relocated; provided further, that if Lessee is removed and relocated
in other space within the Zone which is then leasing at a Base Rent less than
the Base Rent of the Premises at that time, Lessee's Base Rent shall be reduced
to the Base Rent then being charged for the space in which Lessee has been
relocated. Nothing herein contained shall be construed to relieve Lessee, or
imply that Lessee is relieved of the liability for or obligation to pay general
services charges due by reason of the provisions of Article 4 of this Lease, the
provisions of which Article shall be applied to the space to which Lessee is
moved. Lessee agrees that Lessor's exercise of its election to remove and
relocate Lessee shall not terminate this Lease or release Lessee, in whole or in
part, from Lessee's obligation to pay the rents and perform the covenants and
agreements for the full Lease term.
C. Notwithstanding anything provided herein to the contrary, Lessee
agrees that Lessor shall have the right to place in the Premises (but in such
manner as to reduce to a minimum interference with Lessee's use of the Premises)
utility lines, pipes, structural members and the like to serve the Premises or
other tenants of the Zone, and to place, maintain and repair such utility lines,
pipes and the like, in, over and upon the Premises.
D. Lessee shall be further entitled to 2 parking spaces to be
designated by Lessor. If the Lessee should desire parking spaces in addition to
those provided above, such additional spaces, if available as determined by
Lessor, shall be at Lessee's sole cost and expense at rates determined from time
to time by Lessor.
E. The premises are further described as:
Building Two, Showroom 22 with app. 1,069 sq. ft.
Building Two, Showroom 23 with app. 1,069 sq. ft.
ARTICLE 2 - TERM OF LEASE
A. The term of this Lease shall be for a period for One (1) full year
commencing on August 16, 1999 (Commencement Date) and terminating on August 15,
2000 (Termination Date). Lessee shall have the right to review the terms of this
Lease for early termination upon the giving written notice of intention to
terminate by February 16, 2000, at which time they will have thirty (30) days to
vacate the premises (Lessor and Lessee accept to give each other notification by
way of an advanced written notice by February 16, 2000 of its intention of early
termination of the lease.)
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ARTICLE 3 - RENT
A. Lessee hereby covenants and agrees to pay Lessor as Base Rent for
the Premises the sum o Four Thousand Five Hundred Eleven and 18/100 Dollars
($4,511.18) per annum in equal monthly installments of Three Hundred Seventy
Five and 93/100 Dollars ($375.93) each, all in advance, on the first day of
every calendar month during the term hereof. If the term of this Lease commences
on a day other than the first day of a month, Lessee shall pay Base Rent equal
to one-thirtieth of the month Base Rent multiplied by the number of rental days
of such fractional month. If any installment of Base Rent or other additional
charges accruing under the Lease becomes overdue, a late charge of five percent
of the amount so overdue may be charged by the Lessor for the purpose of
defraying expenses incident to handling the delinquent payment.
B. Commencing August 15th, 2000 and annually thereafter, the Base Rent
provided above shall be increased by an amount equal to any percentage increase
in the cost of living as computed unde the Consumer Price Index for all Urban
Consumers published by the Bureau of Labor Statistics, U.S. Department of Labor
(the Index). For this purpose, the increase shall be applied if the Index in the
month of September is higher than the Index for September of the prior year. The
amount of increase shall be determined by multiplying the Base Rent payable
during the year in question by a fraction, the numerator of which is the Index
during the month of September and the denominator of which is the Index as of
September of the prior year. The amount of rent as then increased shall be paid
in equal monthly installments beginning immediately. Notwithstanding the
foregoing, the additional rent as computed under this paragraph shall not be
decreased by any year in which the Index decreases, but shall remain the same
during the ensuing year. These provisions shall be applied during the remaining
and any extended term of this Lease.
C. All rents and other charges called for herein shall be payable only
in legal tender of the United States of America. All payment of rent and other
charges shall be made to Lessor without notice or demand at such place as the
Lessor may from time to time designate in writing. Unless charged by the Lessor
as provided herein, all such amounts shall be addressed to Treasurer, Miami Free
Zone Corporation, 2305 N.W. 107th Avenue, Miami, Florida 33172. The extension of
time for the payment of any installment of rent or the acceptance by the Lessor
of any money other than legal tender of the United States shall not be a waiver
of the right of the Lessor to insist on having all other payments of rent made
at the time and in the manner provided above.
D. (1) Lessee has deposited with the Lessor the sum of One Thousand One
Hundred Twenty Seven and 80/100 Dollars ($1,127.80) as a security deposit, the
receipt whereof by check, subject to collection, is hereby acknowledged. Said
deposit shall be held by Lessor, without liability for interest thereon, as
security for the full and faithful performance by Lessee of each and every term,
covenant and condition of this Lease on the part of Lessee to be observed and
performed. The security deposit shall not be mortgaged, assigned, transferred or
encumbered by Lessee without the written consent of Lessor and any such act on
the part of Lessee shall be without force and effect and shall not be binding
upon Lessor. No interest shall
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be paid of said deposit. The Security Deposit will be returned to the Lessee
upon the proper return of the premises, all keys, passes and Zone Identification
materials as per Article 15 herein.
(2) If any of rents herein reserved or any other sum payable
by Lessee to Lessor is overdue and unpaid or if Lessor makes payments on behalf
of Lessee or if Lessee fails to perform any of the terms of this Lease, then
Lessor may, at its option, and without prejudice to any other remedy which
Lessor may have on account for the payment of the rents or other sums due from
Lessee, or towards any loss, damage or expense sustained by Lessor resulting
from such default on the part of Lessee; and in such event Lessee fully and
faithfully complies with all the terms, covenants and conditions of this Lease
and promptly pays all of the rentals as they fall due and all other sums payable
by Lessee to Lessor, the deposit shall be returned in full to Lessee following
the date of the expiration of the term hereof and the surrender of the Premises
by Lessee in compliance with the provisions of this Lease.
(3) If the bankruptcy, insolvency, reorganization or other
creditor-debtor proceedings are instituted by or against Lessee, or its
successors or assigns, or any guarantor of Lessee hereunder, the security
deposit shall be applied first to the payment of any rents and/or other charges
due Lessor for all periods prior to the institution of such proceedings and the
balance, if any, of such security deposit may be retained by Lessor in partial
liquidation of Lessor's damages.
(4) Lessor may deliver the security deposited by Lessee
hereunder to the purchaser of Lessor's interest in the Premises is such interest
is sold or transferred, and thereupon Lessor shall be discharged and released
from all further liability with respect to the deposit or the return thereof to
Lessee, and Lessee agrees to look solely to the new Lessor for the return of the
security deposit. This provision shall also apply to any subsequent transferees.
No holder of a mortgage or deed of trust or Lessor under a ground or underlying
lease to which this lease is or may be subordinate shall be responsible in
connection with the security deposited hereunder, unless such mortgagee or
holder of such deed of trust or Lessor has actually received the security
deposited hereunder.
E. In addition to the Base Rent, the Other Charges set forth in Article
4, below, and any and all other payments to be made by Lessee hereunder, for the
purpose of securing the collection thereof, shall be deemed to be additional
rent hereunder, whether or not designated as such, and shall be due and payable
on demand or together with the next succeeding installment of rent, whichever
first occurs. Lessor shall have the same rights and remedies upon Lessee's
failure to pay the same as for the non-payment of the rent. Lessor, at its
election, shall have the right (but not the obligation) to pay for or perform
any act which requires the expenditure of any sums of money by reason of the
failure or neglect of Lessee to perform any of the provisions of this Lease
within the grace period, if any, applicable thereto, and if Lessor elects to pay
such sums or perform such acts requiring the expenditure of monies, Lessee
agrees to repay Lessor, upon demand, all such sums, which shall be deemed to be
additional rent hereunder and be payable by Lessee as such.
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ARTICLE 4 - REAL ESTATE TAXES AND OTHER CHARGES.
A. (1) For the purpose of this Article, the term "Other Charges" covers
Lessee's proportionate share of the General Services which include, but are not
limited to, all real estate taxes, assessments, water and sewer charges, sales
and/or rent taxes, applicable Florida Sales and Use taxes general liability
insurance, Foreign Trade Zone bonds and administration, computer services,
security and surveillance, daily trash removal, common area electricity,
lighting, maintenance, cleaning and repair, parking, special assessments, other
governmental impositions and charges of every kind and nature whatsoever,
extraordinary as well as ordinary, foreseen and unforeseen, and each and every
installment thereof which shall or may, during the lease term, be levied,
assessed, imposed, become due and payable out of, or for, the Miami Free Zone or
any part thereof, and all costs incurred by Lessor in contesting, litigation or
negotiating the same with the governmental authority. Lessee agrees to pay its
proportionate share of the amount of real estate taxes which, during the term of
this Lease and any renewal or extension thereof, exceeds the amount payable by
Lessor for the first year the Miami Free Zone was assessed as improved property.
Lessee's proportionate share of the real estate taxes shall be computed by
multiplying the total amount of the excess real estate each year by a fraction,
the numerator or which shall be the Floor Area of the Premises and the
denominator of which shall be the total rentable floor area of all buildings in
the Miami Free Zone as of the beginning of the calendar year in which such taxes
are paid. Lessee hereby waives any right it may have by statute or otherwise to
protest real estate taxes to any public taxing authority.
(2) Nothing herein contained shall be construed to include as
a tax which shall be the basis of real estate taxes, any inheritance, estate,
succession, transfer, gift, franchise, corporation, income or profit tax or
capital levy that is or may be imposed upon Lessor; provided, however, that , if
at any time after the date hereof of the methods of taxation shall be altered so
that in lieu, of, as a substitute for or in addition to the whole or any part of
the taxes now levied assessed or imposed on real estate as such, there shall be
levied, assessed or imposed, (i) a tax on the rents received from such real
estate, or (ii) a license fee measured by the rents receivable by Lessor which
is otherwise measured by or based in whole or in part upon the Zone, or any
portion thereof, or (iii) an income or franchise tax, then the same shall be
included in the computation of real estate taxes hereunder, computed as if the
amount of such tax or fee so payable were that due if the Zone were the only
property of Lessor subject thereto.
B. For each year in which there is an excess in taxes Lessee shall pay
Lessor monthly one-twelfth of the amount of the Lessee's proportionate tax
liability based on the actual taxes for the preceding calendar year. Lessor
shall notify Lessee in writing of the actual amount due by Lessee for the
preceding calendar year when determined. Any amount paid by Lessee which exceeds
the true amount due shall be credited on the next succeeding payment due
pursuant to this Section. If Lessee has paid less than the true amount due,
Lessee shall pay the difference within ten days of receipt of notice from
Lessor. If the term of this Lease begins or ends other than on the first or last
day of a calendar year, these charges shall be billed and adjusted on the basis
of such fraction of a calendar year. Should the taxing authorities include in
such real estate taxes, machinery, equipment, fixtures, inventory or other
personal property or
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assets of the Lessee, then Lessee shall also pay its proportionate share of the
entire real estate taxes for such items.
C. (1) All costs and expenses of every kind and nature paid or incurred
by Lessor (including amounts determined as reasonable and appropriate reserves)
in operating, managing, equipping, providing security for, policing (including
U.S. Customs Services) and, to the extent provided by Lessor, lighting,
repairing, replacing, maintaining, heating and air conditioning (if the Zone
includes common areas, which are enclosed), landscaping and gardening all areas
within the Zone, shall be paid by Lessee, as hereinafter provided. Such costs
and expenses shall likewise include (but shall not be limited to) water and
sewer charges; premiums for workmen's compensation and similar insurance; wages,
unemployment taxes, social security taxes, and personal property taxes and
assessments; fees for required licenses and permits; supplies; reasonable
depreciation of equipment and administrative costs equal to 15% of the total
costs of operation and maintaining the Zone (such 15% factor shall not be
applied against operating reserves); but there shall be excluded costs of
equipment properly chargeable to capital account and depreciation of the
original cost of constructing buildings and other capital improvements within
the Zone. In addition, Lessee shall pay its share of the amount by which annual
premiums for public liability, property damage or five insurance exceed the
annual premiums for such insurance payable by Lessor during the first annual
premium period ending in calendar year 1979.
(2) Lessee's share of such costs and expenses shall be
computed on a monthly basis by multiplying the whole of such costs and expenses
by a fraction, the numerator of which is the total Floor Area in the Premises
and the denominator of which is the total gross square footage of all Lessees
within the Zone benefiting from such costs and expenses, as reasonably
determined by Lessor.
(3) Payment on account of Lessee's share shall be made monthly
in arrears, and at the times and in the fashion herein provided for the payment
of Base Rent. Lessor shall have the same rights and remedies for the non-payment
by Lessee of any amounts due hereunder as Lessor has hereunder for the failure
of Lessee to pay the Base Rent.
ARTICLE 5 - LESSOR'S WORK AND APPROVAL OF LESSEE'S PLANS AND SPECIFICATIONS.
Lessor covenants and agrees to construct the Premises substantially in
accordance with its construction obligations set forth in Exhibit "B" entitled
"Design Manual and Lease Criteria", which is attached hereto and incorporated
herein by reference. Lessor shall commence and complete its construction in the
Premises as soon as may practically be done, but Lessor shall not liable in any
manner whatsoever for its failure to do so.
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ARTICLE 6 - LESSEE'S WORK AND APPROVAL OF LESSEE'S PLAN AND SPECIFICATIONS.
A. Lessee covenants and agrees, after Lessor notifies Lessee in writing
that the shell of the Premises is ready for commencement of Lessee's work, to
commence and to promptly complete its construction work and installation of
fixtures with all due diligence in accordance with its construction obligations
set forth in Exhibit "B" and in accordance with its Preliminary Plans and
Specifications and its Working Plans and Specifications, as provided for herein.
If Lessee neglects, fails or refuses to promptly commence its work as aforesaid
and thereafter neglects, fails or refuses to diligently proceed with and
complete its work, then Lessor, after 30 days' notice to Lessee, may (1)
complete Lessee's work at Lessee's expense and thereupon commence the term of
this Lease, (2) commence hereunder notwithstanding the non completion of
Lessee's work, (3) declare this Lease canceled and of no further force and
effect, or (4) declare this Lease in default and accelerate all rents reserved
hereunder.
B. Lessee may, with the written consent of Lessor enter the Premises
for preliminary work prior to the completion of Lessor's work, provided that
Lessee's work shall be done in such manner so as not to interfere with the
completion of Lessor's Work.
C. Lessee shall furnish to Lessor all certificates and approval with
respect to work done by Lessee or on Lessee's behalf that may be required from
any authority for the issuance of a certificate of occupancy and that lessor
shall have no responsibility or liability whatsoever for any loss or damage to
any such fixtures or equipment installment or left in the Premises and Lessee's
entry on and occupancy of the Premises prior to the commencement of this Lease
shall be governed by and subject to all the provisions, covenants and conditions
to this Lease other than those requiring the payment of Rent and other charges.
D. Lessee must furnish Preliminary Plans and Specifications
incorporating the Lessee's construction obligations under Exhibit "B" for
Lessor's prior approval within 30 days after Lessor provided Lessee with outline
plans for the Premises. Within 60 days after approval by Lessor of Lessee's
Preliminary Plans and Specifications, Lessee shall submit Working Plans and
Specifications for Lessor's review and prior approval. All Preliminary Plans and
Specifications and Working Plans and Specifications and other architectural or
engineering drawings submitted or to be submitted by Lessee to Lessor shall
comply with Exhibit "B".
E. Lessee agrees not to place or suffer to be placed or to maintain on
the exterior of the Premise any sign, awning, advertising matter on the glass of
any window or door of the Premises without first obtaining the Lessor's written
approval thereof. Lessee further agrees to maintain such sign, awning,
decoration, lettering, advertising matter or other thing as may be approved in
good condition and repair at all times.
F. Any contractor or workman used to perform Lessee's work under
Exhibit "B" shall be dismissed from the job by Lessor or Lessor's architect if,
in the reasonable judgment of Lessor or Lessee shall exonerate, indemnify and
hold harmless the Lessor or Lessor's architect from any loss, cost, damage or
liability incurred by reason of any such demand.
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G. Lessor may, at any time require any contractor retained by Lessee to
do work on the Premises to furnish a payment bond for the benefit of Lessor or
Lessee.
H. Lessor may contract, at Lessee's expense, to have any of Lessee's
work done which directly affects the structural or other elements of the
Premises which Lessor has agreed to provide Lessee or other tenants of the Zone.
ARTICLE 7 - USE OF PREMISES
A. The Premises shall be occupied and used solely for the purpose
of:
Office Use. Exhibition of electronics, watches and general
merchandise
B. Lessee covenants and agrees to:
(1) conduct no sales to the public upon the Premises.
(2) store all trash and refuse in appropriate containers
within the Premises and to attend to the regular
disposal thereof in the manner designated by Lessor.
(3) refrain from burning any trash or rubbish within the
Premises or the Zone.
(4) use a refuse disposal service provided or approved by
the Lessor.
(5) keep the Premises in a clean and safe condition.
(6) prevent the Premises from becoming or being used in
any way which may be a nuisance to the Lessor or to
any Lessee in the Zone.
(7) abide by all reasonable rules and regulations from
time to time established by the Lessor.
C. Lessee covenants and agrees not to use or occupy or suffer or permit
the Premises or any part thereof to be used or occupied for any purpose contrary
to law or the rules or regulations of any public authority or the requirements
of any insurance underwriters or rating bureaus or in any manner so as to
increase the cost of insurance to the Lessor over and above the normal cost of
such insurance for the use above permitted for the type and location of the
building of which the Premises are a part. Lessee will, on demand, reimburse
Lessor for all extra premiums caused by Lessee's use of the Premises, whether or
not Lessor has consented to such use. Lessee shall at its sole expense promptly
comply with all present and future laws, regulations or rules of any county,
state, federal and other governmental authority and any bureau and department
thereof, and of the National Board of Fire Underwriters or any other body
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exercising similar functions which may be applicable to the Premises, including
the making of any required structural changes thereto. If Lessee shall install
any electrical equipment that overloads the lines in the Premises, Lessee shall
at its own expense make whatever changes are necessary to comply with the
requirements of the insurance underwriters and governmental authorities having
jurisdiction there over.
ARTICLE 8 - SPECIAL REQUIREMENTS
A. The Lessee shall pay all costs, expenses, claims, fines, penalties,
and damages, including attorneys' fees and court costs, whether or not judicial
or administrative proceedings are initiated, that may be paid or incurred by
Lessor because of the failure of the Lessee to comply with U.S. Customs
regulations, and the Lessee shall indemnify the Lessor from all liability
arising from such non-compliance. Upon termination of the lease, if there are
any discrepancies which may give rise to claim for duties, taxes, liquidated
damages, penalties or other charges by U.S. Customs, the Lessor shall continue
to have a lien on Lessee's property and inventory in an amount sufficient to
protect the Lessor against such claims.
B. Lessee agrees that it will adopt and utilize the inventory control
procedure required by the Lessor and by the United States Customs Service,
maintained by Lessor under supervision of the United States Customs Service.
Lessee shall pay Lessor for the use of said inventory control procedures and
systems, including computer services rendered at such rates as the Lessor may
reasonably establish, from time to time.
C. Lessor, as the operator of the Zone, is required to submit periodic
reports to the Foreign-Trade Zones Board and the United States Customs Service
or may be required to perform other acts as the operator of the foreign-trade
zone in compliance with other governmental regulations. Lessee hereby agrees to
fully comply in the creation and maintenance of procedures, systems, regulations
or programs which Lessor may, in its reasonable discretion, deem necessary to
ensure compliance with all governmental requirements. Notwithstanding the
foregoing, Lessor shall not be responsible for compliance by Lessee with the
applicable customs laws and regulations, and shall bear no responsibility for
the payment of any penalties assessed for Lessee's failure to comply with any
customs laws and regulations. Lessee agrees to hold Lessor harmless from any
liability arising from Lessee's failure to comply with customs laws and
regulations.
D. Lessee agrees that all liability for duties, taxes or penalties due
any agency of the United States government and arising from Lessee's use of the
Premises shall be borne by Lessee, including any duty, taxes or penalties on
merchandise which is pilfered, lost or not accounted for to the satisfaction of
the U.S. Customs Service for which Lessee may be liable. Lessee agrees to hold
Lessor harmless from the cost of any such assessment of duties, taxes or
penalties.
E. Lessee agrees that it will be bound by the provisions of
Foreign-Trade Zone No. 32 Tariff No. 1 attached hereto as Exhibit "C" and which
is incorporated herein by reference, any
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changes thereto or revisions or reissue thereof, and all Regulations promulgated
based thereon, during the term of this Lease and any extensions thereof.
F. Lessee agrees to keep the Premises open for business during all
hours of United States Customs Service operation in the Zone.
G. Lessor shall have no liability to Lessee for any failure of or delay
by the United States Customs Service in providing personnel to perform Customs
services at the Zone, even if such failure or delay restricts or prohibits
movement of goods into or out of the Zone.
ARTICLE 9 - ALTERATIONS
Lessee covenants and agrees not to make or permit to be made any
alterations, improvements and/or additions of any kind or nature to the Premises
or any part thereof except by and with written consent of Lessor first had and
obtained. All alterations, improvements and additions to the Premises shall be
made in accordance with the provisions of Exhibit "B" and all applicable laws
and shall at once when made or installed be deemed to have attached to the
freehold and to have become the property of Lessor and shall remain for the
benefit of Lessor at the end of the term or other expiration of this Lease in as
good order and condition as they were when installed, reasonable wear and tear
excepted. If prior to the termination of this Lease, or within 15 days
thereafter, Lessor so directs, Lessee shall promptly remove the additions,
improvements, fixtures and installations which were placed in the Premises by
Lessee and which are designated in said notice. Lessee shall repair any damage
occasioned by such removal and in default thereof Lessor may effect said
removals and repairs at Lessee's expense. In the event of making such
alterations, improvements and/or additions as herein provided, Lessee further
agrees to indemnify and save harmless the Lessor from all expenses, liens,
claims or damages to either persons or property arising out of or resulting from
the undertaking or making of said alterations, additions and improvements.
Lessor may, at any time, require any contractor retained by Lessee to make any
alternations in the Premises to furnish a payment bond for the benefit of Lessor
and Lessee.
ARTICLE 10 - MAINTENANCE OF PREMISES, INDEMNITY AND INSURANCE
A. (1) Lessor covenants and agrees to keep and maintain the roof (said
term excluding the suspended ceiling) and structural portions of the Premises
except for any damage thereto caused by any negligence (whether by act or
omission) of Lessee, its employees, agents, invitees, licensees, assignees or
contractors, in which event such damages shall be promptly repaired at the sole
cost and expense of Lessee. Other than as herein provided Lessor shall not be
responsible to make any other improvements or repairs of any kind, in or upon
the Premises.
(2) Lessee covenants and agrees to keep and maintain in good
order, condition and repair (which repair shall mean replace if necessary) the
Premises and every part thereof, except as hereinbefore provided, including but
without limitation, the exterior and interior
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portions of all doors, door checks, security gates, windows, glass, utility
facilities, plumbing and sewage facilities within the Premises or under the
floor slab including free flow up to the main sewer line, fixtures, heating,
air-conditioning (including exterior mechanical equipment), exterior utility
facilities and exterior electrical equipment serving the Premises and interior
walls, floors and ceilings, including compliance with applicable building codes
relating to fire extinguishers. If Lessee refuses or neglects to commence or
complete repairs promptly and adequately Lessor may, but shall not be required
to do so, make or complete said repairs and Lessee shall pay the cost thereof to
Lessor upon demand.
B. (1) Lessee hereby agrees to defend, pay, indemnify and save free and
harmless Lessor, and/or any fee owner or ground or underlying Lessors of the
Zones, from and against any and all claims, demands, fines, suites, actions,
proceedings, orders, decrees and judgments of any kind or nature by or in favor
of anyone whomsoever and from and against any and all costs and expenses,
including attorneys' fees, resulting from or in connection with loss of life,
bodily or personal injury or property damage arising, directly or indirectly out
of or from or on account of any occurrences in, upon, at or from the Premises or
occasioned wholly or in part through the use and occupancy of the Premises or
any improvements therein or appurtenances thereto, or by any act or omission of
Lessee or any subtenant, concessionaire or licensee or Lessee, or their
respective employees, agents, contractors, or invitees in, upon, at or from the
Premises or its appurtenances or any common areas of the Zone. It is agreed that
the indemnification provided for herein shall survive the termination of the
Lease.
(2) Lessee and all those claiming by, through or under Lessee
shall store their property in and shall occupy and use the Premises any
improvements therein and appurtenances thereto and all other portions of the
Zone solely at their own risk and Lessee and all those claiming by, through or
under Lessee hereby release Lessor, to the full extent permitted by law, from
all claims of every kind, including loss of life, personal or bodily injury,
damage to merchandise, equipment, fixtures or other property, or damage to
business or for business interruption, arising, directly or indirectly, out of
or from or on account of such occupancy and use or resulting from any present or
future conditions or state of repair thereof.
(3) Lessor shall not be responsible or liable at any time to
Lessee, or to those claiming by, through or under Lease, for any loss of life,
bodily or personal injury, or damage, loss or injury to property or business, or
for business interruption, that may be occasioned by or through the acts,
omissions or negligence of Lessee, it agents, servants and/or employees, or of
any other persons, or any other tenants or occupants of any portion of the Zone.
(4) Lessor shall not be responsible or liable at any time for
any defects, latent or otherwise, in any buildings or improvements in the Zone
or any of the equipment machinery, utilities, appliances or apparatus therein,
nor shall Lessor be responsible or liable at any time for loss of life, or
injury or damage to any person or to any property or business of Lessee, or
those claiming by, through, or under Lessee, caused by or resulting from the
bursting, breaking, leaking, running, seeping, overflowing or backing up of
water, steam, gas or sewage, in any part of the Premises or caused by or
resulting from Acts of God or the elements, or resulting from any defect or
negligence in the occupancy, construction, operation or use of any buildings or
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improvements in the Zone, including the Premises, or any of the equipment,
fixtures, machinery, appliances or apparatus therein.
(5) Lessee shall give prompt notice to Lessor in case of fire
or other casualty or accidents in the Premises or in the building of which the
Premises form a part or of any defects therein or in any of its fixtures,
machinery or equipment.
(6) In case Lessor, without fault on its part, shall be made a
party to any litigation commenced by or against Lessee, then Lessee shall
indemnify and hold lessor harmless therefrom and shall pay Lessor all costs and
expenses, including reasonable attorneys' fees, which Lessor may sustain by
reason thereof.
(7) Lessee expressly acknowledges that all of the foregoing
provisions of this Article shall apply and become effective from and after the
date Lessor shall deliver possession of the Premises to Lessee in accordance
with the terms of this Lease.
C. (1) Lessor's insurance: All the construction work described in
Exhibit "B" hereof, whether performed or paid for by Lessor or Lessee (including
all alterations, additions or improvements to the Premises made, with Lessor's
written consent, subsequent to the initial construction thereof) shall be
insured by Lessor against fire and such other risks as are, from time to time,
included in standard extended coverage endorsements and/or, at Lessor's option,
other special broad form coverages in amounts equal to at least 90% of the sound
insurable value thereof (including any increase in value thereof resulting from
increased construction costs), subject to deductibles. Subject to Lessee's
compliance with the applicable insurance requirements set forth in Exhibit "B"
hereof, Lessee shall carry such insurance with respect to Lessee's work in the
Premises (including any such subsequent alterations, additions, or improvements)
from and after the date of the commencement of such work.
(a) Comprehensive General Liability Insurance on an
occurrence basis with minimum limits of liability in an amount of $1,000,000 for
bodily injury, personal injury or death to any one person and $1,000,000 for
bodily injury, personal injury or death to more than one person and $500,000
with respect to damage to property, including water damage and sprinkler leakage
legal liability; Lessee shall, at Lessee's expense, cause to be excluded form
such liability insurance the "Care, Custody and Control Exclusion";
(b) Property Insurance covering loss or injury to
Lessee's merchandise, equipment fixtures or other property stored in the
Premises, however caused, in an amount adequate to cover the full replacement
value thereof, it being fully understood that Lessor is not an insurer of
Lessee's property, and it is the intent of the parties hereto that any losses
sustained by Lessee will be compensated for by insurance procured by Lessee for
its own property. In the event Lessee does not procure such insurance to protect
its own property, Lessor shall not be liable or responsible to Lessee, or those
claiming by, through or under Lessee for damage, loss, or injury to Lessee's
property, whether occasioned by or through the acts, omissions or negligence of
Lessor, its agents, servants or employees or any other persons, or any tenants
or occupants of any portion of the Zone;
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(c) Fire insurance, with extended coverage and
vandalism and malicious mischief endorsements, in an amount adequate to cover
the full replacement value of all fixtures and contents in the Premises in the
event of fire or other casualty;
(d) Plate glass insurance covering all plate glass in
the Premises;
(e) If there is a boiler or air-conditioning
equipment serving the Premises (whether installed in, adjoining, above or
beneath the same) Broad Form Boiler and Machinery Insurance in the amount of
$100,000; and
(f) Any and all insurance procured by the Lessee
whether it be to cover loss of property, liability or any other event or
circumstance, must contain a waiver of subrogation rights as against the Lessor
and any of its agents, servants and/or employees, it being the intent hereof
that any claims for damages to property or person of any type or nature shall be
borne by the Lessee's insurance company and/or the Lessee without recourse
against the Lessor, its agents, servants and/or employees.
(3) All Comprehensive General Liability insurance to be
procured by Lessee in pursuance of this Article and Exhibit "B" hereof shall be
issued in the names and for the benefit of Lessor, its designee(s) and Lessee by
one or more responsible insurance companies satisfactory to Lessor and licensed
to do business in Florida; and at Lessee's option, such insurance may be carried
under a blanket policy covering the Premises and any other of Lessee's stores,
offices, warehouses or other facilities. All policies of insurance mentioned in
Section C(2) of this Article shall contain the following endorsements:
(a) that such insurance may not be canceled or
amended with respect to Lessor except upon 15 days prior written notice from the
insurance company to Lessor sent by certified or registered mail;
(b) that Lessee shall be solely responsible for the
payment of all premiums under such policy and that Lessor shall have no
obligation for the payment thereof;
(c) that in the event of payment of any loss covered
by such policy, Lessor shall be paid first by the insurance company of its loss;
(d) an express waiver of any right of subrogation by
the insurance company against Lessor, the Lessee hereby expressly waiving any
such right of subrogation for any reason or occurrence whatsoever and for any
and all purposes, Lessee hereby waiving any and all claims of subrogation that
otherwise may inure to the benefit of Lessee's insurance company by operation of
law, common law or contract; and
(e) Lessee agrees to deliver to Lessor Certificates
or Memoranda of Insurance of all policies of insurance to be procured by Lessee
within 10 days of the inception of such policies and, at least 10 days prior to
the expiration of any such policy, Lessee shall deliver
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to Lessor Certificates or Memoranda of Insurance evidencing the renewal thereof.
The minimum limits of any insurance coverage to be maintained by Lessee
hereunder shall not limit Lessee's liability under the indemnity contained in
this Article or elsewhere hereunder.
D. Lessee shall not stock, use or sell or permit or suffer to be
stocked, used or sold any article or do anything in or about the Premises which
may be prohibited by or violate any of Lessor's insurance policies or the rules
and regulations of the fire Insurance Rating Organization having jurisdiction or
any similar body, or which will increase any insurance rates and premiums on the
Premises, the building of which it forms a part and/or other building or
improvements in the Zone. If as a result of:
(1) any failure of Lessee, or anyone claiming by, through or
under Lessee, to comply with the foregoing sentence of this Section D, or
(2) the use and occupancy of the Premises by Lessee or anyone
claiming by, through or under Lessee, whether or not Lessor has consented to the
same or,
(3) Lessee's failure to use and/or continuously to occupy and
operate Lessee's business in the Premises in the manner provided for in this
Lease, or
(4) Lessee's abandonment of the Premises,
the insurance rates applicable to any policies of insurance carried by Lessor
covering the Zone property or the rental income to be derived therefrom shall be
increased, Lessee agrees to pay Lessor within 10 days after Lessor's written
demand therefor, as additional rent hereunder, the entire portion of the
premiums for said insurance which shall be attributable to such higher rates.
In determining whether any increase in such rates is the result of any of the
aforementioned acts or omissions of Lessee or anyone claiming by, through or
under Lessee, a schedule or rule book issued by the applicable rating
organization or the rating procedures or rules of Lessor's insurance companies
shall be conclusive evidence of the several items and charges which make up the
insurance rates and premiums on the Premises and the Zone. If any such insurance
carried by Lessor shall be canceled by the insurance carrier as a result of the
aforementioned acts or omissions of Lessee or anyone claiming by, through or
under Lessee, Lessee agrees to indemnify and hold Lessor harmless from all
damages costs and expenses which Lessor may sustain by reason thereof.
E. Lessee agrees and warrants that with respect to all employees
working in Lessee's leased area and all business activities engaged in by
Lessee, Lessee shall be solely responsible for complying with all federal, state
and local health laws.
ARTICLE 11 - COMMON AREAS
All common areas and other common facilities (hereinafter collectively called
"Common Areas") made available by Lessor in or about the Zone shall be subject
to the exclusive control
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and management of Lessor, expressly reserving unto Lessor, without limitation,
the right to erect and install structures, equipment or facilities within the
enclosed portions or the parking or other areas. "Common Areas" (as initially
constructed or as the same may at any time thereafter be enlarged or reduced)
shall mean all areas, space, facilities, equipment, signs and special services
from time to time made available by Lessor for the common and joint use and
benefit of Lessor, the Lessee and other tenants and occupants of the Zone, and
their respective employees, agents, subtenants, concessionaires, licensees,
customers and other invitees, which may include (but shall not be deemed a
representation as to their availability), the sidewalks, parking areas, access
roads, driveways, landscaped areas, truck service ways, tunnels, loading docks,
pedestrian malls (enclosed or open), courts, stairs, ramps, elevators,
escalators, comfort and first aid stations and public washrooms. Lessor hereby
expressly reserves the right, from time to time: to construct, maintain and
operate lighting and other facilities, equipment and signs on all of said Common
Areas; to regulate the same; to change the area; level; location and arrangement
of the parking areas and other facilities forming a part of said Common Areas;
to build multi-story parking facilities; to restrict parking by tenants and
other occupants of the Zone and their employees, agents, subtenants,
concessionaires and licensees; to enforce parking charges (by operation of
meters or otherwise), to close temporarily all or any portion of the Common
Areas for the purpose of making repairs or changes thereto and to discourage
non-customer parking; and to establish, modify and enforce reasonable rules and
regulations with respect to the Common Areas and the use to be made thereof.
Lessor shall operate, manage, equip, police, light and maintain the common Areas
in such manner as Lessor, in its sole discretion may from time to time
determine, and Lessor shall have sole right and exclusive authority to employ
and discharge all personnel with respect thereto. Lessee is hereby given a
license (in common with all others to whom Lessor has or may hereafter grant
rights) to use, during the term of this Lese, the Common Areas of the Zone as
they may now or at any time during the term of this Lease exist, provided,
however that if the size, location or arrangement of such Common Areas or the
type of facilities at any time forming a part thereof be changed or diminished,
Lessor shall not be subject to any liability therefor, nor shall Lessee be
entitled to any compensation or diminution or abatement of rent therefor, nor
shall such change or diminution of such areas be deemed a constructive or actual
eviction. In order to establish that the Zone and any portion thereof is and
will continue to remain private property and to prevent a dedication thereof or
the accrual of any rights to any person or to the public therein, the Lessor
hereby reserves the unrestricted right, in the Lessor's sole discretion, to
close all or any portion of the Zone owned, leased or controlled by Lessor to
the general public for one day in each calendar year, and in connection
therewith, to seal off all entrances to the Zone, or any portion thereof. Lessee
hereby acknowledges, consents and agrees that any and/or all service, facilities
and access by the public to the Premises and/or to the Zone may be suspended in
whole or in part on legal holidays, on such other days as amy be declared by
local, state or federal authorities as days of observance, and/or during any
periods of actual or threatened civil commotion, insurrection or other
circumstances beyond Lessor's control when Lessor, in Lessor's reasonable
judgment, shall deem the suspension of such services, facilities and access
necessary for the protection and/or preservation of persons and/or property.
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ARTICLE 12 - MECHANICS LIEN OR CLAIMS
Lessee shall do all things reasonably necessary to prevent the filing of any
mechanics' or other liens against the Premises or any other portion of the Zone
or the interest of the Lessor or any ground or underlying Lessors therein or the
interest of any mortgagees or holders of any deed of trust covering the Zone by
reason of any work, labor, services or materials performed or supplied or
claimed to have been performed or supplied to Lessee, or anyone holding the
Premises, or any part thereof, through or under Lessee. If any such lien shall
at any time be filed, Lessee shall either cause the same to be vacated and
canceled or record within 10 days after the date of the filing thereof, or, if
the Lessee in good faith determines that such lien should be contested, Lessee
shall furnish such security, by surety bond or otherwise, as may be necessary or
be prescribed by law to release the same as a lien against the real property and
to prevent any foreclosure of such lien during the pendency of such contest. If
Lessee shall fail to vacate or release such lien in the manner and within the
time period aforesaid then, in addition to any other right or remedy of Lessor
resulting from Lessee's said default, Lessor may, but shall not be obligated to
, vacate or release the same either by paying the amount claimed to be due or by
procuring the release of such lien by giving security or in such other manner as
may be prescribed by law. Lessee shall repay to Lessor, as additional rent
hereunder on demand, all sums disbursed or deposited by lessor pursuant to the
foregoing provisions of this Section, including Lessor's cost and expense of
attorneys' fees incurred in connection therewith. However, nothing contained
herein shall imply any consent or agreement on the part of Lessor or any ground
or underlying Lessors or mortgagees or holders of deeds of trust of the Zone to
subject their respective estates or interest to liability under any mechanics'
or other lien law, whether or not the performance or the furnishing of such
work, labor, services or materials to Lessee or anyone holding the Premises, or
any part thereof, through or under Lessee, shall have been consented to by
Lessor and/or any of such parties.
ARTICLE 13 - DESTRUCTION
If the Premises are partially damaged by fire or other casualty insured under
Lessor's insurance policies, then upon Lessor's receipt of the insurance
proceeds, Lessor shall, except as otherwise provided herein, repair and restore
the same (exclusive of Lessee's fixtures, decorations, signs and contents)
substantially to the condition thereof immediately prior to such damage or
destruction, limited, however, to the extent of the insurance proceeds received
by Lessor therefor. If by reason of such occurrence:
(1) the Premises are rendered wholly untenantable, or
(2) the Premises are damaged in whole or in part as a result
of a risk which is not covered by Lessors insurance policies, or
(3) the Premises are damaged in whole or part during the last
three years of the term (or of any renewal term) hereof, or
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(4) the building of which the Premises form a part of all of
the buildings which then comprise the Zone is or are damaged (whether or not the
Premises are damaged) to an extent of 50% or more of the then replacement value
thereof, or
(5) any or all of said buildings or the Common Areas of the
Zone are damaged (whether or not the Premises are damaged) to such an extent
that the Zone cannot in the sole judgment of the Lessor be operated as an
integral unit, then or in any such events, Lessor may elect either to repair the
damage as aforesaid, or to cancel this Lease by written notice of cancellation
given to Lessee within 180 days after the date of such occurrence, and thereupon
this Lease shall cease and terminate with the same force and effect as though
the date set forth in the Lessor's said notice were the date herein fixed for
the expiration of the Term hereof and Lessee shall vacate and surrender the
Premises to Lessor. Upon the termination of this Lease, as aforesaid, Lessee's
liability for the rents reserved hereunder shall cease as of the effective date
of the termination of this Lease, as aforesaid, Lessee's liability for the rents
reserved hereunder shall cease as of the effective date of the termination of
this lease, subject, however, to the provisions for the prior abatement of rent
hereinafter set forth. Unless this Lease is terminated by Lessor, as aforesaid,
this Lease shall remain in full force and effect and the Parties waive the
provisions of any law to the contrary, the Lessee shall repair, restore or
replace Lessee's fixtures, decorations, signs, and contents in the Premises in a
manner and to at least a condition equal to that existing prior to their damage
or destruction and the proceeds of all insurance carried by Lessee on said
property shall be held in trust by Lessee for the purposes of such repair,
restoration or replacement. If by reason of such fire or other casualty the
Premises are rendered wholly untenantable the fixed rent shall be fully abated,
or if only partially damaged such rent shall be abated proportionately as to
that portion of the Premises rendered untenantable, in either event (unless
Lessor shall elect to terminate this Lease, as aforesaid) until 15 days after
notice by Lessor to Lessee that the Premises have been substantially repaired
and restored or until Lessee's business operations are restored in the entire
Premises, whichever shall occur sooner. Lessee shall continue the operation of
Lessee's business in the Premises or any part thereof not so damaged during any
such period to the extent reasonably practicable from the standpoint of prudent
business management and, except for such abatement of the Rent as hereinabove
set forth, nothing herein contained shall be construed to abate Lessee's
obligations for the payment of any additional rents and charges reserved
hereunder. If such damage or other casualty shall be caused by the negligence of
Lessee or of Lessee's subtenants, concessionaires, licensees, contractors or
invitees or their respective agents or employees, there shall be no abatement of
rent. Except for the abatement of the Rent hereinabove set forth, Lessee shall
not be entitled to and hereby waives all claims against Lessor for any
compensation or damage for loss of use of the whole or any part of the Premises
and/or for any inconvenience or annoyance occasioned by any such damage,
destruction, repair or restoration. The provisions of any statute or other law
which may be in effect at the time of the occurrence of any such damage or
destruction, under which a Lease is automatically terminated or a Lessee is
given the right to terminate a Lease upon the occurrence of any such damage or
destruction, are hereby expressly waive by Lessee.
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ARTICLE 14 - ACCESS TO PREMISES
A. Lessee agrees to permit Lessor or Lessor's agents to inspect or
examine the Premises at any reasonable time and to permit Lessor to make such
repairs, alterations, improvements or additions in the Premises or to the
building of which Lessee has covenanted herein to do and has failed so to do or
which Lessor may be obligated or may desire to undertake, without the same being
construed as an evidence of Lessee in whole or in part and the rent shall in no
wise abate while such repairs, alterations, improvements or additions are being
made by reason of loss or interruption of the business of Lessee because of the
prosecution of such work. Lessor shall have the right to enter the Premises and
to exhibit same to prospective tenants and/or mortgagees.
B. Lessee agrees to permit U.S, Customs agents to enter the Premises at
any reasonable time, without notice, for the purpose of examining the same.
ARTICLE 15 - SURRENDER OF PREMISES
A. Lessee covenants and agrees to deliver up and surrender to the
Lessor possession of the Premises upon expiration of this Lease, or its earlier
termination as herein provided, broom clean and in as good condition and repair
as the same shall be at the commencement of the term of this Lease, or may have
been put by the Lessor during the continuances thereof, ordinary wear and tear
and damage by fire or the elements beyond Lessee's control excepted.
B. Lessee shall on Lessor's written directions and at Lessor's option
at Lessee's expense remove all property of Lessee and all alterations, additions
and improvements as to which Lessor shall have made the election hereinabove
provided, repair all damage to the Premises caused by such removal and restore
the Premises to the condition in which they were prior to the installation of
the articles so removed. Any property not so removed at the expiration of the
term hereof and as to which Lessor shall have not made said election, shall be
deemed to have been abandoned by Lessee and may be retained or disposed of by
Lessor, as Lessor shall desire. Lessee's obligation to observe or perform this
covenant shall survive the expiration or termination of this Lease.
ARTICLE 16 - UTILITIES
A. Lessee covenants and agrees to pay for all utility services rendered
or furnished to the Premises, including heat, water, gas, electricity, sewer
rental, sewage treatment facilities and the like, together with all taxes levied
or other charges on such utilities. If Lessor shall supply any such services, or
if any such services are required to be paid for by Lessor under a master meter,
Lessee will purchase same from Lessor at charges not in excess of the charges
for the service in question made by any publicly utility corporation or
governmental agency supplying such utilities in the area plus an additional 10%
for Lessor's costs as may be incurred in connection therewith. Any such charges
for service supplied by Lessor shall be due and payable
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within 10 days after billing therefor are rendered to Lessee. Lessor shall have
the same rights for non-payment of such charges as it would have under this
Lease for non-payment of rent. In no event shall Lessor be liable for the
quality, quantity, failure or interruption of such service to the Premises.
B. Lessor may, with notice to Lessee, or without notice in the case of
an emergency, cut off and discontinue gas, water, electricity and any or all
other utilities whenever such discontinuance is necessary in order to make
repairs or alterations. No such action by Lessor shall be construed by Lessee to
terminate this Lease, nor shall Lessor be in any way responsible or liable for
such action.
ARTICLE 17 - ASSIGNMENT AND SUBLETTING
A. Lessee covenants and agrees not to assign this Lease or to sublet
the whole or any part of the Premises, or to permit any other persons to occupy
same without the written consent of the Lessor, references elsewhere herein to
assignees notwithstanding. If the Lessee requests permission to either assign
this Lease, or to sublet the whole or any part of the Premises, or this Lease is
deemed to be assigned pursuant to Paragraph B of this Article, then Lessor may
elect to do one of the following:
(1) consent on such reasonable terms and conditions as
Lessor may deem advisable or
(2) withhold consent in its sole and absolute discretion
Any such assignment or subletting even with the consent of Lessor, shall not
relieve Lessee from liability for payment of rent or other sums herein provided
or from the obligation to keep and be bound by the terms, conditions and
covenants of this Lease. The acceptance of rent from any other person shall not
be deemed to be a waiver of any of the provisions of this Lease or to be a
consent to the assignment of this Lease or subletting of the Premises.
B. If Lessee is a corporation, then any transfer of this Lease from
Lessee by merger, consolidation or liquidation or any change in ownership or
power to vote of a majority of its outstanding voting stock shall constitute an
assignment for the purpose of this Lease.
C. An assignment for the benefit or creditors or by operation of law
shall not be effective to transfer any rights to assignee without the written
consent of the Lessor first having been obtained.
D. Lessor may assign this Lease, or the rents due hereunder, at any
time.
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ARTICLES 18 - CONDEMNATION
A. If the whole of the Premises or such part thereof as will render the
remainder untenantable shall be acquired or taken by eminent domain for any
public or quasi-public use or purpose or by private purchase in lieu thereof,
then this Lease and the term hereof shall automatically cease and terminate as
of the date of title vesting in such proceedings.
B. If any part of the Premises shall be so taken and such partial
taking shall render that portion not so taken unsuitable for the purposes for
which the Premises were leased, then Lessor and Lessee shall each have the right
to terminate this Lease by written notice given to the order within 60 days
after the date of title vesting in such proceeding. If any part of the Premises
shall be so taken and this Lease shall not be terminated, as aforesaid, then
this Lease and all of the terms and provisions thereof shall continue in full
force and effect, except that the Rent shall be reduced in the same proportion
that the floor area of the Premises taken (including basement and mezzanine
space, if any) bears to the original floor are demises, and Lessor shall, upon
receipt of the award in condemnation, make all necessary repairs or alterations
(exclusive of Lessee's fixtures, decorations, signs and contents) to restore the
portion of the Premises remaining to as near its former condition as the
circumstances will permit, and to the building of which the Premises from part
to the extent necessary to constitute the portion of the building not so taken a
complete arquitectural, unit; provided, however, that Lessor, in any event,
shall not be required to spend for such repair and alteration work an amount in
excess of the respective amounts received by Lessor as damages for the taking of
such part of the Premises and of the building of which it forms a part, and
Lessee, at Lessee's expense, shall make all necessary repairs and alterations to
Lessee's trade fixtures, decorations, signs, and contents.
C. As used herein, the amount received by Lessor shall mean that
portion of the award in condemnation received by Lessor from the condemning
authority which is free and clear of all prior claims or collections by the
holders of any mortgages or deeds of trust or any ground of underling Lessors.
D. If more than 20% of the floor area of the building of which the
Premises forms a part or of the Zone shall be taken as aforesaid, Lessor shall
have the right, by written notice given to Lessee, to terminate this Lease, such
termination to be effective as of the date of title vesting in such proceedings.
E. If this Lease is terminated as provided in this Article all rents
shall be paid by Lessee up to the date that Possession is so taken by public
authority and Lessor shall make an equitable refund of any rents paid by Lessee
in advance and not yet earned.
F. All damages or compensation awarded or paid for any such taking,
whether for the whole or a part of the Premises or any part of the land,
building and improvements constituting the Zone, shall belong to and be the
property of Lessor without any participation by lessee, whether such damages or
compensation shall be awarded or paid for diminution in value of the fee or any
interest of Lessor in any ground or underlying lease covering the Zone or in the
leasehold estate created hereby, and Lessee hereby expressly waives and
relinquishes all claims
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to such award or compensation or any part thereof and of the right to
participate ;in any such condemnation proceedings against the owners of any
interest in the Zone; provided, however, that noting herein contained shall be
construed to preclude Lessee from prosecuting any claim directly against the
condemning authority, but not against Lessor, for the value of or damages to
and/or for the cost of removal of Lessee's movable fixtures and other personal
property which under the terms of the Lease, as may be recoverable by Lessee in
Lessee's own right, provided further that no such claim shall diminish or
otherwise adversely affect Lessor's award. Each Party agrees to execute and
deliver to the other all instruments that may be required to effectuate the
provisions of this Article.
ARTICLE 19 - DEFAULT BY LESSEE
A. If at any time after the date of Lease (whether prior to the
commencement of or during the Term of this Lease):
(1) any proceedings in bankruptcy, insolvency or
re-organization shall be instituted against Lessee pursuant to any federal or
state law now or hereafter enacted, or any receiver or trustee shall be
appointed for all or any portion of Lessee's business or property, or any
execution or attachment shall issue against Lessee or any of Lessee's business
or property or against the leasehold estate created hereby, and any such
proceedings, process or appointment be not discharged and dismissed within 30
days from the date of such filing, appointment or issuance; or
(2) Lessee shall be adjudged a bankrupt or insolvent, or
Lessee shall make an assignment for the benefit of creditors, or Lessee shall
file a voluntary petition in bankruptcy or petitions for (or enters into) an
arrangement or for reorganization, composition or any other arrangement with
Lessee's creditors under any federal or state law now or hereafter enacted, or
this Lese or the estate of the Lessee herein shall pass to or devolve upon, by
operation of law or otherwise, anyone other than Lessee (except as herein
provided), the occurrence of any one of such contingencies shall be deemed to
constitute and shall be construed as a repudiation by Lessee of Lessee's
obligations hereunder and shall cause this Lease ipso facto to be canceled and
terminated, without thereby releasing Lessee; and upon such termination Lessor
shall have the immediate right to re-enter the Premises and to remove all
persons and property therefrom and this Lease shall not be treated as an asset
of the Lessee's estate and neither the Lessee nor anyone claiming by, through or
under Lessee by virtue of any law or any order of any court shall be entitled to
the possession of the Premises or to remain in the possession thereof. Upon the
termination of this Lease, as aforesaid, Lessor shall have the right at its
option to retain as partial damages, and not as a penalty, any prepaid rents and
any security deposited by Lessee hereunder and Lessor shall also be entitled to
exercise such rights and remedies to recover from Lessee as damages such amounts
as are specified in this Article, unless any statute or rule of law governing
the proceedings in which such damages are to be proved shall lawfully limit the
amount of such claims capable of being so proved, in which case Lessor shall be
entitled to recover, as and for liquidated damages, the maximum amount which may
be allowed under any such statute or rule of law. As used herein the term
"Lessee" shall be deemed to include Lessee and its successors and assigns and
the guarantor of the Lessee's obligations under this Lease, if any.
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B. (1) If this Lease be assigned or the Premises be sublet, either
voluntarily or by operation of law, except as herein provided, or if Lessee
shall fail (i) to pay, when due, any rental or other sum payable hereunder
within five days after the same are due; or (ii) to correct any default with
respect to Article 8 hereof within five days after written notice of such
default shall have been given to Lessee; or (iii) to keep, observe or perform
any of the other terms, covenants and conditions herein to be kept, observed and
performed by Lessee for more than five days after written notice shall have been
given to Lessee specified (other than a default under subdivision (i) hereof)
shall be of such nature that the same cannot be reasonably cured or remedied
within said five day period, if Lessee shall not in good faith have commenced
the curing or remedying of such default within such five day period and shall no
thereafter continuously and diligently proceed therewith to completion; (iv) or
if Lessee shall make default with respect to any other lease between Lessor and
Lessee, then and in any one or more of such events *herein sometimes referred to
as an "Event of Default"), Lessor shall have the immediate right to re-enter the
Premises, either by summary proceedings, by force or otherwise and to dispossess
Lessee and all other occupants therefrom and remove and dispose of all property
therein or, at Lessor's election, to store such property in a public warehouse
or elsewhere at the cost and for the account of Lessee, all without service of
any notice of intention to re-enter with or without resort to legal process
(which Lessee hereby expressly waives) and without Lessor being deemed guilty of
trespass or becoming liable for any loss or damage which may be occasioned
thereby. Upon the occurrence of any such Event of Default, Lessor shall also
have the right, at its option, in addition to and not in limitation of any other
right or remedy, to terminate this Lease by giving Lessee a written three days'
notice of cancellation and upon the expiration of said three days, this Lease
and the Term hereof shall end ad expire as fully and completely as if the date
of expiration of such three day period were the date herein definitely fixed for
the end and expiration of this Lease and the Term hereof and thereupon, unless
Lessor shall have theretofore elected to reenter the Premises, Lessor shall have
the immediate right of re-entry, in the manner aforesaid, and Lessee and all
other occupants shall quit and surrender the Premises to Lessor, but Lessee
shall remain liable as hereinafter provided; provided, however that if Lessee
shall default (-i-) in the timely payment of any rental or other sum payable
hereunder and any such default shall continue or be repeated for two consecutive
months, or for a total of four months in any period of 12 months, or (-ii-) in
the performance of any other covenant of this Lease more than six times, in the
aggregate, in any period of six months, then, notwithstanding that such defaults
shall have been cured within the period after notice as above provided, any
further similar default shall be deemed to be deliberate and Lessor thereafter
may serve said written three day notice of termination without affording to
Lessee an opportunity to cure such further default.
(2) If by reason of the occurrence of any such Event of
Default, the Term of this Lease shall end before the date thereof originally
fixed herein, or Lessor shall re-enter the Premises, or Lessee shall be ejected,
dispossessed, or removed therefrom by summary proceedings or in any other
manner, whether or not specifically enumerated in this Lese, or if the Premises
become vacant, deserted or abandoned, Lessor at any time thereafter may relet
the Premises, or any part or parts thereof, either in the name of Lessor or as
agent for Lessee, for a term or terms which may, at Lessor's option, be less
than or exceed the period of the remainder of the term hereof or which otherwise
would have constituted the balance of the term of this
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Lease, and grant concessions of free rent. Lessor shall receive the rents from
such reletting and shall apply the same, first, to the payment of any
indebtedness other than rent due hereunder from Lessee, to Lessor; second to the
payment of such expenses as Lessor may have incurred in connection with
re-entering, ejecting, removing, dispossessing, reletting, altering, repairing,
redecorating, subdividing, or otherwise preparing the Premises for reletting,
including brokerage and attorneys' fees; and the residue, if any, Lessor shall
apply to the fulfillment of the terms, covenants and conditions of Lessee
hereunder and Lessee hereby waives all claims to the surplus, if any. Lessee
shall be and hereby agrees to be liable for and to pay Lessor any deficiency
between the rent, additional rents and other charges reserved herein and the net
rentals, as aforesaid, of reletting, if any, for each month of the period which
otherwise would have constituted the balance of the term of this Lease. Lessee
hereby agrees to pay such deficiency in monthly installments on the rent days
specified in this Lese and any suit or proceeding brought to collect the
deficiency for any month, either during the Term of this Lease or after any
termination thereof, shall not prejudice or preclude in any way the rights of
Lessor to collect the deficiency for any subsequent month by a similar suit or
proceeding. Lessor shall in no event be liable in any way whatsoever for the
failure to relet the Premises or , in the event of such reletting, for failure
to collect the rents reserved thereunder. Lessor is hereby authorized and
empowered to make such repairs, alterations, decorations, subdivisions or other
preparations for the reletting of the Premises as Lessor shall deem fit,
advisable and necessary, without in any way releasing Lessee from any liability
hereunder, as aforesaid. Lessor shall have a lien for the payment of all sums to
be paid by Lessee hereunder (including all expenses incurred by Lessor in
recovering possession of the Premises and the reletting thereof, which shall be
deemed to be rent) upon all of Lessee's property, which shall be in addition to
any landlord's lien that may now or at any time hereafter be provided by law.
(3) No such re-entry or taking possession of the Premises by
Lessor shall be construed as an election on its part to terminate this Lease
unless a written notice of such intention be given to Lessee or unless the
termination thereof shall result as a matter of law or be decreed by a court of
competent jurisdiction. Notwithstanding any such reletting without termination,
Lessor may at any time thereafter elect to terminate this Lease for such
previous breach.
(4) If this Lease is terminated pursuant to the foregoing
provisions of this Article, Lessor may recover from Lessee all damages it may
sustain by reason of Lessee's default, including the cost of recovering the
Premises and attorneys' fees and upon so electing and in lieu of the damages
that may be recoverable under subparagraph B(2) above (measured by the monthly
deficiency, if any) shall be entitled to recover form Lessee, as and for
liquidated damages, and not as a penalty, an amount equal to the difference
between the rent, additional rents and other charges reserved hereunder for the
period which otherwise would have constituted the balance of the Term of this
Lease and the rental value of the Premises at the time of such election, for
such period, both discounted at the rate of four percent per annum to present
worth, all of which shall immediately be due and payable by Lessee to Lessor. In
determining the rental value of the Premises, the rental realized by any
reletting, if such reletting be accomplished by Lessor within a reasonable time
after the termination of this Lease, shall be, deemed prima facie to be rental
value. Nothing herein contained, however, shall limit or
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prejudice the right of Lessor to prove and obtain as liquidated damages by
reason of such termination, an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when, the governing the proceedings
in which, such damages are to be provided, whether or not such amount be
greater, equal to, or less than the amounts referred to in subparagraph B(2) of
this Article.
(5) If Lessee is declared in default of this Lease by reason
of the occurrence of any Event of Default, then Lessor may immediately or at any
time thereafter terminate Lessee's access to the Alternate Inventory Control
System maintained by Lessor under the supervision of the United States Customs
Service.
(6) The Parties hereby waive trial by jury in any action,
proceeding or counterclaim brought by either Party against the other on any
matter whatsoever arising out of or in any way connected with this Lease, the
relationship of Lessor and Lessee created hereby, the Lessee's use or occupancy
of the Premises, and/or any claim for injury or damage. In the event Lessor
commences any action or proceeding for non-payment of rent, additional rents or
other charges due hereunder, Lessee agrees not to interpose any counterclaim of
any nature or description in any such action or proceedings. The foregoing,
however shall not be construed as a waiver of Lessee's right to assert such
claim in a separate action or proceeding instituted by Lessee.
(7) Lessee hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event Lessee
shall be evicted or dispossessed from the Premises for any cause, or Lessor
re-enters the Premises following the occurrence of any Event of Default
hereunder, or this Lease is terminated by the expiration date thereof originally
fixed herein.
(8) In the event of any breach or threatened breach by Lessee
of any of the terms and provisions of this Lease, Lessor shall have the right to
injunctive relief as if no other remedies were provided herein for such breach.
The rights and remedies herein reserved by or granted to
Lessor are distinct, separate and cumulative, and the exercise of any of them
shall not be deemed to preclude, waive or prejudice Lessor's right to exercise
any or all others.
(9) Lessee hereby expressly waives any right to assert a
defense based on merger and agrees that neither the commencement of any action
or proceeding, nor the settlement thereof, nor the entry of judgment therein
shall bar Lessor from bringing any subsequent actions or proceeds from time to
time.
(10) If Lessee shall default hereunder prior to the date fixed
as the commencement of any renewal or extension of this Lease, whether by a
renewal option herein contained or by separate agreement, Lessor may cancel such
option or agreement for renewal or extension of this Lease upon two days'
written notice to Lessee.
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(11) Wherever in this Lease the Lessor has reserved or is
granted the right to "re-entry" into the Premises the use of such word is not
intended, nor shall it be construed to be limited to its technical legal
meaning.
(12) In the event that Lessor should bring suit for the
possession of the Premises, for the recovery of any sum due under, or because of
the breach of, any covenant of this Lease, or for any other relief against
Lessee, declaratory or otherwise, or should Lessee bring any suit for any relief
against Lessor, declaratory or otherwise, arising out of this Lease, and Lessor
should prevail in any such suit, Lessee agrees to pay Lessor all costs, expenses
and reasonable attorneys' fees that Lessor may have incurred in connection
therewith, which shall be deemed to have accrued on the commencement of such
suit and shall be enforceable whether or not such suit is prosecuted to
judgment. Nothing contained in this Article shall be deemed or construed to
require Lessor to give notices herein provided for prior to the commencement of
a summary proceeding for non-payment or rent, it being intended that any such
notice or notices are for the sole and only purpose of creating a conditional
limitation or a condition precedent hereunder to which this Lease shall
terminate and Lease shall become a hold-over tenant.
ARTICLE 20 - DEFAULT BY LESSOR
A. Lessor shall in no event be charged with default in the performance
of any of its obligations hereunder unless and until Lessor shall have failed to
perform such obligations within 60 days (or such additional time as is
reasonably required to correct any such default) after notice to Lessor by
Lessee properly specifying wherein Lessor has failed to perform any such
obligations.
B. If the holder of record of any mortgage covering the Premises shall
have given prior written notice to Lessee that it is the holder of a mortgage
and that such notice includes the address at which notices to such mortgages are
to be sent, then Lessee agrees to give the holder of record of such mortgagee
notice simultaneously with any notice given to Lessor to correct any default of
Lessor and hereinabove promises and agrees that the holder of record of such
mortgage shall have the right, within 60 days after receipt of said notice, to
correct or remedy such default before Lessee may take any action under this
Lease by reason of such default. Any notice of default given Lessor shall be
null and void unless simultaneous notice has been given to said mortgagee.
ARTICLE 21 - ESTOPPEL CERTIFICATE, ATTORNMENT AND SUBORDINATION
A. This lease is subject and subordinate to each and every ground or
underlying lease of the Zone or any part thereof heretofore or hereafter made by
Lessor (all of the foregoing collectively being the "Superior Leases") and to
each and every trust indenture and mortgage (collectively the "Mortgages") which
may now or hereafter affect the Zone or any part thereof or any such Superior
Lease and the leasehold interest created thereby, and to all renewals,
extensions, supplements, amendments, modifications, consolidations and
replacements thereof or
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thereto, substitutions therefor, and advances made thereunder. This clause shall
be self-operative and no further instrument of subordination shall be required
to make the interest of any Lessor under a Superior Lease, or trustee or
mortgagee of a Mortgage superior to the interest of Lessee hereunder. In
confirmation of such subordination, however, Lessee shall execute promptly any
certificate that Lessor may request and Lessee hereby irrevocably constitutes
and appoints Lessor as Lessee's attorney-in-fact to execute any such certificate
or certificates for and on behalf of Lessee. However, should any Lessor under
such Superior Lease or any mortgagee under any such Mortgage request that this
lease be made superior, rather than subordinate, to any such Superior Lease
and/or Mortgage, then Lessee, within 10 days following Lessor's written request
therefor, agrees to execute and deliver, without charge, any and all documents
(in form acceptable to Lessor and such Lessors or mortgagees) effectuating such
priority. Lessee covenants and agrees that, except as expressly provided herein,
Lessee shall not do anything that would constitute a default under any Superior
Lease or Mortgage, or omit to do anything that Lessee is obligated to do under
the terms of this lease so as to cause Lessor to be in default under any of the
foregoing.
B. If at any time prior to the expiration of the term hereof, any
Superior Lease shall terminate or be terminated for any reason, Lessee agrees,
at the election and upon demand of any owner of the Zone or the Lessor under any
such other Superior Lease, or of any mortgagee in possession of the Zone, to
attorn, from time to time, to any such owner, Lessor or mortgagee, upon the then
executory terms and conditions of this Lease, for the remainder of the term
originally demised in this Lease, provided that such owner, Lessee or mortgagee,
as the case may be, or receiver caused to be appointed by any of the foregoing,
shall then be entitled to possession of the Zone. The provisions of this
subsection B shall inure to the benefit of any such owner, Lessor or mortgagee,
shall apply notwithstanding that, as a matter of law, this Lease may terminate
upon the termination of any such Superior Lease, and shall be self-operative
upon any such demand, and no further instrument shall be required to give effect
to said provisions. Lessee, however, upon demand of any such owner, Lessor or
mortgagee, agrees to execute, from time to time, instruments in confirmation of
the foregoing provisions of this subsection B, satisfactory to any such owner,
Lessor or mortgagee, acknowledging such attornment and setting forth the terms
and conditions of its tenancy. Nothing contained in this subsection B shall be
construed to impair any right otherwise exercisable by any such owner, Lessor or
mortgagee.
C. From time to time, within seven days next following Lessor's
request, Lessee shall deliver to Lessor a written statement executed and
acknowledged by Lessee, in form satisfactory to Lessor,
(1) stating that this lease is then in full force and effect
and has not been modified (or if modified, setting forth all modifications),
(2) setting forth the date to which the Rent, additional rent
and other charges hereunder have been paid,
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(3) stating whether or not, to the best knowledge of Lessee,
Lessor is in default under this Lease, and, if Lessor is in default, setting
forth the specific nature of all such defaults,
(4) certifying that Lessor has completed construction of the
Premises,
(5) certifying that Lessee has accepted possession of the
Premises, and
(6) as to any other matters requested by Lessor, Lessee
acknowledges that any statement delivered pursuant to this sub-section C may be
relied upon by any purchaser or owner of the Zone, or Lessor's interest in the
Zone or any Superior Lease, or by any mortgage of a Mortgage, or by any assignee
of any mortgagee of a mortgage, or any Lessor under any Superior Lease.
D. This Lease shall not be recorded without the prior written consent
of Lessor. Upon the request of Lessor, Lessee agrees to execute a short form of
this Lease which may be recorded in Lessor's sole discretion.
E. If any lending institution with which Lessor has negotiated or may
negotiate interim or long-term financing for the Zone does not approve the
financial and credit rating of Lessee for purposes of such financing, or if any
such lending institution shall require a change or changes in this Lease as a
condition of its approval of this Lease for such financing, and if within 30
days after notice from lessor:
(1) Lessee fails or refuses to supply or execute assurances
and/or guarantees which are stated by Lessor as indicated to be necessary to
secure the approval of Lessee's financial and credit rating by any such lending
institution, or
(2) if Lessee fails or refuses to execute with Lessor the
amendment or amendments to this Lease accomplishing the change or changes which
are stated by Lessor to be needed in connection with approval of this Lease for
purposes of such financing, Lessor shall have the right to cancel this Lease at
any time prior to the commencement of Lessee's work, as described in Article 6
hereof. In the event of cancellation by Lessor hereunder, this Lease shall be
and become null and void with no further liability or obligation on the part of
either party hereto.
ARTICLE 22 - HOLDING OVER
If Lessee remains in possession of all or any part of the Premises
after the expiration of the term o9f this Lease or any renewal thereof, the
Lessee shall be deemed a Lessee of the Premises at sufferance, subject to all of
the terms and provisions hereof, except only as to the terms of this Lease;
provided, that the rent payable during such period as Lessee continues to hold
the Premises or any part thereof shall be at twice the highest annual rate of
Base Rent and additional rent theretofore paid under this Lease.
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ARTICLE 23 - QUIET ENJOYMENT
If Lessee pays the Base Rent and other charges herein provided and
performs all of the covenants and agreements herein stipulated to be performed
on the Lessee's part, Lessee shall, at all times during said term, have the
peaceable and quiet enjoyment and possession of the Premises without any manner
of hindrance from Lessor or any person lawfully claiming through Lessor, except
as to such portion of the Premises as shall be taken under the power of eminent
domain.
ARTICLE 24 - SECURITY AGREEMENT
A. For valuable consideration and as security for the payment of rent
and other charges reserved hereunder whether due or otherwise hereunder, Lessee
hereby grants to Lessor a first security interest in the following described
collateral: (1) All inventory in the Premises during the term of this Lease; (2)
All equipment and other personalty placed in the Premises during the term of
this Lease; and (3) All proceeds of said inventory, equipment and personalty.
B. Upon the happening of any of the following events or conditions,
namely: (1) Default in the payment of rent or performance of any of the
obligations or of any covenant or liability contained or referred to herein; (2)
Making of any levy, seizure or attachment of the collateral; and (3) Death,
dissolution, termination of existence, insolvency, business failure, appointment
of a receiver, assignment for the benefit or creditors by or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against Lessee or
any guarantor or surety for Lessee; thereupon, or any time thereafter (such
default not having previously been cured) Lessor shall then have all the
remedies of a secured party under the laws of the State of Florida, including
without limitation thereto, the right to take possession of the collateral and
for that purpose Lessor may enter upon the Premises and remove the same
therefrom. Lessor will give Lessee at least 10 days' prior written notice of any
public sale thereof or of the date after which any private sale or any other
intended disposition is to be made, and at any such sale the Lessor may purchase
the collateral.
C. This security agreement and the first security interest and
collateral created hereby shall be terminated when all of the rent and other
charges becoming due during the term of this Lease or extension thereof have
been paid in full.
ARTICLE 25 - REIMBURSEMENT
All terms, covenants and conditions herein contained, to be performed
by Lessee, shall be performed at its sole expense and if Lessor shall pay any
sum of money or do any act which requires the payment of money, by reason of the
failure, neglect or refusal of Lessee to perform
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such term, covenant or condition, the sum of money so paid by Lessor shall be
payable by Lessee to Lessor with the next succeeding installment of rent.
ARTICLE 26 - TITLES OF ARTICLES
The titles of the articles throughout this Lease are for convenience
and reference only, and the words contained therein shall in no way be held to
explain, modify, amplify or aid in the interpretation, construction or meaning
of the provisions of this instrument.
ARTICLE 27 - NOTICES
Any notices, request, demand, approval, consent or other communication
which Lessor or Lessee may be required to give to the other Party shall be in
writing and shall be mailed to the other Party at the address specified on page
1 hereof, or to the Premises if such communication is to the Lessee, or to such
other address as either Party shall have designated to the other. The time of
the rendition of notice to Lessee by Lessor shall be hen same is mailed, postage
prepaid. The time of the rendition of notice to the Lessor shall be upon receipt
by Lessor.
ARTICLE 28 - DEFINITIONS
1) "Zone" shall mean the real estate located in Dade County, Florida, described
in Exhibit "D" which is attached hereto and incorporated herein by reference,
and all improvements thereon.
2) "Floor Area" shall mean the actual number of square feet of floor space of
all floors, basements and mezzanines of the Premises without deduction or
exclusion for any space occupied or used by columns, stairs or other interior
construction or equipment within the exterior faces of exterior walls, except
party walls (walls shared by separate tenants), in which case the center of the
wall in questions shall be used instead of the exterior face thereof.
3) As used in this Lease and when required by context, each number (singular or
plural) shall include all numbers, and each gender shall include all genders;
and unless the context otherwise requires, the word "person" shall include
"corporation, firm or association".
4) "Lessor" so far as covenants or obligations on the part of Lessor are
concerned, shall be limited to mean and include only the owner (or Lessee of the
ground or underlying lease of which this Lease is a sublease) for the time being
of the Zone, buildings and the land on which they stand. If the Zone or the
ground or underlying lease, be sold or transferred, the seller (or assignor of
the ground or underlying lease of ;which this lease is a sublease) shall be
automatically and entirely released of all covenants and obligations of this
Lese from and after the date of such conveyance or transfer, provided the
purchaser has assumed and agreed to carry out all covenants and obligations of
Lessor hereunder, it being intended hereby that the
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covenants and obligations contained in this Lease to be performed on the part of
the Lessor shall be binding upon Lessor, its successors and assigns, only during
their respective successive periods of ownership. Notwithstanding anything to
the contrary provided in this Lease, it is specifically understood and agreed by
Lessor and Lessee that there shall be absolutely no personal liability on the
part of the Lessor or its successor with respect to any of the terms, conditions
and covenants of this Lease, and that Lessee shall look solely to the interest
of Lessor in the Zone for the satisfaction of each and every remedy of Lessee in
the event of any breach by Lessor of any terms, conditions and covenants of this
Lease to be observed or performed by Lessor.
5) "Term" shall mean the period specified under article 2 of this Lease.
ARTICLE 29 - INVALIDITY OF PARTICULAR PROVISIONS
If any term or provision of this Lease or the application thereof to
any person or circumstance shall to any extent, be invalid or unenforceable, the
remainder of this Lease or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lese shall be valid and be enforced to the fullest extent permitted by law.
ARTICLE 30 - PROVISIONS BINDING
A. the submission of this document for examination and negotiation does
not constitute and offer to lease, or a reservation for or option for the
Premises. This document shall become effective and binding only upon the
execution and delivery hereof by both Lessor and Lessee.
B. Except as herein otherwise expressly provided, the terms and
provisions hereof shall be binding upon and shall inure to the benefit of the
heirs, executors, administrators, successors and permitted assigns,
respectively, of the Lessor and the Lessee. Each term and each provision of this
Lease shall be construed to be both an independent covenant and a condition. The
reference contained to successors and assigns of Lessee is not intended to
constitute a consent to assignment by Lessee, but has reference only to those
instances in which Lessor may have given written consent to a particular
assignment.
ARTICLE 31 - RELATIONSHIP OF PARTIES
Nothing contained in this Lease shall be deemed or construed by the
Parties hereto or by any third party to create the relationship of principal and
agent or of partnership or of joint venture or of any association whatsoever
between Lessor and Lessee, it being expressly understood and agreed that neither
the computation of rent nor any other provisions contained in
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this lease nor any act or acts of the Parties hereto shall be deemed to create
any relationship between Lessor and Lessee other than the relationship of
landlord and tenant.
ARTICLE 32 - NO WAIVER
The failure of Lessor to insist upon the strict performance of any
provision of this Lease, or the failure of Lessor to exercise any right, option
or remedy hereby reserved shall not be construed as a waiver for the future of
any such provision, right, option or remedy or as a waiver of a subsequent
breach thereof. The consent or approval by Lessor of any act by Lessee requiring
Lessor's consent or approvals shall not be construed to waive or render
unnecessary the requirement for Lessor's consent or approval of any subsequent
similar act by Lessee. The receipt by Lessor of rent with knowledge of a breach
of any provision of this Lease shall not be deemed to have been waived unless
such waiver shall be in writing signed by Lessor. No payment by Lessee or
receipt by Lessor of a lesser amount than the rents and/or other charges hereby
reserved shall be deemed to be other than on account of the earliest rents
and/or charges then unpaid, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment by Lessee be deemed in accord
and satisfaction and Lessor may accept such check or payment without prejudice
to lessor's right to recover the balance of such rents and/or other charges due
or Lessor may pursue any other remedy in this Lease provided, and no waiver by
lessor in favor of any other Lessee or occupant of the Zone shall constitute a
waiver in favor of the lessee herein.
ARICLE 33 - BROKERAGE
Lessee covenants, warrants and represents to Lessor that there were no
brokers instrumental in consummating this Lease and that no conversation or
prior negotiations were had by Lessee with any other broker concerning the
renting of the Premises. Lessee agrees to protect, indemnify, save and keep
harmless the Lessor against and from all claims, loss, cost, damage or expense,
including attorneys' fees, arising out of or from any claims for brokerage
commissions or finders fees resulting from any conversation or negotiations had
by Lessee with any broker or any other person.
Lessor shall be excused for the period or periods of delay in the
opening of the Zone or in the performance of any of Lessor" obligations,
hereunder when delayed, hindered or prevented from so doing by any cause or
causes beyond Lessor's control, which shall include, without limitation, all
delays caused by Lessee, labor disputes, riots, civil commotion or insurrection,
war or war-like operations, invasion, rebellion, military or usurped power,
sabotage, governmental restrictions, regulations or controls, inability o obtain
any materials, services or financing, fire, unusual or extreme weather
conditions or other casualties, or acts of God. If as a result of any such
events Lessor shall be unable to exercise any right or option within any time
limit provided therefor in this Lease, such time limit shall be deemed extended
for a period equal to the duration of such event.
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<PAGE>
ARTICLE 34 - FORCE MAJEURE
Lessor shall be excused for the period or periods of delay in the
opening of the Zone or in the performance of any of Lessor's obligations,
hereunder when delayed, hindered or prevented from so doing by any cause or
causes beyond Lessor's control, which shall include, without limitation, all
delays caused by Lessee, labor disputes, riots, civil commotion or insurrection,
war or war-like operation, invasion, rebellion, military or usurped power,
sabotage, governmental restrictions, regulations or controls, inability o obtain
any materials, services or financing, fire, unusual or extreme weather
conditions or other casualties, or acts of God. If as a result of any such
events Lessor shall be unable to exercise any right or option within any time
limit provided therefor in this Lease, such time limit shall be deemed extended
for a period equal to the duration of such event.
ARTICLE 35 - RADON GAS
Pursuant to Section 404.056(8) of the Florida Statutes, Lessor is
required to notify Lessee of the following:
Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may
present health risks to persons who are exposed to it over
time. Levels of radon that exceed federal and state guidelines
have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained
from your county public health unit.
ARTICLE 36 - CHOICE OF LAW
This Agreement is made pursuant to, and is and shall be subject and
interpreted according to the laws of the State of Florida.
ARTICLE 37 - LITIGATION & ATTORNEYS FEES
Any litigation between the parties arising out of this Lease shall be
in the courts of the State of Florida in Miami-Dade County, Florida. In the
event of any such litigation the prevailing party shall be entitled to recover
all costs incurred, such costs to include without limitation reasonable
attorney's fees, including attorney's fees on appeal and in any bankruptcy
proceedings, ad this provision shall survive the termination of this lease
agreement.
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ARTICLE 38 - HAZARDOUS MATERIALS
Lessee for itself, its employees and agents, agrees that it shall
strictly comply with all statutes, laws, ordinances, rules, regulations, and
precautions now or hereafter mandated by any federal, state, local or other
governmental agency with respect to Lessee's use, generation, storage, or
disposal of hazardous, toxic, or radioactive materials (collectively "Hazardous
Materials") at the Premises. Lessee does expressly covenants to defend, hold
harmless and indemnify Lessor of and from all liability, directly of indirectly
arising out of the use, generation, storage, or disposal of hazardous materials
in violation of applicable environmental laws, statues or regulations by Lessee
or its agents, employees, officers or invitees, including, without limitation
the cost of any required or necessary repair, cleanup or detoxification and the
preparation of any closure or other required plans. Lessees obligations pursuant
to the foregoing indemnity shall survive the termination of this Lease. Lessee
shall provide Lessor with reasonable access, upon reasonable notice, to Lessee's
records concerning the use and storage of such materials at the Premises.
As required by Law, Lessor hereby notifies the Lessee of Section
24-12.1 of the code of Metropolitan Miami Dade County which deals with the
protection of the potable water supply wells in the area of the Miami Free Zone
which is located within the cone of influence of the "Northwest Wellfield."
Further information is available from the Department of Environmental Resources
Management located at 33 S.W. 2nd Avenue, Miami, Florida 33130 (Tel:
305-372-6789).
ARTICLE 39 - TRANSLATIONS AND SUMMARIES
No summary or translation of this Lease shall be binding on Lessor, and
only the terms of this Lease shall be binding on Lessor and Lessee.
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IN WITNESS WHEREOF, the respective parties have hereunto set their
hands and seals and caused these presents to be executed as of the day and year
first written above.
Signed, sealed and delivered in the presence of:
Lessor:
MIAMI FREE ZONE CORPORATION
(Witness)_______________________
(Witness)_______________________ By: /s/ German Leiva
----------------------------------------
German Leiva, President
(Witness)_______________________ Lessee:
TAKE TO AUCTION.COM, INC.
(Witness)_______________________ By: /s/ Albert Friedman
----------------------------------------
Albert Friedman, President and
Chief Executive Officer
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STATE OF FLORIDA )
) SS
COUNTY OF DADE )
On this 4th day of August, 1999, before me personally appeared German
Leiva who being by me duly sworn, did depose and say that he is the President of
Miami Free Zone Corporation, the Florida Corporation described in and which
executed the foregoing instrument, as Lessor; and that he signed his name
thereto in said capacity.
/s/ Gabriela Zangroniz
---------------------------------
Notary Public
State of Florida at Large
STATE OF FLORIDA )
) SS
COUNTY OF DADE )
On this 4th day of August, 1999, before me personally appeared Mr.
Albert Friedman to me known, who being by me duly sworn did depose and say that
he is the president and Chief Executive Officer of Take to Auction.Com, Inc.,
the corporation described in and which executed the foregoing instrument, as
Lessee; and that he signed his name thereto in said capacity.
/s/ Gabriela Zangroniz
---------------------------------
Notary Public
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Exhibit 10.06
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is dated as of
___________________, 1999, by and between TAKE TO AUCTION.COM INC., a Florida
corporation (the "Corporation"), with its principal office located at 2335 N.W.
107th Avenue, Suite 2M-23, Miami, Florida 33172 and
____________________________, whose residence is _____________________________
(the "Indemnitee").
RECITALS
1. The substantial increase in corporate litigation subjects directors
and officers of corporations and others to expensive litigation risks at the
same time that the availability of competent and qualified directors, officers,
employees, consultants, advisers and agents has been greatly reduced, and the
coverage offered by directors' and officers' liability insurance has been
severely limited;
2. The Corporation's Amended and Restated Articles of Incorporation
(the "Articles of Incorporation") and Amended and Restated By-Laws (the
"By-Laws") require the Corporation to indemnify and advance expenses to its
directors and officers to the fullest extent permitted by law and the Indemnitee
has been serving and continues to serve as a director or officer of the
Corporation in part in reliance on such Articles of Incorporation and By-Laws;
3. In recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Corporation in an effective manner and Indemnitee's reliance on the Articles
of Incorporation and By-Laws, and in part to provide Indemnitee with specific
contractual assurance that the protection promised by the Articles of
Incorporation and By-Laws will be available to Indemnitee (regardless of, among
other things, any amendment to or revocation of such or any change in the
composition of the Corporation's Board of Directors (the "Board") or acquisition
transaction relating to the Corporation), the Corporation wishes to provide in
this Agreement for the indemnification of, and the advancing of expenses to,
Indemnitee to the fullest extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is maintained,
for the continued coverage of Indemnitee under the Corporation's directors' and
officers' liability insurance policies;
4. As a condition to the Indemnitee's agreement to continue to serve as
a director of the Corporation, the Indemnitee requires that he be indemnified
from liability to the fullest extent permitted by law; and
5. The Corporation is willing to indemnify the Indemnitee to the
fullest extent permitted by law in order to retain the services of the
Indemnitee.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
<PAGE>
1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER THAN THOSE BY OR IN
THE RIGHT OF THE CORPORATION. Subject to Section 5 hereof, the Corporation shall
indemnify and hold harmless the Indemnitee from and against any and all claims,
damages, expenses (including attorneys' fees), judgments, penalties, fines
(including excise taxes assessed with respect to an employee benefit plan),
settlements, and all other liabilities incurred or paid by him in connection
with the investigation, defense, prosecution, settlement or appeal of any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) and to which the Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that the Indemnitee is or
was an officer, director, shareholder, employee, consultant adviser or agent of
the Corporation, or is or was serving at the request of the Corporation as an
officer, director, partner, trustee, employee, adviser or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by the Indemnitee in any
such capacity or capacities, provided that the Indemnitee 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, had no reasonable cause to believe his conduct was unlawful.
2. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION. Subject to Section 5 hereof the Corporation shall indemnify and
hold harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts actually and reasonably incurred or paid by him in
connection with the investigation, defense, prosecution, settlement or appeal of
any threatened, pending or completed action, suit or proceeding by or in the
right of the Corporation to procure a judgment in its favor, whether civil,
criminal, administrative or investigative, and to which the Indemnitee was or is
a party or is threatened to be made a party by reason of the fact that the
Indemnitee is or was an officer, director, shareholder, employee, consultant,
adviser or agent of the Corporation, or is or was serving at the request of the
Corporation as an officer, director, partner, trustee, employee, adviser or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that (i) the
Indemnitee 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 (ii) no
indemnification shall be made under this Section 2 in respect of any claim,
issue or matter as to which the Indemnitee shall have been adjudged to be liable
to the Corporation for misconduct in the performance of his duty to the
Corporation unless, and only to the extent that, the court in which such
proceeding was brought (or any other court of competent jurisdiction) shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
3. MANDATORY INDEMNIFICATION AGAINST EXPENSES INCURRED WHILE
TESTIFYING. Subject to Section 5 hereof, the Corporation shall indemnify the
Indemnitee against expenses (including attorney's fees) incurred or paid by the
Indemnitee as a result of providing testimony in any proceeding, whether civil,
criminal, administrative or investigative (including but not limited to any
action or suit by or in the right of the Corporation to procure judgment in its
favor), by reason of the fact that the Indemnitee is or was an officer,
director,
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shareholder, employee, consultant, adviser or agent of the Corporation, or is or
was serving at the request of the Corporation as an officer, director, partner,
trustee, employee, adviser or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise.
4. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF NEGLIGENCE. The
Corporation shall reimburse the Indemnitee for any expenses (including
attorney's fees) and amounts actually and reasonably incurred or paid by him in
connection with the investigation, defense, settlement or appeal of any action
or suit described in Section 2 hereof that results in an adjudication that the
Indemnitee was liable for negligence, gross negligence or recklessness (but not
willful misconduct) in the performance of his duty to the Corporation; provided,
however, that the Indemnitee acted in good faith and in a manner he believed to
be in or not opposed to the best interests of the Corporation.
5. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under Sections
1, 2 and 3 hereof (unless ordered by a court) and any reimbursement made under
Section 4 hereof shall be made by the Corporation only as authorized in the
specific case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable requirements set forth in Sections 1, 2, 3 and
4 hereof, as the case may be. Subject to Sections 6.6, 6.7 and 9 of this
Agreement, the Determination shall be made in the following order of preference:
(a) first, by the Board by a majority vote or consent of a
quorum, in each case consisting of directors who are not, at the time
of the Determination, named parties to such action, suit or proceeding
("Disinterested Directors"); or
(b) next, if such a quorum of Disinterested Directors cannot
be obtained, by majority vote or consent of a committee duly designated
by the Board (in which designation all directors, whether or not
Disinterested Directors, may participate) consisting solely of two or
more Disinterested Directors; or
(c) next, if such a committee cannot be designated, by any
independent legal counsel (who may be any outside counsel regularly
employed by the Corporation) in a written opinion; or
(d) next, if such legal counsel determination cannot be
obtained, by vote or consent of the holders of a majority of the
Corporation's Common Stock.
5.1 NO PRESUMPTIONS. The termination of any action, suit or 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 Indemnitee
did not act in good faith and in a manner that 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, had reasonable cause to believe that his conduct
was unlawful.
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5.2 BENEFIT PLAN CONDUCT. The Indemnitee's conduct with respect to an
employee benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan shall be deemed
to be conduct that the Indemnitee reasonably believed to be not opposed to the
best interests of the Corporation.
5.3 RELIANCE AS SAFE HARBOR. For purposes of any Determination
hereunder, the Indemnitee 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, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on (i) the records or books of account of the Corporation or another
enterprise, including financial statements, (ii) information supplied to him by
the officers of the Corporation or another enterprise in the course of their
duties, (iii) the advice of legal counsel for the Corporation or another
enterprise, or (iv) information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in this
Section 5.3 shall mean any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise of which the Indemnitee is or
was serving at the request of the Corporation as an officer, director, partner,
trustee, employee, adviser or agent. The provisions of this Section 5.3 shall
not be deemed to be exclusive or to limit in any way the other circumstances in
which the Indemnitee may be deemed to have met the applicable standard of
conduct set forth in Sections 1, 2 or 4 hereof, as the case may be.
5.4 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other provision
of this Agreement, to the extent that the Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding described in
Sections 1 or 2 hereof, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal thereof. For purposes of this Section 5.4, the term
"successful on the merits or otherwise' shall include, but not be limited to,
(i) any termination, withdrawal, or dismissal (with or without prejudice) of any
claim, action, suit or proceeding against the Indemnitee without any express
finding of liability or guilt against him, and (ii) the expiration of 120 days
after the making of any claim or threat of an action, suit or proceeding without
the institution of the same and without any promise or payment made to induce a
settlement.
5.5 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Indemnitee is
entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Corporation for some or a portion of the claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines or amounts
paid in settlement by the Indemnitee in connection with the investigation of,
defense of, settlement of, appeal of or testimony provided with respect to any
action specified in Sections 1, 2, 3 or 4 hereof, but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify and/or
reimburse the Indemnitee for the portion thereof to which the Indemnitee is
entitled. The party or parties making the Determination shall determine the
portion (if less than all) of such claims, damages, expenses (including
attorneys' fees), judgments, penalties, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
4
<PAGE>
6. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED.
6.1 COSTS. All costs of making the Determination required by Section 6
hereof shall be borne solely by the Corporation, including, but not limited to,
the costs of legal counsel, proxy solicitations and judicial determinations. The
Corporation shall also be solely responsible for paying (i) all reasonable
expenses incurred by the Indemnitee to enforce this Agreement, including, but
not limited to, the costs incurred by the Indemnitee to obtain court-ordered
indemnification pursuant to Section 9 hereof regardless of the outcome of any
such application or proceeding, and (ii) all costs of defending any suits or
proceedings challenging payments to the Indemnitee under this Agreement.
6.2 TIMING OF THE DETERMINATION. The Corporation shall use its best
efforts to make the Determination contemplated by Section 5 hereof promptly. In
addition, the Corporation agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15
days after a written request for a Determination (a "Request") is
delivered to the Corporation by the Indemnitee;
(b) if the Determination is to be made by independent legal
counsel, such Determination shall be made not later than 30 days after
a Request is delivered to the Corporation by the Indemnitee; and
(c) if the Determination is to be made by the shareholders of
the Corporation, such Determination shall be made not later than 90
days after a Request is delivered to the Corporation by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or reimbursement is sought,
and/or (ii) final disposition of the action, suit or proceeding with respect to
which indemnification or reimbursement is sought.
6.3 REASONABLENESS OF EXPENSES. The evaluation and finding as to the
reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days of
the Indemnitee's delivery to the Corporation of a Request that includes a
reasonable accounting of expenses incurred:
(a) first, by the Board by a majority vote or consent of a
quorum consisting of Disinterested Directors; or
(b) next, if a quorum cannot be obtained under subdivision
(a), by majority vote or consent of a committee duly designated by the
Board (in which designation all
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<PAGE>
directors, whether or not Disinterested Directors, may participate),
consisting solely of two or more Disinterested Directors; or
(c) next, if a finding cannot be obtained under either
subdivision (a) or (b), by vote or consent of the holders of a majority
of the Corporation's Common Stock.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 6.3 is not made within the prescribed
time. The finding required by this Section 6.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
6.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a
Determination that the Indemnitee has met the applicable requirements set forth
in Sections 1, 2, 3 or 4 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 6.3 hereof, or the passage of
time prescribed for making such determination(s), the Corporation shall pay to
the Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
6.5 SHAREHOLDER VOTE ON DETERMINATION. Notwithstanding the provisions
of the Florida statutes, if the Indemnitee is a shareholder of the Corporation,
the Indemnitee and any other shareholder who is a party to the proceeding for
which indemnification or reimbursement is sought shall be entitled to vote on
any Determination to be made by the Corporation's shareholders, including a
Determination made pursuant to Section 6.3 hereof. In addition, in connection
with each meeting at which a shareholder Determination will be made, the
Corporation shall solicit proxies that expressly include a proposal to indemnify
or reimburse the Indemnitee. The Corporation proxy statement relating to the
proposal to indemnify or reimburse the Indemnitee shall not include a
recommendation against indemnification or reimbursement.
6.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the Determination
required under Section 5 is to be made by independent legal counsel, such
counsel shall be selected by the Indemnitee with the approval of the Board,
which approval shall not be unreasonably withheld. The fees and expenses
incurred by counsel in making any Determination (including Determinations
pursuant to Section 6.8 hereof) shall be borne solely by the Corporation
regardless of the results of any Determination and, if requested by counsel, the
Corporation shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel.
6.7 RIGHT OF INDEMNITEE TO APPEAL AN ADVERSE DETERMINATION BY BOARD. If
a Determination is made by the Board or a committee thereof that the Indemnitee
did not meet the requirements set forth in Sections 1, 2, 3 or 4 hereof upon the
written request of the Indemnitee and the Indemnitee's delivery of $500 to the
Corporation, the Corporation shall cause a new Determination to be made by the
Corporation's shareholders at the next regular or
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special meeting of shareholders. Subject to Section 9 hereof, such Determination
by the Corporation's shareholders shall be binding and conclusive for all
purposes of this Agreement.
6.8 RIGHT OF INDEMNITEE TO SELECT FORUM FOR DETERMINATION. If, at any
time subsequent to the date of this Agreement, "Continuing Directors" do not
constitute a majority of the members of the Board, or there is otherwise a
change in control of the Corporation (as contemplated by Item 403(c) of
Regulation S-K), then upon the request of the Indemnitee, the Corporation shall
cause the Determination required by Section 5 hereof to be made by independent
legal counsel selected by the Indemnitee and approved by the Board (which
approval shall not be unreasonably withheld), which counsel shall be deemed to
satisfy the requirements of clause (3) of Section 5 hereof. If none of the legal
counsel selected by the Indemnitee are willing and/or able to make the
Determination, then the Corporation shall cause the Determination to be made by
a majority vote or consent of a Board committee consisting solely of Continuing
Directors. For purposes of this Agreement, a "Continuing Director" means either
a member of the Board at the date of this Agreement or a person nominated to
serve as a member of the Board by a majority of the then Continuing Directors.
6.9 ACCESS BY INDEMNITEE TO DETERMINATION. The Corporation shall afford
to the Indemnitee and his representatives ample opportunity to present evidence
of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Corporation shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Corporation proxy
statement relating to a shareholder Determination.
6.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each action or
suit described in Section 2 hereof, the Corporation shall cause its counsel to
use its best efforts to obtain from the Court in which such action or suit was
brought (i) an express adjudication whether the Indemnitee is liable for
negligence or misconduct in the performance of his duty to the Corporation, and,
if the Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
7. SCOPE OF INDEMNITY. The actions, suits and proceedings described in
Sections 1 and 2 hereof shall include, for purposes of this Agreement, any
actions that involve, directly or indirectly, activities of the Indemnitee both
in his capacities as a Corporation director, officer, adviser or agent and
actions taken in another capacity while serving as director, officer, adviser or
agent, including, but not limited to, actions or proceedings involving (i)
compensation paid to the Indemnitee by the Corporation, (ii) activities by the
Indemnitee on behalf of the Corporation, including actions in which the
Indemnitee is plaintiff, (iii) actions alleging a misappropriation of a
"corporate opportunity," (iv) responses to a takeover attempt or threatened
takeover attempt of the Corporation, (v) transactions by the Indemnitee in
Corporation securities, and (vi) the Indemnitee's preparation for and appearance
(or potential appearance) as a witness in any proceeding relating, directly or
indirectly, to the Corporation. In addition, the Corporation agrees that, for
purposes of this Agreement, all services performed by the Indemnitee on behalf
of, in connection with or related to any subsidiary of the Corporation, any
employee benefit plan established for the benefit of employees of the
Corporation or any subsidiary, any corporation or
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partnership or other entity in which the Corporation or any subsidiary has a 5%
ownership interest, or any other affiliate shall be deemed to be at the request
of the Corporation.
8. ADVANCE FOR EXPENSES.
8.1 MANDATORY ADVANCE. Expenses (including attorneys' fees) incurred by
the Indemnitee in investigating, defending, settling or appealing any action,
suit or proceeding described in Sections 1 or 2 hereof shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding. The Corporation shall promptly pay the amount of such expenses to
the Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Corporation of a written request for an advance pursuant to this
Section 8, together with a reasonable accounting of such expenses.
8.2 UNDERTAKING TO REPAY. The Indemnitee hereby undertakes and agrees
to repay to the Corporation any advances made pursuant to this Section 8 if and
to the extent that it shall ultimately be found (by final judicial determination
from which there is no further right to appeal) that the Indemnitee is not
entitled to be indemnified by the Corporation for such amounts.
8.3 MISCELLANEOUS. The Corporation shall make the advances contemplated
by this Section 8 regardless of the Indemnitee's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee by the
Corporation will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 8 shall be unsecured and interest-free.
9. COURT-ORDERED INDEMNIFICATION.
9.1 Regardless of whether the Indemnitee has met the requirements set
forth in Sections 1, 2, 3 or 4 hereof, as the case may be, and notwithstanding
the presence or absence of any Determination whether such standards have been
satisfied, the Indemnitee may apply for indemnification (and/or reimbursement
pursuant to Sections 4 or 13 hereto) to the court conducting any proceeding to
which the Indemnitee is a party or to any other court of competent jurisdiction.
On receipt of an application, the court, after giving any notice the court
considers necessary, may order indemnification (and/or reimbursement) if it
determines the Indemnitee is fairly and reasonably entitled to indemnification
(and/or reimbursement) in view of all the relevant circumstances (including this
Agreement).
9.2 The right to indemnification and advances as provided by this
Agreement shall be enforceable by Indemnitee in an action in any court of
competent jurisdiction. In such an action, the burden of proving that
indemnification is not required hereunder shall be on the Corporation. Neither
the failure of the Corporation (including its Board and independent legal
counsel) to have made a Determination prior to the commencement of such an
action that indemnification is proper in the circumstances because Indemnitee
has met the applicable standard of conduct, nor an actual Determination by the
Corporation including its Board and independent legal counsel) that Indemnitee
has not met such applicable standard of conduct, shall be a defense to such an
action or create a presumption that Indemnitee has not met the applicable
standard of conduct.
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Indemnitee's expenses reasonably incurred in connection with establishing his
right to indemnification, in whole or in part, in connection with any proceeding
shall also be indemnified by the Corporation.
10. NONDISCLOSURE OF PAYMENTS. Except as expressly required by federal
securities laws, neither party shall disclose any payments under this Agreement
unless prior approval of the other party is obtained. Any payments to the
Indemnitee that must be disclosed shall, unless otherwise required by law, be
described only in the Corporation's proxy or information statements relating to
special and/or annual meetings of the Corporation's shareholders, and the
Corporation shall afford the Indemnitee the reasonable opportunity to review all
such disclosures and, if requested, to explain in such statement any mitigating
circumstances regarding the events reported.
11. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF CLAIMS.
No legal action shall be brought and no cause of action shall be asserted by or
on behalf of the Corporation (or any of its subsidiaries) against the
Indemnitee, his spouse, heirs, executors, personal representatives or
administrators after the expiration of 2 years from the date the Indemnitee
ceases (for any reason) to serve as either an officer, director, adviser or
agent of the Corporation, and any claim or cause of action of the Corporation
(or any of its subsidiaries) shall be extinguished and deemed released unless
asserted by filing of a legal action within such 2-year period.
12. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any other
provision of this Agreement, if the Indemnitee is deceased, and indemnification
of the Indemnitee would be permitted and/or required under this Agreement, the
Corporation shall indemnify and hold harmless the Indemnitee's estate, spouse,
heirs, administrators, personal representatives and executors (collectively the
"Indemnitee's Estate") against, and the Corporation shall assume, any and all
claims, damages, expenses (including attorneys' fees), penalties, judgments,
fines and amounts paid in settlement actually incurred by the Indemnitee or the
Indemnitee's Estate in connection with the investigation, defense, settlement or
appeal of any action described in Sections 1, 2 or 4 hereof.
13. MISCELLANEOUS.
13.1 NOTICE. Any notice required or permitted to be delivered hereunder
shall be deemed to be delivered when sent by facsimile with receipt confirmed or
deposited in the United States mail, postage prepaid, registered or certified
mail, return receipt requested, or by overnight courier addressed to the parties
at the addresses first stated herein, or to such other address as either party
hereto shall from time to time designate to the other party by notice in writing
as provided herein.
13.2 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties hereto with respect to the subject matter hereof. It
supercedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
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13.3 NON-EXCLUSIVITY. The rights of indemnification and reimbursement
provided in this Agreement shall be in addition to any rights to which the
Indemnitee may otherwise be entitled under the Corporation's Articles of
Incorporation or By-Laws or any statute, agreement, vote of shareholders or
otherwise.
13.4 SEVERABILITY. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision of this Agreement affect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
13.5 SAVING CLAUSE. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify Indemnitee as to expenses, judgments,
fines and penalties with respect to any proceeding to the full extent permitted
by any applicable portion of Agreement that shall not have been invalidated or
by any applicable law.
13.6 COOPERATION AND INTENT. The Corporation shall cooperate in good
faith with the Indemnitee and use its best efforts to ensure that the Indemnitee
is indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
13.7 SECURITY. To the fullest extent permitted by applicable law, the
Corporation may from time to time, but shall not be required to, provide such
insurance, collateral, letters of credit or other security devices as its Board
may deem appropriate to support or secure the Corporation's obligations under
this Agreement.
13.8 CHOICE OF LAW. This Agreement will be interpreted, construed and
enforced in accordance with the laws of the State of Florida, without giving
effect to the application of the principles pertaining to conflicts of laws.
13.9 AMENDMENT. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
13.10 BINDING EFFECT. The obligations of the Corporation to the
Indemnitee hereunder shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee, adviser and/or agent of
the Corporation. Each and all of the covenants, terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Corporation and, upon the death of the Indemnitee, to the benefit
of the estate, heirs, executors, administrators and personal representatives of
the Indemnitee.
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13.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original.
13.12 EFFECTIVE DATE. The provisions of this Agreement shall cover
claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
13.13 EFFECT OF WAIVER. The failure of any party at any time or times
to require performance of any provision of this Agreement will in no manner
affect the right to enforce the same. The waiver by any party of any breach of
any provision of this Agreement will not be construed to be a waiver by any such
party of any succeeding breach of that provision or a waiver by such party of
any breach of any other provision.
13.14 ENFORCEMENT. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs. Any suit, action or proceeding with
respect to this Agreement shall be brought in the courts of Miami-Dade or
Broward County in the State of Florida or in the U.S. District Court for the
Southern District of Florida. The parties hereto hereby accept the exclusive
jurisdiction of those courts for the purpose of any such suit, action or
proceeding.
Venue for any such action, in addition to any other venue permitted by
statute, will be Miami-Dade or Broward County, Florida. The parties hereto
hereby irrevocably waive, to the fullest extent permitted by law, any objection
that any of them may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any
judgment entered by any court in respect thereof brought in Miami-Dade or
Broward County, Florida, and hereby further irrevocably waive any claim that any
suit, action or proceeding brought in Miami-Dade or Broward County, Florida, has
been brought in an inconvenient forum.
The parties hereto acknowledge and agree that any party's remedy at law
for a breach or threatened breach of any of the provisions of this Agreement
would be inadequate and such breach or threatened breach shall be per se deemed
as causing irreparable harm to such party. Therefore, in the event of such
breach or threatened breach, the parties hereto agree that, in addition to any
available remedy at law, including but not limited to monetary damages, an
aggrieved party, without posting any bond, shall be entitled to obtain, and the
offending party agrees not to oppose the aggrieved party's request for,
equitable relief in the form of specific enforcement, temporary restraining
order, temporary or permanent injunction, or any other equitable remedy that may
then be available to the aggrieved party.
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IN WITNESS WHEREOF, this Agreement has been duly signed by the parties
hereto on the day and year first above written.
TAKE TO AUCTION.COM, INC.
By:________________________________
Name:______________________________
Title:_____________________________
THE INDEMNITEE
___________________________________
12
Exhibit 10.07
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
1. PURPOSE..............................................................1
2. DEFINITIONS..........................................................1
3. NUMBER OF SHARES AVAILABLE FOR OPTIONS...............................8
4. VESTING LIMITATION FOR ISOS..........................................9
5. CONDITIONS FOR GRANT OF OPTIONS......................................9
6. EXERCISE PRICE......................................................12
7. EXERCISE OF OPTIONS.................................................12
8. EXERCISABILITY OF OPTIONS...........................................14
9. TERMINATION OF OPTION EXERCISE PERIOD...............................15
10. ADJUSTMENT OF SHARES................................................16
11. TRANSFERABILITY OF OPTIONS..........................................18
12. ISSUANCE OF SHARES..................................................19
13. REDEMPTION OF SHARES BY THE COMPANY.................................20
14. ADMINISTRATION......................................................21
15. WITHHOLDING OR DEDUCTION FOR TAXES..................................23
16. INTERPRETATION......................................................23
17. AMENDMENT AND TERMINATION OF THE PLAN...............................24
18. INFORMATION TO OPTIONEES............................................24
19. RIGHTS AS AN EMPLOYEE OR NON-EMPLOYEE...............................24
20. SUCCESSORS AND ASSIGNS..............................................25
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TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
----------------------------------------
1. Purpose. The Take To Auction.Com, Inc. 1999 Stock Option Plan (the
"Plan") has been established by Take To Auction.Com, Inc., a Florida corporation
(the "Company"), to advance the interests of the Company by providing an
additional incentive to attract and retain qualified and competent persons who
are key to the Company, including key employees of and consultants or advisors
to, the Company and its Subsidiaries, if any, and upon whose efforts and
judgment the success of the Company is largely dependent, through the
encouragement of stock ownership in the Company by such persons.
2. Definitions. As used herein, the following terms shall have the
meanings indicated.
(a) "Affiliate" shall mean a person, entity or organization which is
controlled by, under common control with, controlling, or is an Officer or
Director of, beneficial owner of five percent or greater of the equity or voting
securities of, or, through contract relationship or otherwise exerts substantial
influence over or is substantially influence by, the Company.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean any of the following:
(i) a determination by the Company that there has been a
willful, reckless or grossly negligent failure by the Optionee to perform his or
her duties as an Employee or Non-Employee Eligible Individual;
(ii) a willful breach by the Optionee of any of the material
terms or provisions of his employment agreement;
(iii) any conduct by the Optionee that either results in his
or her conviction of a felony under the laws of the United States of America or
any state thereof, or of an equivalent crime under the laws of any other
jurisdiction;
(iv) the commission by the Optionee of an act or acts
involving fraud, embezzlement, misappropriation, theft, breach of fiduciary duty
or material dishonesty against the Company or its Subsidiary, their properties
or personnel;
(v) any act by the Optionee that the Company determines to be
in willful or wanton disregard of the Company's best interests, or which
results, or is intended to result, directly or indirectly, in improper gain or
personal enrichment of the Optionee at the expense of the Company;
(vi) a determination by the Company that there has been a
willful, reckless or grossly negligent failure by the Optionee to comply with
any rules, regulations, policies or procedures of the Company or any Subsidiary,
or that the Optionee has engaged in any act,
<PAGE>
behavior or conduct showing willful or wanton disregard of the best interests of
the Company or any Subsidiary or occasioned by a deliberate and material
violation or disregard of standards of behavior that the Company or any
Subsidiary has a right to expect of its Employees or Non-Employee Eligible
Individuals; or
(vii) if the Optionee, while employed by or in the service of
the Company or any Subsidiary, and for two years thereafter, violates a
confidentiality, non-solicitation and/or noncompete agreement with the Company
or any Subsidiary, or fails to safeguard, divulges, communicates, uses to the
detriment of the Company or any Subsidiary or for the benefit of any person or
persons, or misuses in any way, any Confidential Information; provided, however,
if the Optionee is subject to an employment agreement which defines "Cause,"
then "Cause" shall have the meaning set forth in such employment agreement.
(d) "Change of Control" shall mean any of the following events: (i)
any "person", as such term is used in section 14(d) of the Securities Exchange
Act, other than the Company, any employee benefit plan of the Company or any
Affiliate, any Affiliate of the Company, or any shareholder of the Company as of
the Effective Date, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act (or any successor rule), directly or
indirectly, of twenty percent (20%) or more of the combined voting power of the
Company's common stock; (ii) any consolidation or merger of the Company, other
than a consolidation or merger with the sole purpose of reorganizing the Company
into another form of entity or changing the Company's state of organization; or
(iii) any sale, lease, exchange or other transfer (in one or a series of related
transactions) of all, or substantially all, of the assets of the Company other
than any sale, lease, exchange or other transfer to any entity which the Company
or its stockholders own, directly or indirectly, all of the outstanding voting
securities of such entity after such transfer.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
(f) "Committee" shall mean the compensation committee appointed by
the Board pursuant to Section 13 hereof to administer the Plan or, if not
appointed, the Board.
(g) "Common Stock" shall mean the Company's Common Stock, par value
$.001 per share.
(h) "Company" shall mean Take To Auction.Com, Inc., a Florida
corporation.
(i) "Confidential Information" shall mean any and all information
pertaining to the Company (including, without limitation, information relating
to its products, services, marketing practices, production practices, management
agreements, clients, customers, prospects, sources of prospects, suppliers,
financial condition, results of operations, costs and methods of doing business,
owners and ownership structure) that is not generally available to the public.
(j) "Covered Employee" shall mean any individual who, as of the
close of the Company's taxable year in which an Option is granted, is (i) the
Chief Executive Officer of the Company or is acting in such capacity ("CEO"),
(ii) among the four highest compensated
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officers of the Company (other than the CEO) whose compensation is required to
be reported to Shareholders under the Securities Exchange Act, or (iii)
otherwise considered to be a "Covered Employee" within the meaning of Section
162(m) of the Code.
(k) "Director" shall mean a member of the Board.
(l) "Disability" shall have the same meaning as a "total and
permanent (mental or physical) disability" as set forth in Section 22(e)(3) of
the Code, as determined by a medical doctor selected by the Committee.
(m) "Employee" shall mean any person, including an officer or a
director, who is employed by the Company, or any Subsidiary.
(n) "Fair Market Value" of a Share on any date of reference shall be
the Closing Price of a share of Common Stock on such date, unless the Committee
in its sole discretion shall determine otherwise in a fair and uniform manner.
For this purpose, the "Closing Price" of the Common Stock on any business day
shall be (i) if the Common Stock is listed or admitted for trading on any United
States national securities exchange, or if actual transactions are otherwise
reported on a consolidated transaction reporting system, the last reported sale
price of the Common Stock on such exchange or reporting system, as reported in
any newspaper of general circulation; (ii) if the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), or any similar system of automated dissemination of quotations of
securities prices in common use, the mean between the closing high bid and low
asked quotations for such day of the Common Stock on such system; or (iii) if
neither clause (i) nor (ii) is applicable, the mean between the high bid and low
asked quotations for the Common Stock as reported by the National Quotation
Bureau, Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least five of the 10 preceding
days. If the information set forth in clauses (i) through (iii) above is
unavailable or inapplicable to the Company (e.g., if the Company's Common Stock
is not then publicly traded or quoted), then the "Fair Market Value" of a Share
shall be the fair market value (i.e., the price at which a willing seller would
sell a Share to a willing buyer when neither is acting under compulsion and when
both have reasonable knowledge of all relevant facts) of a share of the Common
Stock on the business day immediately preceding such date as the Committee in
its sole and absolute discretion shall determine in a fair and uniform manner.
(o) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Code.
(p) "Non-Employee Eligible Individual" shall mean an advisor or
consultant to the Company or any Subsidiary who contributes or has an
opportunity to contribute to the success of the Company or any Subsidiary.
(q) "Non-Statutory Stock Option" shall mean an Option which is not
an Incentive Stock Option.
(r) "Officer" shall mean the Company's chairman, president,
principal financial officer, principal accounting officer (or, if there is no
such accounting officer, the controller), any unit, division or Subsidiary
president, any vice-president of the Company in charge of a principal
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<PAGE>
business unit, division or function (such as sales, administration or finance),
any other officer who performs a policy-making function, or any other person who
performs similar policy-making functions for the Company. Officers of
Subsidiaries shall be deemed Officers of the Company if they perform such
policy-making functions for the Company. As used in this paragraph, the phrase
"policy-making function" does not include policy-making functions that are not
significant.
(s) "Option" shall mean a stock option to purchase Shares granted
pursuant to this Plan.
(t) "Option Agreement" shall mean the agreement between the Company
and the Optionee pursuant to which Options are granted.
(u) "Optionee" shall mean a person to whom an Option is granted
under this Plan or any person who succeeds to the rights of such person under
this Plan by reason of the death of such person or otherwise.
(v) "Outside Director" shall mean a member of the Board who: (i) is
not a current employee of the Company or any Affiliate, (ii) is not a former
employee of the Company or any Affiliate who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
taxable year; (iii) has not been an officer of the Company or any Affiliate;
(iv) does not receive remuneration either directly or indirectly, in any
capacity other than as a director; and (v) satisfies any other conditions that
shall from time to time be required to qualify as an "outside director" under
Section 162(m) of the Code and the regulations thereunder and also as a
"Non-Employee Director" under Rule 16b-3 promulgated under the Securities
Exchange Act. For this purpose, "remuneration" shall have the meaning afforded
that term pursuant to Treasury Regulations issued under Section 162(m) of the
Code, and shall exclude any de minimis remuneration excluded under those
Treasury Regulations.
(w) "Plan" shall mean the Take To Auction.Com, Inc. 1999 Stock
Option Plan, effective August 25, 1999.
(x) "Retirement" shall mean the occurrence of an Optionee's
termination of employment or service with the Company and its Subsidiaries after
completing at least five years of service and attaining age 65.
(y) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the
Securities Exchange Act.
(z) "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(aa) "Share" shall mean one share of Common Stock, as adjusted in
accordance with Section 10 of this Plan.
(bb) "Subsidiary" shall mean any corporation (other than the
Company), partnership, joint venture or other entity (collectively referred to
as "entities") in any unbroken chain of entities beginning with the Company if,
at the time of the granting of the Option, each of
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<PAGE>
the entities other than the last entity in the unbroken chain owns equity
possessing 50 percent or more of the profits interest or total combined voting
power of all classes of equity in one of the other equities in such chain.
3. Number of Shares Available for Options. The Company may grant to
Optionees from time to time Options to purchase an aggregate of up to fifteen
percent (15%) of the issued and outstanding Shares as of the effective date of
this Plan, as further adjusted by Section 10;
provided, however, that if any Option granted under this Plan is not exercised
in the time allowed for such exercise, or if any such Option shall terminate,
expire or be canceled, forfeited or surrendered as to any Shares, the Shares
relating to such lapsed Option shall be available for issuance pursuant to new
Options subsequently granted under this Plan. Upon the grant of any Option
hereunder, authorized and unissued, or treasury, Shares shall be reserved for
issuance to permit exercise under this Plan. An Option granted hereunder shall
be either an Incentive Stock Option or a Non-Statutory Stock Option as
determined by the Committee at the time of grant of such Option and the Option
Agreement shall clearly state whether it is an Incentive Stock Option or
Non-Statutory Stock Option or, failing a clear indication, be deemed a
Non-Statutory Stock Option. All Incentive Stock Options shall be granted within
10 years from the effective date of this Plan.
4. Vesting Limitation for ISOs. Options otherwise qualifying as
Incentive Stock Options hereunder will not be treated as Incentive Stock Options
to the extent that the aggregate Fair Market Value (determined at the time the
Option is granted) of the Shares, with respect to which Options meeting the
requirements of Code Section 422(b) are exercisable for the first time by any
individual during any calendar year (under all stock option or similar plans of
the Company and any Subsidiary), exceeds $100,000.
5. Conditions for Grant of Options.
(a) Each Option shall be evidenced by a written Option Agreement in
the form of Exhibit A attached hereto that may contain any term deemed necessary
or desirable by the Committee, provided such terms are not inconsistent with
this Plan or any applicable law.
(b) Optionees shall be selected by the Committee from: (i) all
Employees (including Directors and Officers who are Employees); (ii)
Non-Employee Eligible Individuals; and (iii) former or prospective Employees and
Non-Employee Eligible Individuals.
(c) In granting Options, the Committee shall take into consideration
the contribution the person has made, or is expected to make, with respect to
the success of the Company or its Subsidiaries and such other factors as the
Committee shall determine. The Committee shall also have the authority to
consult with and receive recommendations from Officers and other personnel of
the Company and its Subsidiaries with regard to these matters. The Committee may
from time to time prescribe such terms and conditions concerning such Options as
it deems appropriate, including, without limitation: (i) the exercise price or
prices of the Option or any installments thereof; (ii) the date or dates on
which the Option becomes and/or remains exercisable; (iii) providing that the
Option vests or becomes exercisable in installments over a period of time,
and/or upon the attainment of certain standards, specifications or goals; (iv)
conditioning the exercise of an Option on the continued employment or service of
the
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<PAGE>
Optionee for a specified period of time; or (v) other conditions or termination
events with respect to the exercisability of any Option, provided that such
other conditions or events are not more favorable to an Optionee than those
expressly permitted herein.
(d) The Options granted to Employees or Non-Employee Eligible
Individuals under this Plan shall be in addition to regular salaries, pension,
life insurance or other benefits related to their employment with or service to
the Company or its Subsidiaries.
(e) Notwithstanding any other provisions of this Plan to the
contrary, an Incentive Stock Option shall not be granted to any person owning
directly or indirectly (through attribution under Section 424(d) of the Code) at
the date of grant, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (or of its parent or subsidiary, as
those terms are defined in Section 424 of the Code, at the date of grant) unless
the option price of such Option is at least 110% of the Fair Market Value of the
Shares subject to such Option on the date the Option is granted, and such Option
by its terms is not exercisable after the expiration of five years from the date
such Option is granted.
(f) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, the aggregate number of Shares
with respect to which Options may be granted to any one Optionee may not exceed
sixty percent (60%) of authorized Options, subject to adjustment as provided in
Section 10(a) hereof.
(g) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, Options may not be granted to a
Covered Employee unless the grant of such Option is authorized by, and all of
the terms of such Options are determined by, a Committee that is appointed in
accordance with Section 13 of this Plan and all of whose members are Outside
Directors.
(h) Incentive Stock Options may be granted only to Employees.
(i) The Committee may, in its sole discretion, condition the grant
of an Option upon the execution and delivery of confidentiality, non-competition
and other restrictive covenants and agreements, all of which may be incorporated
into the Option Agreement.
(j) The date of grant of an Option shall, for all purposes, be the
date on which the Board makes the determination to grant such Option. Notice of
the determination shall be given to each Optionee within a reasonable time after
the date of such grant.
6. Exercise Price.
(a) Except as provided in this Section 6, the exercise price per
Share of any Option shall be the price determined by the Committee at the time
the Option is granted, provided it is in excess of the Share's par value.
(b) Subject to Section 5(e), the exercise price of any Incentive
Stock Option shall not be less than the Fair Market Value of the Share
underlying the Option (as determined in the sole and absolute discretion of the
Committee in a fair and uniform manner) on the date such Incentive Stock Option
is granted.
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7. Exercise of Options.
(a) An Option shall be deemed exercised when: (i) the Company has
received written notice of such exercise in accordance with the terms of the
Option; (ii) full payment of the exercise price for all of the Shares as to
which the Option is exercised has been made; (iii) the Optionee has agreed to be
bound by the terms, provisions and conditions of any applicable shareholders'
agreement; and (iv) arrangements that are satisfactory to the Committee in its
sole discretion have been made for the Optionee's payment to the Company of the
amount that is necessary for the Company or the Subsidiary employing the
Optionee to withhold in accordance with applicable Federal or state tax
withholding requirements. Unless further limited by the Committee in any Option
Agreement, the exercise price of any Option may be paid in cash, by certified or
official bank check, by personal check (with the approval of the Committee), by
money order, with Shares owned by the Optionee that have been owned by the
Optionee for more than 6 months on the date of surrender or such other period as
may be required to avoid a charge to the Company's earnings for financial
accounting purposes, by authorization for the Company to withhold Shares
issuable upon exercise of the Option, by arrangement with a broker that is
acceptable to the Committee where payment of the exercise price is made pursuant
to an irrevocable direction to the broker to deliver all or a part of the
proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note (as
described below). If the exercise price is paid in whole or in part with Shares,
the value of the Shares surrendered shall be their Fair Market Value on the date
the Option is exercised.
(b) The Company in its sole discretion may, on an individual basis
or pursuant to a general program established in connection with this Plan, lend
money to an Optionee, guarantee a loan to an Optionee, or otherwise assist an
Optionee to obtain the financing necessary to exercise all or a portion of an
Option granted hereunder or to pay any tax liability of the Optionee
attributable to such exercise. If the exercise price is paid in whole or in part
with the Optionee's promissory note, such note shall: (i) provide for full
recourse to the maker; (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option; (iii) bear interest at the
prime rate of the Company's principal lender, plus two percent; and (iv) contain
such other terms as the Board or Committee in its sole discretion shall
reasonably require.
(c) No Optionee shall be deemed to be a holder of any Shares subject
to an Option unless and until a stock certificate or certificates for such
Shares are issued to such person(s) under the terms of this Plan (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). Until the issuance of the stock certificate
evidencing the Shares as to which an Option has been exercised, no right to vote
or to receive dividends or any other rights as a shareholder shall exist with
respect to such Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, notwithstanding the exercise of such Option, except as
expressly provided in Section 10 hereof.
8. Exercisability of Options.
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(a) Except as otherwise provided in this Section 8 and subject to
Section 12, an Option shall become exercisable in such amounts, at such vesting
intervals, upon such events or occurrences, and upon such other terms and
conditions as shall be provided in the individual's Option Agreement.
(b) Subject to Section 5(e), the expiration date(s) of an Option
shall be determined by the Committee at the time of grant, but in no event shall
an Option be exercisable after the expiration of 7 years from the date of grant
of the Option.
(c) Unless otherwise expressly provided in any Option Agreement, and
notwithstanding the exercise schedule set forth in any Option Agreement, each
outstanding Option, may, in the sole discretion of the Committee, become fully
exercisable upon the date of the occurrence of any Change of Control or the
Optionee's termination of employment with the Company by reason of Retirement,
death or Disability. However, unless otherwise expressly provided in any Option
Agreement, the Option shall not be exercisable earlier than six months after the
date of grant, and if and only if Optionee remains in the employ or service of
the Company or Subsidiary, as the case may be, on such date.
9. Termination of Option Exercise Period.
(a) Unless otherwise expressly provided in any Option Agreement, the
unexercised portion of any Option granted to an Optionee shall automatically and
without notice immediately terminate at the earliest to occur of the following:
(i) one year after the date on which the Optionee's employment
or service is terminated for any reason, other than by reason of: (A) Cause; (B)
voluntary termination of employment or service by the Optionee; or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company of the
Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service by the Optionee;
(iv) one year after the date of the Optionee's death provided,
that with respect to the death of an Optionee who previously terminated his
employment or his service by reason of Disability, the option exercise period
shall expire at the later to occur of one year following the date on which the
Optionee's employment or service with the Company was terminated due to
Disability, or one month following the Optionee's death.
(b) Unless otherwise expressly provided in any Option, the Committee
in its sole discretion may, by giving written notice ("cancellation notice") to
the Optionee, cancel, effective upon the date of the consummation of any Change
of Control, any Option that remains unexercised on such date. Such cancellation
notice shall be given within a reasonable period of time prior to the proposed
date of such cancellation and may be given either before or after approval of
such corporate transaction.
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(c) Upon termination of an Option (or portion thereof) pursuant to
the foregoing provisions of this Section 9, any Option (or portion thereof) not
previously exercised shall be canceled.
10. Adjustment of Shares.
(a) If, at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Common Stock through the declaration of a stock
dividend, through any recapitalization, reclassification, stock split-up,
combination or exchange of Common Stock (other than any such exchange or
issuance of Common Stock through which Common Stock is issued to effect an
acquisition of another business or entity or the Company's purchase of Common
Stock to exercise a "call" purchase option), then and in such event:
(i) appropriate adjustment shall be made in the maximum number of
Shares available for grant under this Plan, so that the same percentage of the
Company's issued and outstanding Shares shall continue to be subject to being so
optioned; and
(ii) appropriate adjustment shall be made in the number of Shares and
the exercise price per Share thereof then subject to any outstanding Option, so
that the same percentage of the Company's issued and outstanding Shares shall
remain subject to purchase at the same aggregate exercise price.
(b) Such adjustments shall be made by the Committee, whose
determination shall be final, binding and conclusive.
(c) Subject to the specific terms of any Option Agreement, the
Committee may change the terms of Options outstanding under this Plan, with
respect to the option price or the number of Shares subject to the Options, or
both, when, in the Committee's sole judgment and discretion, such adjustments
become appropriate by reason of a Change of Control.
(d) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into or exchangeable for shares of its capital stock of any class,
either in connection with a direct or underwritten sale or upon the exercise of
rights or warrants to subscribe therefor or purchase such shares, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or exercise price of Shares then subject
to outstanding Options granted under this Plan.
(e) Without limiting the generality of the foregoing, the existence
of outstanding Options granted under this Plan shall not affect in any manner
the right or power of the Company to make, authorize or consummate: (i) any or
all adjustments, recapitalizations, reclassifications, reorganizations or other
changes in the Company's capital structure or its business; (ii) any merger or
consolidation of the Company or to which the Company is a party; (iii) any
issuance by the Company of debt securities, or preferred or preference stock,
that would rank senior to or above the Shares subject to outstanding Options;
(iv) any purchase or issuance by the Company of Shares or other classes of
common stock or common equity securities; (v) the dissolution or
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liquidation of the Company; (vi) any sale, transfer, encumbrance, pledge or
assignment of all or any part of the assets or business of the Company; or (vii)
any other corporate act or proceeding, whether of a similar character or
otherwise.
(f) The Optionee shall receive written notice within a reasonable
time prior to the consummation of such action advising the Optionee of any of
the foregoing. The Committee may, in the exercise of its sole discretion, in
such instances declare that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise her or his Option.
11. Transferability of Options.
(a) No Option shall be subject to alienation, assignment, pledge,
charge or other transfer other than by the Optionee by will or the laws of
descent and distribution, and any attempt to make any such prohibited transfer
shall be void; provided, however, that a Non-Statutory Stock Option may be
transferred to a family member or trust for the benefit of a family member if
the Committee's prior written consent is obtained (which consent may be obtained
at the time an Option is granted) and provided the transaction does not violate
the requirements of Rule 16b-3. Each Option shall be exercisable during the
Optionee's lifetime only by the Optionee, or in the case of a Non-Statutory
Stock Option that has been assigned or otherwise transferred with the
Committee's prior written consent, only by the assignee consented to by the
Committee.
(b) Unless the Committee's prior written consent is obtained (which
consent may be obtained at the time an Option is granted), and provided the
transaction does not violate the requirements of Rule 16b-3, no Shares acquired
by an Officer, as that term is defined under Rule 16b-3, or Director pursuant to
the exercise of an Option may be sold, assigned, pledged or otherwise
transferred prior to the expiration of the six-month period following the date
on which the Option was granted.
12. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the Company
shall not be obligated to issue any Shares unless it is advised by counsel of
its selection that it may do so without violation of the applicable Federal and
State laws pertaining to the issuance of securities, and may require any stock
so issued to bear a legend, may give its transfer agent instructions, and may
take such other steps, as in its judgment are reasonably required to prevent any
such violation.
(b) As a condition of any sale or issuance of Shares upon exercise
of any Option, the Committee may require such agreements or undertakings, if
any, as the Committee may deem necessary or advisable to assure compliance with
any law, regulation, agreement or other applicable restriction, including, but
not limited to, the following:
(i) a representation and warranty by the Optionee to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
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(ii) (A) an agreement and undertaking to comply with all of
the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
13. Redemption of Shares by the Company.
(a) Right to Redeem. Subject to any restrictions under applicable
corporate or other laws, and notwithstanding any other provisions of this Plan
to the contrary, the Company shall have the right to redeem any Shares issued to
any Optionee upon the exercise by such Optionee of the Option granted to him
under the Plan immediately upon the termination of Optionee's employment or
service arising from (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary termination of employment or services of the Optionee; or (iv) the
termination of employment or services of the Optionee for Cause (each an "Event
of Redemption").
(b) Redemption Price.
(i) The purchase price (the "Redemption Price"), to be paid by
the Company at the Redemption Closing (as defined herein) for the Shares of the
Optionee upon the occurrence of an Event of Redemption pursuant to Section
13(a)(i)-(iii), shall be the Fair Market Value of the Shares on the date of the
Event of Redemption, as determined in accordance with Section 2(n) hereof.
(ii) In the event of an Event of Redemption set forth in
Section 13(a)(iv), the Redemption Price shall be zero, and the Optionee shall
immediately surrender the Shares to the Company without payment of any further
compensation for his Shares.
(c) Redemption Closing. The closing (the "Redemption Closing") shall
take place no later than thirty (30) days after the date of the occurrence of
the Redemption Event. At the Redemption Closing: (i) the Optionee shall deliver
to the Company the share certificate or certificates evidencing the ownership of
the Shares together with duly executed stock powers endorsed in blank and such
other documents as the Company shall require; and (ii) the Company shall pay to
the Optionee the Redemption Price (if any) by wire transfer, certified check or,
in the Company's sole discretion, by delivery of a promissory note to the
Optionee in the principal amount of the Redemption Price and payable on such
terms as the Company may deem appropriate.
14. Administration.
(a) This Plan shall be administered by the Committee, which shall
consist of not less than two Directors, each of whom shall be Outside Directors.
The Committee shall have all of the powers of the Board with respect to this
Plan. Any member of the Committee may be removed at any time, with or without
cause, by resolution of the Board, and any vacancy occurring in the membership
of the Committee may be filled by appointment by the Board.
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(b) Subject to the provisions of this Plan, the Committee shall have
the authority, in its sole discretion, to: (i) grant Options; (ii) determine the
Fair Market Value per Share; (iii) determine the exercise price per Share at
which Non-Statutory Stock Options may be exercised; (iv) determine the Optionees
to whom, and the time or times at which, Options shall be granted; (v) determine
the number of Shares subject to each Option; (vi) determine the terms,
conditions and provisions of each Option granted (which need not be identical);
(vii) with the consent of the holder thereof, modify or amend each Option;
(viii) defer (with the consent of the Optionee) or accelerate the exercise date
of any Option; and (ix) make all other determinations deemed necessary or
advisable for the administration of this Plan.
(c) The Committee may, from time to time, adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of this
Plan or any Option shall be final and conclusive, and binding upon all Optionees
and any other holders of any Options granted under this Plan.
(d) Any and all decisions or determinations of the Committee shall
be made either: (i) by a majority vote of the members of the Committee at a
meeting of the Committee; or (ii) without a meeting by the unanimous written
approval of the members of the Committee.
(e) The Board may reserve to itself the power to grant Options to
Employees or Directors or directors of any Subsidiary who are not Covered
Employees. If and to the extent that the Board reserves such powers, then all
references herein to the Committee shall refer to the Board with respect to the
Options granted by the Board.
(f) No Member of the Committee, or any Officer or Director, shall be
personally liable for any act or omission made in good faith in connection with
this Plan.
(g) The inability of the Company to obtain authority from any
regulatory body having jurisdiction over the grant of options under the Plan,
which authority is deemed by the Company's legal counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
15. Withholding or Deduction for Taxes. If at any time specified herein
for the making of any issuance or delivery of any Option or Common Stock to any
Optionee, any law or regulation of any governmental authority having
jurisdiction in the premises shall require the Company to withhold, or to make
any deduction for, any taxes or take any other action in connection with the
issuance or delivery then to be made, such issuance or delivery shall be
deferred until such withholding or deduction shall have been provided for by the
Optionee or beneficiary, or other appropriate action shall have been taken, as
determined by the Committee in its sole discretion.
16. Interpretation.
(a) This Plan shall be administered and interpreted so that all
Incentive Stock Options granted under this Plan will qualify as Incentive Stock
Options under Section 422 of the Code. If any provision of this Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions
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hereof, and this Plan shall be construed and enforced as if such provision had
never been included in this Plan.
(b) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b-3, any ambiguities or inconsistencies in construction of
the Plan shall be interpreted to give effect to such intention, and if any
provision of the Plan is found not to be in compliance with Rule 16b-3, such
provision shall be deemed null and void to the extent required to permit the
Plan to comply with Rule 16b-3. The Board and the Committee each may from time
to time adopt rules and regulations under, and amend, the Plan in furtherance of
the intent of the foregoing.
(c) This Plan shall be governed by the internal laws of the State of
Florida.
(d) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan or affect the meaning or
interpretation of any part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
17. Amendment and Termination of the Plan. Either the Board or the
Committee may from time to time amend or terminate this Plan or any Option
without approval of the shareholders of the Company, unless shareholder approval
is required by Rule 16b-3, applicable stock exchange or quotation systems, or
applicable Code provisions; provided, however, that, except to the extent
provided in Section 9, no amendment or termination of this Plan or any Option
issued hereunder shall substantially impair any Option previously granted to any
Optionee without the consent of such Optionee.
18. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such person has one or more Options
outstanding, copies of all annual reports and other information provided to all
shareholders of the Company The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
Employees whose duties assure their access to equivalent information.
19. Rights as an Employee or Non-Employee. Neither the Plan nor any
Option granted pursuant thereto shall be construed to give any person the right
to remain in the employ or service of the Company or any Affiliate, or to affect
the right of the Company or any Affiliate to terminate such individual's
employment or service at any time with or without cause. The grant of an Option
shall not entitle the Optionee to, or disqualify the Optionee from,
participation in the grant of any other Option under the Plan or participation
in any other benefit plan maintained by the Company or any Affiliate.
20. Successors and Assigns. The Plan shall be binding upon the
Company's successors and assigns and shall inure to the benefit of any
representative, executor, administrator, heir, or legatee of the Optionee.
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TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
-------------------------
This agreement ("Agreement") by and between Take To Auction.Com, Inc.,
a Florida corporation (the "Company"), and Albert Friedman (the "Optionee")
currently residing at __________________________________, as entered into as of
the 25th day of August, 1999 (the "Grant Date"). Under this Agreement, the
Company grants an option (the "Option") to the Optionee to purchase a total of
one hundred seventy-four thousand four hundred ninety (174,490) shares (the
"Shares") of Common Stock which takes into consideration the stock split on a
2.326530644-for-1 basis effective November 3, 1999, par value $.001 per share of
the Company (the "Common Stock") at the exercise price determined as provided
herein, pursuant to the Take To Auction.Com, Inc. 1999 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference. The
Optionee hereby acknowledges receipt of the Plan and agrees to be bound by all
of the terms and conditions thereof. Capitalized terms used but not otherwise
defined herein shall have the same meanings as provided in the Plan.
1. Nature of the Option. This Option is a Non-Statutory Stock Option
and is not intended to constitute an "incentive stock option" as that term is
used in Code Section 422.
2. Exercise Schedule. Except as otherwise provided herein or in the
Plan, this Option shall be exercisable in accordance with Section 6 in whole or
in part and cumulatively according to the following schedule:
(a) 58,163.33 shares of Common Stock shall vest one year after
the signing of this Agreement.
(b) 58,163.33 shares of Common Stock shall vest two years
after the signing of this Agreement.
(c) 58,163.33 shares of Common Stock shall vest three years
after the signing of this Agreement.
provided, however, that in no event shall the Option be exercisable after the
expiration of 7 years from the Grant Date. Notwithstanding any other provision
herein, each increment of this Option set forth in the schedule above shall vest
and become exercisable by the Optionee if and only if the Optionee is in the
employ of the Company on the relevant date or dates indicated above.
3. Change of Control; Acceleration of Vesting. In the event of a Change
of Control this Option may, at the sole discretion of the Committee: (a) become
immediately vested and exercisable in full; or (b) be converted into an option
or similar equity security of the surviving or successor company having, as
similar as possible or better, the rights, value, terms and characteristics of
this Option, or (c) terminate immediately prior to the consummation of such
proposed action; provided, that if the Option is then exercisable, the Optionee
shall have
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received written notice within a reasonable time prior to the consummation of
such action advising the Optionee of (i) any of the foregoing and (ii) that the
Optionee has the opportunity to exercise his Option during such period. The
Committee may, in the exercise of its sole discretion, in such instances declare
that this Option shall terminate as of a date fixed by the Board and give the
Optionee the right to exercise his or her Option.
4. Exercise Price. The exercise price of the Shares subject to this
Option is $0.41 for each Share.
5. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become unexercisable at the time of the
earliest to occur of the following:
(i) one year after the date on which the Optionee's
employment or service with the Company or a Subsidiary is terminated for any
reason, including, but not limited to a Disability, other than by reason of (A)
Cause, (B) voluntary termination of employment by the Optionee, or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company
or any Subsidiary of the Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service with the Company or any Subsidiary by the Optionee;
(iv) one year after the date of the Optionee's death;
provided, that if the Optionee shall die after terminating employment or service
by reason of Disability, the unexercised portion of any Option may be
exercisable only until the later to occur of one year following the Optionee's
termination of employment or service, or one month following the Optionee's
death.
(b) The Committee in its sole discretion may, by giving
written notice ("cancellation notice") to the Optionee, cancel, effective upon
the date of the consummation of any Change of Control, any Option that remains
unexercised on such date. Such cancellation notice shall be given within a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 5, any Option (or portion thereof) not previously
exercised pursuant to Section 7 hereof shall be canceled.
6. Transferability of Options.
(a) This Option is not subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or by the
laws of descent and distribution and any attempt to make such a prohibited
transfer shall be void. Notwithstanding, the Committee hereby permits the
Optionee to transfer this Non Statutory Stock Option to a family member or
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trust for the benefit of a family member, provided such transfer does not
violate the requirements of Rule 16-3. The Option shall be exercisable during
the Optionee's lifetime only by the Optionee or, in the event this Non Statutory
Stock Option has been assigned or otherwise transferred, only by such assignee.
(b) Provided the transaction does not violate the requirements
of Rule 16b-3, no Shares acquired by an Officer or Director, as these terms are
defined under Rule 16b-3, pursuant to the exercise of an Option may be sold,
assigned, pledged or otherwise transferred prior to the expiration of the
six-month period following the Grant Date.
7. Exercise of Options.
(a) The Optionee shall exercise the Option in whole or in part
by filing a written notice in the form of an "Exercise Letter" (attached hereto
as Exhibit 1) with the Secretary of the Company at its corporate headquarters.
The Exercise Letter shall specify the number of Shares that the Optionee elects
to purchase, and shall be accompanied by payment of the exercise price for such
Shares as indicated in the Exercise Letter.
(b) The exercise price of the Option may be paid in cash, by
certified or official bank check, by personal check (with the approval of the
Committee), by money order, with Shares owned by the Optionee that have been
owned by the Optionee for more than 6 months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings for
financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the exercise price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note. If the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Exercise Letter is
filed with the Company.
(c) The Optionee shall not be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to the Optionee under the terms of this Option and
the Plan (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). Until the issuance of the
stock certificate evidencing the shares as to which an Option has been
exercised, no right to vote or to receive dividends or any other rights as a
shareholder shall exist with respect to shares of Common Stock subject to an
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
notwithstanding the exercise of such Option, except as expressly provided in
Section 10 hereof.
8. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal and State laws pertaining to the issuance of securities. If the Company
reaches such a determination, it shall use all reasonable efforts to
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<PAGE>
obtain compliance to such laws, rules or regulations. In making any
determination hereunder, the Company may rely on the opinion of counsel for the
Company. As a condition to the exercise of this Option, the Company may require
the Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
9. Death of Optionee. Upon the death of Optionee this Option may be
exercised by the executor or administrator of the Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death and only for such period of time as shall be permitted pursuant to Section
5(a) hereof, and subject to all of the restrictions contained in this Agreement
and the Plan.
10. Adjustment of Shares.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the aggregate number
of Shares which have been authorized for issuance hereunder, as well as the
exercise price per share of Common Stock covered by this Option, shall be
appropriately adjusted for any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a stock dividend or through
any recapitalization, reclassification, stock split-up, combination or exchange
of Common Stock (other than any such exchange or issuance of Common Stock
through which Common Stock is issued to effect an acquisition of another
business or entity or the Company's purchase of Common Stock to exercise a
"call" purchase option). Such adjustments shall be made by the Committee, whose
determination in this respect shall be final, binding and conclusive.
(b) The Committee may change the terms of Options outstanding
under the Plan, with respect to the exercise price or the number of Shares
subject to this Option, or both, when, in the Committee's sole judgment and
discretion, such adjustments become appropriate by reason of a Change of
Control.
(c) Except as expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such shares, or upon conversion of
shares or obligations of the Company convertible into such shares or securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to this Option.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate: (i)
any or all adjustments, recapitalizations, reclassifications, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference
stock, that would rank senior to or above the Shares subject to outstanding
Options; (iv) any purchase or issuance by the Company of Shares or other classes
of common stock or common equity securities; (v) the
4
<PAGE>
dissolution or liquidation of the Company; (vi) any sale, transfer, encumbrance,
pledge or assignment of all or any part of the assets or business of the
Company; or (vii) any other corporate act or proceeding, whether of a similar
character or otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise her or his
Option.
11. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any law, regulation, agreement or other applicable restriction,
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all
of the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
12. Redemption of Shares by the Corporation.
(a) Right to Redeem. Subject to any restrictions under
applicable corporate or other laws, and notwithstanding any other provisions to
the contrary, and in addition to the rights of the Company contained in Section
5 hereof, the Company shall have the right to redeem any Shares issued to the
Optionee pursuant to the exercise by such Optionee of the Option granted to him
hereunder immediately upon the termination of Optionee's employment or services
arising from: (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary termination of employment or services of the Optionee; or (iv) the
termination of employment or services of the Optionee for Cause (each an "Event
of Redemption").
5
<PAGE>
(b) Redemption Price.
(i) Subject to clause (ii) below, the purchase price
(the "Redemption Price"), to be paid by the Company to the Optionee at the
Redemption Closing (as defined below) for the Shares of the Optionee upon the
occurrence of an Event of Redemption pursuant Section 12(a)(i)-(iii), shall be
the Fair Market Value of the Shares on the date of the Event of Redemption as
determined in accordance with Section 2(n) of the Plan.
(ii) In the event that the Corporation's right to
redeem pursuant to Section 12(a) above occurs as a result of the termination of
employment or services of the Optionee for Cause, as set forth in Section
12(a)(iv) hereof, the Optionee shall not be entitled to receive any compensation
for his Shares, and the Optionee shall immediately surrender the Shares to the
Company without payment of any further compensation for the Shares.
(c) Redemption Closing. The closing (the "Redemption Closing")
shall take place no later than thirty (30) days after the date of the occurrence
of the Redemption Event. At the Redemption Closing: (i) the Optionee shall
deliver to the Company the share certificate or certificates evidencing the
ownership of the Shares together with duly executed stock powers endorsed in
blank and such other documents as the Company shall require; and (ii) the
Company shall pay to the Optionee the Redemption Price (if any) by wire
transfer, certified check or, in the Company's sole discretion, by delivery of a
promissory note to the Optionee in the principal amount of the Redemption Price
and payable on such terms as the Company may deem appropriate.
13. Withholding. In the event the Company determines that it is
required to withhold Federal, state, or local taxes in connection with the
purchase or disposition of Shares, the Optionee or any person succeeding to the
rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Company to enable it to
satisfy no more than the statutory minimum of such withholding requirements.
14. Miscellaneous.
(a) If any provision of this Agreement should be held invalid
for the granting of Options or illegal for any reason, such determination shall
not affect the remaining provisions hereof, but instead this Agreement shall be
construed and enforced as if such provision had never been included in this
Agreement.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida.
(c) Headings contained in this Agreement are for convenience
only and shall in no manner be construed as part of this Agreement.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) Neither the Plan nor any Option granted pursuant thereto
shall be construed to give any person the right to remain in the employ or
service of the Company or any
6
<PAGE>
Affiliate, or to affect the right of the Company or any Affiliate to terminate
such individual's employment or service at any time with or without cause. The
grant of an Option shall not entitle the Optionee to, or disqualify the Optionee
from, participation in the grant of any other Option under the Plan or
participation in any other benefit plan maintained by the Company or any
Affiliate.
(f) This Agreement shall be binding upon the Company's
successors and assigns and shall inure to the benefit of any representative,
executor, administrator, heir or legatee of the Optionee.
15. Acknowledgment. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan or this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
TAKE TO AUCTION.COM, INC.
By:/s/ Mitchell Morgan
------------------
Mitchell Morgan, Vice President
and Chief Financial Officer
- --------------------------------------------------------------------------------
Accepted and Agreed to on the
date first above written.
OPTIONEE
/s/ Albert Friedman
- -----------------------
Albert Friedman
<PAGE>
Exhibit 1
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
Election to Exercise Stock Option
To:
From:
Date:
Pursuant to the provisions of my Option Agreement (the
"Agreement") issued under the Take To Auction.Com, Inc. 1999 Stock Option Plan
(the "Plan") with the grant date of _______________ [insert Grant Date], I
hereby elect to exercise on the exercise date indicated below the option
evidenced by that Agreement (the "Option") with respect to ___________ [insert
number] Shares of Take To Auction.Com, Inc. (the "Option Shares"). I agree to
purchase the Option Shares at the price and terms established under the
Agreement and the Plan. I am attaching $_____________ (__________ U.S. Dollars)
as payment in full of the exercise price of the Option Shares in the form of
cash, bank check, certified check or personal check (with the consent of the
Committee) [circle one].
I hereby represent that I am acquiring the Option Shares for
my own account for investment and that I have no present intention of
distributing or otherwise disposing of any such shares in violation of the
Securities Act of 1933, as amended (the "Securities Act"). I understand that no
delivery of the Option Shares will be made to me until the Committee has
determined that such delivery complies with applicable federal and state
securities laws.
I also recognize that such shares constitute "restricted
securities" under the Securities Act and have not been registered under the
Securities Act or any applicable state securities laws, that the certificate
will contain a legend restricting their transfer, that the transfer agent for
Take To Auction.Com, Inc. (the "Company") will be instructed not to effectuate a
transfer without written authorization from the Company and that the Option
Shares may not be transferred or sold unless they are subsequently registered or
an exemption from such registration is available. I understand that the Company
is under no obligation to register the Option Shares.
I am aware of the Company's business affairs and financial
condition and have acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Option Shares. I acknowledge
that I have received from the Company a
<PAGE>
copy of the Plan and a copy of the Agreement. I have substantial knowledge and
experience in financial and business matters so that I am capable of evaluating
the merits and risks of acquiring the Option Shares and have the capacity to
protect my own interests.
[I am an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.]
I further understand that pursuant to the Agreement the Option
Shares are subject to additional restrictions regarding transfer and resale and
Company repurchase rights.
I hereby warrant that I am entitled under the Agreement and
the Plan to purchase the Option Shares which I have agreed to purchase herein.
I further understand that the Company may refrain from
delivering or transferring the Option Shares until the Committee has determined
that I have made payment in full of the Purchase Price for all Option Shares
designated in this document (e.g., my check has cleared, if payment is made by
personal check) and I have tendered to the Company (or, if applicable, an
affiliate of the Company) cash or other consideration acceptable to the
Committee which is sufficient to pay any federal, state or local taxes that the
Committee determines the Company (or, if applicable, an affiliate of the
Company) is required to withhold as a result of my exercise of the Option and
that the Company (or, if applicable, an affiliate of the Company) has the right
to deduct from cash payments otherwise due to me any such tax.
- --------------------------------------
(signature)
Exercise Date:
------------------------
<PAGE>
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
AMENDED AND RESTATED
NON-STATUTORY STOCK OPTION AGREEMENT
-------------------------
This amended and restated agreement ("Restated Agreement") by and
between Take To Auction.Com, Inc., a Florida corporation (the "Company"), and
Mitchell H. Morgan (the "Optionee") currently residing at
__________________________________, as entered into as of the 25th day of
August, 1999 (the "Grant Date"). Under this Restated Agreement, the Company
grants an option (the "Option") to the Optionee to purchase a total of one
hundred forty-five thousand four hundred eight (145,408) shares (the "Shares")
of Common Stock which takes into consideration the stock split on a
2.326530644-for-1 basis effective November 3, 1999, par value $.001 per share of
the Company (the "Common Stock") at the exercise price determined as provided
herein, pursuant to the Take To Auction.Com, Inc. 1999 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference. The
Optionee hereby acknowledges receipt of the Plan and agrees to be bound by all
of the terms and conditions thereof. Capitalized terms used but not otherwise
defined herein shall have the same meanings as provided in the Plan.
1. Nature of the Option. This Option is a Non-Statutory Stock Option
and is not intended to constitute an "incentive stock option" as that term is
used in Code Section 422.
2. Exercise Schedule. Except as otherwise provided herein or in the
Plan, this Option shall be exercisable in accordance with Section 6 in whole or
in part and cumulatively according to the following schedule:
(a) 48,469.33 shares of Common Stock shall vest one year after
the signing of this Restated Agreement.
(b) 48,469.33 shares of Common Stock shall vest two years
after the signing of this Restated Agreement.
(c) 48,469.33 shares of Common Stock shall vest three years
after the signing of this Restated Agreement.
provided, however, that in no event shall the Option be exercisable after the
expiration of 7 years from the Grant Date. Notwithstanding any other provision
herein, each increment of this Option set forth in the schedule above shall vest
and become exercisable by the Optionee if and only if the Optionee is in the
employ of the Company on the relevant date or dates indicated above.
3. Change of Control; Acceleration of Vesting. In the event of a Change
of Control this Option may, at the sole discretion of the Committee: (a) become
immediately vested and exercisable in full; or (b) be converted into an option
or similar equity security of the surviving or successor company having, as
similar as possible or better, the rights, value, terms and characteristics of
this Option, or (c) terminate immediately prior to the consummation of
1
<PAGE>
such proposed action; provided, that if the Option is then exercisable, the
Optionee shall have received written notice within a reasonable time prior to
the consummation of such action advising the Optionee of (i) any of the
foregoing and (ii) that the Optionee has the opportunity to exercise his Option
during such period. The Committee may, in the exercise of its sole discretion,
in such instances declare that this Option shall terminate as of a date fixed by
the Board and give the Optionee the right to exercise his or her Option.
4. Exercise Price. The exercise price of the Shares subject to this
Option is $0.41 for each Share.
5. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become unexercisable at the time of the
earliest to occur of the following:
(i) one year after the date on which the Optionee's
employment or service with the Company or a Subsidiary is terminated for any
reason, including, but not limited to a Disability, other than by reason of (A)
Cause, (B) voluntary termination of employment by the Optionee, or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company
or any Subsidiary of the Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service with the Company or any Subsidiary by the Optionee;
(iv) one year after the date of the Optionee's death;
provided, that if the Optionee shall die after terminating employment or service
by reason of Disability, the unexercised portion of any Option may be
exercisable only until the later to occur of one year following the Optionee's
termination of employment or service, or one month following the Optionee's
death.
(b) The Committee in its sole discretion may, by giving
written notice ("cancellation notice") to the Optionee, cancel, effective upon
the date of the consummation of any Change of Control, any Option that remains
unexercised on such date. Such cancellation notice shall be given within a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 5, any Option (or portion thereof) not previously
exercised pursuant to Section 7 hereof shall be canceled.
6. Transferability of Options.
(a) This Option is not subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or by the
laws of descent and distribution and any attempt to make such a prohibited
transfer shall be void. Notwithstanding, the Committee
2
<PAGE>
hereby permits the Optionee to transfer this Non Statutory Stock Option to a
family member or trust for the benefit of a family member, provided such
transfer does not violate the requirements of Rule 16-3. The Option shall be
exercisable during the Optionee's lifetime only by the Optionee or, in the event
this Non Statutory Stock Option has been assigned or otherwise transferred, only
by such assignee.
(b) Provided the transaction does not violate the requirements
of Rule 16b-3, no Shares acquired by an Officer or Director, as these terms are
defined under Rule 16b-3, pursuant to the exercise of an Option may be sold,
assigned, pledged or otherwise transferred prior to the expiration of the
six-month period following the Grant Date.
7. Exercise of Options.
(a) The Optionee shall exercise the Option in whole or in part
by filing a written notice in the form of an "Exercise Letter" (attached hereto
as Exhibit 1) with the Secretary of the Company at its corporate headquarters.
The Exercise Letter shall specify the number of Shares that the Optionee elects
to purchase, and shall be accompanied by payment of the exercise price for such
Shares as indicated in the Exercise Letter.
(b) The exercise price of the Option may be paid in cash, by
certified or official bank check, by personal check (with the approval of the
Committee), by money order, with Shares owned by the Optionee that have been
owned by the Optionee for more than 6 months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings for
financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the exercise price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note. If the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Exercise Letter is
filed with the Company.
(c) The Optionee shall not be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to the Optionee under the terms of this Option and
the Plan (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). Until the issuance of the
stock certificate evidencing the shares as to which an Option has been
exercised, no right to vote or to receive dividends or any other rights as a
shareholder shall exist with respect to shares of Common Stock subject to an
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
notwithstanding the exercise of such Option, except as expressly provided in
Section 10 hereof.
8. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal and State laws pertaining to the issuance of
3
<PAGE>
securities. If the Company reaches such a determination, it shall use all
reasonable efforts to obtain compliance to such laws, rules or regulations. In
making any determination hereunder, the Company may rely on the opinion of
counsel for the Company. As a condition to the exercise of this Option, the
Company may require the Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
9. Death of Optionee. Upon the death of Optionee this Option may be
exercised by the executor or administrator of the Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death and only for such period of time as shall be permitted pursuant to Section
5(a) hereof, and subject to all of the restrictions contained in this Restated
Agreement and the Plan.
10. Adjustment of Shares.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the aggregate number
of Shares which have been authorized for issuance hereunder, as well as the
exercise price per share of Common Stock covered by this Option, shall be
appropriately adjusted for any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a stock dividend or through
any recapitalization, reclassification, stock split-up, combination or exchange
of Common Stock (other than any such exchange or issuance of Common Stock
through which Common Stock is issued to effect an acquisition of another
business or entity or the Company's purchase of Common Stock to exercise a
"call" purchase option). Such adjustments shall be made by the Committee, whose
determination in this respect shall be final, binding and conclusive.
(b) The Committee may change the terms of Options outstanding
under the Plan, with respect to the exercise price or the number of Shares
subject to this Option, or both, when, in the Committee's sole judgment and
discretion, such adjustments become appropriate by reason of a Change of
Control.
(c) Except as expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such shares, or upon conversion of
shares or obligations of the Company convertible into such shares or securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to this Option.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate: (i)
any or all adjustments, recapitalizations, reclassifications, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference
stock, that would rank senior to or above the Shares subject to outstanding
Options; (iv) any purchase or issuance
4
<PAGE>
by the Company of Shares or other classes of common stock or common equity
securities; (v) the dissolution or liquidation of the Company; (vi) any sale,
transfer, encumbrance, pledge or assignment of all or any part of the assets or
business of the Company; or (vii) any other corporate act or proceeding, whether
of a similar character or otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise her or his
Option.
11. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any law, regulation, agreement or other applicable restriction,
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all
of the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
12. Redemption of Shares by the Corporation.
(a) Right to Redeem. Subject to any restrictions under
applicable corporate or other laws, and notwithstanding any other provisions to
the contrary, and in addition to the rights of the Company contained in Section
5 hereof, the Company shall have the right to redeem any Shares issued to the
Optionee pursuant to the exercise by such Optionee of the Option granted to him
hereunder immediately upon the termination of Optionee's employment or services
arising from: (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary
5
<PAGE>
termination of employment or services of the Optionee; or (iv) the termination
of employment or services of the Optionee for Cause (each an "Event of
Redemption").
(b) Redemption Price.
(i) Subject to clause (ii) below, the purchase price
(the "Redemption Price"), to be paid by the Company to the Optionee at the
Redemption Closing (as defined below) for the Shares of the Optionee upon the
occurrence of an Event of Redemption pursuant Section 12(a)(i)-(iii), shall be
the Fair Market Value of the Shares on the date of the Event of Redemption as
determined in accordance with Section 2(n) of the Plan.
(ii) In the event that the Corporation's right to
redeem pursuant to Section 12(a) above occurs as a result of the termination of
employment or services of the Optionee for Cause, as set forth in Section
12(a)(iv) hereof, the Optionee shall not be entitled to receive any compensation
for his Shares, and the Optionee shall immediately surrender the Shares to the
Company without payment of any further compensation for the Shares.
(c) Redemption Closing. The closing (the "Redemption Closing")
shall take place no later than thirty (30) days after the date of the occurrence
of the Redemption Event. At the Redemption Closing: (i) the Optionee shall
deliver to the Company the share certificate or certificates evidencing the
ownership of the Shares together with duly executed stock powers endorsed in
blank and such other documents as the Company shall require; and (ii) the
Company shall pay to the Optionee the Redemption Price (if any) by wire
transfer, certified check or, in the Company's sole discretion, by delivery of a
promissory note to the Optionee in the principal amount of the Redemption Price
and payable on such terms as the Company may deem appropriate.
13. Withholding. In the event the Company determines that it is
required to withhold Federal, state, or local taxes in connection with the
purchase or disposition of Shares, the Optionee or any person succeeding to the
rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Company to enable it to
satisfy no more than the statutory minimum of such withholding requirements.
14. Miscellaneous.
(a) If any provision of this Restated Agreement should be held
invalid for the granting of Options or illegal for any reason, such
determination shall not affect the remaining provisions hereof, but instead this
Restated Agreement shall be construed and enforced as if such provision had
never been included in this Restated Agreement.
(b) This Restated Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Florida.
(c) Headings contained in this Restated Agreement are for
convenience only and shall in no manner be construed as part of this Restated
Agreement.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
6
<PAGE>
(e) Neither the Plan nor any Option granted pursuant thereto
shall be construed to give any person the right to remain in the employ or
service of the Company or any Affiliate, or to affect the right of the Company
or any Affiliate to terminate such individual's employment or service at any
time with or without cause. The grant of an Option shall not entitle the
Optionee to, or disqualify the Optionee from, participation in the grant of any
other Option under the Plan or participation in any other benefit plan
maintained by the Company or any Affiliate.
(f) This Restated Agreement shall be binding upon the
Company's successors and assigns and shall inure to the benefit of any
representative, executor, administrator, heir or legatee of the Optionee.
15. Acknowledgment. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan or this Restated Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Restated
Agreement as of the date first above written.
TAKE TO AUCTION.COM, INC.
By:/s/ Albert Friedman
--------------------------
Albert Friedman, President
- --------------------------------------------------------------------------------
Accepted and Agreed to on the
date first above written.
OPTIONEE
/s/ Mitchell H. Morgan
- --------------------------
Mitchell H. Morgan
7
<PAGE>
Exhibit 1
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
Election to Exercise Stock Option
To:
From:
Date:
Pursuant to the provisions of my Restated Option Agreement (the
"Restated Agreement") issued under the Take To Auction.Com, Inc. 1999 Stock
Option Plan (the "Plan") with the grant date of _______________ [insert Grant
Date], I hereby elect to exercise on the exercise date indicated below the
option evidenced by that Restated Agreement (the "Option") with respect to
___________ [insert number] Shares of Take To Auction.Com, Inc. (the "Option
Shares"). I agree to purchase the Option Shares at the price and terms
established under the Restated Agreement and the Plan. I am attaching
$_____________ (__________ U.S. Dollars) as payment in full of the exercise
price of the Option Shares in the form of cash, bank check, certified check or
personal check (with the consent of the Committee) [circle one].
I hereby represent that I am acquiring the Option Shares for my own
account for investment and that I have no present intention of distributing or
otherwise disposing of any such shares in violation of the Securities Act of
1933, as amended (the "Securities Act"). I understand that no delivery of the
Option Shares will be made to me until the Committee has determined that such
delivery complies with applicable federal and state securities laws.
I also recognize that such shares constitute "restricted securities"
under the Securities Act and have not been registered under the Securities Act
or any applicable state securities laws, that the certificate will contain a
legend restricting their transfer, that the transfer agent for Take To
Auction.Com, Inc. (the "Company") will be instructed not to effectuate a
transfer without written authorization from the Company and that the Option
Shares may not be transferred or sold unless they are subsequently registered or
an exemption from such registration is available. I understand that the Company
is under no obligation to register the Option Shares.
I am aware of the Company's business affairs and financial condition
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Option Shares. I acknowledge that I
have received from the Company a copy of the Plan and a copy of the Restated
Agreement. I have substantial knowledge and experience in
<PAGE>
financial and business matters so that I am capable of evaluating the merits and
risks of acquiring the Option Shares and have the capacity to protect my own
interests.
[I am an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.]
I further understand that pursuant to the Restated Agreement the Option
Shares are subject to additional restrictions regarding transfer and resale and
Company repurchase rights.
I hereby warrant that I am entitled under the Restated Agreement and
the Plan to purchase the Option Shares which I have agreed to purchase herein.
I further understand that the Company may refrain from delivering or
transferring the Option Shares until the Committee has determined that I have
made payment in full of the Purchase Price for all Option Shares designated in
this document (e.g., my check has cleared, if payment is made by personal check)
and I have tendered to the Company (or, if applicable, an affiliate of the
Company) cash or other consideration acceptable to the Committee which is
sufficient to pay any federal, state or local taxes that the Committee
determines the Company (or, if applicable, an affiliate of the Company) is
required to withhold as a result of my exercise of the Option and that the
Company (or, if applicable, an affiliate of the Company) has the right to deduct
from cash payments otherwise due to me any such tax.
- -------------------------------------
(signature)
Exercise Date:
-----------------------
2
<PAGE>
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
-------------------------
This agreement ("Agreement") by and between Take To Auction.Com, Inc.,
a Florida corporation (the "Company"), and Lucien Lallouz (the "Optionee")
currently residing at __________________________________, as entered into as of
the 25th day of August, 1999 (the "Grant Date"). Under this Agreement, the
Company grants an option (the "Option") to the Optionee to purchase a total of
one hundred seventy-four thousand four hundred ninety (174,490) shares (the
"Shares") of Common Stock which takes into consideration the stock split on a
2.326530644-for-1 basis effective November 3, 1999, par value $.001 per share of
the Company (the "Common Stock") at the exercise price determined as provided
herein, pursuant to the Take To Auction.Com, Inc. 1999 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference. The
Optionee hereby acknowledges receipt of the Plan and agrees to be bound by all
of the terms and conditions thereof. Capitalized terms used but not otherwise
defined herein shall have the same meanings as provided in the Plan.
1. Nature of the Option. This Option is a Non-Statutory Stock Option
and is not intended to constitute an "incentive stock option" as that term is
used in Code Section 422.
2. Exercise Schedule. Except as otherwise provided herein or in the
Plan, this Option shall be exercisable in accordance with Section 6 in whole or
in part and cumulatively according to the following schedule:
(a) 58,163.33 shares of Common Stock shall vest one year after
the signing of this Agreement.
(b) 58,163.33 shares of Common Stock shall vest two years
after the signing of this Agreement.
(c) 58,163.33 shares of Common Stock shall vest three years
after the signing of this Agreement.
provided, however, that in no event shall the Option be exercisable after the
expiration of 7 years from the Grant Date. Notwithstanding any other provision
herein, each increment of this Option set forth in the schedule above shall vest
and become exercisable by the Optionee if and only if the Optionee is in the
employ of the Company on the relevant date or dates indicated above.
3. Change of Control; Acceleration of Vesting. In the event of a Change
of Control this Option may, at the sole discretion of the Committee: (a) become
immediately vested and exercisable in full; or (b) be converted into an option
or similar equity security of the surviving or successor company having, as
similar as possible or better, the rights, value, terms and characteristics of
this Option, or (c) terminate immediately prior to the consummation of such
proposed action; provided, that if the Option is then exercisable, the Optionee
shall have
<PAGE>
received written notice within a reasonable time prior to the consummation of
such action advising the Optionee of (i) any of the foregoing and (ii) that the
Optionee has the opportunity to exercise his Option during such period. The
Committee may, in the exercise of its sole discretion, in such instances declare
that this Option shall terminate as of a date fixed by the Board and give the
Optionee the right to exercise his or her Option.
4. Exercise Price. The exercise price of the Shares subject to this
Option is $0.41 for each Share.
5. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become unexercisable at the time of the
earliest to occur of the following:
(i) one year after the date on which the Optionee's
employment or service with the Company or a Subsidiary is terminated for any
reason, including, but not limited to a Disability, other than by reason of (A)
Cause, (B) voluntary termination of employment by the Optionee, or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company
or any Subsidiary of the Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service with the Company or any Subsidiary by the Optionee;
(iv) one year after the date of the Optionee's death;
provided, that if the Optionee shall die after terminating employment or service
by reason of Disability, the unexercised portion of any Option may be
exercisable only until the later to occur of one year following the Optionee's
termination of employment or service, or one month following the Optionee's
death.
(b) The Committee in its sole discretion may, by giving
written notice ("cancellation notice") to the Optionee, cancel, effective upon
the date of the consummation of any Change of Control, any Option that remains
unexercised on such date. Such cancellation notice shall be given within a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 5, any Option (or portion thereof) not previously
exercised pursuant to Section 7 hereof shall be canceled.
6. Transferability of Options.
(a) This Option is not subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or by the
laws of descent and distribution and any attempt to make such a prohibited
transfer shall be void. Notwithstanding, the Committee hereby permits the
Optionee to transfer this Non Statutory Stock Option to a family member or
2
<PAGE>
trust for the benefit of a family member, provided such transfer does not
violate the requirements of Rule 16-3. The Option shall be exercisable during
the Optionee's lifetime only by the Optionee or, in the event this Non Statutory
Stock Option has been assigned or otherwise transferred, only by such assignee.
(b) Provided the transaction does not violate the requirements
of Rule 16b-3, no Shares acquired by an Officer or Director, as these terms are
defined under Rule 16b-3, pursuant to the exercise of an Option may be sold,
assigned, pledged or otherwise transferred prior to the expiration of the
six-month period following the Grant Date.
7. Exercise of Options.
(a) The Optionee shall exercise the Option in whole or in part
by filing a written notice in the form of an "Exercise Letter" (attached hereto
as Exhibit 1) with the Secretary of the Company at its corporate headquarters.
The Exercise Letter shall specify the number of Shares that the Optionee elects
to purchase, and shall be accompanied by payment of the exercise price for such
Shares as indicated in the Exercise Letter.
(b) The exercise price of the Option may be paid in cash, by
certified or official bank check, by personal check (with the approval of the
Committee), by money order, with Shares owned by the Optionee that have been
owned by the Optionee for more than 6 months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings for
financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the exercise price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note. If the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Exercise Letter is
filed with the Company.
(c) The Optionee shall not be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to the Optionee under the terms of this Option and
the Plan (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). Until the issuance of the
stock certificate evidencing the shares as to which an Option has been
exercised, no right to vote or to receive dividends or any other rights as a
shareholder shall exist with respect to shares of Common Stock subject to an
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
notwithstanding the exercise of such Option, except as expressly provided in
Section 10 hereof.
8. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal and State laws pertaining to the issuance of securities. If the Company
reaches such a determination, it shall use all reasonable efforts to
3
<PAGE>
obtain compliance to such laws, rules or regulations. In making any
determination hereunder, the Company may rely on the opinion of counsel for the
Company. As a condition to the exercise of this Option, the Company may require
the Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
9. Death of Optionee. Upon the death of Optionee this Option may be
exercised by the executor or administrator of the Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death and only for such period of time as shall be permitted pursuant to Section
5(a) hereof, and subject to all of the restrictions contained in this Agreement
and the Plan.
10. Adjustment of Shares.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the aggregate number
of Shares which have been authorized for issuance hereunder, as well as the
exercise price per share of Common Stock covered by this Option, shall be
appropriately adjusted for any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a stock dividend or through
any recapitalization, reclassification, stock split-up, combination or exchange
of Common Stock (other than any such exchange or issuance of Common Stock
through which Common Stock is issued to effect an acquisition of another
business or entity or the Company's purchase of Common Stock to exercise a
"call" purchase option). Such adjustments shall be made by the Committee, whose
determination in this respect shall be final, binding and conclusive.
(b) The Committee may change the terms of Options outstanding
under the Plan, with respect to the exercise price or the number of Shares
subject to this Option, or both, when, in the Committee's sole judgment and
discretion, such adjustments become appropriate by reason of a Change of
Control.
(c) Except as expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such shares, or upon conversion of
shares or obligations of the Company convertible into such shares or securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to this Option.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate: (i)
any or all adjustments, recapitalizations, reclassifications, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference
stock, that would rank senior to or above the Shares subject to outstanding
Options; (iv) any purchase or issuance by the Company of Shares or other classes
of common stock or common equity securities; (v) the
4
<PAGE>
dissolution or liquidation of the Company; (vi) any sale, transfer, encumbrance,
pledge or assignment of all or any part of the assets or business of the
Company; or (vii) any other corporate act or proceeding, whether of a similar
character or otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise her or his
Option.
11. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any law, regulation, agreement or other applicable restriction,
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all
of the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
12. Redemption of Shares by the Corporation.
(a) Right to Redeem. Subject to any restrictions under
applicable corporate or other laws, and notwithstanding any other provisions to
the contrary, and in addition to the rights of the Company contained in Section
5 hereof, the Company shall have the right to redeem any Shares issued to the
Optionee pursuant to the exercise by such Optionee of the Option granted to him
hereunder immediately upon the termination of Optionee's employment or services
arising from: (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary termination of employment or services of the Optionee; or (iv) the
termination of employment or services of the Optionee for Cause (each an "Event
of Redemption").
5
<PAGE>
(b) Redemption Price.
(i) Subject to clause (ii) below, the purchase price
(the "Redemption Price"), to be paid by the Company to the Optionee at the
Redemption Closing (as defined below) for the Shares of the Optionee upon the
occurrence of an Event of Redemption pursuant Section 12(a)(i)-(iii), shall be
the Fair Market Value of the Shares on the date of the Event of Redemption as
determined in accordance with Section 2(n) of the Plan.
(ii) In the event that the Corporation's right to
redeem pursuant to Section 12(a) above occurs as a result of the termination of
employment or services of the Optionee for Cause, as set forth in Section
12(a)(iv) hereof, the Optionee shall not be entitled to receive any compensation
for his Shares, and the Optionee shall immediately surrender the Shares to the
Company without payment of any further compensation for the Shares.
(c) Redemption Closing. The closing (the "Redemption Closing")
shall take place no later than thirty (30) days after the date of the occurrence
of the Redemption Event. At the Redemption Closing: (i) the Optionee shall
deliver to the Company the share certificate or certificates evidencing the
ownership of the Shares together with duly executed stock powers endorsed in
blank and such other documents as the Company shall require; and (ii) the
Company shall pay to the Optionee the Redemption Price (if any) by wire
transfer, certified check or, in the Company's sole discretion, by delivery of a
promissory note to the Optionee in the principal amount of the Redemption Price
and payable on such terms as the Company may deem appropriate.
13. Withholding. In the event the Company determines that it is
required to withhold Federal, state, or local taxes in connection with the
purchase or disposition of Shares, the Optionee or any person succeeding to the
rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Company to enable it to
satisfy no more than the statutory minimum of such withholding requirements.
14. Miscellaneous.
(a) If any provision of this Agreement should be held invalid
for the granting of Options or illegal for any reason, such determination shall
not affect the remaining provisions hereof, but instead this Agreement shall be
construed and enforced as if such provision had never been included in this
Agreement.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida.
(c) Headings contained in this Agreement are for convenience
only and shall in no manner be construed as part of this Agreement.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) Neither the Plan nor any Option granted pursuant thereto
shall be construed to give any person the right to remain in the employ or
service of the Company or any
6
<PAGE>
Affiliate, or to affect the right of the Company or any Affiliate to terminate
such individual's employment or service at any time with or without cause. The
grant of an Option shall not entitle the Optionee to, or disqualify the Optionee
from, participation in the grant of any other Option under the Plan or
participation in any other benefit plan maintained by the Company or any
Affiliate.
(f) This Agreement shall be binding upon the Company's
successors and assigns and shall inure to the benefit of any representative,
executor, administrator, heir or legatee of the Optionee.
15. Acknowledgment. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan or this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
TAKE TO AUCTION.COM, INC.
By:/s/ Albert Friedman
----------------------------
Albert Friedman, President
- --------------------------------------------------------------------------------
Accepted and Agreed to on the date first above written.
OPTIONEE
/s/ Lucien Lallouz
- -----------------------
Lucien Lallouz
7
<PAGE>
Exhibit 1
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
Election to Exercise Stock Option
To:
From:
Date:
Pursuant to the provisions of my Option Agreement (the "Agreement")
issued under the Take To Auction.Com, Inc. 1999 Stock Option Plan (the "Plan")
with the grant date of _______________ [insert Grant Date], I hereby elect to
exercise on the exercise date indicated below the option evidenced by that
Agreement (the "Option") with respect to ___________ [insert number] Shares of
Take To Auction.Com, Inc. (the "Option Shares"). I agree to purchase the Option
Shares at the price and terms established under the Agreement and the Plan. I am
attaching $_____________ (__________ U.S. Dollars) as payment in full of the
exercise price of the Option Shares in the form of cash, bank check, certified
check or personal check (with the consent of the Committee) [circle one].
I hereby represent that I am acquiring the Option Shares for my own
account for investment and that I have no present intention of distributing or
otherwise disposing of any such shares in violation of the Securities Act of
1933, as amended (the "Securities Act"). I understand that no delivery of the
Option Shares will be made to me until the Committee has determined that such
delivery complies with applicable federal and state securities laws.
I also recognize that such shares constitute "restricted securities"
under the Securities Act and have not been registered under the Securities Act
or any applicable state securities laws, that the certificate will contain a
legend restricting their transfer, that the transfer agent for Take To
Auction.Com, Inc. (the "Company") will be instructed not to effectuate a
transfer without written authorization from the Company and that the Option
Shares may not be transferred or sold unless they are subsequently registered or
an exemption from such registration is available. I understand that the Company
is under no obligation to register the Option Shares.
I am aware of the Company's business affairs and financial condition
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Option Shares. I acknowledge that I
have received from the Company a copy of the Plan and a copy of the Agreement. I
have substantial knowledge and experience in financial and
<PAGE>
business matters so that I am capable of evaluating the merits and risks of
acquiring the Option Shares and have the capacity to protect my own interests.
[I am an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.]
I further understand that pursuant to the Agreement the Option Shares
are subject to additional restrictions regarding transfer and resale and Company
repurchase rights.
I hereby warrant that I am entitled under the Agreement and the Plan to
purchase the Option Shares which I have agreed to purchase herein.
I further understand that the Company may refrain from delivering or
transferring the Option Shares until the Committee has determined that I have
made payment in full of the Purchase Price for all Option Shares designated in
this document (e.g., my check has cleared, if payment is made by personal check)
and I have tendered to the Company (or, if applicable, an affiliate of the
Company) cash or other consideration acceptable to the Committee which is
sufficient to pay any federal, state or local taxes that the Committee
determines the Company (or, if applicable, an affiliate of the Company) is
required to withhold as a result of my exercise of the Option and that the
Company (or, if applicable, an affiliate of the Company) has the right to deduct
from cash payments otherwise due to me any such tax.
- ------------------------------------
(signature)
Exercise Date:
----------------------
2
<PAGE>
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
-------------------------
This agreement ("Agreement") by and between Take To Auction.Com, Inc.,
a Florida corporation (the "Company"), and Hugo Calemczuk (the "Optionee")
currently residing at __________________________________, as entered into as of
the 25th day of August, 1999 (the "Grant Date"). Under this Agreement, the
Company grants an option (the "Option") to the Optionee to purchase a total of
one hundred seventy-four thousand four hundred ninety (174,490) shares (the
"Shares") of Common Stock which takes into consideration the stock split on a
2.326530644-for-1 basis effective November 3, 1999, par value $.001 per share of
the Company (the "Common Stock") at the exercise price determined as provided
herein, pursuant to the Take To Auction.Com, Inc. 1999 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference. The
Optionee hereby acknowledges receipt of the Plan and agrees to be bound by all
of the terms and conditions thereof. Capitalized terms used but not otherwise
defined herein shall have the same meanings as provided in the Plan.
1. Nature of the Option. This Option is a Non-Statutory Stock Option
and is not intended to constitute an "incentive stock option" as that term is
used in Code Section 422.
2. Exercise Schedule. Except as otherwise provided herein or in the
Plan, this Option shall be exercisable in accordance with Section 6 in whole or
in part and cumulatively according to the following schedule:
(a) 58,163.33 shares of Common Stock shall vest one year after
the signing of this Agreement.
(b) 58,163.33 shares of Common Stock shall vest two years
after the signing of this Agreement.
(c) 58,163.33 shares of Common Stock shall vest three years
after the signing of this Agreement.
provided, however, that in no event shall the Option be exercisable after the
expiration of 7 years from the Grant Date. Notwithstanding any other provision
herein, each increment of this Option set forth in the schedule above shall vest
and become exercisable by the Optionee if and only if the Optionee is in the
employ of the Company on the relevant date or dates indicated above.
3. Change of Control; Acceleration of Vesting. In the event of a Change
of Control this Option may, at the sole discretion of the Committee: (a) become
immediately vested and exercisable in full; or (b) be converted into an option
or similar equity security of the surviving or successor company having, as
similar as possible or better, the rights, value, terms and characteristics of
this Option, or (c) terminate immediately prior to the consummation of such
proposed action; provided, that if the Option is then exercisable, the Optionee
shall have
<PAGE>
received written notice within a reasonable time prior to the consummation of
such action advising the Optionee of (i) any of the foregoing and (ii) that the
Optionee has the opportunity to exercise his Option during such period. The
Committee may, in the exercise of its sole discretion, in such instances declare
that this Option shall terminate as of a date fixed by the Board and give the
Optionee the right to exercise his or her Option.
4. Exercise Price. The exercise price of the Shares subject to this
Option is $0.41 for each Share.
5. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become unexercisable at the time of the
earliest to occur of the following:
(i) one year after the date on which the Optionee's
employment or service with the Company or a Subsidiary is terminated for any
reason, including, but not limited to a Disability, other than by reason of (A)
Cause, (B) voluntary termination of employment by the Optionee, or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company
or any Subsidiary of the Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service with the Company or any Subsidiary by the Optionee;
(iv) one year after the date of the Optionee's death;
provided, that if the Optionee shall die after terminating employment or service
by reason of Disability, the unexercised portion of any Option may be
exercisable only until the later to occur of one year following the Optionee's
termination of employment or service, or one month following the Optionee's
death.
(b) The Committee in its sole discretion may, by giving
written notice ("cancellation notice") to the Optionee, cancel, effective upon
the date of the consummation of any Change of Control, any Option that remains
unexercised on such date. Such cancellation notice shall be given within a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 5, any Option (or portion thereof) not previously
exercised pursuant to Section 7 hereof shall be canceled.
6. Transferability of Options.
(a) This Option is not subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or by the
laws of descent and distribution and any attempt to make such a prohibited
transfer shall be void. Notwithstanding, the Committee hereby permits the
Optionee to transfer this Non Statutory Stock Option to a family member or
2
<PAGE>
trust for the benefit of a family member, provided such transfer does not
violate the requirements of Rule 16-3. The Option shall be exercisable during
the Optionee's lifetime only by the Optionee or, in the event this Non Statutory
Stock Option has been assigned or otherwise transferred, only by such assignee.
(b) Provided the transaction does not violate the requirements
of Rule 16b-3, no Shares acquired by an Officer or Director, as these terms are
defined under Rule 16b-3, pursuant to the exercise of an Option may be sold,
assigned, pledged or otherwise transferred prior to the expiration of the
six-month period following the Grant Date.
7. Exercise of Options.
(a) The Optionee shall exercise the Option in whole or in part
by filing a written notice in the form of an "Exercise Letter" (attached hereto
as Exhibit 1) with the Secretary of the Company at its corporate headquarters.
The Exercise Letter shall specify the number of Shares that the Optionee elects
to purchase, and shall be accompanied by payment of the exercise price for such
Shares as indicated in the Exercise Letter.
(b) The exercise price of the Option may be paid in cash, by
certified or official bank check, by personal check (with the approval of the
Committee), by money order, with Shares owned by the Optionee that have been
owned by the Optionee for more than 6 months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings for
financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the exercise price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note. If the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Exercise Letter is
filed with the Company.
(c) The Optionee shall not be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to the Optionee under the terms of this Option and
the Plan (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). Until the issuance of the
stock certificate evidencing the shares as to which an Option has been
exercised, no right to vote or to receive dividends or any other rights as a
shareholder shall exist with respect to shares of Common Stock subject to an
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
notwithstanding the exercise of such Option, except as expressly provided in
Section 10 hereof.
8. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal and State laws pertaining to the issuance of securities. If the Company
reaches such a determination, it shall use all reasonable efforts to
3
<PAGE>
obtain compliance to such laws, rules or regulations. In making any
determination hereunder, the Company may rely on the opinion of counsel for the
Company. As a condition to the exercise of this Option, the Company may require
the Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
9. Death of Optionee. Upon the death of Optionee this Option may be
exercised by the executor or administrator of the Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death and only for such period of time as shall be permitted pursuant to Section
5(a) hereof, and subject to all of the restrictions contained in this Agreement
and the Plan.
10. Adjustment of Shares.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the aggregate number
of Shares which have been authorized for issuance hereunder, as well as the
exercise price per share of Common Stock covered by this Option, shall be
appropriately adjusted for any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a stock dividend or through
any recapitalization, reclassification, stock split-up, combination or exchange
of Common Stock (other than any such exchange or issuance of Common Stock
through which Common Stock is issued to effect an acquisition of another
business or entity or the Company's purchase of Common Stock to exercise a
"call" purchase option). Such adjustments shall be made by the Committee, whose
determination in this respect shall be final, binding and conclusive.
(b) The Committee may change the terms of Options outstanding
under the Plan, with respect to the exercise price or the number of Shares
subject to this Option, or both, when, in the Committee's sole judgment and
discretion, such adjustments become appropriate by reason of a Change of
Control.
(c) Except as expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such shares, or upon conversion of
shares or obligations of the Company convertible into such shares or securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to this Option.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate: (i)
any or all adjustments, recapitalizations, reclassifications, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference
stock, that would rank senior to or above the Shares subject to outstanding
Options; (iv) any purchase or issuance by the Company of Shares or other classes
of common stock or common equity securities; (v) the
4
<PAGE>
dissolution or liquidation of the Company; (vi) any sale, transfer, encumbrance,
pledge or assignment of all or any part of the assets or business of the
Company; or (vii) any other corporate act or proceeding, whether of a similar
character or otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise her or his
Option.
11. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any law, regulation, agreement or other applicable restriction,
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all
of the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
12. Redemption of Shares by the Corporation.
(a) Right to Redeem. Subject to any restrictions under
applicable corporate or other laws, and notwithstanding any other provisions to
the contrary, and in addition to the rights of the Company contained in Section
5 hereof, the Company shall have the right to redeem any Shares issued to the
Optionee pursuant to the exercise by such Optionee of the Option granted to him
hereunder immediately upon the termination of Optionee's employment or services
arising from: (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary termination of employment or services of the Optionee; or (iv) the
termination of employment or services of the Optionee for Cause (each an "Event
of Redemption").
5
<PAGE>
(b) Redemption Price.
(i) Subject to clause (ii) below, the purchase price
(the "Redemption Price"), to be paid by the Company to the Optionee at the
Redemption Closing (as defined below) for the Shares of the Optionee upon the
occurrence of an Event of Redemption pursuant Section 12(a)(i)-(iii), shall be
the Fair Market Value of the Shares on the date of the Event of Redemption as
determined in accordance with Section 2(n) of the Plan.
(ii) In the event that the Corporation's right to
redeem pursuant to Section 12(a) above occurs as a result of the termination of
employment or services of the Optionee for Cause, as set forth in Section
12(a)(iv) hereof, the Optionee shall not be entitled to receive any compensation
for his Shares, and the Optionee shall immediately surrender the Shares to the
Company without payment of any further compensation for the Shares.
(c) Redemption Closing. The closing (the "Redemption Closing")
shall take place no later than thirty (30) days after the date of the occurrence
of the Redemption Event. At the Redemption Closing: (i) the Optionee shall
deliver to the Company the share certificate or certificates evidencing the
ownership of the Shares together with duly executed stock powers endorsed in
blank and such other documents as the Company shall require; and (ii) the
Company shall pay to the Optionee the Redemption Price (if any) by wire
transfer, certified check or, in the Company's sole discretion, by delivery of a
promissory note to the Optionee in the principal amount of the Redemption Price
and payable on such terms as the Company may deem appropriate.
13. Withholding. In the event the Company determines that it is
required to withhold Federal, state, or local taxes in connection with the
purchase or disposition of Shares, the Optionee or any person succeeding to the
rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Company to enable it to
satisfy no more than the statutory minimum of such withholding requirements.
14. Miscellaneous.
(a) If any provision of this Agreement should be held invalid
for the granting of Options or illegal for any reason, such determination shall
not affect the remaining provisions hereof, but instead this Agreement shall be
construed and enforced as if such provision had never been included in this
Agreement.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida.
(c) Headings contained in this Agreement are for convenience
only and shall in no manner be construed as part of this Agreement.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) Neither the Plan nor any Option granted pursuant thereto
shall be construed to give any person the right to remain in the employ or
service of the Company or any
6
<PAGE>
Affiliate, or to affect the right of the Company or any Affiliate to terminate
such individual's employment or service at any time with or without cause. The
grant of an Option shall not entitle the Optionee to, or disqualify the Optionee
from, participation in the grant of any other Option under the Plan or
participation in any other benefit plan maintained by the Company or any
Affiliate.
(f) This Agreement shall be binding upon the Company's
successors and assigns and shall inure to the benefit of any representative,
executor, administrator, heir or legatee of the Optionee.
15. Acknowledgment. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan or this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
-----------------------------
Albert Friedman, President
- --------------------------------------------------------------------------------
Accepted and Agreed to on the date first above written.
OPTIONEE
/s/ Hugo Calemczuk
- -------------------------
Hugo Calemczuk
7
<PAGE>
Exhibit 1
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
Election to Exercise Stock Option
To:
From:
Date:
Pursuant to the provisions of my Option Agreement (the "Agreement")
issued under the Take To Auction.Com, Inc. 1999 Stock Option Plan (the "Plan")
with the grant date of _______________ [insert Grant Date], I hereby elect to
exercise on the exercise date indicated below the option evidenced by that
Agreement (the "Option") with respect to ___________ [insert number] Shares of
Take To Auction.Com, Inc. (the "Option Shares"). I agree to purchase the Option
Shares at the price and terms established under the Agreement and the Plan. I am
attaching $_____________ (__________ U.S. Dollars) as payment in full of the
exercise price of the Option Shares in the form of cash, bank check, certified
check or personal check (with the consent of the Committee) [circle one].
I hereby represent that I am acquiring the Option Shares for my own
account for investment and that I have no present intention of distributing or
otherwise disposing of any such shares in violation of the Securities Act of
1933, as amended (the "Securities Act"). I understand that no delivery of the
Option Shares will be made to me until the Committee has determined that such
delivery complies with applicable federal and state securities laws.
I also recognize that such shares constitute "restricted securities"
under the Securities Act and have not been registered under the Securities Act
or any applicable state securities laws, that the certificate will contain a
legend restricting their transfer, that the transfer agent for Take To
Auction.Com, Inc. (the "Company") will be instructed not to effectuate a
transfer without written authorization from the Company and that the Option
Shares may not be transferred or sold unless they are subsequently registered or
an exemption from such registration is available. I understand that the Company
is under no obligation to register the Option Shares.
I am aware of the Company's business affairs and financial condition
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Option Shares. I acknowledge that I
have received from the Company a copy of the Plan and a copy of the Agreement. I
have substantial knowledge and experience in financial and
<PAGE>
business matters so that I am capable of evaluating the merits and risks of
acquiring the Option Shares and have the capacity to protect my own interests.
[I am an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.]
I further understand that pursuant to the Agreement the Option Shares
are subject to additional restrictions regarding transfer and resale and Company
repurchase rights.
I hereby warrant that I am entitled under the Agreement and the Plan to
purchase the Option Shares which I have agreed to purchase herein.
I further understand that the Company may refrain from delivering or
transferring the Option Shares until the Committee has determined that I have
made payment in full of the Purchase Price for all Option Shares designated in
this document (e.g., my check has cleared, if payment is made by personal check)
and I have tendered to the Company (or, if applicable, an affiliate of the
Company) cash or other consideration acceptable to the Committee which is
sufficient to pay any federal, state or local taxes that the Committee
determines the Company (or, if applicable, an affiliate of the Company) is
required to withhold as a result of my exercise of the Option and that the
Company (or, if applicable, an affiliate of the Company) has the right to deduct
from cash payments otherwise due to me any such tax.
- ------------------------------------
(signature)
Exercise Date:
----------------------
2
<PAGE>
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
-------------------------
This agreement ("Agreement") by and between Take To Auction.Com, Inc.,
a Florida corporation (the "Company"), and Horacio Groisman (the "Optionee")
currently residing at __________________________________, as entered into as of
the ___ day of August, 1999 (the "Grant Date"). Under this Agreement, the
Company grants an option (the "Option") to the Optionee to purchase a total of
one hundred seventy-four thousand four hundred ninety (174,490) shares (the
"Shares") of Common Stock which takes into consideration the stock split on a
2.326530644-for-1 basis effective November 3, 1999, par value $.001 per share of
the Company (the "Common Stock") at the exercise price determined as provided
herein, pursuant to the Take To Auction.Com, Inc. 1999 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference. The
Optionee hereby acknowledges receipt of the Plan and agrees to be bound by all
of the terms and conditions thereof. Capitalized terms used but not otherwise
defined herein shall have the same meanings as provided in the Plan.
1. Nature of the Option. This Option is a Non-Statutory Stock Option
and is not intended to constitute an "incentive stock option" as that term is
used in Code Section 422.
2. Exercise Schedule. Except as otherwise provided herein or in the
Plan, this Option shall be exercisable in accordance with Section 6 in whole or
in part and cumulatively according to the following schedule:
(a) 58,163.33 shares of Common Stock shall vest one year after
the signing of this Agreement.
(b) 58,163.33 shares of Common Stock shall vest two years
after the signing of this Agreement.
(c) 58,163.33 shares of Common Stock shall vest three years
after the signing of this Agreement.
provided, however, that in no event shall the Option be exercisable after the
expiration of 7 years from the Grant Date. Notwithstanding any other provision
herein, each increment of this Option set forth in the schedule above shall vest
and become exercisable by the Optionee if and only if the Optionee is in the
employ of the Company on the relevant date or dates indicated above.
3. Change of Control; Acceleration of Vesting. In the event of a Change
of Control this Option may, at the sole discretion of the Committee: (a) become
immediately vested and exercisable in full; or (b) be converted into an option
or similar equity security of the surviving or successor company having, as
similar as possible or better, the rights, value, terms and characteristics of
this Option, or (c) terminate immediately prior to the consummation of such
proposed action; provided, that if the Option is then exercisable, the Optionee
shall have
<PAGE>
received written notice within a reasonable time prior to the consummation of
such action advising the Optionee of (i) any of the foregoing and (ii) that the
Optionee has the opportunity to exercise his Option during such period. The
Committee may, in the exercise of its sole discretion, in such instances declare
that this Option shall terminate as of a date fixed by the Board and give the
Optionee the right to exercise his or her Option.
4. Exercise Price. The exercise price of the Shares subject to this
Option is $0.41 for each Share.
5. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become unexercisable at the time of the
earliest to occur of the following:
(i) one year after the date on which the Optionee's
employment or service with the Company or a Subsidiary is terminated for any
reason, including, but not limited to a Disability, other than by reason of (A)
Cause, (B) voluntary termination of employment by the Optionee, or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company
or any Subsidiary of the Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service with the Company or any Subsidiary by the Optionee;
(iv) one year after the date of the Optionee's death;
provided, that if the Optionee shall die after terminating employment or service
by reason of Disability, the unexercised portion of any Option may be
exercisable only until the later to occur of one year following the Optionee's
termination of employment or service, or one month following the Optionee's
death.
(b) The Committee in its sole discretion may, by giving
written notice ("cancellation notice") to the Optionee, cancel, effective upon
the date of the consummation of any Change of Control, any Option that remains
unexercised on such date. Such cancellation notice shall be given within a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 5, any Option (or portion thereof) not previously
exercised pursuant to Section 7 hereof shall be canceled.
6. Transferability of Options.
(a) This Option is not subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or by the
laws of descent and distribution and any attempt to make such a prohibited
transfer shall be void. Notwithstanding, the Committee hereby permits the
Optionee to transfer this Non Statutory Stock Option to a family member or
2
<PAGE>
trust for the benefit of a family member, provided such transfer does not
violate the requirements of Rule 16-3. The Option shall be exercisable during
the Optionee's lifetime only by the Optionee or, in the event this Non Statutory
Stock Option has been assigned or otherwise transferred, only by such assignee.
(b) Provided the transaction does not violate the requirements
of Rule 16b-3, no Shares acquired by an Officer or Director, as these terms are
defined under Rule 16b-3, pursuant to the exercise of an Option may be sold,
assigned, pledged or otherwise transferred prior to the expiration of the
six-month period following the Grant Date.
7. Exercise of Options.
(a) The Optionee shall exercise the Option in whole or in part
by filing a written notice in the form of an "Exercise Letter" (attached hereto
as Exhibit 1) with the Secretary of the Company at its corporate headquarters.
The Exercise Letter shall specify the number of Shares that the Optionee elects
to purchase, and shall be accompanied by payment of the exercise price for such
Shares as indicated in the Exercise Letter.
(b) The exercise price of the Option may be paid in cash, by
certified or official bank check, by personal check (with the approval of the
Committee), by money order, with Shares owned by the Optionee that have been
owned by the Optionee for more than 6 months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings for
financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the exercise price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note. If the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Exercise Letter is
filed with the Company.
(c) The Optionee shall not be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to the Optionee under the terms of this Option and
the Plan (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). Until the issuance of the
stock certificate evidencing the shares as to which an Option has been
exercised, no right to vote or to receive dividends or any other rights as a
shareholder shall exist with respect to shares of Common Stock subject to an
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
notwithstanding the exercise of such Option, except as expressly provided in
Section 10 hereof.
8. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal and State laws pertaining to the issuance of securities. If the Company
reaches such a determination, it shall use all reasonable efforts to
3
<PAGE>
obtain compliance to such laws, rules or regulations. In making any
determination hereunder, the Company may rely on the opinion of counsel for the
Company. As a condition to the exercise of this Option, the Company may require
the Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
9. Death of Optionee. Upon the death of Optionee this Option may be
exercised by the executor or administrator of the Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death and only for such period of time as shall be permitted pursuant to Section
5(a) hereof, and subject to all of the restrictions contained in this Agreement
and the Plan.
10. Adjustment of Shares.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the aggregate number
of Shares which have been authorized for issuance hereunder, as well as the
exercise price per share of Common Stock covered by this Option, shall be
appropriately adjusted for any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a stock dividend or through
any recapitalization, reclassification, stock split-up, combination or exchange
of Common Stock (other than any such exchange or issuance of Common Stock
through which Common Stock is issued to effect an acquisition of another
business or entity or the Company's purchase of Common Stock to exercise a
"call" purchase option). Such adjustments shall be made by the Committee, whose
determination in this respect shall be final, binding and conclusive.
(b) The Committee may change the terms of Options outstanding
under the Plan, with respect to the exercise price or the number of Shares
subject to this Option, or both, when, in the Committee's sole judgment and
discretion, such adjustments become appropriate by reason of a Change of
Control.
(c) Except as expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such shares, or upon conversion of
shares or obligations of the Company convertible into such shares or securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to this Option.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate: (i)
any or all adjustments, recapitalizations, reclassifications, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference
stock, that would rank senior to or above the Shares subject to outstanding
Options; (iv) any purchase or issuance by the Company of Shares or other classes
of common stock or common equity securities; (v) the
4
<PAGE>
dissolution or liquidation of the Company; (vi) any sale, transfer, encumbrance,
pledge or assignment of all or any part of the assets or business of the
Company; or (vii) any other corporate act or proceeding, whether of a similar
character or otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise her or his
Option.
11. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any law, regulation, agreement or other applicable restriction,
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all
of the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
12. Redemption of Shares by the Corporation.
(a) Right to Redeem. Subject to any restrictions under
applicable corporate or other laws, and notwithstanding any other provisions to
the contrary, and in addition to the rights of the Company contained in Section
5 hereof, the Company shall have the right to redeem any Shares issued to the
Optionee pursuant to the exercise by such Optionee of the Option granted to him
hereunder immediately upon the termination of Optionee's employment or services
arising from: (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary termination of employment or services of the Optionee; or (iv) the
termination of employment or services of the Optionee for Cause (each an "Event
of Redemption").
5
<PAGE>
(b) Redemption Price.
(i) Subject to clause (ii) below, the purchase price
(the "Redemption Price"), to be paid by the Company to the Optionee at the
Redemption Closing (as defined below) for the Shares of the Optionee upon the
occurrence of an Event of Redemption pursuant Section 12(a)(i)-(iii), shall be
the Fair Market Value of the Shares on the date of the Event of Redemption as
determined in accordance with Section 2(n) of the Plan.
(ii) In the event that the Corporation's right to
redeem pursuant to Section 12(a) above occurs as a result of the termination of
employment or services of the Optionee for Cause, as set forth in Section
12(a)(iv) hereof, the Optionee shall not be entitled to receive any compensation
for his Shares, and the Optionee shall immediately surrender the Shares to the
Company without payment of any further compensation for the Shares.
(c) Redemption Closing. The closing (the "Redemption Closing")
shall take place no later than thirty (30) days after the date of the occurrence
of the Redemption Event. At the Redemption Closing: (i) the Optionee shall
deliver to the Company the share certificate or certificates evidencing the
ownership of the Shares together with duly executed stock powers endorsed in
blank and such other documents as the Company shall require; and (ii) the
Company shall pay to the Optionee the Redemption Price (if any) by wire
transfer, certified check or, in the Company's sole discretion, by delivery of a
promissory note to the Optionee in the principal amount of the Redemption Price
and payable on such terms as the Company may deem appropriate.
13. Withholding. In the event the Company determines that it is
required to withhold Federal, state, or local taxes in connection with the
purchase or disposition of Shares, the Optionee or any person succeeding to the
rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Company to enable it to
satisfy no more than the statutory minimum of such withholding requirements.
14. Miscellaneous.
(a) If any provision of this Agreement should be held invalid
for the granting of Options or illegal for any reason, such determination shall
not affect the remaining provisions hereof, but instead this Agreement shall be
construed and enforced as if such provision had never been included in this
Agreement.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida.
(c) Headings contained in this Agreement are for convenience
only and shall in no manner be construed as part of this Agreement.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) Neither the Plan nor any Option granted pursuant thereto
shall be construed to give any person the right to remain in the employ or
service of the Company or any
6
<PAGE>
Affiliate, or to affect the right of the Company or any Affiliate to terminate
such individual's employment or service at any time with or without cause. The
grant of an Option shall not entitle the Optionee to, or disqualify the Optionee
from, participation in the grant of any other Option under the Plan or
participation in any other benefit plan maintained by the Company or any
Affiliate.
(f) This Agreement shall be binding upon the Company's
successors and assigns and shall inure to the benefit of any representative,
executor, administrator, heir or legatee of the Optionee.
15. Acknowledgment. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan or this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
TAKE TO AUCTION.COM, INC.
By:/s/ Albert Friedman
--------------------------------
Albert Friedman, President
- --------------------------------------------------------------------------------
Accepted and Agreed to on the date first above written.
OPTIONEE
/s/ Horacio Groisman
- -------------------------------
Horacio Groisman
7
<PAGE>
Exhibit 1
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
Election to Exercise Stock Option
To:
From:
Date:
Pursuant to the provisions of my Option Agreement (the "Agreement")
issued under the Take To Auction.Com, Inc. 1999 Stock Option Plan (the "Plan")
with the grant date of _______________ [insert Grant Date], I hereby elect to
exercise on the exercise date indicated below the option evidenced by that
Agreement (the "Option") with respect to ___________ [insert number] Shares of
Take To Auction.Com, Inc. (the "Option Shares"). I agree to purchase the Option
Shares at the price and terms established under the Agreement and the Plan. I am
attaching $_____________ (__________ U.S. Dollars) as payment in full of the
exercise price of the Option Shares in the form of cash, bank check, certified
check or personal check (with the consent of the Committee) [circle one].
I hereby represent that I am acquiring the Option Shares for my own
account for investment and that I have no present intention of distributing or
otherwise disposing of any such shares in violation of the Securities Act of
1933, as amended (the "Securities Act"). I understand that no delivery of the
Option Shares will be made to me until the Committee has determined that such
delivery complies with applicable federal and state securities laws.
I also recognize that such shares constitute "restricted securities"
under the Securities Act and have not been registered under the Securities Act
or any applicable state securities laws, that the certificate will contain a
legend restricting their transfer, that the transfer agent for Take To
Auction.Com, Inc. (the "Company") will be instructed not to effectuate a
transfer without written authorization from the Company and that the Option
Shares may not be transferred or sold unless they are subsequently registered or
an exemption from such registration is available. I understand that the Company
is under no obligation to register the Option Shares.
I am aware of the Company's business affairs and financial condition
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Option Shares. I acknowledge that I
have received from the Company a copy of the Plan and a copy of the Agreement. I
have substantial knowledge and experience in financial and
<PAGE>
business matters so that I am capable of evaluating the merits and risks of
acquiring the Option Shares and have the capacity to protect my own interests.
[I am an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.]
I further understand that pursuant to the Agreement the Option Shares
are subject to additional restrictions regarding transfer and resale and Company
repurchase rights.
I hereby warrant that I am entitled under the Agreement and the Plan to
purchase the Option Shares which I have agreed to purchase herein.
I further understand that the Company may refrain from delivering or
transferring the Option Shares until the Committee has determined that I have
made payment in full of the Purchase Price for all Option Shares designated in
this document (e.g., my check has cleared, if payment is made by personal check)
and I have tendered to the Company (or, if applicable, an affiliate of the
Company) cash or other consideration acceptable to the Committee which is
sufficient to pay any federal, state or local taxes that the Committee
determines the Company (or, if applicable, an affiliate of the Company) is
required to withhold as a result of my exercise of the Option and that the
Company (or, if applicable, an affiliate of the Company) has the right to deduct
from cash payments otherwise due to me any such tax.
- ---------------------------------------
(signature)
Exercise Date:
-------------------------
2
<PAGE>
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
-------------------------
This agreement ("Agreement") by and between Take To Auction.Com, Inc.,
a Florida corporation (the "Company"), and Jonathan Geller (the "Optionee")
currently residing at _____________________________, is entered into as of this
1st day of October, 1999 (the "Grant Date"). Under this Agreement, the Company
grants an option (the "Option") to the Optionee to purchase a total of one
hundred sixty-two thousand eight hundred fifty-seven (162,857) shares (the
"Shares") of Common Stock which takes into consideration the stock split on a
2.326530644-for-1 basis effective November 3, 1999, par value $.001 per share of
the Company (the "Common Stock") at the exercise price determined as provided
herein, pursuant to the Take To Auction.Com, Inc. 1999 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference. The
Optionee hereby acknowledges receipt of the Plan and agrees to be bound by all
of the terms and conditions thereof. Capitalized terms used but not otherwise
defined herein shall have the same meanings as provided in the Plan.
1. Nature of the Option. This Option is a Non-Statutory Stock Option
and is not intended to constitute an "incentive stock option" as that term is
used in Code Section 422.
2. Exercise Schedule. Except as otherwise provided herein or in the
Plan, this Option shall be exercisable in accordance with Section 6 in whole or
in part and cumulatively according to the following schedule:
(a) 54,285.67 shares of Common Stock shall vest one year after
the signing of this Agreement.
(b) 54,285.67 shares of Common Stock shall vest two years
after the signing of this Agreement.
(c) 54,285.67 shares of Common Stock shall vest three years
after the signing of this Agreement.
provided, however, that in no event shall the Option be exercisable after the
expiration of 7 years from the Grant Date. Notwithstanding any other provision
herein, each increment of this Option set forth in the schedule above shall vest
and become exercisable by the Optionee if and only if the Optionee is in the
employ of the Company on the relevant date or dates indicated above.
3. Change of Control; Acceleration of Vesting. In the event of a Change
of Control this Option may, at the sole discretion of the Committee: (a) become
immediately vested and exercisable in full; or (b) be converted into an option
or similar equity security of the surviving or successor company having, as
similar as possible or better, the rights, value, terms and characteristics of
this Option, or (c) terminate immediately prior to the consummation of such
proposed action; provided, that if the Option is then exercisable, the Optionee
shall have
<PAGE>
received written notice within a reasonable time prior to the consummation of
such action advising the Optionee of (i) any of the foregoing and (ii) that the
Optionee has the opportunity to exercise his Option during such period. The
Committee may, in the exercise of its sole discretion, in such instances declare
that this Option shall terminate as of a date fixed by the Board and give the
Optionee the right to exercise his or her Option.
4. Exercise Price. The exercise price of the Shares subject to this
Option is $0.41 for each Share.
5. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become unexercisable at the time of the
earliest to occur of the following:
(i) one year after the date on which the Optionee's
employment or service with the Company or a Subsidiary is terminated for any
reason, including, but not limited to a Disability, other than by reason of (A)
Cause, (B) voluntary termination of employment by the Optionee, or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company
or any Subsidiary of the Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service with the Company or any Subsidiary by the Optionee;
(iv) one year after the date of the Optionee's death;
provided, that if the Optionee shall die after terminating employment or service
by reason of Disability, the unexercised portion of any Option may be
exercisable only until the later to occur of one year following the Optionee's
termination of employment or service, or one month following the Optionee's
death.
(b) The Committee in its sole discretion may, by giving
written notice ("cancellation notice") to the Optionee, cancel, effective upon
the date of the consummation of any Change of Control, any Option that remains
unexercised on such date. Such cancellation notice shall be given within a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 5, any Option (or portion thereof) not previously
exercised pursuant to Section 7 hereof shall be canceled.
6. Transferability of Options.
(a) This Option is not subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or by the
laws of descent and distribution and any attempt to make such a prohibited
transfer shall be void. Notwithstanding, the Committee hereby permits the
Optionee to transfer this Non Statutory Stock Option to a family member or
2
<PAGE>
trust for the benefit of a family member, provided such transfer does not
violate the requirements of Rule 16-3. The Option shall be exercisable during
the Optionee's lifetime only by the Optionee or, in the event this Non Statutory
Stock Option has been assigned or otherwise transferred, only by such assignee.
(b) Provided the transaction does not violate the requirements
of Rule 16b-3, no Shares acquired by an Officer or Director, as these terms are
defined under Rule 16b-3, pursuant to the exercise of an Option may be sold,
assigned, pledged or otherwise transferred prior to the expiration of the
six-month period following the Grant Date.
7. Exercise of Options.
(a) The Optionee shall exercise the Option in whole or in part
by filing a written notice in the form of an "Exercise Letter" (attached hereto
as Exhibit 1) with the Secretary of the Company at its corporate headquarters.
The Exercise Letter shall specify the number of Shares that the Optionee elects
to purchase, and shall be accompanied by payment of the exercise price for such
Shares as indicated in the Exercise Letter.
(b) The exercise price of the Option may be paid in cash, by
certified or official bank check, by personal check (with the approval of the
Committee), by money order, with Shares owned by the Optionee that have been
owned by the Optionee for more than 6 months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings for
financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the exercise price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note. If the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Exercise Letter is
filed with the Company.
(c) The Optionee shall not be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to the Optionee under the terms of this Option and
the Plan (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). Until the issuance of the
stock certificate evidencing the shares as to which an Option has been
exercised, no right to vote or to receive dividends or any other rights as a
shareholder shall exist with respect to shares of Common Stock subject to an
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
notwithstanding the exercise of such Option, except as expressly provided in
Section 10 hereof.
8. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal and State laws pertaining to the issuance of securities. If the Company
reaches such a determination, it shall use all reasonable efforts to
3
<PAGE>
obtain compliance to such laws, rules or regulations. In making any
determination hereunder, the Company may rely on the opinion of counsel for the
Company. As a condition to the exercise of this Option, the Company may require
the Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
9. Death of Optionee. Upon the death of Optionee this Option may be
exercised by the executor or administrator of the Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death and only for such period of time as shall be permitted pursuant to Section
5(a) hereof, and subject to all of the restrictions contained in this Agreement
and the Plan.
10. Adjustment of Shares.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the aggregate number
of Shares which have been authorized for issuance hereunder, as well as the
exercise price per share of Common Stock covered by this Option, shall be
appropriately adjusted for any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a stock dividend or through
any recapitalization, reclassification, stock split-up, combination or exchange
of Common Stock (other than any such exchange or issuance of Common Stock
through which Common Stock is issued to effect an acquisition of another
business or entity or the Company's purchase of Common Stock to exercise a
"call" purchase option). Such adjustments shall be made by the Committee, whose
determination in this respect shall be final, binding and conclusive.
(b) The Committee may change the terms of Options outstanding
under the Plan, with respect to the exercise price or the number of Shares
subject to this Option, or both, when, in the Committee's sole judgment and
discretion, such adjustments become appropriate by reason of a Change of
Control.
(c) Except as expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such shares, or upon conversion of
shares or obligations of the Company convertible into such shares or securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to this Option.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate: (i)
any or all adjustments, recapitalizations, reclassifications, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference
stock, that would rank senior to or above the Shares subject to outstanding
Options; (iv) any purchase or issuance by the Company of Shares or other classes
of common stock or common equity securities; (v) the
4
<PAGE>
dissolution or liquidation of the Company; (vi) any sale, transfer, encumbrance,
pledge or assignment of all or any part of the assets or business of the
Company; or (vii) any other corporate act or proceeding, whether of a similar
character or otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise her or his
Option.
11. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any law, regulation, agreement or other applicable restriction,
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all
of the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
12. Redemption of Shares by the Corporation.
(a) Right to Redeem. Subject to any restrictions under
applicable corporate or other laws, and notwithstanding any other provisions to
the contrary, and in addition to the rights of the Company contained in Section
5 hereof, the Company shall have the right to redeem any Shares issued to the
Optionee pursuant to the exercise by such Optionee of the Option granted to him
hereunder immediately upon the termination of Optionee's employment or services
arising from: (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary termination of employment or services of the Optionee; or (iv) the
termination of employment or services of the Optionee for Cause (each an "Event
of Redemption").
5
<PAGE>
(b) Redemption Price.
(i) Subject to clause (ii) below, the purchase price
(the "Redemption Price"), to be paid by the Company to the Optionee at the
Redemption Closing (as defined below) for the Shares of the Optionee upon the
occurrence of an Event of Redemption pursuant Section 12(a)(i)-(iii), shall be
the Fair Market Value of the Shares on the date of the Event of Redemption as
determined in accordance with Section 2(n) of the Plan.
(ii) In the event that the Corporation's right to
redeem pursuant to Section 12(a) above occurs as a result of the termination of
employment or services of the Optionee for Cause, as set forth in Section
12(a)(iv) hereof, the Optionee shall not be entitled to receive any compensation
for his Shares, and the Optionee shall immediately surrender the Shares to the
Company without payment of any further compensation for the Shares.
(c) Redemption Closing. The closing (the "Redemption Closing")
shall take place no later than thirty (30) days after the date of the occurrence
of the Redemption Event. At the Redemption Closing: (i) the Optionee shall
deliver to the Company the share certificate or certificates evidencing the
ownership of the Shares together with duly executed stock powers endorsed in
blank and such other documents as the Company shall require; and (ii) the
Company shall pay to the Optionee the Redemption Price (if any) by wire
transfer, certified check or, in the Company's sole discretion, by delivery of a
promissory note to the Optionee in the principal amount of the Redemption Price
and payable on such terms as the Company may deem appropriate.
13. Withholding. In the event the Company determines that it is
required to withhold Federal, state, or local taxes in connection with the
purchase or disposition of Shares, the Optionee or any person succeeding to the
rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Company to enable it to
satisfy no more than the statutory minimum of such withholding requirements.
14. Miscellaneous.
(a) If any provision of this Agreement should be held invalid
for the granting of Options or illegal for any reason, such determination shall
not affect the remaining provisions hereof, but instead this Agreement shall be
construed and enforced as if such provision had never been included in this
Agreement.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida.
(c) Headings contained in this Agreement are for convenience
only and shall in no manner be construed as part of this Agreement.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) Neither the Plan nor any Option granted pursuant thereto
shall be construed to give any person the right to remain in the employ or
service of the Company or any
6
<PAGE>
Affiliate, or to affect the right of the Company or any Affiliate to terminate
such individual's employment or service at any time with or without cause. The
grant of an Option shall not entitle the Optionee to, or disqualify the Optionee
from, participation in the grant of any other Option under the Plan or
participation in any other benefit plan maintained by the Company or any
Affiliate.
(f) This Agreement shall be binding upon the Company's
successors and assigns and shall inure to the benefit of any representative,
executor, administrator, heir or legatee of the Optionee.
15. Acknowledgment. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan or this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
TAKE TO AUCTION.COM, INC.
By:/s/ Albert Friedman
--------------------------------
Albert Friedman, President
- --------------------------------------------------------------------------------
Accepted and Agreed to on the date first above written.
OPTIONEE
/s/ Jonathan Geller
- ---------------------------
Jonathan Geller
7
<PAGE>
Exhibit 1
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
Election to Exercise Stock Option
To:
From:
Date:
Pursuant to the provisions of my Option Agreement (the "Agreement")
issued under the Take To Auction.Com, Inc. 1999 Stock Option Plan (the "Plan")
with the grant date of _______________ [insert Grant Date], I hereby elect to
exercise on the exercise date indicated below the option evidenced by that
Agreement (the "Option") with respect to ___________ [insert number] Shares of
Take To Auction.Com, Inc. (the "Option Shares"). I agree to purchase the Option
Shares at the price and terms established under the Agreement and the Plan. I am
attaching $_____________ (__________ U.S. Dollars) as payment in full of the
exercise price of the Option Shares in the form of cash, bank check, certified
check or personal check (with the consent of the Committee) [circle one].
I hereby represent that I am acquiring the Option Shares for my own
account for investment and that I have no present intention of distributing or
otherwise disposing of any such shares in violation of the Securities Act of
1933, as amended (the "Securities Act"). I understand that no delivery of the
Option Shares will be made to me until the Committee has determined that such
delivery complies with applicable federal and state securities laws.
I also recognize that such shares constitute "restricted securities"
under the Securities Act and have not been registered under the Securities Act
or any applicable state securities laws, that the certificate will contain a
legend restricting their transfer, that the transfer agent for Take To
Auction.Com, Inc. (the "Company") will be instructed not to effectuate a
transfer without written authorization from the Company and that the Option
Shares may not be transferred or sold unless they are subsequently registered or
an exemption from such registration is available. I understand that the Company
is under no obligation to register the Option Shares.
I am aware of the Company's business affairs and financial condition
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Option Shares. I acknowledge that I
have received from the Company a copy of the Plan and a copy of the Agreement. I
have substantial knowledge and experience in financial and
<PAGE>
business matters so that I am capable of evaluating the merits and risks of
acquiring the Option Shares and have the capacity to protect my own interests.
[I am an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.]
I further understand that pursuant to the Agreement the Option Shares
are subject to additional restrictions regarding transfer and resale and Company
repurchase rights.
I hereby warrant that I am entitled under the Agreement and the Plan to
purchase the Option Shares which I have agreed to purchase herein.
I further understand that the Company may refrain from delivering or
transferring the Option Shares until the Committee has determined that I have
made payment in full of the Purchase Price for all Option Shares designated in
this document (e.g., my check has cleared, if payment is made by personal check)
and I have tendered to the Company (or, if applicable, an affiliate of the
Company) cash or other consideration acceptable to the Committee which is
sufficient to pay any federal, state or local taxes that the Committee
determines the Company (or, if applicable, an affiliate of the Company) is
required to withhold as a result of my exercise of the Option and that the
Company (or, if applicable, an affiliate of the Company) has the right to deduct
from cash payments otherwise due to me any such tax.
- -------------------------------------
(signature)
Exercise Date:
-----------------------
Exhibit 10.08
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of this __ day of August, 1999, by and between SLI.com Venture I ("Purchaser")
and TAKE TO AUCTION.COM, INC., a Florida corporation (the "Corporation").
RECITALS
A. The Corporation currently has an authorized capitalization
consisting of 50,000,000 shares of common stock, par value $.001 per share (the
"Common Stock"), of which 7,000,000 shares are issued and outstanding as of the
date hereof, and 10,000,000 shares of Preferred stock, par value $.001, of which
no shares are issued and outstanding.
B. Purchaser desires to purchase, and the Corporation desires to sell,
three hundred sixty-eight thousand and four hundred twenty-one (368,421) shares
of Common Stock (the "Stock"), subject to the terms and conditions of this
Agreement.
C. The directors of the Corporation, having considered the provisions
of this Agreement, have approved this Agreement, having determined that the
provisions hereof are in the best interests of the Corporation and its
shareholders.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Subscription for Purchase. Intending to be legally bound,
Purchaser hereby irrevocably subscribers for and purchases and the Corporation
hereby irrevocably issues and sells the Stock at the Purchase Price set forth in
Section 2 hereof.
Section 2. Purchase Price. The aggregate purchase price (the "Purchase
Price") to be paid for the Stock to be acquired pursuant to this Agreement is
[three hundred fifty thousand Dollars ($350,000.00)]. The Purchase Price shall
be paid and delivered as set forth in Section 3 below.
Section 3. Closing. The closing shall occur at the principal office of
offices of Baker & McKenzie, 1200 Brickell Avenue Miami, Florida 33131, at 10:00
a.m. on August 27, 1999, or at such other time and place as the Company shall
designate by written notice to the undersigned. At the closing, the Corporation
shall present Purchaser share certificates for all shares of Stock to be
acquired, such share certificates to be in proper form for transfer. Purchaser,
upon receipt of a proper tender of the Stock from the Corporation, shall tender
payment of the Purchase Price in
<PAGE>
cash or by official bank check or money order (or such other form of
consideration as may be mutually agreed upon by the parties).
Section 4. Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to the Corporation as follows:
(a) State Securities Laws. Purchaser received this Agreement
and first learned of the offer and sale of the Stock contemplated hereby in
Florida. Purchaser executed and will execute all documents contemplated hereby
in Florida, and intends that the laws of Florida govern this offering of Stock.
Purchaser understands, agrees and acknowledges that the Stock
has not been registered under the Florida Securities Act in reliance upon
exemption provisions contained therein which the Corporation believes are
available. Any sale made pursuant to such exemption provisions is voidable by
Purchaser within three business days after the first tender of consideration is
made by Purchaser to the issuer, an agent of the issuer or an escrow agent. A
withdrawal within such three day period will be without any further liability to
any person. To accomplish this withdrawal, a subscriber need only send a letter
or telegram to the Corporation at the address set forth in these offering
documents, indicating his or her intention to withdraw.
Such letter or telegram should be sent and postmarked prior to
the end of the aforementioned third business day. It is advisable to send such
letter by certified mail, return receipt requested, to ensure that it is
received and also to evidence the date it was mailed. If the request is made
orally, in person or by telephone, to a representative of the Corporation, a
written confirmation that the request has been received should be requested.
(b) Authority. Purchaser has the capacity, power and authority
to execute this Agreement and perform her obligations hereunder. This Agreement
has been duly executed and delivered by Purchaser and (assuming the due
execution and delivery hereof by the Corporation) constitutes a valid and
binding obligation of Purchaser enforceable against Purchaser in accordance with
its terms.
(c) Acquisition for Investment. Purchaser shall acquire the
Stock for investment solely for Purchaser's account and not for distribution,
transfer or resale to others.
(d) Restrictions on Transfer. Purchaser understands that she
must bear the economic risk of the purchase of the Stock for an indefinite
period of time because, except as provided in this Agreement, (i) the
Corporation's sale of the Stock to Purchaser will not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws in reliance on Purchaser's representations; (ii) the Stock may not be sold,
transferred, pledged, or otherwise disposed of without the consent of the
Corporation and an opinion of counsel for or satisfactory to the Corporation
that registration under the Act or any applicable state securities laws is not
required; (iii) the Corporation neither has an obligation to register a sale of
the Stock nor has it agreed to do so in the future; and (iv) the exemption
provided in Rule 144 under the Act is not presently available for the resale of
any Stock, and it is
2
<PAGE>
unlikely that such exemption will be available at any time in the future with
respect to any proposed transfer of Stock.
(e) Certain Risk Factors. Purchaser understands the
speculative nature of and risks involved in the proposed investment in the
Corporation, and all matters relating to the structure and the operations of the
Corporation have been discussed and explained to Purchaser's satisfaction. For a
discussion of certain risk factors that should be considered in connection with
an investment in the Common Stock offered hereby, please see the section
entitled Risk Factors contained in the Business Plan dated August, 1999,
attached hereto as Exhibit A. Purchaser specifically acknowledges, understands
and agrees that, (i) as a minority shareholder, Purchaser will have no control
over or influence in the management of the Corporation, (ii) that no return on
investment, whether through distributions, appreciation, transferability or
otherwise, and no above-average or other performance, by, through or of the
Corporation, has been promised, assured, represented or warranted by the
Corporation or any director, officer, employee, agent or representative thereof;
(iii) that there is no present public or other market for the Stock and that
there may never be a public or other market for the Stock; and (iv) that the
purchase of the Stock is a highly speculative investment, involving a high
degree of risk, and is suitable only for persons of adequate financial means who
are able to bear the economic risks inherent in such an investment and have no
need for liquidity in this investment in that, among other things, (a) such
persons may not be able to liquidate their investment in the event of an
emergency or otherwise, (b) transferability is extremely limited, and (c) in the
event of a disposition or otherwise, such persons could sustain a complete loss
of their entire investment.
(f) Restrictive Legends. Purchaser understands that the
certificate evidencing Purchaser's Stock will bear a restrictive legend
prohibiting the transfer thereof except in compliance with the applicable state
and federal securities laws.
(g) Access to Information. Purchaser has been offered, and up
to the date of purchase shall be offered, the opportunity to ask questions of,
and receive answers from, the Corporation and to obtain any additional
information, to the extent that the Corporation possesses such information or
could have acquired it without unreasonable effort or expense, necessary to
verify the accuracy of the information contained in the documents delivered to
Purchaser and has in general had access to all information Purchaser has deemed
material to an investment decision with respect to the purchase of the Stock.
Section 5. Representations of the Corporation. The Corporation hereby
represents and warrants to Purchaser that, upon payment of the Purchase Price
and upon the issuance and delivery of the Stock to Purchaser in accordance with
the terms and conditions of this Agreement, the Stock will be duly authorized,
validly issued, fully paid and nonassessable; and Purchaser will be the true and
lawful owner of the Stock, and will hold such Stock free and clear of any and
all security interests, liens, claims, options, charges or other legal or
equitable restrictions or encumbrances.
3
<PAGE>
Section 6. Legend. All certificates representing Stock of the
Corporation issued to Purchaser shall bear the following legend. At the bottom
of the face of each such certificate there shall appear the following statement:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED. SEE REVERSE SIDE."
All certificates representing Stock of the Corporation issued to the
shareholders shall also bear the following legends on the reverse side of the
certificate (or legends in substantially similar form):
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH
SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL,
SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED."
The Corporation may also cause to be imposed upon such certificates such other
legends as counsel to the Corporation shall determine to be required under the
provisions of any federal securities act or any state law.
Section 7. Notice. Any notice or demand required to be given hereunder
shall be in writing and shall be deemed to have been duly given and received, if
given by hand, when a writing containing such notice is received by the person
to whom addressed or, is given by mail, two (2) business days after a certified
or registered letter containing such notice, with postage prepaid, is deposited
in the United States mails, addressed to:
To the Corporation: Take to Auction.com, Inc.
2335 N.W. 107th Avenue, Suite 2 M-23
Miami, Florida 33172
Attn: Albert Friedman, President
Telephone: (305) 436-0870
Telecopier: (305) _________
4
<PAGE>
With a copy to: Baker & McKenzie,
1200 Brickell Avenue, 19th Floor
Miami, Florida 33131
Telecopier: (305) 789-8953
Attention: Keith Wasserstrom, Esq.
To Purchaser: At the address provided on the signature page hereto.
Any party may change its address for the purposes of this Agreement by giving
notice of such change of address to the other parties in the manner herein
provided for giving notice. Time shall be of the essence with respect to all
time periods specified for the giving of notices to the Corporation hereunder.
Section 8. Miscellaneous.
(a) Modification. This Agreement may only be amended,
terminated or modified by the written consent of all parties.
(b) Successors. This Agreement cannot be assigned,
transferred or otherwise conveyed by Purchaser without the consent of the
Corporation which consent shall not be unreasonably withheld. This Agreement
shall be binding upon the parties hereto, their heirs, administrators,
successors, executors and assigns, and the parties hereto do covenant and agree
that they themselves and their respective heirs, executors, successors,
administrators and assigns will execute any and all instruments, releases,
assignments and consents that may be reasonably required of them to more fully
execute the provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall serve as an original for all
purposes, but all copies of which shall constitute but one and the same
Agreement.
(d) Headings. All headings set forth in this
Agreement are intended for convenience only and shall not control or affect the
meaning, construction or effect of this Agreement or of any of the provisions
thereof.
(e) Governing Law. This Agreement shall be governed
by and shall be construed and enforced in accordance with the laws of the State
of Florida. To the fullest extent permitted by law, the subscriber and the
Corporation hereby (a) submit to the jurisdiction of the Florida and United
States courts for the Florida judicial circuit and the federal district,
respectively, wherein lies Miami-Dade County, Florida for purposes of any legal
action or proceeding brought under this Agreement and (b) agree that exclusive
venue of any such action or proceeding may be laid in Miami-Dade County, Florida
and waive any claim that the same is an inconvenient forum.
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<PAGE>
(f) Entire Agreement. This Agreement constitutes the
entire Agreement of the parties hereto with respect to the subject matter
hereof, and it is hereby agreed that any prior oral or written agreements
concerning the sale or disposition of the Stock shall be null and void.
(g) Specific Performance; Fees. The right to own and
vote Stock is hereby declared by the parties hereto to be a unique right, the
loss of which is not susceptible to monetary quantification. Consequently, the
parties hereto agree that an action for specific performance of the purchase and
sale obligations created by this Agreement is a proper remedy for the breach of
its provisions. If the parties to this Agreement are forced to institute legal
proceedings to enforce their rights in accordance with the provisions of this
Agreement, the prevailing party shall be entitled to recover their reasonable
attorneys' fees and court costs incurred in enforcing such rights.
(h) Indemnification. Each party shall indemnify and
hold each other and their respective affiliated companies, officers, directors,
employees, stockholders and agents harmless from all liabilities, claims, costs,
damages and expenses, including reasonable attorney's fees and costs, at both
the trial and appellate levels, arising out of any breach on the part of the
either party with respect to any of their respective representations or
obligations under this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set
their names as of the date first above written.
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
-----------------------------------
Name: Albert Friedman
Title: President
Purchaser:
SLI.com VENTURE I
By: /s/ Mario Alberto Janovich
-----------------------------------
Name: Mario Alberto Janovich
Title: Attorney-in-fact
Address of Purchaser:
Plaza Credicoop Bank
Piso #12
Calle Nicanor y Obarrio y Calle 50
Panama, Republica de Panama
Exhibit 10.09
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of this 20th day of October, 1999, by and between Dominion Income Management,
Inc. ("Purchaser") and TAKE TO AUCTION.COM, INC., a Florida corporation (the
"Corporation").
RECITALS
A. The Corporation currently has an authorized capitalization
consisting of 50,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock"), of which 7,368,421 shares are issued and outstanding as of the
date hereof, and 10,000,000 shares of Preferred stock, par value $0.001, of
which no shares are issued and outstanding.
B. Purchaser desires to purchase, and the Corporation desires to sell,
three hundred sixty-eight thousand and four hundred twenty-one (368,421) shares
of Common Stock (the "Stock"), subject to the terms and conditions of this
Agreement.
C. The directors of the Corporation, having considered the provisions
of this Agreement, have approved this Agreement, having determined that the
provisions hereof are in the best interests of the Corporation and its
shareholders.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Subscription for Purchase. Intending to be legally bound,
Purchaser hereby irrevocably subscribers for and purchases and the Corporation
hereby irrevocably issues and sells the Stock at the Purchase Price set forth in
Section 2 hereof.
Section 2. Purchase Price. The aggregate purchase price (the "Purchase
Price") to be paid for the Stock to be acquired pursuant to this Agreement is
three hundred fifty thousand Dollars ($350,000.00). The Purchase Price shall be
paid and delivered as set forth in Section 3 below.
Section 3. Closing. The closing shall occur at the principal office of
offices of Baker & McKenzie, 1200 Brickell Avenue Miami, Florida 33131, at 10:00
a.m. on October 21, 1999, or at such other time and place as the Company shall
designate by written notice to the undersigned. At the closing, the Corporation
shall present Purchaser share certificates for all shares of Stock to be
acquired, such share certificates to be in proper form for transfer. Purchaser,
upon receipt of a proper tender of the Stock from the Corporation, shall tender
payment of the Purchase Price in cash or by official bank check or money order
(or such other form of consideration as may be mutually agreed upon by the
parties).
<PAGE>
Section 4. Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to the Corporation as follows:
(a) State Securities Laws. Purchaser received this Agreement
and first learned of the offer and sale of the Stock contemplated hereby in
Florida. Purchaser executed and will execute all documents contemplated hereby
in Florida, and intends that the laws of Florida govern this offering of Stock.
Purchaser understands, agrees and acknowledges that
the Stock has not been registered under the Florida Securities Act in reliance
upon exemption provisions contained therein which the Corporation believes are
available. Any sale made pursuant to such exemption provisions is voidable by
Purchaser within three business days after the first tender of consideration is
made by Purchaser to the issuer, an agent of the issuer or an escrow agent. A
withdrawal within such three day period will be without any further liability to
any person. To accomplish this withdrawal, a subscriber need only send a letter
or telegram to the Corporation at the address set forth in these offering
documents, indicating his or her intention to withdraw.
Such letter or telegram should be sent and postmarked
prior to the end of the aforementioned third business day. It is advisable to
send such letter by certified mail, return receipt requested, to ensure that it
is received and also to evidence the date it was mailed. If the request is made
orally, in person or by telephone, to a representative of the Corporation, a
written confirmation that the request has been received should be requested.
(b) Authority. Purchaser has the capacity, power and authority
to execute this Agreement and perform her obligations hereunder. This Agreement
has been duly executed and delivered by Purchaser and (assuming the due
execution and delivery hereof by the Corporation) constitutes a valid and
binding obligation of Purchaser enforceable against Purchaser in accordance with
its terms.
(c) Acquisition for Investment. Purchaser shall acquire the
Stock for investment solely for Purchaser's account and not for distribution,
transfer or resale to others.
(d) Restrictions on Transfer. Purchaser understands that she
must bear the economic risk of the purchase of the Stock for an indefinite
period of time because, except as provided in this Agreement, (i) the
Corporation's sale of the Stock to Purchaser will not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws in reliance on Purchaser's representations; (ii) the Stock may not be sold,
transferred, pledged, or otherwise disposed of without the consent of the
Corporation and an opinion of counsel for or satisfactory to the Corporation
that registration under the Act or any applicable state securities laws is not
required; (iii) the Corporation neither has an obligation to register a sale of
the Stock nor has it agreed to do so in the future; and (iv) the exemption
provided in Rule 144 under the Act is not presently available for the resale of
any Stock, and it is unlikely that such exemption will be available at any time
in the future with respect to any proposed transfer of Stock.
2
<PAGE>
(e) Certain Risk Factors. Purchaser understands the
speculative nature of and risks involved in the proposed investment in the
Corporation, and all matters relating to the structure and the operations of the
Corporation have been discussed and explained to Purchaser's satisfaction. For a
discussion of certain risk factors that should be considered in connection with
an investment in the Common Stock offered hereby, please see the section
entitled Risk Factors contained in the Business Plan dated August, 1999,
attached hereto as Exhibit A. Purchaser specifically acknowledges, understands
and agrees that, (i) as a minority shareholder, Purchaser will have no control
over or influence in the management of the Corporation, (ii) that no return on
investment, whether through distributions, appreciation, transferability or
otherwise, and no above-average or other performance, by, through or of the
Corporation, has been promised, assured, represented or warranted by the
Corporation or any director, officer, employee, agent or representative thereof;
(iii) that there is no present public or other market for the Stock and that
there may never be a public or other market for the Stock; and (iv) that the
purchase of the Stock is a highly speculative investment, involving a high
degree of risk, and is suitable only for persons of adequate financial means who
are able to bear the economic risks inherent in such an investment and have no
need for liquidity in this investment in that, among other things, (a) such
persons may not be able to liquidate their investment in the event of an
emergency or otherwise, (b) transferability is extremely limited, and (c) in the
event of a disposition or otherwise, such persons could sustain a complete loss
of their entire investment.
(f) Restrictive Legends. Purchaser understands that the
certificate evidencing Purchaser's Stock will bear a restrictive legend
prohibiting the transfer thereof except in compliance with the applicable state
and federal securities laws.
(g) Access to Information. Purchaser has been offered, and up
to the date of purchase shall be offered, the opportunity to ask questions of,
and receive answers from, the Corporation and to obtain any additional
information, to the extent that the Corporation possesses such information or
could have acquired it without unreasonable effort or expense, necessary to
verify the accuracy of the information contained in the documents delivered to
Purchaser and has in general had access to all information Purchaser has deemed
material to an investment decision with respect to the purchase of the Stock.
Section 5. Representations of the Corporation. The Corporation hereby
represents and warrants to Purchaser that, upon payment of the Purchase Price
and upon the issuance and delivery of the Stock to Purchaser in accordance with
the terms and conditions of this Agreement, the Stock will be duly authorized,
validly issued, fully paid and nonassessable; and Purchaser will be the true and
lawful owner of the Stock, and will hold such Stock free and clear of any and
all security interests, liens, claims, options, charges or other legal or
equitable restrictions or encumbrances.
Section 6. Legend. All certificates representing Stock of the
Corporation issued to Purchaser shall bear the following legend. At the bottom
of the face of each such certificate there shall appear the following statement:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED. SEE REVERSE SIDE."
3
<PAGE>
All certificates representing Stock of the Corporation issued to the
shareholders shall also bear the following legends on the reverse side of the
certificate (or legends in substantially similar form):
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH
SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL,
SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED."
The Corporation may also cause to be imposed upon such certificates such other
legends as counsel to the Corporation shall determine to be required under the
provisions of any federal securities act or any state law.
Section 7. Notice. Any notice or demand required to be given hereunder
shall be in writing and shall be deemed to have been duly given and received, if
given by hand, when a writing containing such notice is received by the person
to whom addressed or, is given by mail, two (2) business days after a certified
or registered letter containing such notice, with postage prepaid, is deposited
in the United States mails, addressed to:
To the Corporation: Take to Auction.com, Inc.
2335 N.W. 107th Avenue, Suite 2 M-23
Miami, Florida 33172
Attn: Albert Friedman, President
Telephone: (305) 436-8070
Telecopier: (305) 436-8016
With a copy to: Baker & McKenzie,
1200 Brickell Avenue, 19th Floor
Miami, Florida 33131
Telecopier: (305) 789-8953
Attention: Keith Wasserstrom, Esq.
To Purchaser: At the address provided on the signature page hereto.
4
<PAGE>
Any party may change its address for the purposes of this Agreement by giving
notice of such change of address to the other parties in the manner herein
provided for giving notice. Time shall be of the essence with respect to all
time periods specified for the giving of notices to the Corporation hereunder.
Section 8. Miscellaneous.
(a) Modification. This Agreement may only be amended,
terminated or modified by the written consent of all parties.
(b) Successors. This Agreement cannot be assigned,
transferred or otherwise conveyed by Purchaser without the consent of the
Corporation which consent shall not be unreasonably withheld. This Agreement
shall be binding upon the parties hereto, their heirs, administrators,
successors, executors and assigns, and the parties hereto do covenant and agree
that they themselves and their respective heirs, executors, successors,
administrators and assigns will execute any and all instruments, releases,
assignments and consents that may be reasonably required of them to more fully
execute the provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall serve as an original for all
purposes, but all copies of which shall constitute but one and the same
Agreement.
(d) Headings. All headings set forth in this
Agreement are intended for convenience only and shall not control or affect the
meaning, construction or effect of this Agreement or of any of the provisions
thereof.
(e) Governing Law. This Agreement shall be governed
by and shall be construed and enforced in accordance with the laws of the State
of Florida. To the fullest extent permitted by law, the subscriber and the
Corporation hereby (a) submit to the jurisdiction of the Florida and United
States courts for the Florida judicial circuit and the federal district,
respectively, wherein lies Miami-Dade County, Florida for purposes of any legal
action or proceeding brought under this Agreement and (b) agree that exclusive
venue of any such action or proceeding may be laid in Miami-Dade County, Florida
and waive any claim that the same is an inconvenient forum.
(f) Entire Agreement. This Agreement constitutes the
entire Agreement of the parties hereto with respect to the subject matter
hereof, and it is hereby agreed that any prior oral or written agreements
concerning the sale or disposition of the Stock shall be null and void.
(g) Specific Performance; Fees. The right to own and
vote Stock is hereby declared by the parties hereto to be a unique right, the
loss of which is not susceptible to monetary quantification. Consequently, the
parties hereto agree that an action for specific performance of the purchase and
sale obligations created by this Agreement is a proper remedy for the breach of
its provisions. If the parties to this Agreement are forced to institute legal
proceedings to enforce their rights in accordance with the provisions of this
Agreement, the
5
<PAGE>
prevailing party shall be entitled to recover their reasonable attorneys' fees
and court costs incurred in enforcing such rights.
(h) Indemnification. Each party shall indemnify and
hold each other and their respective affiliated companies, officers, directors,
employees, stockholders and agents harmless from all liabilities, claims, costs,
damages and expenses, including reasonable attorney's fees and costs, at both
the trial and appellate levels, arising out of any breach on the part of the
either party with respect to any of their respective representations or
obligations under this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set
their names as of the date first above written.
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
------------------------------------
Name: Albert Friedman
Title: President
Purchaser:
Dominion Income Management, Inc.
By: /s/ Andrew L. Evans
------------------------------------
Name: Andrew L. Evans
Title: Chairman
Address of Purchaser:
15302 25th Drive S.E.
Millcreek, WA 95612
6
Exhibit 10.10
Version Date: September 16, 1999
USi Agreement Number: 113
iMAP AGREEMENT
USinternetworking, Inc. ("USi"), a Delaware corporation with its principal
office located at One USi Plaza, Annapolis, MD 21401-7428 and taketoAuction
("Client"), a Florida corporation, with its principal office located at 2335
N.W. 107th Avenue, Miami, FL 33172, hereby agree that the following terms and
conditions will apply to each iMAP Solution provided under this iMAP Agreement
("Agreement").
1. SCOPE OF SERVICE
1.1 Services
USi will provide the services as defined in individual Product
Schedules which will be mutually agreed upon, attached hereto and
incorporated herein as Exhibit A. The Product Schedules may be modified
by mutual written agreement. Changes or additions to work performed
under each Product Schedule may require changes in the resources
provided by USi and may result in additional costs or charges in each
Product Schedule.
1.2 Separate Agreement
Each Product Schedule shall reflect a separate agreement of the
parties, and, unless otherwise clearly specified in writing, the terms
and conditions of each Product Schedule shall be independent of and
shall have no impact upon, the provisions of any other Product
Schedule.
1.3 Additional Services
Client may order additional iMAP Solutions or add on to existing iMAP
Solutions by contacting USi. USi will send Client a Product Schedule,
based on USi's formal requirements analysis and/or proposal for the
additional services, specifying the terms of the iMAP Solution,
including the payment(s) due for each ordered item. Client may accept
the terms of the iMAP Solution by signing that Product Schedule and
returning it to USi. All executed Product Schedules will become part of
this Agreement and will be covered by all of this Agreement's terms and
conditions.
2. DEFINITIONS
2.1 "Acceptable Use Policy" shall mean USi's policy on the use of its
Global Network. The Acceptable Use Policy can be viewed at
http://www.usi.net/usepolicy.html.
2.2 "Addenda" shall mean any written document executed by both parties
which modifies the terms of this Agreement or any executed Product
Schedule.
2.3 "Agreement" shall mean this iMAP Agreement, any and all Exhibits
attached hereto and all Product Schedules attached simultaneously with
the execution of the Agreement or agreed upon and executed subsequent
hereto.
2.4 "Consulting and Implementation Services" shall mean the services
provided by USi as part of the iMAP Solution and may be set forth in
the Product Schedule as applicable.
2.5 "Content" means any and all text, multimedia or images (graphics, audio
and video), data and the like provided by Client and installed on a
server, which shall be subject to the terms and conditions set forth in
the Product Schedule and Acceptable Use Policy.
2.6 "Customization" shall mean any customized deliverable created by USi as
part of the iMAP Solution.
2.7 "Documentation" shall mean the Software Application user manual(s) and
any other materials supplied by USi concurrently with the delivery of
and for use with the iMAP Solution.
2.8 "Global Network" shall mean USi's Internet-based data center and
network.
Usinternetworking, Inc. Page 1 Copyright (Copyright) 1999
iMAP Agreement 9903-7 Proprietary & Confidential Usinternetworking, Inc.
<PAGE>
Version Date: September 16, 1999
2.9 "Hardware" shall mean any computing or networking equipment USi uses
and/or provides to Client for its use as part of the iMAP Solution.
2.10 "iMAP Solution" shall mean the collective bundling of any and all
Consulting and Implementation Services, Customization, access to the
Global Network, Hardware, Project Software, Software Application(s),
USi Software and Work Product, as outlined in each executed Product
Schedule.
2.11 "Product Schedule" shall mean a written order for any iMAP Solution
accepted by USi and executed by both parties, which shall be subject to
the terms and conditions of this Agreement and which, at a minimum,
shall contain a description of the work to be undertaken and the
obligations and responsibilities of each party related to that Product
Schedule.
2.12 "Project Software" shall mean any software developed by USi under this
Agreement or any Product Schedule.
2.13 "SLA" shall mean the Service Level Agreement specified in each Product
Schedule.
2.14 "Software Application" shall mean the Third Party computer software USi
provides to Client for its use as part of the iMAP Solution.
2.15 "Third Party" shall mean any natural person or legal entity other than
USi and Client.
2.16 "USi Software" shall mean certain software which was developed by USi
independently of this Agreement or pursuant to the terms of this
Agreement as may be required for customization.
2.17 "Work Product" shall mean all Consulting and Implementation Services
performed and/or created by USi solely for Client under this Agreement
as well as any other products of its work created hereunder solely for
Client which may consist of reports, designs, data or similar
materials.
3. LICENSE
3.1 Rights Granted
In accordance with the terms of this Agreement, USi grants to Client a
limited, nontransferable, non-exclusive license to use the iMAP
Solution included in the executed Product Schedules attached hereto for
the sole purpose of supporting the operations of Client's business as
described in the Product Schedule. Notwithstanding anything to the
contrary, Client may not use the iMAP Solution in a resale capacity, to
process and/or analyze the data of a Third Party as a service bureau or
on any Hardware other than as set forth in the relevant Product
Schedule.
3.2 Ownership
Except as expressly provided in Section 11 below, all components except
as outlined in product schedule in "Additional Ownership Rights" of the
iMAP Solution provided to Client shall remain at all times the property
of USi and/or its Third Party Software Application vendors and contain
trade secrets and other valuable proprietary information of USi and/or
its Third Party vendor.
3.3 Effective Date
This Agreement shall be effective on the date it is executed by USi,
and shall remain in effect for the Term unless terminated in accordance
with the provisions set forth in this Agreement.
3.4 Software
Client acknowledges and understands that USi may provide to Client (a)
USi Software and/or (b) Software Applications owned by Third Parties
which USi uses under license agreements from Third Parties defined in
Section 2.14 as "Software Application." Client acknowledges that (a)
title to all such USi Software and Software Application remains with
and is subject to the proprietary rights of USi or its Third Party
vendor, and (b) such USi Software and Software Application contain
trade secrets and other valuable proprietary information of USi or its
Third Party vendor.
3.5 Restrictions
Usinternetworking, Inc. Page 2 Copyright (Copyright) 1999
iMAP Agreement 9903-7 Proprietary & Confidential Usinternetworking, Inc.
<PAGE>
Version Date: September 16, 1999
Client agrees it shall not: (a) alter or modify the USi or Software
Application or any part thereof; (b) copy or duplicate, or permit a
Third Party to copy or duplicate, the USi Software or Software
Application or any part thereof or (c) reverse engineer, decompile or
disassemble USi Software or Software Application, unless otherwise
provided in the relevant Product Schedule.
3.6 Non-Transferable
Client agrees not to license, sell, transfer, lease or disclose the USi
Software or Software Application to any Third Party.
4. TERM
4.1 Agreement Term
The term of this Agreement (the "Term") shall commence on the Effective
Date and shall expire five (5) years thereafter unless (a) either
terminated pursuant to the terms of this Agreement or (b) extended by
mutual written agreement.
4.2 Product Schedule
Each individual Product Schedule shall include a period of performance.
In the event that any Product Schedule period of performance extends
beyond the Term, the Term shall automatically be extended and remain in
effect until such time as the Product Schedule period of performance is
completed.
5. PAYMENTS
5.1 Fees
As compensation for the license of the iMAP Solution granted to Client
and the provisions of services as applicable, Client agrees to pay the
amount(s) specified in each executed Product Schedule. Any fee
specified in a Product Schedule will only remain in effect until the
date specified in the Product Schedule.
5.2 Payment Terms
Unless otherwise specified in the Product Schedule, payments will be
due and payable to USi within thirty (30) days of Client's receipt of
USi's invoice. Such invoices will be generated in accordance with the
terms specified in each Product Schedule. USi reserves the right, in
USi's absolute discretion, to perform a credit check on Client.
5.3 Taxes
Client shall be responsible for the payment of all taxes associated
with this Agreement or its use of the iMAP Solution (other than taxes
based on USi's net income), including, but not limited to, personal
property taxes, import taxes, taxes on telecommunication services,
information services, data processing services or similar governmental
charges that may be assessed by any jurisdiction, whether based on
gross revenue or delivery of products or services. If USi is required
to pay any such taxes directly, Client shall, upon receipt of USi's
invoice, reimburse USi for any amount that USi has paid.
Notwithstanding the above, Client shall not be required to pay those
taxes from which Client is legally exempt.
5.4 Insurance
Client shall obtain and maintain adequate liability insurance and
insurance against loss or damage to USi's Hardware located on Client's
premises. Upon request, Client shall furnish to USi a Certificate of
Insurance or other evidence of insurance coverage.
5.5 Interest
Any payments not made when due will be subject to an interest charge of
one and one-half percent (1.5%) per month, unless applicable law
specifies a lower lawful rate of interest, in which case past due
payments shall bear interest at that lower maximum rate.
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6. WARRANTIES
6.1 Performance Warranty
USi warrants that: (a) work performed to complete any Product Schedule
will be performed by qualified personnel in a professional, workmanlike
manner, consistent with the prevailing standards of the industry; and
(b) it will use commercially reasonable efforts to complete each
Product Schedule.
6.2 Authority Warranty
USi warrants that it has the authority to license the Software
Application(s) for the purposes set forth in this Agreement and the
Product Schedule. Client acknowledges and agrees that its sole and
exclusive remedies for breach of this warranty are set forth in Section
8.1 of this Agreement.
6.3 Limitation
Unless otherwise expressly provided herein or in a Product Schedule,
neither USi nor any of its service providers, licensors, employees or
agents warrant (a) that the functions contained in the iMAP Solution
provided hereunder will meet Client's requirements or (b) that the
operation of the iMAP Solution will be uninterrupted or error free or
(c) that the products or services will have the capacity to meet the
demand during specific hours. USi will not be liable for any damages
that Client may suffer arising out of use, or inability to use, the
products or services provided hereunder. USi will not be liable for
unauthorized access to or alteration, theft or destruction of Client's
data files, programs, procedures or information through accident,
fraudulent means or devices, or any other method, unless such access,
alteration, theft or destruction is caused as a result of USi's gross
negligence or intentional misconduct.
6.4 Exclusion
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES
AND CONDITIONS, EXPRESSED, IMPLIED OR STATUTORY, INCLUDING, BUT NOT
LIMITED TO, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, TITLE OR NONINFRINGEMENT.
7. CLIENT CARE
7.1 Client Assistance Center
Under the Client Care program, USi will provide a level of service
concerning Client's iMAP Solution as outlined in each specific Product
Schedule. In all cases, Client will have availability to USi's Client
Assistance Center twenty-four (24) hours per day, seven (7) days per
week, three hundred sixty-five (365) days per year. Client acknowledges
and agrees that all calls into the Client Assistance Center are public
and may be monitored and/or recorded for quality control purposes.
7.2 Service Level Agreements
USi will provide a Service Level Agreement with each iMAP Solution
which will be stated in each executed Product Schedule. Specific
remedies for USi's failure to meet the applicable Service Level
Agreement will be stated in each executed Product Schedule.
7.3 Maintenance Window
USi has established set maintenance windows on Tuesday and Friday
mornings between the hours of 2am and 6am (ET). During this time, USi
reserves the right to take down a Client's server(s) in order to
conduct routine maintenance checks to both software and hardware. If a
Client's server(s) will be down for more than two (2) minutes within
this pre-established window, USi will advise Client of such prior to
any scheduled maintenance downtime. USi will not be responsible for any
damages or costs incurred by Client, if any, for scheduled down time.
USi reserves the right to change its maintenance window upon prior
notice to Client.
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8. INDEMNITY OBLIGATIONS
8.1 USi Indemnity Obligations
USi will (a) defend Client against any final claim that the products or
services delivered by USi infringe a patent, copyright, trade secret,
or other proprietary right in the United States; and (b) pay costs,
damages and attorney's fees finally awarded against Client as a result
of such claims.
(a) Infringement Remedies. In addition to defending Client as
stated above, if a claim occurs, or in USi's opinion, is
likely to occur, USi will, at its sole option and expense,
(subject to its agreement with Software Application vendors)
either (i) procure Client the right to continue using the
Software Application in question, or (ii) replace or modify
the infringing Software Application so that it becomes
noninfringing; provided that the Software Application's
functionality are not materially and adversely affected by
such replacement or modification. If neither of these
alternatives is reasonably available, Client shall return the
Software Application at issue and USi will refund the amount
paid by Client to USi for such Software Application as
depreciated. The depreciation shall be an equal amount per
year over a three (3) year life commencing with the date of
installation.
(b) Exclusions. USi shall not be liable for infringement claims
based on (i) the combination, operation or use of Software
Application with hardware, data or software not supplied by
USi if the claim would have been avoided by use of other
hardware, data or software; or (ii) modifications to Software
Application if the modifications were not made by USi.
8.2 Client Indemnity Obligations
Client will (a) defend USi against any claims by Third Parties arising
from Client's use of Software Application or iMAP Solution provided by
USi hereunder excluding, however, (i) proprietary rights infringement
claims under Section 8.1; and (ii) claims for bodily injury or damages
to tangible personal property proximately caused by the negligent act,
error or omission of USi and (b) pay costs, damages and attorney's fees
finally awarded against USi and any settlement costs incurred as a
result of such claims.
8.3 Conditions
The indemnification obligations set forth above in Sections 8.1 and 8.2
are contingent upon compliance with the following conditions by the
party seeking indemnification:
(a) Providing prompt written notice of a claim within twenty (20)
days of its service upon indemnified party;
(b) Providing all information and evidence within its control
which is necessary for the indemnifying party to conduct a
defense; and
(c) Providing the indemnifying party with sole control of the
defense and all related settlement negotiations. However, the
non-indemnifying party may participate in the defense or
settlement of the claim at its own expense.
8.4 Limitations of Remedy
This Section 8 states the entire obligations of the parties with
respect to indemnity or infringement of copyrights, patents, trade
secrets or other intellectual property or proprietary rights.
9. LIMITATION OF LIABILITY
9.1 Limitation of Liability
USi's entire liability and Client's exclusive remedies are set forth in
this Section 9, Section 6 WARRANTIES, Section 8 INDEMNITY OBLIGATIONS
and Section 10 TERMINATION. USi's liability to Client for damages
(regardless of the form of action, whether in contract, tort, warranty
or otherwise) shall in no event exceed three (3) times the monthly fee
paid by the Client to USi under this
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Agreement for the one (1) month period immediately preceding the event
which caused the damage or injury.
9.2 Disclaimer of Damages
EXCEPT IN THE CASE OF CLIENT'S BREACH OF USi'S INTELLECTUAL PROPERTY
RIGHTS, NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OR FOR THE LOSS OF PROFIT, REVENUE,
OR DATA, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH POTENTIAL LOSS OR DAMAGES. CLIENT FURTHER AGREES THAT USi SHALL
NOT BE LIABLE FOR ANY CLAIM OR DEMAND AGAINST CLIENT OR USi BY ANY
THIRD PARTY, EXCEPT TO THE EXTENT EXPRESSLY COVERED UNDER SECTION 8
INDEMNITY OBLIGATIONS OR SECTION 9 LIMITATION OF LIABILITY.
10. TERMINATION
10.1 Termination for Breach
Either party may terminate this Agreement immediately upon written
notice to the other party if the other party materially breaches any
obligation under this Agreement and fails to cure such breach within
thirty (30) days after receiving notice of the breach. Unless otherwise
agreed in writing, termination of this Agreement shall also
automatically terminate all Product Schedules which are incomplete at
the time of termination. Termination of one Product Schedule shall have
no effect on any other Product Schedule or the Agreement so long as the
party in default of the Product Schedule being terminated complies with
the terms and conditions of the Agreement and other Product Schedules.
Notwithstanding anything to the contrary, either party shall have the
right to terminate this Agreement and the license granted herein in the
event the other party (a) terminates or suspends its business, (b)
becomes subject to any bankruptcy or insolvency proceeding under
Federal or state statute, (c) becomes insolvent or becomes subject to
direct control by a trustee, receiver or similar authority, or (d) has
wound up liquidated, voluntarily or otherwise. In the event of
termination by reason of Client's failure to comply with any part of
this Agreement, or upon any act which shall give rise to USi's right to
terminate, USi shall have the right, at any time, to terminate the
license and take immediate possession of the iMAP Solutions and all
copies wherever located, without demand or notice. Within ten (10) days
after termination of the license, Client shall return to USi all
tangible portions of the iMAP Solutions, including any Hardware
provided by USi and any Software in the form provided by USi or as
modified, or, upon request by USi, destroy all tangible portions of the
iMAP Solutions and all copies, and certify in writing that they have
been destroyed. Termination of this Agreement shall not relieve Client
of its obligations regarding confidentiality under Section 12 below.
Lastly, no cure period shall be afforded in an event of a breach of
Sections 3 or 12.1, for which USi shall be entitled to all legal and
equitable remedies, including but not limited to, injunctive relief,
without requirement of bond.
10.2 Effect of Termination
Termination of this Agreement for any reason shall not affect any past
or future sums due USi under this Agreement or any additional remedies
provided by law or equity to USi. All rights that have been granted to
Client shall immediately be terminated and all unpaid charges accrued
under this Agreement shall become immediately due and payable upon the
happening of any event of termination. The Parties also agree to return
to one another, within sixty (60) days of a request, any property, data
sheets, schematics, samples, customer lists, confidential information,
in whatever form or media which are used by a disclosing party or which
are furnished to a recipient.
10.3 Return of Content
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In the event of a termination of this Agreement or any Product Schedule
for default by USi, or on account of Client's decision not to renew a
Product Schedule at the end of the applicable period of performance
defined in each Product Schedule, USi shall deliver to Client, at no
additional cost to Client, and in a format and on a date mutually
agreeable to both parties, (i) all data contained on Hardware (Section
2.9) used in the iMAP Solution delivered to Client; (ii) all Content
(Section 2.5), (iii) all Project Software (Section 2.12); and (iv) all
Work Product (Section 2.17). Client agrees that, after termination of
this Agreement or a specific Product Schedule, (a) USi shall have no
obligation to support the Work Product or Project Software; (b) Client
may use the Work Product and Project Software solely to support the
internal operations of its business; (c) Client may not resell,
disclose, or allow access to, the Work Product or Project Software to
any Third Party; and (d) USi reserves all rights to (i) the use of the
Work Product or Project Software in whatever manner USi chooses,
including in the support of iMAP Solutions provided to other USi
clients; and (ii) the IP addresses or address blocks assigned by USi in
support of the iMAP Solution delivered to Client under this Agreement
and related Product Schedule(s).
11. SOFTWARE AND WORK PRODUCT DEVELOLPED UNDER AGREEMENT
11.1 Title
Except as otherwise provided for in Section 11.2 below or as may be
expressly agreed in any Product Schedule, USi shall retain title to and
ownership of any (a) Hardware provided by USi; (b) any Software
Application(s); and (c) any USi Software. To the extent that Project
Software contains any USi Software or Software Application(s), such
Project Software is subject to restrictions as may be applicable to the
USi Software or Software Application(s) which is incorporated therein.
11.2 Client Ownership
Client shall retain title to and all ownership rights (a) in any Work
Product; (b) in any Project Software; and (c) in Content, but grants
USi a perpetual, royalty-free license to use the Work Product and
Project Software pursuant to Section 10.3(d), and all items outlined in
product schedule in "Additional Ownership Rights.".
12. GENERAL PROVISIONS
12.1 Nondisclosure
Each party shall retain in confidence all proprietary information
transmitted to the other that the disclosing party has identified in
writing as being proprietary and/or confidential, and will make no use
of such information except under the terms and during the term of this
Agreement. Client agrees to use all reasonable precautions and take all
necessary steps to prevent the iMAP Solution from being acquired by
unauthorized persons, and to take appropriate action, by instruction,
agreement, or other-wise, with regard to all persons permitted access
to the iMAP Solution, in order to ensure the iMAP Solution is
protected. Client shall not disclose the iMAP Solution to any person
for any purpose other than as provided in this Agreement. However,
neither party shall have an obligation to maintain the confidentiality
of information that (a) it has rightfully received from another party
prior to its receipt from the disclosing party; (b) the disclosing
party has disclosed to a Third Party without any obligation to maintain
such information in confidence, (c) enters the public domain or becomes
generally known to the public by some action other than breach of this
Agreement by the receiving party; or (d) is independently developed by
the receiving party. Each party shall safeguard proprietary and
confidential information disclosed by the other using the same degree
of care it uses to safeguard its own proprietary and confidential
information but, in no event, shall use less than a reasonable degree
of care. Each
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party's obligation under this paragraph shall extend for a period of
three (3) years following termination or expiration of this Agreement.
12.2 Assignment
Neither this Agreement nor any rights granted hereunder may be sold,
leased, assigned or otherwise transferred, in whole or in part by
Client by operation of law otherwise, and any such attempted assignment
shall be void and of no effect without the advance written consent of
USi, such consent not to be unreasonably withheld or delayed; provided,
however, that such consent shall not be required if Client assigns this
Agreement to a wholly owned subsidiary or in connection with a merger,
acquisition, or sale of all or substantially all of its assets, unless
the surviving entity is a competitor of USi. USi reserves the right to
assign its right to receive and collect payments hereunder without the
consent of Client.
12.3 Governing Law
This Agreement shall be governed by and con-strued in accordance with
the laws of the State of Maryland, without regard to conflicts of law.
The parties to this Agreement consent to the exclusive jurisdiction and
venue of the state and federal courts sitting in or for Anne Arundel
County, Maryland.
12.4 Waiver
No waiver of any breach of any provisions of this Agreement shall
constitute a waiver of any other breach of the same or any other
provision of the Agreement, and no waiver shall be effective unless
made in writing.
12.5 Severability
In the event that any term or provision of this Agreement conflicts
with the law under which this Agreement is to be construed, or if any
such provision is held invalid by a court with jurisdiction over the
parties to this Agreement, such provision shall be restated to reflect,
as nearly as possible, the original intentions of the parties in
accordance with applicable law, and the remainder of this Agreement
shall remain in full force and effect.
12.6 Enforcement
Both parties agree to pay all reasonable costs and expenses the other
party incurs in successfully enforc-ing this Agreement, including
reasonable attorneys' fees.
12.7 Force Majeure
Neither party shall be liable for any delay or failure in performance
due to Force Majeure, which shall mean acts of God, earthquake, labor
disputes, changes in law, regulation or government policy, riots, war,
fire, epidemics, acts or omissions of vendors or suppliers,
transportation difficulties or other occurrences which are beyond
either party's reasonable control. In the event that USi is prevented
or delayed in the delivery or installation of the iMAP Solution for
reasons beyond its control, such delivery or installation shall take
place as soon thereafter as is reasonably possible. This provision
shall not apply to any obligation of Client to pay money under this
Agreement or any Product Schedule.
12.8 Notice
Any notice or invoice required or permitted under this Agreement shall
be in writing and delivered by hand or mailed by overnight express
charges prepaid or certi-fied mail with return receipt requested to the
address set forth above. Notices or invoices shall be deemed received
when delivered.
12.9 Hiring
Client and USi agree that during the term of this Agreement and for one
(1) year thereafter, they will not, without prior written consent of
the other, employ or offer employment to any employee of the other who
has worked to a material extent on matters relating to this Agreement
or the provision of USi services by USi hereunder.
12.10 Survival
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The terms of Sections 3, 4, 5, 8, 9, 11 and 12 shall survive the
termination or expiration of this Agreement.
12.11 Acceptable Use Policy
Client agrees at all times, and to require and enforce its employees,
agents and contractors at all times, to comply with the USi Acceptable
Use Policy, the terms of which may be modified from time to time by USi
on the website referred to above in Section 2.1. Client agrees to
indemnify and hold USi harmless from any damages, costs and expenses
incurred by USi caused by the breach of this provision.
12.12 Third Party Rights
The provisions of this Agreement are solely for the benefit of the
parties hereto and not for the benefit of any Third Parties.
12.13 Entire Agreement
This Agreement (including all Product Schedules and Addenda, if any)
contains the full under-standing between the parties and supercedes all
prior representations or agreements, whether oral or written, with
respect to such matters. The Agreement (including all Product Schedules
and Addenda, if any) may only be changed by a written document signed
by both parties. To the extent of any inconsistencies between the
Agreement and the Product Schedule, the Product Schedule shall control,
except if the Agreement is modified by Addenda, then the Addenda shall
control. Principles of contract construction or rules of law that, in
the event of inconsistency or ambiguity, would construe against the
drafter this Agreement or any Product Schedule, shall not apply.
USinternetworking, Inc. taketoAuction
By: /s/ William T. Price By: /s/ Albert Friedman
--------------------------------------- -------------------------
Name: William T. Price Name: Albert Friedman
Title: Vice President and General Counsel Title: President and CEO
Date: 9/23/99 Date: 9/17/99
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Version Date: September 17, 1999
USi Agreement Number: 113
Effective Date: September 17. 1999
PRODUCT SCHEDULE
This Product Schedule is governed by and incorporated into the terms and
conditions contained in the IMAP Agreement entered into between
USinternetworking, Inc. ("USi") and taketoAuction ("Client") dated September 17,
1999. USi's Proposal to Client dated September 13, 1999 (the "Proposal") is
attached as Exhibit A to this Product Schedule, although only those Sections of
the Proposal specifically referenced below shall be incorporated into the terms
and conditions of this Product Schedule.
iMAP SOLUTION: USi Internet Selling application powered by
BroadVision as detailed in Section 1 of the
Proposal.
HOSTING OF EXISTING WEB SITE: USi agrees to host Client's current web
site for up to four (4) months at no
additional charge, which includes the
migration of Client's servers and network
capacity to USi's Enterprise Data Center.
USi shall have no responsibility for
Client's applications and will not provide
any type of Service Level Agreement. In
addition, USi shall provide, at no charge,
up to thirty (30) hours of professional
services assistance to maintain or
enhance Client's existing web site.
Additional hours of professional services
will be billable at an hourly rate of $160
plus reasonable travel and living expenses.
USi reserves the right, in its sole
discretion, to withdraw the hosting of
Client's existing web site should USi
determine that such temporary hosting
environment is not feasible or will have a
negative impact on the implementation of the
iMAP Solution.
PAYMENT SCHEDULE: Client agrees to the following Payment
Schedule:
1. $40,000 due and payable on the
Effective Date of this
Product Schedule.
2. Sixty (60) equal monthly service fee
payments of $41,000 commencing
December 15, 1999.
All monthly service fee invoices will be
issued in advance on the 15th of the month
prior to the calendar month of service. This
pricing is valid for the Initial Period and
is exclusive of any applicable taxes,
tariffs, telecommunications surcharges or
other governmental fees or charges that may
be imposed from time to time by applicable
law or regulation.
DELIVER OF LIMITED VERSION: As noted in Section 1.8 of the Proposal, USi
will deliver the limited version of the iMAP
Solution by January 31, 2000. Should USi
fail to deliver this limited version as such,
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all monthly service fee payments shall be
suspended until USi delivers this limited
version.
EFFECTIVE DATE OF PRODUCT
SCHEDULE: Upon execution of this Product Schedule by
both parties or another date, mutually agreed
upon in writing by the parties as set forth
above.
PERIOD OF PERFORMANCE: The Period of Performance of this Product
Schedule shall commence on the Effective
Date and shall continue until
December 14, 2004 (the "Initial Period").
Thereafter, this Product Schedule shall
automatically renew for successive twelve
(12) month periods (the "Renewal Period")
on the same terms and conditions as herein
agreed, as may be amended from time to time,
including, but not limited to, monthly
payments as described below, unless and
until either party provides the other
party with a notice of termination thirty
(30) days prior to the end of the Initial
Period or any annual Renewal Period.
PRICE CHANGES: USi will notify Client sixty (60) days prior
to any Renewal Period of any price changes
which will become effective upon such
Renewal Period.
BANDWIDTH VARIATION POLICY: Should Client exceed bandwidth or server
processing requirements of this project, USi
reserves the right to amend this Product
Schedule and increase the monthly fees to
reflect the additional bandwidth
requirements. USi will provide Client with a
monthly status report o bandwidth and server
usage.
CLIENT CARE: Under the Client Care program, Client's Help
Desk will have availability to (a) USi's
Client Assistance Center twenty-four (24)
hours per day, seven (7) days per week, three
hundred sixty-five (365)days per year and (b)
the assigned Client Assistance Team during
Client's designated standard business hours.
CONSULTING SERVICES: USi will provide Consulting Services as
outlined in Section 1 of the Proposal.
ADDITIONAL CONSULTING SERVICES: During the Initial Period, USi agrees to
provide Client up to six hundred (600) hours
of Additional Consulting Services
("Additional Services") per year in support
of the periodic enhancement of the IMAP
Solution. All fees for the Additional
Services are included in the Payment
Schedule. The scope and time frames for
delivery of the Additional Services will be
mutually agreed upon between both parties. In
addition, the Additional Services will be
provided on mutually agreeable dates
scheduled at least two (2) weeks in advance.
It is understood that any additional software
or hardware requirements may change monthly
payment installment payment plan stated
above.
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SECURITY PROCEDURES: USi defines certain policies and
procedures to provide the level of security
associated with the iMAP Solution. Client
acknowledges and understands that no network
security procedures can assure complete
network security or prevent all unauthorized
access to the network. These policies and
procedures will change over time to
reflect emerging technologies, business
practices and Internet-related issues.
SERVICE LEVEL AGREEMENT:
Usi's Service Level:
USi will provide for 99.5% Availability for the iMAP Solution application
services (as herein defined) within USi's assumed control.
"Availability" refers to a User's ability to access the application on the
appropriate USi hosted server and receive a valid response, where a "valid
response" is any reply sent by the appropriate server that is either normal
application behavior or an exception notification that can be identified and
read by the user.
"Assumed control" includes all of the following components except for those
specifically excluded in the Remedy section below:
o network services to the ISP (Internet Service Provider) circuit termination
termination point on the router in USi's data center (i.e. Public Internet
Connectivity)
o network services to the Private IP Carrier circuit termination point on
the router in USi's data center (i.e. Private IP Network Connectivity)
o all USi provided hardware including servers, network equipment and security
components
o all USi provided software, including operating systems, web servers,
database servers, applications, utilities and customized components
o USi managed routers on customer premises
Remedy:
In the event USi is unable to provide:
1. Ninety-nine percent (99%) Availability in any given calendar month,
Client shall receive a credit to their account equal to five percent
(5%) of that month's service fees excluding rebilled circuit charges.
2. Ninety-five percent (95%) Availability in any given calendar month,
Client shall receive a credit to their account equal to ten percent
(10%) of that month's service fees excluding rebilled circuit charges.
3. Ninety percent (90%) Availability in any given calendar month, Client
shall receive a credit to their account equal to fifteen percent (15%)
of that month's service fees, excluding rebilled circuit charges.
If USi fails to meet ninety-five percent (95%) Availability for three (3)
consecutive calendar months, Client may terminate this Product Schedule without
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penalty, regardless of any term remaining on the Agreement, without liability to
either party for penalties or damages associated with such termination and upon
thirty (30) days prior written notice to USi.
"Availability" percentage shall be calculated as follows:
x = (n - Number of Hours Service is "down") * 100
-------------------------------------------------
where "n" is the total number of hours in any given calendar month, and "x" is
the Availability percentage.
Specifically excluded from "n" in this calculation and exceptions to the levels
of Availability provided herein are (a) scheduled maintenance windows; (b)
reasons of Force Majeure (as defined in Section 12.8 of the Agreement); (c)
issues associated with Client provided hardware, software and other equipment;
(d) issues associated with Client provided or Client leased local area networks
or ISP connections; (e) use of unapproved or modified hardware or software
and/or; (t) issues arising from the misuse of the iMAP Solution by Client, its
employees, agents, customers or contractors.
In the event of a Force Majeure event, the Client shall have the option of
canceling this Product Schedule with USi if the resulting total outage time is
greater than fourteen (14) consecutive days in any six (6) month period, without
liability to either party for penalties or damages associated with such outages
or termination and upon thirty (30) days prior written notice to USi.
The remedies stated in this Section are Client's sole and exclusive remedies for
service interruption.
Client Responsibilities: This section describes Client's additional
responsibilities under this Agreement.
1. Client will designate qualified personnel to act as liaisons between Client
and USi.
2. Client will adhere to and will require any Third Party (as defined in
the iMAP Agreement) having access to the iMAP Solution to adhere to
USi's Acceptable Use Policy as set forth at the following URL:
http://www.usi.netIusepolicy.
3. Client is responsible for obtaining and complying with license terms for all
Client-provided software, if any, which are sufficient to allow use of the
software on the Hardware.
4. Client is solely responsible for Content, including any subsequent changes
or updates made or authorized by Client. Client represents and warrants
that Content: (a) will not infringe or violate the rights of any Third
Party including, but not limited to, intellectual property, privacy or
publicity rights of others; (b) is not abusive, profane or offensive to a
reasonable person; or (c) will not be hateful or threatening. Violations of
the foregoing by Client may result in early termination of services by USi.
5. Client is solely responsible for the Contents of its transmissions and
the transmissions of Third Parties accessing the iMAP Solution through
Client. Client agrees to comply with U.S. and International law with regard
to the transmission of technical data which is exported from the United
States through the iMAP Solution. Client further agrees not to use the iMAP
Solution a) for illegal purposes or (b) to interfere with or disrupt other
network users, network services or network equipment. Interference or
disruptions include, but are not limited to, distribution of unsolicited
advertising or chain letters, propagation of computer worms and viruses, and
use of the network to make unauthorized entry to any other machine
accessible via the network. Violations of the foregoing by Client may result
in early termination of services by USi.
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6. Client shall be responsible for providing USi with end user login names
and passwords for the purpose of authenticating and authorizing Global
Network access by end users to the iMAP Solution.
7. Client shall be responsible for handling all communication, technical
support to and business relations with end users who are the customers
of Client including but not limited to responding to inquiries and
questions.
8. Client shall be responsible for providing to USi all information
required for the Acceptance Test in a timely manner and in form
directed by USi. Client shall participate in the Acceptance Testing in
good faith and with all due diligence.
9. Client shall provide USi with access to such hardware, software and
network connections that reside on Client's premises as USi shall
require.
10. Client shall bear the entire risk of loss or damage to USi hardware
located at Client's premises. Client shall obtain and maintain adequate
liability insurance and insurance against loss or damage to the hardware.
Upon request, Client shall furnish to USi a Certificate of Insurance or
other evidence of insurance coverage. Client shall promptly notify USi of
any loss or damage to its hardware. In the event of loss or damage, Client,
at USi's sole option, shall either place the hardware in good condition and
repair or pay to USi the replacement value of the hardware. In the event
that any such loss or damage renders the hardware inoperable in any way so
as to cause a delay in the provision of the IMAP Solution to the Client,
Client shall indemnify and hold USi harmless under Section 8 of the
Agreement from any resulting claims Client or Third Parties may have.
Furthermore, Client shall not be entitled to any Service Level Agreement
credits for any loss of Availability due to the loss or damage to USi
hardware located at Client's premises.
11. Client shall be responsible to perform the obligations set forth in the
incorporated provisions of the Proposal.
Page 5
<PAGE>
Version Date: September 17, 1999
ADDITIONAL OWNERSHIP RIGHTS: Notwithstanding anything to the contrary in the
Agreement, both parties acknowledge that Client's
logo's, trademarks, service marks, copyrights,
business modules and patents, whether pending
or registered, without limitation, including
Client's site design, architecture, layout and
contents are the sole property of Client.
OFFER EXPIRATION DATE: SEPTEMBER 30,1999
USINTERNETWORKING, INC. TAKETOAUCTION
/s/ William T. Price /s/ Albert Friedman
- --------------------- -----------------------
(signature) (signature)
William T. Price Albert Friedman
- ---------------- ------------------
Vice President and General Counsel (printed name)
President and CEO
-----------------------------------
(title)
9/23/99 9/17/99
- ----------------------------- -------------------------------
(date) (date)
Page 6
Exhibit 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Take to Auction.com,
Inc. on Form S-1 of our report dated August 26, 1999 (October 1, 1999 as to Note
5 and November 3, 1999 as to Note 7) (which report expresses an unqualified
opinion and includes an explanatory paragraph relating to the Company's ability
to continue as a going conern), appearing in the Prospectus, which is part of
this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche
- -------------------------------
Deloitte & Touche LLP
Miami, Florida
November 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the Company's
financial statements as of July 31, 1999 and the period from June 2, 1999 (date
of inception) through July 31, 1999 and is qualified in its entirety by
reference to such financial statements and notes thereto.
</LEGEND>
<CIK> 1093837
<NAME> Take to Auction.com, Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-02-1999
<PERIOD-END> JUL-31-1999
<CASH> 52,493
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,916
<CURRENT-ASSETS> 56,409
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 110,704
<CURRENT-LIABILITIES> 49,575
<BONDS> 0
0
0
<COMMON> 1,382
<OTHER-SE> 59,747
<TOTAL-LIABILITY-AND-EQUITY> 110,704
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (23,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,600)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
