<PAGE>
As filed with the Securities and Exchange Commission on March 21, 2000
Registration 333-31586
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
POINTSHARE CORPORATION
(Exact name of registrant as specified in its charter)
----------------
<TABLE>
<S> <C> <C>
Delaware 7374 91-1675071
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
1300 114th Avenue SE, Suite 100
Bellevue, Washington 98004
(425) 635-0500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
TIMOTHY J. KILGALLON
Chief Executive Officer
Pointshare Corporation
1300 114th Avenue SE, Suite 100
Bellevue, Washington 98004
(425) 635-0500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
SONYA F. ERICKSON ALAN F. DENENBERG
NOEL C. HOWE Shearman & Sterling
GORDON EMPEY 1550 El Camino Real, Suite 100
Venture Law Group Menlo Park, California 94025
A Professional Corporation (650) 330-2200
4750 Carillon Point
Kirkland, Washington 98033-7355
(425) 739-8700
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]__________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]__________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]__________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Proposed
Maximum Aggregate Amount Of
Title Of Each Class Of Securities To Be Registered Offering Price(1) Registration Fee(2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $0.001..................... $60,000,000 $15,840
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
amount of the registration fee.
(2) Previously paid.
----------------
The registrant hereby amends this registration statement on the date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on the date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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, other than
underwriting discounts and commissions, payable by Pointshare in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee............................................ $ *
NASD filing fee................................................. *
Nasdaq National Market listing fee.............................. *
Printing and engraving expenses................................. *
Legal fees and expenses......................................... *
Accounting fees and expenses.................................... *
Blue Sky qualification fees and expenses........................ *
Transfer Agent and Registrar fees............................... *
Miscellaneous fees and expenses................................. *
----
Total......................................................... *
====
</TABLE>
- --------
*To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Article VII of
Pointshare's certificate of incorporation and sections 6.1 and 6.2 of Article
IX of Pointshare's bylaws provide for indemnification of its directors,
officers, employees and other agents to the maximum extent permitted by the
Delaware General Corporation Law. In addition, Pointshare has entered into
indemnification agreements with its directors and officers. The indemnification
agreements may require Pointshare, among other things, to indemnify its
directors against certain liabilities that may arise by reason of their status
or service as directors (other than liabilities arising from willful misconduct
of culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' insurance if available on reasonable terms. The underwriting
agreement (Exhibit 1.1 hereto) also provides for cross indemnification among
Pointshare and the underwriters with respect to certain matters, including
matters arising under the Securities Act of 1933.
Item 15. Recent Sales of Unregistered Securities
(a) Since inception in 1995, Pointshare has issued and sold (without payment
of any selling commission to any person) the following unregistered securities:
1. In April 1996, Pointshare issued and sold 2,498,000 shares of common
stock to two individuals at a price of $0.03 per share for an
aggregate purchase price of $70,000 plus contributed services in the
amount of $7,284.
2. From June to October 1996, Pointshare issued and sold 300,000 shares
of common stock to several individuals at a price of $1.00 per share
for an aggregate purchase price of $300,000.
3. In January 1997, Pointshare issued and sold 2,000 shares of common
stock to a consultant at a price in exchange for services valued at
$2,000 or $1.00 per share
4. In February 1997, Pointshare issued and sold 60,000 shares of common
stock to an individual at a price of $1.25 per share for an aggregate
purchase price of $75,000.
II-1
<PAGE>
5. In June 1997, Pointshare issued warrants to purchase up to 250,000
shares of common stock at an exercise price of $0.08 per share in
connection with promissory notes convertible into shares of
Pointshare's next equity offering. These warrants have an aggregate
exercise price of $17,500.
6. In July 1997, the 2,860,000 shares of common stock then outstanding
were converted into 2,950,500 shares of subordinated convertible
preferred stock in connection with Pointshare's reincorporation from
Washington into Delaware.
7. In July 1997, Pointshare issued and sold 750,000 shares of common
stock at a price of $0.08 per share for an aggregate purchase price of
$60,000.
8. In July 1997, Pointshare issued and sold 7,125,000 shares of Series A
preferred stock at a price of $0.80 per share for an aggregate
purchase price of $5,700,000.
9. In January 1999, Pointshare issued and sold 5,785,515 shares of Series
B preferred stock at a price of $1.25 for an aggregate of $7,231,893.
10. In January 1999, Pointshare issued warrants to purchase up to 258,904
shares of common stock at an exercise price of $0.08 per share issued
in connection with promissory notes convertible into shares of Series
B preferred stock. These warrants have an aggregate exercise price of
$20,712.
11. In September 1999, Pointshare issued and sold 14,635,693 shares of
Series C preferred stock at a price of $2.75 per share for an
aggregate purchase price of $40,248,155.
12. In February 2000, Pointshare issued and sold 1,205,000 shares of
Series D preferred stock at a price of $5.00 per share for an
aggregate purchase price of $6,025,000.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuances described in Items 15(a)(1)-(12) were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) or
Regulation D, or other applicable exemption of the Securities Act as
transactions by an issuer not involving any public offering. The recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends where affixed to the
securities issued in such transactions. All recipients had adequate access,
through their relationships with us, to information about Pointshare .
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Asset Purchase Agreement dated March 17, 1998 between the Registrant
and MedLynx LLC.
2.2 Asset Purchase Agreement dated December 9, 1998 between the Registrant
and Peregrin Medical Review, Inc.
3.1 Amended and Restated Certificate of Incorporation of Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
offering.
3.3 Bylaws of the Registrant, as amended.
4.1* Form of the Registrant's common stock certificate.
4.2 Amended and Restated Investors' Rights Agreement dated February 29,
2000 between the Registrant and certain stockholders.
4.3 Form of Common Stock Purchase Warrant issued by the Registrant in
favor of certain investors.
4.4 Form of Preferred Stock Purchase Warrant dated August 26, 1999 issued
by the Registrant in the Phoenix Leasing Incorporated transaction.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
4.5 Form of Common Stock Purchase Warrant dated February 2, 2000 issued by
the Registrant in connection with the Health Trade Links, Inc.
acquisition.
4.6 Common Stock Purchase warrant dated February 2, 2000 issued by the
Registrant in favor of Washoe Professional Center.
4.7 Preferred Stock Purchase Warrant dated July 28, 1999 issued by the
Registrant in favor of Imperial Bancorp.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1 Form of Indemnification Agreement between the Registrant and each of
its officers and directors.
10.2 1996 Stock Plan.
10.3 2000 Stock Plan.
10.4 1998 Directors' Stock Option Plan.
10.5 2000 Employee Stock Purchase Plan.
10.6+ Alliance Agreement dated October 6, 1998 between the Registrant and
Washington Hospital Services, Inc.
10.7+ Addendum Agreement dated June 3, 1999 between the Registrant and
Washington Hospital Services, Inc.
10.8*+ WSMA - Pointshare General Terms dated September 27, 1999 between the
Registrant and Washington State Medical Association.
10.9+ Alliance Agreement dated December 9, 1998 between the Registrant and
Oregon Medical Association.
10.10*+ OAHHS - Pointshare Alliance General Terms dated January 12, 2000
between the Registrant and Oregon Association of Hospitals and Health
Plans.
10.11 Fourth Amendment to Lease dated February 21, 2000 between the
Registrant and Spieker Properties, L.P.
10.12 Sublease dated July 13, 1997 between the Registrant and Baugh
Industrial Contractors Inc.
10.13 Agreement of Lease dated February 1, 1998 between MedLynx L.L.C. and
Sixth and Virginia Properties.
10.14 Lease modification #1 dated March 26, 1999 between Registrant and
Sixth and Virginia Properties.
10.15 Loan and Security Agreement dated September 22, 1997 between the
Registrant and Imperial Bank.
10.16 Loan and Security Agreement dated July 15, 1998 between the Registrant
and Imperial Bank.
10.17 First Amendment and Waiver to Loan and Security Agreement dated
January 5, 1999 between the Registrant and Imperial Bank.
10.18 Second Amendment to Loan and Security Agreement dated July 28, 1999
between the Registrant and Imperial Bank.
10.19 Senior Loan and Security Agreement No. 6269 dated July 30, 1999
between the Registrant and Phoenix Leasing Incorporated.
10.20 Employment Agreement dated July 18, 1997 between the Registrant and
Timothy J. Kilgallon.
10.21 First Addendum to Employment Agreement dated June 29, 1999 between the
Registrant and Timothy J. Kilgallon.
10.22 Second Addendum to Employment Agreement dated February 8, 2000 between
the Registrant and Timothy J. Kilgallon.
10.23 Employment Agreement dated April 30, 1999 between the Registrant and
R. Scott Wiley.
10.24 Employment Agreement dated July 18, 1997 between the Registrant and
Dennis P. Schmuland, MD.
10.25 Amendment to Employment Agreement dated September 14, 1999 between the
Registrant and Dennis P. Schmuland, MD.
10.26 Consulting Agreement dated April 5, 1999 between the Registrant and
Craig T. Davenport.
10.27 Amendment to Consulting Agreement dated June 29, 1999 between the
Registrant and Craig T. Davenport.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
10.28 Amended and Restated Consulting Agreement dated February 16, 2000
between the Registrant and Craig T. Davenport.
10.29 Promissory Note dated January 14, 2000 issued by Timothy J. Kilgallon
in favor of the Registrant.
10.30 Pledge and Security Agreement dated January 14, 2000 between Timothy
T. Kilgallon and the Registrant.
10.31 Promissory Note dated December 2, 1999 issued by Kelly R. Jorgensen in
favor of the Registrant.
10.32 Security Agreement dated December 2, 1999 between Kelly R. Jorgensen
and the Registrant.
10.33 Promissory Noted dated January 14, 2000 issued by Kirk A. Collamer in
favor of the Registrant.
10.34 Pledge and Security Agreement dated January 14, 2000 between Kirk A.
Collamer and the Registrant.
23.1** Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Venture Law Group (see Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1** Financial Data Schedule (EDGAR-filed version only).
</TABLE>
- --------
** Previously filed.
* To be supplied by amendment.
+ Confidential treatment is being requested as to certain portions of this
Exhibit. Such confidential portions are being provided separately to the
Securities and Exchange Commission.
(b) Financial Statement Schedules
All financial statement schedules not listed are omitted because they are
inapplicable or the requested information is shown in the financial statements
of the Registrant or the related notes to the financial statements.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 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 this offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned Registrant has duly caused this Amendment No. 1 to Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bellevue, State of Washington, on March 21,
2000.
Pointshare Corporation
/s/ Timothy J. Kilgallon
By: _________________________________
Timothy J. Kilgallon
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Kilgallon President, Chief Executive March 21, 2000
______________________________________ Officer and Director
Timothy J. Kilgallon (Principal Executive
Officer)
* Chief Financial Officer March 21, 2000
______________________________________ (Principal Financial and
Kirk Collamer Accounting Officer)
* Director March 21, 2000
______________________________________
Craig T. Davenport
* Director March 21, 2000
______________________________________
Robert C. Bellas, Jr.
* Director March 21, 2000
______________________________________
Cabot Brown
* Director March 21, 2000
______________________________________
Steven J. Dennis
* Director March 21, 2000
______________________________________
Alan Dishlip
* Director March 21, 2000
______________________________________
John D. Stobo, Jr.
</TABLE>
/s/ Timothy J. Kilgallon
*By: ____________________________
Timothy J. Kilgallon
Attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Asset Purchase Agreement dated March 17, 1998 between the Registrant
and MedLynx LLC.
2.2 Asset Purchase Agreement dated December 9, 1998 between the Registrant
and Peregrin Medical Review, Inc.
3.1 Amended and Restated Certificate of Incorporation of Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
offering.
3.3 Bylaws of the Registrant, as amended.
4.1* Form of the Registrant's common stock certificate.
4.2 Amended and Restated Investors' Rights Agreement dated February 29,
2000 between the Registrant and certain stockholders.
4.3 Form of Common Stock Purchase Warrant issued by the Registrant in
favor of certain investors.
4.4 Form of Preferred Stock Purchase Warrant dated August 26, 1999 issued
by the Registrant in the Phoenix Leasing Incorporated transaction.
4.5 Form of Common Stock Purchase Warrant dated February 2, 2000 issued by
the Registrant in connection with the Health Trade Links, Inc.
acquisition.
4.6 Common Stock Purchase warrant dated February 2, 2000 issued by the
Registrant in favor of Washoe Professional Center.
4.7 Preferred Stock Purchase Warrant dated July 28, 1999 issued by the
Registrant in favor of Imperial Bancorp.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1 Form of Indemnification Agreement between the Registrant and each of
its officers and directors.
10.2 1996 Stock Plan.
10.3 2000 Stock Plan.
10.4 1998 Directors' Stock Option Plan.
10.5 2000 Employee Stock Purchase Plan.
10.6+ Alliance Agreement dated October 6, 1998 between the Registrant and
Washington Hospital Services, Inc.
10.7+ Addendum Agreement dated June 3, 1999 between the Registrant and
Washington Hospital Services, Inc.
10.8*+ WSMA - Pointshare General Terms dated September 27, 1999 between the
Registrant and Washington State Medical Association.
10.9+ Alliance Agreement dated December 9, 1998 between the Registrant and
Oregon Medical Association.
10.10*+ OAHHS - Pointshare Alliance General Terms dated January 12, 2000
between the Registrant and Oregon Association of Hospitals and Health
Plans.
10.11 Fourth Amendment to Lease dated February 21, 2000 between the
Registrant and Spieker Properties, L.P.
10.12 Sublease dated July 13, 1997 between the Registrant and Baugh
Industrial Contractors Inc.
10.13 Agreement of Lease dated February 1, 1998 between MedLynx L.L.C. and
Sixth and Virginia Properties.
10.14 Lease modification #1 dated March 26, 1999 between Registrant and
Sixth and Virginia Properties.
10.15 Loan and Security Agreement dated September 22, 1997 between the
Registrant and Imperial Bank.
10.16 Loan and Security Agreement dated July 15, 1998 between the Registrant
and Imperial Bank.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
10.17 First Amendment and Waiver to Loan and Security Agreement dated
January 5, 1999 between the Registrant and Imperial Bank.
10.18 Second Amendment to Loan and Security Agreement dated July 28, 1999
between the Registrant and Imperial Bank.
10.19 Senior Loan and Security Agreement No. 6269 dated July 30, 1999
between the Registrant and Phoenix Leasing Incorporated.
10.20 Employment Agreement dated July 18, 1997 between the Registrant and
Timothy J. Kilgallon.
10.21 First Addendum to Employment Agreement dated June 29, 1999 between the
Registrant and Timothy J. Kilgallon.
10.22 Second Addendum to Employment Agreement dated February 8, 2000 between
the Registrant and Timothy J. Kilgallon.
10.23 Employment Agreement dated April 30, 1999 between the Registrant and
R. Scott Wiley.
10.24 Employment Agreement dated July 18, 1997 between the Registrant and
Dennis P. Schmuland, MD.
10.25 Amendment to Employment Agreement dated September 14, 1999 between the
Registrant and Dennis P. Schmuland, MD.
10.26 Consulting Agreement dated April 5, 1999 between the Registrant and
Craig T. Davenport.
10.27 Amendment to Consulting Agreement dated June 29, 1999 between the
Registrant and Craig T. Davenport.
10.28 Amended and Restated Consulting Agreement dated February 16, 2000
between the Registrant and Craig T. Davenport.
10.29 Promissory Note dated January 14, 2000 issued by Timothy J. Kilgallon
in favor of the Registrant.
10.30 Pledge and Security Agreement dated January 14, 2000 between Timothy
T. Kilgallon and the Registrant.
10.31 Promissory Note dated December 2, 1999 issued by Kelly R. Jorgensen in
favor of the Registrant.
10.32 Security Agreement dated December 2, 1999 between Kelly R. Jorgensen
and the Registrant.
10.33 Promissory Noted dated January 14, 2000 issued by Kirk A. Collamer in
favor of the Registrant.
10.34 Pledge and Security Agreement dated January 14, 2000 between Kirk A.
Collamer and the Registrant.
23.1** Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Venture Law Group (see Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1** Financial Data Schedule (EDGAR-filed version only).
</TABLE>
- --------
** Previously filed.
* To be supplied by amendment.
+ Confidential treatment is being requested as to certain portions of this
Exhibit. Such confidential portions are being provided separately to the
Securities and Exchange Commission.
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is entered into as of March
---------
17, 1998 (the "Effective Time"), by and between HealthKnowledge Corporation, a
--------------
Delaware corporation ("Buyer"), and MedLynx LLC, a Washington limited liability
-----
corporation ("Seller"), and Kelly Jorgensen, a member of Seller ("Jorgensen").
------ ---------
RECITALS
--------
Buyer is in the business of providing intranet solutions to health care
organizations. Seller conducts a business which provides intranet and internet
services to health care organizations (the "Business"). Jorgensen owns
--------
approximately 100% of the membership interest of Seller. Buyer desires to
acquire from Seller, and Seller desires to sell to Buyer, substantially all of
the assets of the Business on the terms and subject to the conditions set forth
in this Agreement.
AGREEMENT
---------
In consideration of the mutual agreements, representations, warranties and
covenants set forth below, Buyer and Seller agree as follows:
1. Definitions.
-----------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings:
(a) "Affiliate" means with respect to any Person, a Person directly
---------
or indirectly controlling or controlled by or under common control with such
Person.
(b) "Buyer Balance Sheet" means the unaudited balance sheet of the
-------------------
Business prepared by the Buyer in accordance with GAAP, consistently applied,
and delivered to Seller after the Closing Date which includes the asset and
liability accounts of the Business as of the Closing Date.
(c) "Closing" means the consummation of the transactions contemplated
-------
hereby.
(d) "Closing Date" means the date of the Closing.
------------
(e) "Code" means the Internal Revenue Code of 1986, as amended.
----
(g) "Effective Balance Sheet" means the balance sheet to be used in
-----------------------
calculating the Purchase Price Adjustment (as defined in Section 2.5 below).
(h) "GAAP" means generally accepted accounting principles of the
----
United States as set forth by the Financial Accounting Standards Board.
<PAGE>
(i) "Governmental Authorizations" means the permits, authorizations,
---------------------------
consents or approvals of any Governmental Entity which are a condition to the
lawful consummation of the transactions contemplated hereby listed on Schedule
--------
1.1(i) to this Agreement.
- ------
(j) "Governmental Entity" means any court, or any federal, state,
-------------------
municipal or other governmental authority, department, commission, board, agency
or other instrumentality (domestic or foreign).
(j) "Lien" means any mortgage, pledge, lien, security interest,
----
option, covenant, condition, restriction, encumbrance, charge or other third-
party claim of any kind.
(k) "Material Adverse Effect" with respect to a Person means any
-----------------------
event, change or effect that is materially adverse to the condition (financial
or otherwise), properties, assets, liabilities, business, operations, results of
operations, or prospects of such Person and its Affiliates, taken as a whole.
(j) "Person" means an individual, corporation, partnership,
------
association, trust, government or political subdivision or agent or
instrumentality thereof, or other entity or organization.
(k) "Purchase Price Adjustment" means the difference between the
-------------------------
Members' Equity section of the Seller Balance Sheet and the Effective Balance
Sheet.
(l) "Seller Balance Sheet" means the unaudited balance sheet of the
--------------------
Business, prepared by Seller in accordance with GAAP, consistently applied, and
delivered to Buyer upon the Closing Date, which includes the Seller's asset and
liability accounts as of the Closing Date.
(m) "Taxes" means all taxes, however denominated, including any
-----
interest, penalties or other additions to tax that may become payable in respect
thereof, (i) imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any such government, for
which Buyer could become liable as successor to or transferee of the Business or
the Purchased Assets or which could become a charge against or lien on any of
the Purchased Assets, which taxes shall include, without limiting the generality
of the foregoing, all sales and use taxes, ad valorem taxes, excise taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, real property gains taxes, transfer taxes,
payroll and employee withholding taxes, unemployment insurance contributions,
social security taxes, and other governmental charges, and other obligations of
the same or of a similar nature to any of the foregoing, which are required to
be paid, withheld or collected, or (ii) any liability for amounts referred to in
(i) as a result of any obligations to indemnify another person.
2. Sale and Purchase
-----------------
2.1 Transfer of Assets. Subject to the terms and conditions of this
------------------
Agreement, Seller shall sell, assign, grant, transfer, and deliver (or cause to
be sold, assigned, granted, transferred
-2-
<PAGE>
and delivered) to Buyer, or to any Affiliate of Buyer designated by Buyer, and
Buyer shall purchase and accept from Seller as of the Closing Date, free and
clear of all Liens, all of the Seller's rights, title and interest in and to all
of the assets, properties and business other than the Excluded Assets (as
defined below) owned, held or used in the conduct of the Business by Seller as
the same shall exist on the Closing Date (the "Purchased Assets"), including,
----------------
without limitation:
(a) all tangible personal property and leases of and other interests
in tangible personal property used in connection with the Business, including,
without limitation, the items listed on Schedule 2.1(a);
---------------
(b) all rights under contracts, agreements, leases and other
interests in real and personal property, licenses, commitments, sales and
purchase orders and other instruments, including, without limitation, the items
listed on Schedule 2.1(b) (collectively the "Contracts");
--------------- ---------
(c) all accounts receivable, notes receivable and other receivables;
(d) all prepaid expenses relating to the operation of the Business
including, but not limited to Taxes, leases and rentals;
(e) all of Seller's rights, claims, credits, causes of action or
rights of set-off against third parties relating to the Purchased Assets,
including, without limitation, unliquidated rights under warranties;
(f) all copyrights, copyright registrations, proprietary processes,
trade secrets, license rights, specifications, technical manuals and data,
drawings, inventions, designs, patents, patent applications, trade names,
trademarks, service marks, product information and data, know-how and
development work-in-progress, customer lists, domain names, software, business
and marketing plans and other intellectual or intangible property embodied in or
pertaining to the Business, whether pending, applied for or issued, whether
filed in the United States or in other countries, including without limitation
the items listed in Schedule 2.1(f), together with all associated goodwill;
---------------
(g) all things authored, discovered, developed, made, perfected,
improved, designed, engineered, acquired, produced, conceived or first reduced
to practice by Seller or any of its employees or agents that are embodied in,
derived from or relate to the Business, in any stage of development, including,
without limitation, modifications, enhancements, designs, concepts, techniques,
methods, ideas, flow charts, coding sheets, notes and all other information
relating to the Business;
(h) any and all design and code documentation, methodologies,
processes, trade secrets, copyrights, design information, product information,
technology, formulae, routines, engineering specifications, technical manuals
and data, drawings, inventions, know-how, techniques, engineering work papers,
and notes, development work-in-process, and other proprietary information and
materials of any kind relating to, used in, or derived from the Purchased Assets
(collectively with subsections (f) and (g), the "Intellectual Property");
---------------------
-3-
<PAGE>
(i) all permits, authorizations, consents and approvals of any
Governmental Entity affecting or relating in any way to the Business, including
without limitation, the items listed on Schedule 2.1(i) (the "Permits");
--------------- -------
(j) all books, records files and papers, whether in hard copy or
electronic format, used in the Business, including without limitation,
engineering information, sales and promotional literature, manuals and data,
sales and purchase correspondence, lists of present, former and prospective
suppliers or customers, personnel and employment records, and any information
relating to Taxes imposed on the Business or Purchased Assets;
(k) all computer software programs, data and associated licenses used
in connection with the Business; and
(l) all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that Buyer is the
successor to the Business.
2.2 Excluded Assets. Buyer agrees that the assets of Seller listed on
---------------
Schedule 2.2 hereto (the "Excluded Assets") shall be excluded from the Purchased
---------------
Assets.
2.3 Transfer of Liabilities. Subject to the terms and conditions of this
-----------------------
Agreement, Buyer or an Affiliate of Buyer designated by Buyer agrees, effective
as of the Closing Date, to assume the following liabilities (the "Assumed
-------
Liabilities").
- -----------
(a) the liabilities set forth on Schedule 2.3(a) to the extent set
---------------
forth thereon; and
(b) the liabilities and obligations of Seller arising under the
Contracts, other than the liabilities attributable to any failure by Seller to
comply with the terms thereof.
2.4 Excluded Liabilities. Except for those liabilities expressly assumed
--------------------
by Buyer or any Affiliate designated by Buyer pursuant to Section 2.3, Buyer
shall not assume and shall not be liable for, and Seller and its direct or
indirect subsidiaries shall retain and remain solely liable for and obligated to
discharge, all of the debts, contracts, agreements, commitments, obligations and
other liabilities of any nature whatsoever of Seller and its direct and indirect
subsidiaries, whether known or unknown, accrued or not accrued, fixed or
contingent, including without limitation, the following:
(a) Any liability for breaches by Seller or any of its direct or
indirect subsidiaries on or prior to the Closing Date of any contract or any
other instrument, contract or purchase order or any liability for payments or
amounts due under any Contract or any other instrument, contract or purchase
order on or prior to the Closing Date;
(b) Any liability or obligation for Taxes attributable to or imposed
upon Seller or any of its direct or indirect subsidiaries, or attributable to or
imposed upon the Purchased Assets for any period (or portion thereof) through
the Closing Date, including, without limitation, any Taxes attributable to or
arising from the transactions contemplated by this Agreement;
-4-
<PAGE>
(c) Any liability or obligation for or in respect of any loan, other
indebtedness for money borrowed, or account payable of Seller, its members or
any of Seller's direct or indirect subsidiaries, including any such liabilities
owed to Affiliates of Seller;
(d) Any liability or obligation arising as a result of any legal or
equitable action or judicial or administrative proceeding initiated at any time,
to the extent relating to any action or omission on or prior to the Closing Date
by or on behalf of Seller, its members or any of Seller's direct or indirect
subsidiaries, including, without limitation, any liability for infringement of
intellectual property rights, claims of ownership regarding the Purchased
Assets, breach of product warranty, injury or death caused by products, or
violations of federal or state securities or other laws;
(e) Any liability or obligation arising on or prior to the Closing
Date out of any "employee benefit plan," as such term is defined by the Employee
Retirement Income Security Act of 1974 ("ERISA") or other employee benefit
-----
plans;
(f) Any liability or obligation for making payments of any kind
(including as a result of the sale of Purchased Assets or as a result of the
termination of employment or consultancy by Seller of Employees, or other claims
arising out of the terms and conditions of employment or consultancy with
Seller, or for vacation or severance pay or otherwise) to Employees of Seller or
in respect of payroll taxes for Employees of Seller;
(g) Any liability of Seller incurred in connection with the making or
performance of this Agreement and the transactions contemplated hereby;
(h) Any liability of Seller arising out of the violation of or
failure to comply with any federal, state, local or foreign laws and regulations
related to the environment or hazardous materials applicable to any aspect of
the Business; and
(i) Any costs or expenses of Seller incurred in connection with
shutting down, deinstalling and removing equipment not purchased by Buyer, and
the costs associated with all contracts and agreements not assumed by Buyer.
2.5 Purchase Price. Subject to the performance by Seller of all of its
--------------
obligations under this Agreement (including delivering all documents required to
be delivered) at the Closing, in consideration of the acquisition of the
Purchased Assets under Section 2.1, Buyer agrees (a) to deliver to Seller or an
account or accounts designated by Seller $75,000 in immediately available funds
(the "Immediate Cash") and 57,000 shares (the "Immediate Shares") of Common
-------------- ----------------
Stock of Buyer (the "Common Stock"), subject to adjustment as provided in
------------
Section 2.6 (collectively, the "Immediate Consideration"); (b) to deliver to
-----------------------
Imperial Trust Company (the "Escrow Agent") or an account or accounts designated
------------
by Escrow Agent (the "Escrow") $100,000 payable in immediately available funds
------
and cancellation of indebtedness owned to Buyer by Seller (the "Escrow Cash")
-----------
which Escrow Cash shall be subject to the provisions of the Escrow Agreement
attached as Exhibit A to this Agreement (the "Escrow Agreement"); (c) to deliver
--------- ----------------
to Venture Law Group 513,000 shares of Common Stock (the "Escrow Stock") (the
------------
Escrow Cash and Immediate Consideration, together with the Escrow Stock being
referred to
-5-
<PAGE>
collectively as the "Purchase Price" and the Immediate Shares and the Escrow
--------------
Stock being referred to collectively as the "Buyer Stock") which Venture Law
-----------
Group shall hold in escrow subject to Buyer's right of repurchase as set forth
in the Jorgensen Employment Agreement (as defined in Section 10.12) and (d) to
assume the Assumed Liabilities.
2.6 Adjustment to Purchase Price.
----------------------------
(a) On the Closing Date, Seller shall deliver to Buyer the Seller
Balance Sheet. Following the Closing Date, and in any event not later than
fifteen (15) days thereafter, Buyer shall deliver to Seller the Buyer Balance
Sheet. The Buyer Balance Sheet shall attach Buyer's calculation of the Purchase
Price Adjustment in accordance with the provisions of this Section 2.5. Seller
shall be entitled to review all work papers and other supporting documentation
used by Buyer in or relevant to the creation of the Buyer Balance Sheet.
(b) The Buyer Balance Sheet shall become the Effective Balance Sheet
for purposes of calculating the Purchase Price Adjustment under this Section 2.6
fifteen (15) days after delivery thereof to Seller unless Seller within such
time period delivers written notice to Buyer (the "Objection Notice") of its
----------------
disagreement as to the value of any item included in the Seller Balance Sheet or
in Buyer's calculation of the Purchase Price Adjustment. Any Objection Notice
shall specify in reasonable detail the nature of such disagreement and the basis
and supporting evidence for Seller's position with respect to the disputed
items. Seller and Buyer shall attempt in good faith to resolve any disagreement
for a period of 30 days following the date of the Notice and develop an
Effective Balance Sheet. If they are unable to do so within such period, they
shall submit the disputed items to a nationally-recognized accounting firm not
affiliated with either Buyer or Seller (the "Arbitrator"), whose decision with
----------
respect to the matters disputed in the Objection Notice shall be final and
binding. The Arbitrator shall render its decision with respect to such matters
within 20 days after such matters are submitted to the Arbitrator and deliver
the Effective Balance Sheet to Buyer and Seller at such time. Seller and Buyer
shall each provide promptly all information and documents within their
respective possession that the Arbitrator, in its sole discretion, deems
necessary in order to make its decision with respect to the disputed matters.
The fees and expenses of the Arbitrator shall be borne equally by Seller and
Buyer.
(c) Within five (5) business days after the Effective Balance Sheet
is finally determined, the Purchase Price Adjustment shall be paid by Buyer or
Seller, as appropriate, to the other party or an account or accounts designated
by such party, in immediately available funds. The Purchase Price Adjustment, if
any, shall be paid into or out of Escrow Cash by Buyer or Seller, as applicable,
in accordance with the provisions of the Escrow Agreement.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Purchased Assets as provided in an exhibit to be prepared by Buyer for
purposes of complying with the requirements of Section 1060 of the Code and the
regulations thereunder. As soon as practicable after the delivery of the
Effective Balance Sheet, Buyer shall deliver to Seller a revised allocation
reflecting any Purchase Price Adjustment, which revised allocation shall be
reasonably consistent with the principles of the allocation set forth in the
exhibit to be attached hereto as determined by Buyer in its good faith
discretion. Buyer and Seller agree to each
-6-
<PAGE>
prepare and file on a timely basis with the Internal Revenue Service (and
applicable state tax authorities) substantially identical and supplemental
Internal Revenue Service Forms 8594 (and corresponding state tax forms)
consistent with Buyer's allocation of the Purchase Price and which gives effect
to any Purchase Price Adjustment. If any Tax authority challenges such
allocation, the party receiving notice of such challenge shall give the other
prompt written notice thereof and the parties shall cooperate in order to
preserve the effectiveness of such allocation.
3. Closing
-------
3.1 Closing. Subject to the terms and conditions of this Agreement, the
-------
Closing shall take place on such date, as soon as practicable after all
conditions precedent in Sections 10 and 11 have been satisfied or waived, as the
parties may agree, but in any case, no later than March 13, 1998 (the "Closing
-------
Date").
- ----
3.2 Actions at the Closing. At the Closing, Seller shall deliver the
----------------------
Purchased Assets to Buyer, Buyer shall deliver the Immediate Consideration to
Seller, deliver the Escrow Cash to the Escrow Agent, and deliver the Escrow
Stock to Venture Law Group and Buyer and Seller shall take such actions and
execute and deliver such agreements, bills of sale, and other instruments and
documents as necessary or appropriate to effect the transactions contemplated by
this Agreement in accordance with its terms, including without limitation the
following:
(a) Bill of Sale; Assignment and Assumption Agreement. Seller shall
-------------------------------------------------
deliver to Buyer a general Bill of Sale in a form reasonably satisfactory to
Buyer and with respect to each Contract, or item of Intellectual Property, an
Assignment and Assumption Agreement in a form reasonably satisfactory to Buyer
(the "Transfer Documents") in each case duly executed by Seller, and in the
------------------
aggregate assigning to Buyer all of Seller's right, title and interest in and to
the Purchased Assets. Buyer may designate one or more of its Affiliates as the
recipient of certain of the Purchased Assets, and as the party to assume certain
of the Assumed Liabilities, in which case Seller shall transfer such Purchased
Assets and Assumed Liabilities to Buyer or the Affiliate(s) designated by Buyer
pursuant to such Transfer Documents.
(b) Purchase Price. Buyer shall deliver the Immediate Consideration
--------------
to Seller and the Escrow Cash to Escrow Agent and the Escrow Stock to Venture
Law Group.
(c) Title. Seller shall provide reasonable evidence of valid title to
-----
such of the Purchased Assets as Buyer may reasonably request in writing prior to
the Closing, in form and substance reasonably satisfactory to Buyer.
(d) Third Party Consents and Assignments. Seller shall deliver to
------------------------------------
Buyer any assignments, and any required consents to assignment, that it has
obtained in respect of the Contracts, duly executed by parties having the
authority to so assign or consent to assign, in form and substance as Buyer
shall reasonably request, as well as a written confirmation from such third
parties that the Contracts are in good standing.
-7-
<PAGE>
(e) Seller Documents. At the Closing, Seller shall deliver to Buyer
----------------
any and all documents required to satisfy the conditions set forth in Section 11
of this Agreement and any other closing documents reasonably requested by Buyer.
(f) Buyer Documents. At the Closing, Buyer shall deliver to Seller
---------------
any and all documents required to satisfy the conditions set forth in Section 10
of this Agreement and any other closing documents reasonably requested by
Seller.
(g) Post-Closing Actions. Subsequent to the Closing Date, Seller
--------------------
shall, and shall cause any Affiliate of Seller to, from time to time execute and
deliver, upon the request of Buyer, all such other and further materials and
documents and instruments of conveyance, transfer or assignment as may
reasonably be requested by Buyer to effect, record or verify the transfer to and
vesting in Buyer of Seller's and any of Seller's Affiliates' right, title and
interest in and to the Purchased Assets, free and clear of all Liens in
accordance with the terms of this Agreement.
4. Securities Law Compliance
-------------------------
4.1 Securities Act Exemption. The Buyer Stock to be issued pursuant to
------------------------
this Agreement shall not be registered under the Securities Act of 1933, as
amended ("Securities Act"), in reliance upon the exemption contained in Section
--------------
4(2) of the Securities Act and Regulation D promulgated thereunder and in
reliance upon the representations and warranties of Seller contained in the
Stockholders Agreement attached as Exhibit B to this Agreement (the
---------
"Stockholders Agreement").
----------------------
4.2 Stock Restrictions.
------------------
(a) The certificates representing the shares of Buyer Stock issued
pursuant to this Agreement shall bear a restrictive legend or legends (and stop
transfer orders shall be placed against the transfer thereof with Buyer's
transfer agent), stating substantially as follows:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(ii) "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY."
(iii) Any legend required by the securities laws of any state.
-8-
<PAGE>
(b) The certificates representing the shares of Escrow Stock issued
pursuant to this Agreement shall bear an additional legend, stating
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A COMPANY
REPURCHASE OPTION AS SET FORTH IN SECTION 7 OF THE EMPLOYMENT AGREEMENT DATED
MARCH 17, 1998 BETWEEN THE COMPANY, KELLY JORGENSEN AND MEDLYNX LLC."
5. Representations and Warranties of Seller and Jorgensen
------------------------------------------------------
Each representation and warranty set forth below is qualified by any
exception or disclosures set forth in the Seller Disclosure Schedule attached
hereto, which exceptions specifically reference the Section(s) to be qualified.
In all other respects, each representation and warranty set out in this Section
5 is not qualified in any way whatsoever, will not merge on Closing or by reason
of the execution and delivery of any agreement, document or instrument at the
Closing, will remain in force on and after the Closing Date, is given with the
intention that liability is not confined to breaches discovered before Closing,
is separate and independent and is not limited by reference to any other
representation or warranty or any other provision of this Agreement, and is made
and given with the intention of inducing the Buyer to enter into this Agreement.
Each of Seller and Jorgensen separately represent and warrant to Buyer as
follows:
5.1 Organization, Standing and Power. Seller is a limited liability
--------------------------------
corporation duly organized and validly existing under the laws of the state of
Washington. Seller has the requisite corporate power and authority and all
necessary permits, authorizations, consents, and approvals of all Governmental
Entities to own, lease and operate its properties and to carry on the Business
as now being conducted and as proposed to be conducted, except where the failure
to have such power, authority and governmental approvals would not, individually
or in the aggregate, have a Material Adverse Effect on the Business. Seller is
duly qualified or licensed as a foreign limited liability company to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for failures to be so
qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect on the Business.
5.2 Authority. The execution and delivery of this Agreement (and all
---------
other agreements and instruments contemplated under this Agreement) by Seller,
the performance by Seller of its obligations hereunder and thereunder, and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action by the members of Seller, and no
other act or proceeding on the part of or on behalf of Seller or its members is
necessary to approve the execution and delivery of this Agreement and such other
agreements and instruments, the performance by Seller of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby. The signatory officers of Seller have the power and
authority to execute and deliver this Agreement and all of the other agreements
and instruments to be executed and delivered by Seller pursuant hereto, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by Seller pursuant to the provisions hereof
and thereof.
-9-
<PAGE>
5.3 Execution and Binding Effect. This Agreement has been duly and
----------------------------
validly executed and delivered by Seller and constitutes, and the other
agreements and instruments to be executed and delivered by Seller pursuant
hereto, upon their execution and delivery by Seller, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof by
Buyer), legal, valid and binding agreements of Seller, enforceable against
Seller in accordance with their respective terms.
5.4 Consents and Approvals of Governmental Entities. Other than the
-----------------------------------------------
Governmental Authorizations there is no requirement applicable to Seller to make
any filing, declaration or registration with, or to obtain any permit,
authorization, consent or approval of, any Governmental Entity as a condition to
the lawful consummation by Seller of the transactions contemplated by this
Agreement and the other agreements and instruments to be executed and delivered
by Seller pursuant hereto or the consummation by Seller of the transactions
contemplated herein or therein.
5.5 No Violation. Neither the execution, delivery and performance of this
------------
Agreement and all of the other agreements and instruments to be executed and
delivered pursuant hereto, nor the consummation of the transactions contemplated
hereby or thereby, will, with or without the passage of time or the delivery of
notice or both, (a) conflict with, violate or result in any breach of the terms,
conditions or provisions of the Limited Liability Company Agreement of Seller,
(b) conflict with or result in a violation or breach of, or constitute a default
or require consent of any Person (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any contract, notice, bond, mortgage, indenture, license, franchise, permit,
agreement, lease or other instrument or obligation to which Seller is a party or
by which Seller or any of the Purchased Assets may be bound, (c) violate any
statute, ordinance or law or any rule, regulation, order, writ, injunction or
decree of any Governmental Entity applicable to Seller or by which any
properties or assets of Seller may be bound, or (d) result in any cancellation
of, or obligation to repay, any grant, loan or other financial assistance
received by Seller from any Governmental Entity. No "bulk sales" legislation
applies to the transactions contemplated by this Agreement.
5.6 Consents. Schedule 5.6 sets forth each agreement, contract or other
-------- ------------
instrument binding upon Seller requiring a consent as a result of the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, except such consents as would not,
individually or in the aggregate, have a Material Adverse Effect if not received
by the Closing Date (each a "Required Consent").
----------------
5.7 Financial Information. Seller has delivered to Buyer an unaudited
---------------------
balance sheet for the Business at March 13, 1998 (the "March 1998 Balance
------------------
Sheet"), a copy of which is set forth in the Seller Disclosure Schedule. The
- -----
monetary amounts for the accounts included in the March 1998 Balance Sheet were
prepared in accordance with GAAP. The March 1998 Balance Sheet accurately and
correctly discloses the amounts of the Purchased Assets as of the Closing Date.
Seller has delivered to Buyer copies of its unaudited statements of income for
the Business for the ten months ended December 31, 1997 and unaudited statements
of income for the month ended January 31, 1998 (together with the March 1998
Balance Sheet, the "Financial Statements"). The Financial Statements have been
--------------------
prepared consistently for all periods
-10-
<PAGE>
presented, and revenues presented on the Financial Statements have been
recognized in accordance with GAAP, consistently applied. The Financial
Statements present fairly the financial condition, operating results and cash
flows of the Business as of the dates and during the periods indicated therein,
subject to normal year-end adjustments, which will not be material in amount or
significance. Seller has also delivered to Buyer selected projected financial
information, a copy of which is set forth in the Seller Disclosure Schedule (the
"Projected Financials"). The Projected Financials were prepared in good faith by
--------------------
Seller and accurately state Seller's good faith belief of Seller's future
prospects.
5.8 No Undisclosed Liabilities. Seller does not have any liability,
--------------------------
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, in excess of $1,000 individually or in the aggregate, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required by
GAAP to be reflected in the Financial Statements which (i) has not been
reflected in the March 1998 Balance Sheet, or (ii) has not arisen in the
ordinary course of the Seller's business since March 13, 1998.
5.9 Absence of Certain Changes. Since March 13, 1998, Seller has
--------------------------
conducted the Business in the ordinary course consistent with past practice and
Seller:
(a) has not created, incurred or assumed (i) any borrowings under
capital leases, or (ii) any obligation which in any material way affect the
Business, the Purchased Assets or Buyer's ability to conduct the Business in
substantially the same manner and condition as conducted by Seller on the date
of this Agreement;
(b) has not changed in any manner the compensation of, or agreed to
provide additional benefits to, or enter into any employment agreement with, any
Employee (as defined in Section 8.1(a));
(c) has maintained insurance coverage in amounts adequate to cover
the reasonably anticipated risks of the business conducted with the Purchased
Assets;
(d) has not acquired or agreed to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
Business.
(e) has not sold, disposed of or encumbered any of the Purchased
Assets or licensed any Purchased Assets to any Person except for the sale of
Inventory in the normal course of business consistent with past practice;
(f) has not engaged in any special promotion which promotes the sale
of Inventory with highly discounted terms;
(g) has not entered into any agreements or commitments relating to
the business conducted with the Purchased Assets, except on commercially
reasonable terms in the ordinary course of business;
-11-
<PAGE>
(h) has complied in all material respects with all laws and
regulations applicable to the Business;
(i) has not entered into any agreement with any third party for the
distribution of any of the Purchased Assets;
(j) has not changed or announced any change to the products or
services sold by the Business except with Buyer's written consent or at Buyer's
request;
(k) has not expanded the use of the Purchased Assets within the
organization of Seller;
(l) has not violated, amended or otherwise change in any way the
terms of any of the Contracts;
(m) has not commenced a lawsuit related to or involving the Purchased
Assets other than (a) for the routine collection of bills; or (b) for a breach
of this Agreement;
(n) has not assigned, sold or otherwise conveyed to any third party,
any of its accounts receivable prior to the Closing Date; or
(o) made any agreement to do any of the foregoing.
5.10 Assets Generally.
----------------
(a) The Purchased Assets include all properties, tangible and
intangible, and only such properties, currently used by Seller in operating the
Business and necessary for Buyer to operate the Business after the Closing Date
in a manner substantially equivalent to the manner in which Seller has operated
the Business prior to and through the Closing Date. Other than the Required
Consents and the Governmental Approvals, no licenses or other consents from, or
payments to, any other Person are or will be necessary for Buyer to operate the
Business and use the Purchased Assets in the manner in which Seller has operated
the same.
(b) Seller holds good and marketable title, license to or leasehold
interest in all of the Purchased Assets and has the complete and unrestricted
power and the unqualified right to sell, assign and deliver the Purchased Assets
to Buyer. Upon consummation of the transactions contemplated by this Agreement,
Buyer will acquire good and marketable title, license or leasehold interest to
the Purchased Assets free and clear of any Liens and there exists no restriction
on the use or transfer of the Purchased Assets, except as may be assumed
hereunder by Buyer as an Assumed Liability. No Person other than Seller has any
right or interest in the Purchased Assets, including the right to grant
interests in the Purchased Assets to third parties, except for Purchased Assets
licensed or leased from third parties which are set forth in the Seller
Disclosure Schedule and identified as such.
(c) None of the Purchased Assets that constitute tangible personal
property is held under any lease, security agreement, conditional sales
contract, lien, or other title retention or security arrangement.
-12-
<PAGE>
(d) Except as provided in this Agreement, no restrictions will exist
on Buyer's right to sell, resell, license or sublicense any of the Purchased
Assets or engage in the Business, nor will any such restrictions be imposed on
Buyer as a consequence of the transactions contemplated by this Agreement or by
any agreement referenced in this Agreement.
(e) All of the Purchased Assets are in good operating condition and
repair, as required for their use in the Business as presently conducted, and
conform to all applicable laws, and no notice of any violation of any law
relating to any of the Purchased Assets or Assumed Liabilities has been received
by Seller.
5.11 Intellectual Property.
---------------------
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby (including without
limitation the continued conduct by Buyer after the Closing Date of the Business
as presently conducted by Seller and the incorporation of any Intellectual
Property in any product of Buyer or an affiliate of Buyer) will not breach,
violate or conflict with any instrument or agreement governing any intellectual
property necessary or required for, or used in, the conduct of the Business as
presently conducted and will not cause the forfeiture or termination or give
rise to a right of forfeiture or termination of any such Intellectual Property
or in any material way impair the right of Buyer or any of its affiliates to
use, sell, license or dispose of, or to bring any action for the infringement
of, any such intellectual property or portion thereof;
(b) Neither the development, manufacture, marketing, license, sale or
use of any product or intellectual property currently licensed, used or sold by
Seller or currently under development violates or will violate any license or
agreement to which Seller is a party or infringes or will infringe any
copyright, patent, trademark, service mark, trade secret or other intellectual
property or other proprietary right of any other party. All registered
trademarks, service marks, patents and copyrights held by Seller are valid and
subsisting. There is no pending or threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any of the
Purchased Assets (including without limitation the Intellectual Property)
necessary or required for, or used in, the conduct of the business of Seller as
presently conducted nor is there any basis for any such claim, nor has Seller
received any notice asserting that any such Purchased Asset (including without
limitation the Intellectual Property) or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party, nor is there any basis for any such assertion. There is no material
unauthorized use, infringement or misappropriation on the part of any third
party of the Purchased Assets (including without limitation the Intellectual
Property); and
(c) Seller has taken reasonable steps (including, without limitation,
entering into confidentiality and non-disclosure agreements with all officers
and Employees of Seller with access to or knowledge of the Purchased Assets
(including without limitation the Intellectual Property) to maintain the secrecy
and confidentiality of, and its proprietary rights in, the Purchased Assets
(including without limitation the Intellectual Property) necessary or required
for, or used in, the conduct of the business of Seller as presently conducted.
The Seller Disclosure Schedule contains a complete and accurate list of all
applications, filings and other
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<PAGE>
formal actions made or taken pursuant to federal, state, local and foreign laws
by Seller to perfect or protect its interest in the Purchased Assets, including,
without limitation, all patents, patent applications, trademarks, trademark
applications, service marks and copyright or mask work registrations.
(d) All fees to maintain Seller's rights in the Intellectual
Property, including, without limitation, patent and trademark registration and
prosecution fees and all professional fees in connection therewith pertaining to
the Intellectual Property due and payable on or before the Closing Date, have
been paid by Seller on or before the Closing Date.
5.12 Service Agreements.
------------------
(a) The Seller Disclosure Schedule contains a list (including names,
addresses, contact names and telephone numbers), which is complete in all
material respects, of all agreements or other arrangements pursuant to which
Seller is obligated to supply products, perform services or otherwise engage in
the conduct of the Business (such agreements, as supplemented below, are
referred to collectively as the "Service Agreements"). Seller has provided a
------------------
true and complete copy of all Service Agreements to Buyer. All such Service
Agreements are in full force and effect and are valid and effective in
accordance with their respective terms against Seller, as the case may be, and
against the other party thereto. Seller holds right, title and interest under
the terms of each Service Agreement free of all Liens. Seller is not in default
under any such Service Agreements (or has caused an event which with notice or
lapse of time, or both, would constitute a default), nor is the other party
thereto in default (or has caused an event which with notice or lapse of time,
or both, would constitute a default) under any such Service Agreements.
(b) Seller has not entered into any agreement under which Seller is
restricted from selling, licensing or otherwise distributing any products or
services to any class of customers, in any geographic area, during any period of
time or in any segment of the market.
(c) Seller has not granted any third party the right to supply any
products or services of the Business to any other third party. No agreement for
supply of the products or services by Seller obligates Seller, and no agreement
would obligate Buyer after the Closing Date, to provide any change in
specification of such products or services or to provide new products or
services. No agreement pursuant to which Seller has licensed the use of any
products to any third party obligates Seller to provide any change in
specification in the performance of such products or to provide new products or
services.
5.13 Warranties and Indemnities. The Seller Disclosure Schedule sets
--------------------------
forth a summary of all warranties and indemnities, express or implied, relating
to products sold or services rendered by Seller, and no warranty or indemnity
has been given by Seller which is not listed on the Seller Disclosure Schedule
or which differs therefrom in any respect. Seller is in compliance with all
warranties described in the Seller Disclosure Schedule. The Seller Disclosure
Schedule also indicates all warranty and indemnity claims currently pending
against Seller.
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<PAGE>
5.14 Real Property. Seller does not own any real property which relates
-------------
to the Business. Seller has terminated, or will terminate prior to Closing,
without further liability all real property leases which relate to the Business.
The Purchased Assets do not include (i) any owned or leased real property or
(ii) any material structures on any real property.
5.15 Inventories. Except for the Intellectual Property, the Purchased
-----------
Assets do not include any raw materials, work-in-process, finished goods,
supplies or other inventories.
5.16 Accounts Receivable. All accounts receivable, notes receivable and
-------------------
other receivables included in the Purchased Assets are valid, genuine and fully
collectible in the aggregate amount thereof, subject to normal and customary
trade discounts less any reserves for doubtful accounts recorded on the March
1998 Balance Sheet. All accounts, notes receivable, and other receivables
arising out of or relating to the Business as of February 28, 1998 have been
included in the March 1998 Balance Sheet.
5.17 Licenses and Permits. Seller holds all consents, approvals,
--------------------
registrations, certifications, authorizations, permits and licenses of, and has
made all filings with, or notifications to, all Governmental Entities pursuant
to applicable requirements of all federal, state, local and foreign laws,
ordinances, governmental rules or regulations applicable to the business,
including, but not limited to, all such laws, ordinances, governmental rules or
regulations relating to registration of the products of the Business (at their
current level of development and use) and certification of the facilities of the
Business. The Business is in compliance with all federal, state, local and
foreign laws, ordinances, governmental rules and regulations relating to the
products manufactured by the Business or otherwise related to the Business and
Seller has no reason to believe that any consents, approvals, authorizations,
registrations, certifications, permits, filings or notifications that it has
received or made to operate the Business are invalid or have been or are being
suspended, canceled, revoked or questioned. There is no investigation or inquiry
to which Seller is a party or, to Seller's knowledge, pending or threatened,
relating to the Business and its compliance with applicable foreign, state,
local or foreign laws, ordinances, governmental rules or regulations. Each such
consent, approval, registration, certification, authorization, permit or license
is transferable and shall be transferred to Buyer in accordance with the terms
of this Agreement.
5.18 Employees.
---------
(a) Schedule 5.18 sets forth the names, home addresses, compensation
-------------
levels, equity interests in Seller, if any, and job titles of all of the
Employees. All Employees, officers, directors and members of Seller or any
Seller subsidiary that have had access to the Purchased Assets are parties to a
written agreement (a "Confidentiality Agreement"), under which each such person
-------------------------
or entity (i) is obligated to disclose and transfer to Seller, without the
receipt by such person of any additional value therefor (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of employment with or performance of
services for Seller, he or she makes or conceives of either solely or jointly
with others, that relate to any subject matter with which his or her work for
Seller may be concerned, or relate to or are connected with the Business,
products or projects of Seller, or involve the use of the time, material or
facilities of Seller, and (ii) is obligated to maintain the confidentiality of
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<PAGE>
proprietary information of Seller. None of Seller's Employees, officers or
directors is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
their obligation to promote the interests of Seller with regard to the Business
or the Purchased Assets or that would conflict with the Business or the
Purchased Assets. Neither the execution nor the delivery of this Agreement, nor
the carrying on of the Business by its Employees will conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such persons or
entities are now obligated. It is currently not necessary nor will it be
necessary for Seller to utilize in the Business any inventions of any of such
persons or entities (or people it currently intends to hire) made or owned prior
to their employment by or affiliation with Seller, nor is it or will it be
necessary to utilize any other assets or rights of any such persons or entities
(or people it currently intends to hire) made or owned prior to their employment
with or engagement by Seller, in violation of any registered patents, trade
names, trademarks or copyrights or any other limitations or restrictions to
which any such persons or entity is a party or to which any of such assets or
rights may be subject. To the Seller's knowledge, none of Seller's Employees,
officers, directors or members that has had knowledge or access to information
relating to the Purchased Assets has taken, removed or made use of any
proprietary documentation, manuals, products, materials, or any other tangible
item from his or her previous employer relating to the Purchased Assets by such
previous employer which has resulted in Seller's access to or use of such
proprietary items included in the Purchased Assets, and Seller will not gain
access to or make use of any such proprietary items in the Business, except to
the extent that any such activities would not have a material adverse effect on
the Purchased Assets or the Business.
(b) Except for the Confidentiality Agreements, there are no written
or oral contracts of employment or consultancy between Seller and any Employee.
(c) The Seller is not a party to a collective bargaining agreement
with any trade union, the Seller's employees are not members of a trade union
certified as a bargaining agent with the Seller and no proceedings to implement
any such collective bargaining agreement or certifications are pending.
5.19 Employee Benefit and Compensation Plans. Buyer will incur no
---------------------------------------
liability with respect to, or on account of, and Seller will retain any
liability for, and on account of, any employee benefit plan of Seller, any of
its Affiliates or any predecessor employer of any Employee, including, but not
limited to, liabilities Seller may have to such Employees under all employee
benefit schemes, incentive compensation plans, bonus plans, pension and
retirement plans, vacation, profit-sharing plans (including any profit-sharing
plan with a cash-or-deferred arrangement) share purchase and option plans,
savings and similar plans, medical, dental, travel, accident, life, disability
and other insurance and other plans or arrangements, whether written or oral and
whether "qualified" or "non-qualified," or to any Employee as a result of
termination of employment by Seller as contemplated by this Agreement. Seller
has not, with respect to any Employee, maintained or contributed to, or been
obligated or required to contribute to, any retirement or pension plan or any
employee benefit plan. Seller is not a party to any collective bargaining
agreement covering any Employee and Seller knows of no effort to organize any
such Employee as a part of any collective bargaining unit. The Seller has
complied with all of its
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<PAGE>
obligations (including obligations to make contributions) in respect of the
pension funds of which its Employees are members, there is no outstanding
liability of the Seller or any of its Affiliates to any such funds and all such
funds are fully funded to meet all potential claims for benefits by any and all
such employees and any former employee.
5.20 Taxes. All Taxes have been or will be paid by Seller for all periods
-----
(or portions thereof) prior to and including the Closing Date. Seller and any
other person required to file returns or reports of Taxes have duly and timely
filed (or will file prior to the Closing Date) all returns and reports of Taxes
required to be filed prior to such date, and all such returns and reports are
true, correct, and complete. There are no liens for Taxes on any of the
Purchased Assets. Seller has complied with all record keeping and tax reporting
obligations relating to income and employment taxes due with respect to
compensation paid to employees or independent contractors providing services to
the Business. Seller is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code. There are no pending or, to Seller's knowledge,
threatened proceedings with respect to Taxes, and there are no outstanding
waivers or extensions of statutes of limitations with respect to assessments of
Taxes. No agreement or arrangement regarding compensation of any employee
providing services to the Business provides for any payments which could result
in a nondeductible expense to the Buyer pursuant to Section 280G of the Code or
an excise tax to the recipient of such payment pursuant to Section 4999 of the
Code.
5.21 Compliance with Law. The operation of the Business has been
-------------------
conducted in all material respects in accordance with all applicable laws,
regulations and other requirements of Governmental Entities having jurisdiction
over the same.
5.22 Health, Safety, Employment and Environmental Matters. To the extent
----------------------------------------------------
that failure to do so or be so would have a Material Adverse Effect upon the
Purchased Assets, Seller is in compliance with all federal, state, local and
foreign laws related to health and occupational safety, environment and
hazardous materials and employment practices that are applicable to the Seller
or its business related to the Purchased Assets, and Seller has conducted its
business relating to the Purchased Assets in compliance with the foregoing laws.
5.23 Material Contracts.
------------------
(a) Schedule 5.23 contains a list of all Contracts which are
-------------
material to the Business ("Material Contracts"). Material Contracts shall
------------------
include, without limitation, the following and shall be categorized in the
Seller Disclosure Schedule as follows:
(i) each Contract under the terms of which Seller, on behalf
of the Business: (A) paid or otherwise gave consideration of more than $5,000 in
the aggregate during the fiscal year ended December 31, 1997, (B) is likely to
pay or otherwise give consideration of more than $5,000 in the aggregate during
the fiscal year ended December 31, 1998, (C) is likely to pay or otherwise give
consideration of more than $5,000 in the aggregate over the remaining term of
such contract or (D) cannot be canceled without penalty or further payment;
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<PAGE>
(ii) all contracts and agreements (excluding routine checking
account overdraft agreements involving petty cash amounts) under which the
Business has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness or under which the Business has imposed (or
may impose) a security interest or lien on any of its assets, whether tangible
or intangible, to secure indebtedness;
(iii) all contracts and agreements that limit the ability of any
Person related to the Business, or any of its affiliates, to compete in any line
of business or with any person or in any geographic area or during any period of
time, or to solicit any customer or client;
(iv) all Contracts pursuant to which the Business has agreed to
supply products to a customer at specified prices, whether directly or through a
specific distributor, manufacturer's representative or dealer; and
(v) all other Contracts (A) which are material to the
Business, (B) the absence of which would have a Material Adverse Effect on the
Business, or (C) which are believed by Seller to be of unique value even though
not material to the Business.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Business, each license, each Material Contract
and each other material contract or agreement of the Business which would not
have been required to be disclosed in Schedule 5.23 had such contract or
-------------
agreement been entered into prior to the date of this Agreement, is a legal,
valid and binding agreement, and none of the Material Contracts is in default by
its terms or has been canceled by the other party; Seller is not in receipt of
any claim of default under any such agreement; and Seller does not anticipate
any termination or change to, or receipt of a proposal with respect to, any such
agreement as a result of the transactions contemplated hereby. Seller has
furnished Buyer with true and complete copies of all such agreements together
with all amendments, waivers or other changes thereto.
5.24 Services. Each of the services sold or provided by Seller in
--------
connection with the Business is, and at all times has been, in compliance in all
material respects with all applicable federal, state, local and foreign laws and
regulations and is, and at all relevant times has been, fit for the ordinary
purposes for which it is intended to be used and conforms in all material
respects to any promises or affirmations of fact made in connection with the
sale of such service.
5.25 Litigation; Other Claims.
------------------------
(a) There are no claims, actions, suits, inquiries, proceedings, or
investigations against Seller, or any of its officers, directors or members,
relating to the Business, the Purchased Assets or Seller's Employees which are
currently pending or threatened, at law or in equity or before or by any
Governmental Entity, or which challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated hereby, nor is Seller
aware of any basis for such claims, actions, suits, inquiries, proceedings, or
investigations; and no Governmental Entity has at any time challenged or
questioned the legal right of Seller to manufacture, offer or sell any of its
products or services in the present manner or style thereof.
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<PAGE>
(b) There are no grievance or arbitration proceedings pending or
threatened, and there are no actual or threatened strikes or work stoppages with
respect to the Business, the Purchased Assets or Seller's Employees, nor is
Seller aware of any basis for such proceedings or events.
5.26 Defaults. Seller is not in default under or with respect to any
--------
judgment, order, writ, injunction or decree of any court or any Governmental
Entity which could reasonably be expected to have a Material Adverse Effect on
the Business or any of the Purchased Assets. There does not exist any default
by Seller or by any other Person, or event that, with notice or lapse of time,
or both, would constitute a default under any agreement entered into by Seller
as part of the operations of the Business which could reasonably be expected to
have a Material and Adverse Effect on the Business or the Purchased Assets, and
no notices of breach thereof have been received by Seller.
5.27 Schedules. The schedules describing the Purchased Assets are
---------
complete and accurate and describe the assets in the possession of, or used by
Seller in connection with the Business. The property listed in such schedules
constitutes all of the tangible and intangible property necessary for the
conduct by Seller of the Business.
5.28 Full Disclosure. Seller is not aware of any facts pertaining to the
---------------
Purchased Assets which affect the Business or the Purchased Assets in a
materially adverse manner or which will in the future affect the Business or the
Purchased Assets in a materially adverse manner. Neither this Agreement nor any
other agreement, exhibit, schedule or officer's certificate being entered into
or delivered pursuant to this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained in such document not misleading.
5.29 Brokers and Finders. Neither Seller nor any of its officers,
-------------------
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fee, commission or finder's fee in connection with
the transactions contemplated by this Agreement.
5.30 Fair Consideration; No Fraudulent Conveyance. The sale of the
--------------------------------------------
Purchased Assets pursuant to this Agreement is made in exchange for fair and
equivalent consideration. Seller is not now insolvent and will not be rendered
insolvent by the sale, transfer and assignment of the Purchased Assets pursuant
to the terms of this Agreement. Seller is not entering into this Agreement or
any of the other agreements referenced in this Agreement with the intent to
defraud, delay or hinder its creditors and the consummation of the transactions
contemplated by this Agreement, and the other agreements referenced in this
Agreement, will not have any such effect. The transactions contemplated in this
Agreement or any agreements referenced in this Agreement will not constitute a
fraudulent conveyance, or otherwise give rise to any right of any creditor of
Seller to any of the Purchased Assets after the Closing.
5.31 Insurance. The Seller Disclosure Schedule lists all insurance
---------
policies and fidelity bonds covering the Purchased Assets. There is no claim by
Seller pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies and bonds.
All premiums due and payable under all such policies
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<PAGE>
and bonds have been paid and Seller is otherwise in material compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). There is no threatened termination
of, or material premium increase with respect to, any of such policies.
6. Representations and Warranties of Buyer
---------------------------------------
Buyer represents and warrants to Seller as follows:
6.1 Organization. Buyer is a corporation duly formed and validly existing
------------
under the laws of Delaware, and has full corporate power and authority and the
legal right to execute and deliver this Agreement and all of the other
agreements and instruments to be executed and delivered by Buyer pursuant
hereto, and to consummate the transactions contemplated hereby and thereby.
6.2 Authority. The execution and delivery of this Agreement (and all
---------
other agreements and instruments contemplated hereunder) by Buyer, the
performance by Buyer of its obligations hereunder and thereunder, and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action by the Board of Directors of Buyer,
and no other act or proceeding on the part of Buyer or its stockholders is
necessary to approve the execution and delivery of this Agreement and such other
agreements and instruments, the performance by Buyer of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby. The signatory officers of Buyer have the power and
authority to execute and deliver this Agreement and all of the other agreements
and instruments to be executed and delivered by Buyer pursuant hereto, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by Buyer pursuant to the provisions hereof
and thereof.
6.3 Execution and Binding Effect. This Agreement has been duly and
----------------------------
validly executed and delivered by Buyer and constitutes, and the other
agreements and instruments to be executed and delivered by Buyer pursuant
hereto, upon their execution and delivery by Buyer, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof by
Seller), legal, valid and binding agreements of Buyer, enforceable against Buyer
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, moratorium, or other laws affecting the
enforcement of creditors' rights generally or provisions limiting competition,
and by equitable principles.
6.4 Consent and Approvals. There is no requirement applicable to Buyer to
---------------------
make any filing, declaration or registration with, or to obtain any permit,
authorization, consent or approval of, any Governmental Entity as a condition to
the lawful consummation by Buyer of the transactions contemplated by this
Agreement and the other agreements and instruments to be executed and delivered
by Buyer pursuant hereto, except for filings (a) which are referred to in the
Buyer Disclosure Schedule or (b) the failure of making which would not have a
Material Adverse Effect on the transactions contemplated hereby.
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<PAGE>
6.5 No Violation. Neither the execution, delivery and performance of this
------------
Agreement and of all the other agreements and instruments to be executed and
delivered pursuant hereto, nor the consummation of the transactions contemplated
hereby or thereby, will, with or without the passage of time or the delivery of
notice or both, (a) conflict with, violate or result in any breach of the terms,
conditions or provisions of the Certificate of Incorporation or Bylaws of Buyer,
(b) conflict with or result in a violation or breach of, or constitute a default
or require consent of any Person (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any notice, bond, mortgage, indenture, license, franchise, permit, agreement,
lease or other instrument or obligation to which Buyer is a party or by which
Buyer or any of its properties or assets may be bound, or (c) violate any
statute, ordinance or law or any rule, regulation, order, writ, injunction or
decree of any Governmental Entity applicable to Buyer or by which any of its
properties or assets may be bound.
6.6 Financial Information. Buyer has delivered to Seller an audited
---------------------
balance sheet and statement of income as of December 31, 1997 (the "Buyer
-----
Financial Statements"). The Buyer Financial Statements have been prepared
- --------------------
consistently for all periods presented, and revenues presented on the Buyer
Financial Statements have been recognized in accordance with GAAP, consistently
applied. The Buyer Financial Statements present fairly the financial condition,
operating results and cash flows of Buyer's business as of the dates and during
the periods indicated therein.
6.7 Licenses and Permits. Buyer holds all consents, approvals,
--------------------
registrations, certifications, authorizations, permits and licenses of, and has
made all filings with, or notifications to, all Governmental Entities pursuant
to applicable requirements of all federal, state, local and foreign laws,
ordinances, governmental rules or regulations applicable to the business,
including, but not limited to, all such laws, ordinances, governmental rules or
regulations relating to registration of the products of its business (at their
current level of development and use) and certification of the facilities of its
business. Buyer is in compliance with all federal, state, local and foreign
laws, ordinances, governmental rules and regulations relating to the products
manufactured by Buyer or otherwise related to its business and Buyer has no
reason to believe that any consents, approvals, authorizations, registrations,
certifications, permits, filings or notifications that it has received or made
to operate the its business are invalid or have been or are being suspended,
canceled, revoked or questioned. There is no investigation or inquiry to which
Buyer is a party or, to Buyer's knowledge, pending or threatened, relating to
its business and its compliance with applicable foreign, state, local or foreign
laws, ordinances, governmental rules or regulations.
6.8 Litigation; Other Claims.
------------------------
(a) There are no claims, actions, suits, inquiries, proceedings, or
investigations against Buyer, or any of its officers, directors or members,
relating to its business or its employees which are currently pending or
threatened, at law or in equity or before or by any Governmental Entity, or
which challenges or seeks to prevent, enjoin, alter or materially delay any of
the transactions contemplated hereby, nor is Buyer aware of any basis for such
claims, actions, suits, inquiries, proceedings, or investigations; and no
Governmental Entity has at any
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<PAGE>
time challenged or questioned the legal right of Buyer to manufacture, offer or
sell any of its products or services in the present manner or style thereof.
(b) There are no grievance or arbitration proceedings pending or
threatened, and there are no actual or threatened strikes or work stoppages with
respect to the business of Buyer, its assets or its employees, nor is Buyer
aware of any basis for such proceedings or events.
6.9 Full Disclosure.
---------------
Buyer has fully provided Seller with all the information that Seller
and Jorgensen have requested for deciding whether to consummate the transactions
contemplated hereby and all information that Buyer believes is reasonably
necessary to enable Seller and Jorgensen to make such a decision (collectively,
the "Buyer Information"). To Buyer's knowledge, no representation or warranty
-----------------
of Buyer contained in this Agreement and the exhibits attached hereto, any
certificate furnished or to be furnished to Seller at the Closing, or the Buyer
Information (when read together) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. To the extent the Buyer Information was prepared by
management of Buyer, the Buyer Information was prepared in good faith.
7. Covenants of Seller.
-------------------
7.1 Access to Information.
---------------------
(a) Prior and subsequent to the Closing, Seller will permit Buyer to
make a full and complete investigation of the Purchased Assets and to receive
from Seller all information of Seller relating to the Purchased Assets or
reasonably related to Seller's conduct of the Business. Without limiting this
right, Seller will give to Buyer and its accountants, legal counsel, and other
representatives full access, during normal business hours, at a mutually
agreeable location arranged in advance, to all of the books, records, files,
documents, properties, and contracts of Seller relating to the Purchased Assets
or reasonably related to Seller's conduct of the Business and allow Buyer and
any such representatives to make copies thereof, all of which shall be made
available in an organized fashion and so as to facilitate an orderly review.
This Section 7.1 shall not affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the transactions contemplated by this Agreement. Seller shall
maintain and make available the information and records specified in this
Section 7.1(a) in the ordinary course of Seller's business and document
retention policies, as if the transactions contemplated by this Agreement had
not occurred.
(b) At all times following the Closing, each party shall provide the
other party (at such other party's expense) with such reasonable assistance,
including the provision of available relevant records or other information and
reasonable access to and cooperation of any Employees as may be reasonably
requested by either of them in connection with the preparation of any financial
statement or tax return, any audit or examination by any taxing authority, or
any judicial or administrative proceeding relating to liability for Taxes.
-22-
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7.2 Third Party Consents. Seller and Buyer shall use commercially
--------------------
reasonable efforts to obtain, within the applicable time periods required, all
Required Consents, waivers, permits, consents and approvals and to effect all
registrations, filings and notices with or to third parties or Governmental
Entities which are necessary to consummate the transactions contemplated by this
Agreement so as to preserve all rights of, and benefits to, the Buyer in the
Purchased Assets.
7.3 Certain Notifications. At all times prior to the Closing, Seller and
---------------------
Buyer shall promptly notify the other party in writing of the occurrence of any
event which will result, or has a reasonable prospect of resulting, in the
failure to satisfy any of the conditions specified in Section 10 or Section 11
of this Agreement.
7.4 Best Efforts. The Seller shall use its best efforts (i) to cause to
------------
be fulfilled and satisfied all of the conditions to the Closing set forth in
Section 10 below, (ii) to cause to be performed all of the matters required of
it at the Closing and (iii) to cause the Contracts to be assigned to Buyer.
7.5 Seller's Conduct of the Business Prior to Closing. During the period
-------------------------------------------------
from the date of this Agreement to the Closing Date, Seller will conduct the
Business in its ordinary and usual course, consistent with past practice, and
will use all reasonable efforts to preserve intact all rights, privileges,
franchises and other authority of the Business, to retain the employees, and to
maintain favorable relationships with licensors, licensees, suppliers,
contractors, distributors, customers, and others having relationships with the
Business. Seller shall promptly notify Buyer of any event or occurrence or
emergency not in the ordinary course of business, and any material event
involving the Business or the Purchased Assets. Without limiting the generality
of the foregoing, and except as approved in writing by Buyer in advance, prior
to the Closing, Seller:
(a) will not create, incur or assume (i) any borrowings under capital
leases, or (ii) any obligation which would in any material way affect the
Business, the Purchased Assets or Buyer's ability to conduct the Business in
substantially the same manner and condition as conducted by Seller on the date
of this Agreement;
(b) will not change in any manner the compensation of, or agree to
provide additional benefits or bonuses to, or enter into any agreement with any
Employee;
(c) will maintain insurance coverage in amounts adequate to cover the
reasonably anticipated risks of the business conducted with the Purchased
Assets;
(d) will not acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
Business.
-23-
<PAGE>
(e) will not sell, dispose of or encumber any of the Purchased Assets
or license any Purchased Assets to any Person except for the sale of Inventory
in the normal course of business consistent with past practice;
(f) will not engage in any special promotion which promotes the sale
of Inventory with highly discounted terms;
(g) will not enter into any agreements or commitments relating to the
Business, except on commercially reasonable terms in the ordinary course of
business of the Business;
(h) will comply in all material respects with all laws and
regulations applicable to the Business;
(i) will not enter into any agreement with any third party for the
distribution of any of the Purchased Assets;
(j) will use reasonable efforts to assist Buyer in employing after
the Closing Date those Employees to whom offers of employment are made by Buyer,
and will not (and will cause its Affiliates not to) solicit such Employees to
remain in the employ of Seller or any of its Affiliates after the Closing Date;
(k) will not change or announce any change to the products or
services sold by the Business except with Buyer's written consent or at Buyer's
request;
(l) will not expand the use of the Purchased Assets within the
organization of Seller;
(m) will not violate, amend or otherwise change in any way the terms
of any of the Contracts;
(n) will not commence a lawsuit related to or involving the Purchased
Assets other than (a) for the routine collection of bills; (b) for injunctive
relief on the grounds that Seller has suffered immediate and irreparable harm
not compensable in money damages, provided that Seller has obtained the prior
written consent of Buyer, such consent not to be unreasonably withheld; or (c)
for a breach of this Agreement;
(p) will not assign, sell or otherwise convey to any third party,
without obtaining Buyer's prior written consent, any of its accounts receivable
prior to the Closing Date;
(q) will not declare, set aside, or pay a dividend or other
distribution in respect to the equity interests of Seller, or directly or
indirectly redeem, purchase or otherwise acquire any of its equity; or
(r) will not issue or sell any of its equity, or securities
exchangeable, convertible or exercisable therefor, or of any other of its
ownership interests;
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7.6 No Other Bids. Until the earlier to occur of (a) the Closing or (b)
-------------
the termination of this Agreement pursuant to its terms, Seller shall not, and
Seller shall not authorize any of its officers, directors, employees or other
representatives to, directly or indirectly, (i) initiate, solicit or encourage
(including by way of furnishing information regarding the Business or the
Purchased Assets) any inquiries, or make any statements to third parties which
may reasonably be expected to lead to any proposal concerning the sale of
Seller, the Business or the Purchased Assets (whether by way of merger, purchase
of equity, purchase of assets or otherwise), or (ii) negotiate, engage in any
substantive discussions, or enter into any agreement, with any Person concerning
the sale of Seller, the Business or the Purchased Assets (whether by way of
merger, purchase of equity, purchase of assets or otherwise).
7.7 Tax Returns. Seller shall (a) continue to file in a timely manner all
-----------
returns and reports relating to Taxes, and such returns and reports shall be
true, correct and complete and shall be subject to the review and consent of
Buyer which consent shall not be unreasonably withheld, and (b) be responsible
for and pay when due any and all Taxes.
7.8 Post-Closing Access to Information. If, after the Closing Date, in
----------------------------------
order to properly operate the Business or prepare documents or reports required
to be filed with governmental authorities or Buyer's financial statements, it is
necessary that Buyer obtain additional information within Seller's possession
relating to the Purchased Assets or the Business, Seller will furnish or cause
its representatives to furnish such information to Buyer. Such information
shall include, without limitation, all agreements between Seller and any Person
relating to the Business. Seller shall maintain and make available the
information and records specified in this Section 7.8 for a period of ten (10)
years after the Closing Date.
7.9 Post-Closing Cooperation. Seller agrees that, if reasonably requested
------------------------
by Buyer, it will cooperate with Buyer, at Buyer's expense, in enforcing the
terms of any agreements between Seller and any third party involving the
Business, including without limitation terms relating to confidentiality and the
protection of intellectual property rights. In the event that Buyer is unable
to enforce its intellectual property rights against a third party as a result of
a rule or law barring enforcement of such rights by a transferee of such rights,
Seller agrees to reasonably cooperate with Buyer by assigning to Buyer such
rights as may be required by Buyer to enforce its intellectual property rights
in its own name. If such assignment still does not permit Buyer to enforce its
intellectual property rights against the third party, Seller agrees to initiate
proceedings against such third party in Seller's name, provided that Buyer shall
be entitled to participate in such proceedings and provided further that Buyer
shall be responsible for the expenses of such proceedings.
7.10 No Post-Closing Retention of Copies. Immediately after the Closing,
-----------------------------------
Seller shall deliver to Buyer or destroy copies of Purchased Assets in Seller's
possession that are in addition to copies delivered to Buyer as part of the
Closing, whether such copies are in paper form, on computer media or stored in
another form; provided, however, that Seller may retain and use copies of
financial books and records relating to the Business as well as other documents
required by law to be kept by Seller for the sole purpose of preparing its
statutory accounts. The Seller shall not be permitted to use the financial books
and records of the Business for any other reason.
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<PAGE>
7.11 Public Announcements. On and prior to the Closing Date, Buyer and
--------------------
Seller shall advise and confer with each other prior to the issuance of any
reports, statements or releases concerning this Agreement (including the
exhibits and schedules hereto) and the transactions contemplated herein. Neither
Buyer nor Seller will make any public disclosure prior to the Closing or with
respect to the Closing unless both parties agree on the text and timing of such
public disclosure; provided, however, that nothing contained herein shall
prevent either party at any time from furnishing any information to any
Governmental Entity.
7.12 Post-Closing Actions. Subsequent to the Closing Date, Seller shall,
--------------------
from time to time, execute and deliver, upon the request of Buyer, all such
other and further materials and documents and instruments of conveyance,
transfer or assignment as may reasonably be requested by Buyer to effect, record
or verify the transfer to, and vesting in Buyer, of Seller's right, title and
interest in and to the Purchased Assets, free and clear of all Liens, in
accordance with the terms of this Agreement.
7.13 Future Agreements. In the event Seller enters into any material
-----------------
agreement between the date of this Agreement and the Closing that relates
primarily to the Business, at the request of Buyer, Seller agrees to include any
such agreement within the Contracts.
7.14 Permits. Seller will assist Buyer in obtaining any licenses, permits
-------
or authorizations required for carrying on the Business but which are not
transferable.
7.15 Taxes. Seller shall be responsible for paying, shall promptly
-----
discharge when due, and shall reimburse, indemnify and hold harmless Buyer from,
any sales or use, transfer, real property gains, excise, stamp, or other similar
Taxes arising from, imposed on or attributable to the transactions contemplated
by this Agreement.
8. Covenant of Buyer.
-----------------
8.1 Buyer's Conduct of the Business Prior to Closing. During the period
------------------------------------------------
from the date of this Agreement to the Closing Date, Buyer will conduct its
business in its ordinary and usual course, consistent with past practice. Buyer
shall promptly notify Seller of any event or occurrence or emergency not in the
ordinary course of business.
8.2 Access to Information. Prior to the Closing, Buyer will permit Seller
---------------------
to make a full and complete investigation of the Buyer's business and to receive
from Buyer all information of Buyer reasonably related to the Buyer's business.
Without limiting this right, Buyer will give to Seller and its accountants,
legal counsel, and other representatives full access, during normal business
hours, at a mutually agreeable location arranged in advance, to all of the
books, records, files, documents, properties, and contracts of Buyer reasonably
related to its business and allow Seller and any such representatives to make
copies thereof, all of which shall be made available in an organized fashion and
so as to facilitate an orderly review. This Section 8.2 shall not affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the transactions
contemplated by this Agreement. Buyer shall maintain and make available the
information and records specified in this Section 8.2
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<PAGE>
in the ordinary course of Buyer's business and document retention policies, as
if the transactions contemplated by this Agreement had not occurred.
8.3 Stock Options. Within 30 days of the date hereof, Buyer will, subject
-------------
to approval by its Board of Directors, grant options to purchase its Common
Stock on terms substantially similar terms and conditions as options granted to
Buyer's employees to the following individuals in the following amounts:
Name Amount
---- ------
Michael Jardeen 6,000
Joseph Duane 12,000
Scott Prindle 12,000
9. Employee Matters
----------------
9.1 Transferred Employees.
---------------------
(a) Offer of Employment. Subject to and in accordance with the
-------------------
provisions of this Section 9, Buyer may offer employment to any or all of the
employees, consultants or independent contractors who are employed or retained
by Seller in the Business as of the date of this Agreement (collectively, the
"Employees"). Seller agrees that it will cooperate with Buyer to identify those
---------
Employees of Seller who are necessary for the conduct the Business. Prior to
the Closing, Buyer, after notice to Seller as to the timing and method of
contact, shall have the right to contact any or all of the Employees for the
purposes of making offers of employment with Buyer (or any Affiliate designated
by Buyer) after the Closing Date and receiving written acceptances of such
employment (in each case contingent on consummation of the transactions
contemplated by this Agreement). Upon Closing, Buyer (or any Affiliates
designated by Buyer) shall hire those Employees to whom it has made an offer in
accordance with this Section 9.1 and who accept such offer in the manner and
within the time frame reasonably established by Buyer. Each such Employee who
is employed by Seller on the Closing Date and who actually transfers to
employment with Buyer (or any Affiliate designated by Buyer) at or after the
Closing Date as a result of an offer of employment made by Buyer is hereafter
referred to as a "Transferred Employee." Transferred Employees shall not
--------------------
include any person on a disability leave of more than twenty-six (26) weeks. On
a periodic basis following the date of this Agreement and prior to the Closing,
Buyer shall advise Seller of its intentions with respect to the Employees it
desires to extend or has extended offers to and the general status of
discussions with such Employees. Notwithstanding such periodic disclosures made
to Seller, Buyer shall not be obligated to hire any employee unless an offer of
employment is subsequently made to, and accepted by, such employee; in addition,
Buyer shall have no obligation to hire any Employees of Seller after the Closing
Date.
(b) Transition. The employment by Seller of the Transferred
----------
Employees shall end at the close of business on the Closing Date and the
employment of the Transferred Employees by Buyer shall commence at 12:01 a.m. on
the day after the Closing Date. The terms of employment with Buyer (or Buyer's
Affiliates) shall be consistent with the terms of
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<PAGE>
employment of Buyer's current employees and as mutually agreed to between each
Transferred Employee and Buyer (or Buyer's Affiliate, as the case may be),
subject to the provisions of this Section 9.1. Between the date of this
Agreement and the Closing Date, Seller will provide each Transferred Employee
with the same level of compensation as that currently provided by Seller. Buyer
shall have no obligation with respect to payments of salary, compensation,
wages, health or similar benefits, commissions, bonuses (deferred or otherwise),
severance, stock or stock options or any other sums due to any Transferred
Employee that accrued before the Closing Date. Seller will be fully responsible
for all amounts payable to any Employee, including (without limitation) all
termination payments, redundancy compensation, severance pay, accrued vacation
pay and other amounts payable in respect of the termination of employment or
consultancy of any Employee in connection with the sale of the Purchased Assets
to the Buyer. In addition, Seller will be fully responsible for all amounts
owing to Transferred Employees prior to Closing.
(c) Retention of Employees Prior to Closing. Seller agrees to use
---------------------------------------
reasonable efforts to retain the Employees as employees of the Business until
the Closing Date, and to assist Buyer in securing the employment after the
Closing Date of those Employees to whom Buyer (or designated by Buyer) makes or
intends to make offers of employment under subsection (a) above. Seller shall
not transfer any Employee to employment with Seller outside of the Business
prior to the Closing or without the consent of Buyer. Seller shall notify Buyer
promptly if, notwithstanding the foregoing, any Employee terminates employment
or consultancy with Seller after the date of this Agreement but prior to the
Closing. Buyer may request Seller to hire additional employees for the
Business, in which case Seller will use commercial reasonable efforts to
identify and hire such employees.
9.2 Compensation and Benefits of Transferred Employees. Coverage for
--------------------------------------------------
Transferred Employees under Buyer's compensation and benefit plans and other
programs shall commence as of 12:01 a.m. on the day after the Closing Date.
Buyer shall be free to establish its own employee benefit plans; Buyer shall
have no obligation to offer benefit plans of the same type or with terms similar
to or better than the terms of Seller's current employee benefit plans. Buyer
may, at its option, give each Transferred Employee credit for such Transferred
Employee's years of most recent continuous service with Seller for purposes of
determining participation and benefit levels under all of Buyer's vacation
policies and benefit plans and programs.
9.3 Other Employees of the Business. With respect to each Employee of the
Business as of the Closing Date who is not a Transferred Employee (each a "Non-
----
Transferred Employee"), Seller agrees to either terminate such Non-Transferred
- --------------------
Employee's employment or consultancy with Seller, effective prior to the
Closing. Seller further acknowledges that the Non-Transferred Employees shall
not be employees or consultants of Buyer after the Closing.
9.4 No Right to Continued Employment or Benefits. No provision in this
--------------------------------------------
Agreement shall create any third party beneficiary or other right in any Person
(including any beneficiary or dependent thereof) for any reason, including,
without limitation, in respect of continued, resumed or new employment with
Seller or Buyer (or any Affiliate of Seller or Buyer) or in respect of any
benefits that may be provided, directly or indirectly, under any plan or
arrangement maintained by Seller, Buyer or any Affiliate of Seller or Buyer.
Except as otherwise expressly provided in this Agreement, Buyer is under no
obligation to hire any Employee of
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<PAGE>
Seller, provide any Employee with any particular benefits, or make any payments
or provide any benefits to those Employees of Seller whom Buyer chooses not to
employ or retain.
9.5 No Solicitation or Hire by Seller. For a period of one year after
---------------------------------
the Closing, Seller will not solicit any Transferred Employee for employment.
For purposes of this Section 9.5, the term "solicit" shall not include the
following activities by Seller: (i) advertising for employment in any bulletin
board (including electronic bulletin boards), newspaper, trade journal or other
publication available for general distribution to the public without specific
reference to any particular employees; (ii) participation in any hiring fair or
similar event open to the public not targeted at Buyer's employees; and (iii)
use of recruiting or employee search firms that have been instructed by Seller
not to target any Transferred Employee.
10. Conditions to Buyer's Obligations
---------------------------------
The obligations of Buyer under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived by Buyer in writing, except as
otherwise provided by law:
10.1 Representations and Warranties True; Performance; Certificate.
-------------------------------------------------------------
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made or given again at and as of the Closing Date;
(b) Seller shall have performed and complied with all of its
agreements, covenants and conditions required by this Agreement to be performed
or complied with by them prior to or on the Closing Date;
(c) The conditions set forth in this Section 10 have been fulfilled
or satisfied, unless otherwise waived in writing by Buyer; and
(d) Buyer shall have received a certificate, dated as of the Closing
Date, signed and verified by an officer of Seller on behalf of Seller certifying
to the matters set forth in Sections 10.1(a) and 10.1(b) above.
10.2 Consents. All Governmental Authorizations, Required Consents and
--------
consents required to transfer the Contracts to Buyer on the terms and conditions
provided to Seller, without change as a result of the transfer to Buyer, shall
have been obtained.
10.3 No Proceedings or Litigation.
----------------------------
(a) No preliminary or permanent injunction or other order shall have
been issued by any Governmental Entity, nor shall any statute, rule, regulation
or executive order be promulgated or enacted by any Governmental Entity which
prevents the consummation of the transactions contemplated by this Agreement.
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<PAGE>
(b) No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced and be pending against any of the
parties, or any of their respective Affiliates, associates, officers or
directors, seeking to prevent transactions contemplated by this Agreement,
including, without limitation, the sale of the Purchased Assets or asserting
that the sale of the Purchased Assets would be illegal or create liability for
damages or which may have a Material Adverse Effect on the Business or the
Purchased Assets.
10.4 Documents. This Agreement, the exhibits and schedules attached
---------
hereto, and any other instruments of conveyance and transfer and all other
documents to be delivered by Seller at the Closing and all actions of Seller
required by this Agreement and the exhibit agreements, or incidental thereto,
and all related matters, shall be in form and substance reasonably satisfactory
to Buyer and Buyer's counsel and shall be in full force and effect.
10.5 Governmental Filings. The parties shall have made any required
--------------------
filing with Governmental Entities in connection with this Agreement and the
exhibit agreements, and any approvals related thereto shall have been obtained
or any applicable waiting periods shall have expired. If a proceeding or review
process by a Governmental Entity is pending in which a decision is expected,
Buyer shall not be required to consummate the transactions contemplated by this
Agreement until such decision is reached or rendered, notwithstanding Buyer's
legal ability to consummate the transactions contemplated by this Agreement
prior to such decision being reached or rendered.
10.6 No Material Adverse Change. There shall have been no material
--------------------------
adverse change in the financial condition or results of operations of the
Business on the Closing Date as compared with the date of this Agreement.
10.7 Termination of Benefit Plans. Seller shall have provided Buyer with
----------------------------
evidence, reasonably satisfactory to Buyer as to the termination of all benefit
plans and payments owing by Seller relating to all Employees and the termination
of all Non-Transferred Employees' benefit plans.
10.8 Member Approval. This Agreement and the transactions it contemplates
---------------
shall have been approved and adopted by the members of Seller in accordance
with the provisions of Seller's Limited Liability Company Agreement, and shall
have otherwise been approved as required by law and the charter documents of
Seller.
10.9 Due Diligence. Buyer shall have received the opportunity to make a
-------------
full investigation of Seller, its business operations, assets, liabilities,
technologies, third party relationships, material contracts and agreements and
any other matter that Buyer deems to be material and such investigation shall be
concluded satisfactory to Buyer, in its sole discretion.
10.10 Escrow Agreement. Buyer and Seller shall have entered into an
----------------
Escrow Agreement in substantially the form attached hereto as Exhibit A, and
---------
such agreement shall remain in full force and effect.
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<PAGE>
10.11 Employment Agreements. Jorgensen shall have entered into an
---------------------
Employment Agreement with Buyer in substantially the form attached hereto as
Exhibit C (the "Jorgensen Employment Agreement").
- --------- ------------------------------
10.12 Stockholders Agreement. Buyer and Seller shall have entered into
----------------------
the Stockholders Agreement in substantially the form attached hereto as Exhibit
-------
B, and such agreement shall remain in full force and effect.
- -
11. Conditions to Seller's Obligations
----------------------------------
The obligations of Seller under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in writing by Seller, except as
otherwise provided by law:
11.1 Representations and Warranties True; Performance.
------------------------------------------------
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made or given again at and as of the Closing Date;
(b) Buyer shall have performed and complied with all of its
agreements, covenants and conditions required by this Agreement to be performed
or complied with by them prior to or on the Closing Date;
(c) Seller shall have received a certificate, dated as of the
Closing Date, signed and verified by an officer of Buyer on behalf of Buyer
certifying to the matters set forth in Sections 11.1(a) and 11.1(b) above.
11.2 No Proceeding or Litigation.
---------------------------
(a) No preliminary or permanent injunction or other order shall have
been issued by any Governmental Entity, nor shall any statute, rule, regulation
or executive order be promulgated or enacted by any Governmental Entity which
prevents the consummation of the transactions contemplated by this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced and be pending against any of the
parties, or any of their respective Affiliates, associates, officers or
directors, seeking to prevent the sale of the Purchased Assets or asserting that
the sale of the Assets would be illegal or create liability for damages.
11.3 Documents. This Agreement, any other instruments of conveyance and
---------
transfer and all other documents to be delivered by Buyer to Seller at the
Closing and all actions of Buyer required by this Agreement or incidental
thereto, and all related matters, shall be in form and substance reasonably
satisfactory to Seller and Seller's counsel.
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<PAGE>
11.4 Governmental Filings. The parties shall have made any filing
--------------------
required with Governmental Entities, and any approvals shall have been obtained
or any applicable waiting periods shall have expired. If a proceeding or review
process by a Governmental Entity is pending in which a decision is expected,
Seller shall not be required to consummate the transactions contemplated by this
Agreement until such decision is reached or rendered, notwithstanding Seller's
legal ability to consummate the transactions contemplated by this Agreement
prior to such decision being reached or rendered.
11.5 Due Diligence. Seller shall have received the opportunity to make a
-------------
full investigation of Buyer, its business operations, assets, liabilities,
technologies, third party relationships, material contracts and agreements and
any other matter that Seller deems to be material and such investigation shall
be concluded satisfactory to Seller, in its sole discretion.
12. Escrow; Indemnification and Vesting
-----------------------------------
12.1 Survival of Representations and Warranties. All covenants to be
------------------------------------------
performed prior to the Closing Date, and all representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the consummation of the transactions contemplated hereby and continue
until 12 months following the Closing (the "Escrow Cash Termination Date");
----------------------------
provided that if any claims for indemnification have been asserted with respect
- --------
to any such representations, warranties and covenants prior to the Escrow Cash
Termination Date, the representations, warranties and covenants on which any
such claims are based shall continue in effect until final resolution of any
claims, and provided, further, that representations, warranties and covenants
-------- -------
relating to Taxes shall survive until 30 days after expiration of all applicable
statutes of limitations relating to such Taxes. All covenants to be performed
after the Closing Date shall continue indefinitely.
12.2 Indemnification. Subject to the limitations set forth in this
---------------
Section 12, from and after the Effective Time, Seller shall protect, defend,
indemnify and hold harmless Buyer and Buyer's Affiliates, officers, directors,
employees, representatives and agents (each of the foregoing Persons is
hereinafter referred to individually as an "Indemnified Person" and collectively
------------------
as "Indemnified Persons") from and against any and all losses, costs, damages,
-------------------
liabilities, fees (including without limitation attorneys' fees) and expenses
(collectively, the "Damages"), that any of the Indemnified Persons incurs or
-------
reasonably anticipates incurring by reason of or in connection with any claim,
demand, action or cause of action (i) alleging misrepresentation, breach of, or
default in connection with, any of the representations, warranties, covenants or
agreements of the Seller contained in this Agreement, including any exhibits or
schedules attached hereto, known to Buyer prior to the Escrow Cash Termination
Date and (ii) relating to the termination prior to Closing of any Employees of
Seller. Damages in each case shall be net of the amount of any insurance
proceeds and indemnity and contribution actually recovered by Buyer.
12.3 Indemnification Damages Threshold. Notwithstanding the foregoing,
---------------------------------
Buyer may not receive any amount of the Escrow Cash from the Escrow based on a
claim for indemnification unless and until a certificate signed by an officer of
Buyer (an "Officer's Certificate") identifying Damages in the aggregate amount
---------------------
in excess of $15,000 has been
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<PAGE>
delivered to the Escrow Agent and such amount is determined pursuant to this
Section 12 to be payable, in which case Buyer shall receive from the Escrow
Agent an amount equal in value to the full amount of such Damages and any
subsequent Damages without deduction in the following manner: first, such amount
shall come from the Escrow Cash; second, to the extent any Damages remain
unpaid, from other assets, if any, constituting the Escrow Cash. In determining
the amount of any Damages attributable to a breach, any materiality standard
contained in a representation, warranty or covenant of Seller shall be
disregarded.
12.4 Escrow Cash Period. Subject to the following requirements and the
------------------
terms of the Escrow Agreement, the Escrow Cash shall be retained by the Escrow
Agent until the Escrow Cash Termination Date. Upon the Escrow Cash Termination
Date, the Escrow Agent shall deliver to the Seller all remaining Escrow Cash
provided, however, that the amount of Escrow Cash, which, in the reasonable
- -----------------
judgment of Buyer, subject to the objection of the Escrow Agent and the
subsequent arbitration of the claim in the manner provided in the Escrow
Agreement, is necessary to satisfy any unsatisfied claims specified in any
Officer's Certificate delivered to the Escrow Agent prior to the Escrow Cash
Termination Date with respect to facts and circumstances existing on or prior to
the Escrow Cash Termination Date shall remain in the possession of the Escrow
Agent until such claims have been resolved. As soon as all such claims have
been resolved, any remaining Escrow Cash not required to satisfy such claims
shall be distributed to the Seller.
12.5 Method of Asserting Claims. All claims for indemnification by the
--------------------------
Buyer or any other Indemnified Person or claims for return of Escrow Shares to
Buyer upon termination of the Jorgensen Employment Agreement pursuant to this
Section 12 shall be made in accordance with the provisions of the Escrow
Agreement.
13. Termination.
-----------
13.1 Termination of Agreement. This Agreement may be terminated at any
------------------------
time prior to the Closing:
(a) By mutual written consent of Buyer and Seller;
(b) By either party, if the other party goes into liquidation, has
an application or order made for its winding up or dissolution, has a resolution
passed or steps taken to pass a resolution for its winding up or dissolution,
becomes unable to pay its debts as and when they fall due, or has a receiver,
receiver and manager, administrator, liquidator, provisional liquidator,
official manager or administrator appointed to it or any of its assets; or
(c) By Buyer or Seller if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement; or
(d) By either party if the Closing does not occur by March 31, 1998.
13.2 Procedure and Effect of Termination. In the event of termination of
-----------------------------------
this Agreement by any or all of the parties pursuant to Section 13.1, written
notice shall be given to
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<PAGE>
each other party specifying the provision of Section 13.1, pursuant to which
such termination is made and shall become void and there shall be no liability
on the part of Buyer or Seller (or their respective officers, directors,
partners or Affiliates), except as a result of any breach of this Agreement by
such party or to the extent such a party is entitled to indemnification under
Section 12 of this Agreement.
14. Miscellaneous.
-------------
14.1 Amendments and Waivers. Any term of this Agreement may be amended or
----------------------
waived with the written consent of the parties or their respective successors
and assigns. Any amendment or waiver effected in accordance with this Section
14.1 shall be binding upon the parties and their respective successors and
assigns.
14.2 Successors and Assigns. The terms and conditions of this Agreement
----------------------
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
14.3 Governing Law; Jurisdiction. This Agreement and all acts and
---------------------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Washington, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of King
County, Washington.
14.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
14.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
14.6 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice, and (a) if to Buyer, with a copy to Sonya Erickson, Venture Law Group,
4750 Carillon Point, Kirkland, WA 98033 or (b) if to Seller, with a copy to Greg
Wright, Wright Law Offices, 800 Bellevue Way NE, Suite 400, Bellevue, WA 98004.
14.7 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually
-34-
<PAGE>
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
14.8 Entire Agreement. This Agreement and the documents referred to
----------------
herein are the product of both of the parties hereto, and constitute the entire
agreement between such parties pertaining to the subject matter hereof and
thereof, and merge all prior negotiations and drafts of the parties with regard
to the transactions contemplated herein and therein. Any and all other written
or oral agreements existing between the parties hereto regarding such
transactions are expressly canceled.
14.9 Advice of Legal Counsel. Each party acknowledges and represents
-----------------------
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its behalf
has read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
[Signature pages follows]
-35-
<PAGE>
This Agreement has been duly executed and delivered by the duly authorized
officers of Seller and Buyer and by Jorgensen as of the date first above
written.
HEALTHKNOWLEDGE CORPORATION
By: /s/ Timothy J. Kilgallon
Name: ____________________________________
Title: ___________________________________
Address: 1300 114th Ave. SE, Suite 100
Bellevue, WA 98004
MEDLYNX LLC
By: /s/ Kelly R. Jorgensen
Name: ____________________________________
Title: ___________________________________
Address: 13013 NE 65th St.
Kirkland, WA 98033
KELLY JORGENSEN
/s/ Kelly R. Jorgensen
__________________________________________
Address: c/o MedLynx LLC
13013 NE 65th St.
Kirkland, WA 98033
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
<PAGE>
Exhibit A
Escrow Agreement
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
<PAGE>
Exhibit B
Stockholders Agreement
-2-
<PAGE>
Exhibit C
Jorgensen Employment Agreement
-3-
<PAGE>
Seller Disclosure Schedule
-4-
<PAGE>
Buyer Disclosure Schedule
-5-
<PAGE>
Exhibit 2.2
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is entered into as of
---------
December 9, 1998 (the "Effective Time"), by and between Pointshare Corporation,
--------------
a Delaware corporation ("Buyer"), and Peregrin Medical Review, Inc., an Oregon
-----
corporation ("Seller") and Samuel H. Bosch, an individual residing in the State
------
of Oregon and the principal stockholder of Seller ("Bosch").
-----
RECITALS
--------
Buyer is in the business of providing on-line solutions to health care
organizations. Seller conducts a business which operates an electronic network
among health care organizations. Buyer desires to acquire from Seller, and
Seller and Bosch desires to sell to Buyer, substantially all of the assets of
the Business (as defined below) on the terms and subject to the conditions set
forth in this Agreement.
AGREEMENT
---------
In consideration of the mutual agreements, representations, warranties and
covenants set forth below, Buyer, Seller and Bosch agree as follows:
1. Definitions.
-----------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings:
"Affiliate" means with respect to any Person, a Person directly or
---------
indirectly controlling or controlled by or under common control with such
Person.
"Business" means the operation of the OMEN Network and all services
--------
and activities of Seller related thereto.
"Closing" means the consummation of the transactions contemplated
-------
hereby.
"Closing Date" means the date of the Closing.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Employees" means employees of Seller who have been principally
---------
involved in the operation of the Business.
"GAAP" means generally accepted accounting principles of the United
----
States as set forth by the Financial Accounting Standards Board.
<PAGE>
"Governmental Authorizations" means the permits, authorizations,
---------------------------
consents or approvals of any Governmental Entity which are a condition to the
lawful consummation of the transactions contemplated hereby listed on Schedule
--------
1.1(i) to this Agreement.
- ------
"Governmental Entity" means any court, or any federal, state,
-------------------
municipal or other governmental authority, department, commission, board, agency
or other instrumentality (domestic or foreign).
"Lien" means any mortgage, pledge, lien, security interest, option,
----
covenant, condition, restriction, encumbrance, charge or other third-party claim
of any kind.
"Material Adverse Effect" with respect to a Person means any event,
-----------------------
change or effect that is materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, business, operations, results of
operations, or prospects of such Person and its Affiliates, taken as a whole.
"OMA Network Operation Agreement" means that certain agreement dated
-------------------------------
November 1, 1997 by and between Seller and the Oregon Medical Association.
"OMEN Network" means the electronic network operated by Seller in
------------
connection with the Oregon Medical Association pursuant to the OMA Network
Operation Agreement.
"Person" means an individual, corporation, partnership, association,
------
trust, government or political subdivision or agent or instrumentality thereof,
or other entity or organization.
"Taxes" means all taxes, however denominated, including any interest,
-----
penalties or other additions to tax that may become payable in respect thereof,
(i) imposed by any federal, territorial, state, local or foreign government or
any agency or political subdivision of any such government, for which Buyer
could become liable as successor to or transferee of the Business or the
Purchased Assets or which could become a charge against or lien on any of the
Purchased Assets, which taxes shall include, without limiting the generality of
the foregoing, all sales and use taxes, ad valorem taxes, excise taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, real property gains taxes, transfer taxes, payroll and
employee withholding taxes, unemployment insurance contributions, social
security taxes, and other governmental charges, and other obligations of the
same or of a similar nature to any of the foregoing, which are required to be
paid, withheld or collected, or (ii) any liability for amounts referred to in
(i) as a result of any obligations to indemnify another person.
2. Sale and Purchase
-----------------
2.1 Transfer of Assets. Subject to the terms and conditions of
------------------
this Agreement, Seller shall sell, assign, grant, transfer, and deliver (or
cause to be sold, assigned, granted, transferred and delivered) to Buyer, or to
any Affiliate of Buyer designated by Buyer, and Buyer shall purchase and accept
from Seller as of the Closing Date, free and clear of all
-2-
<PAGE>
Liens, all of the Seller's rights, title and interest in and to the following
assets, properties and business, other than the Excluded Assets (as defined
below), owned, held or used in the conduct of the Business by Seller as the same
shall exist on the Closing Date (the "Purchased Assets"):
----------------
(a) tangible personal property and leases of and other interests in
tangible personal property used in connection with the Business listed on
Schedule 2.1(a);
- ---------------
(b) all rights under contracts, agreements, licenses, commitments,
sales and purchase orders and other instruments relating to the Business,
including, without limitation, the items listed on Schedule 2.1(b) (collectively
---------------
the "Contracts");
---------
(c) all accounts receivable, notes receivable and other receivables
relating to the Business;
(d) all prepaid expenses relating to the Business including, but not
limited to Taxes, leases and rentals;
(e) all of Seller's rights, claims, credits, causes of action or
rights of set-off against third parties relating to the Purchased Assets and/or
the Business, including, without limitation, unliquidated rights under
warranties;
(f) all copyrights, copyright registrations, proprietary processes,
trade secrets, license rights, specifications, technical manuals and data,
drawings, inventions, designs, patents, patent applications, trade names,
trademarks, service marks, product information and data, know-how and
development work-in-progress, customer lists, domain names, software, business
and marketing plans and other intellectual or intangible property embodied in or
pertaining to the Business, whether pending, applied for or issued, whether
filed in the United States or in other countries, including without limitation
the items listed in Schedule 2.1(f), together with all associated goodwill;
---------------
(g) all things authored, discovered, developed, made, perfected,
improved, designed, engineered, acquired, produced, conceived or first reduced
to practice by Seller or any of its employees or agents that are embodied in,
derived from or relate to the Business, in any stage of development, including,
without limitation, modifications, enhancements, designs, concepts, techniques,
methods, ideas, flow charts, coding sheets, notes and all other information
relating to the Business;
(h) any and all design and code documentation, methodologies,
processes, trade secrets, copyrights, design information, product information,
technology, formulae, routines, engineering specifications, technical manuals
and data, drawings, inventions, know-how, techniques, engineering work papers,
and notes, development work-in-process, and other proprietary information and
materials of any kind relating to, used in, or derived from the Purchased Assets
and/or the Business (collectively with subsections (f) and (g), the
"Intellectual Property");
---------------------
-3-
<PAGE>
(i) all permits, authorizations, consents and approvals of any
Governmental Entity affecting or relating in any way to the Business, including
without limitation, the items listed on Schedule 2.1(i) (the "Permits");
--------------- -------
(j) all books, records files and papers, whether in hard copy or
electronic format, used in the Business, including without limitation,
engineering information, sales and promotional literature, manuals and data,
sales and purchase correspondence, lists of present, former and prospective
suppliers or customers, personnel and employment records, and any information
relating to Taxes imposed on the Business or Purchased Assets;
(k) all computer software programs, data and associated licenses used
in connection with the Business; and
(l) all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that Buyer is the
successor to the Business.
2.2 Excluded Assets. Buyer agrees that the assets of Seller listed on
---------------
Schedule 2.2 hereto (the "Excluded Assets") shall be excluded from the Purchased
---------------
Assets.
2.3 Transfer of Liabilities. Subject to the terms and conditions of this
-----------------------
Agreement, Buyer or an Affiliate of Buyer designated by Buyer agrees, effective
as of the Closing Date, to assume the following liabilities (the "Assumed
-------
Liabilities").
- -----------
(a) the liabilities set forth on Schedule 2.3(a) to the extent set
---------------
forth thereon; and
(b) the liabilities and obligations of Seller accruing under the
Contracts after the Closing Date, other than the liabilities attributable to any
failure by Seller to comply with the terms thereof.
2.4 Excluded Liabilities. Except for those liabilities expressly assumed
--------------------
by Buyer or any Affiliate designated by Buyer pursuant to Section 2.3, Buyer
shall not assume and shall not be liable for, and Seller and its direct or
indirect subsidiaries shall retain and remain solely liable for and obligated to
discharge, all of the debts, contracts, agreements, commitments, obligations and
other liabilities of any nature whatsoever of Seller and its direct and indirect
subsidiaries, whether known or unknown, accrued or not accrued, fixed or
contingent, including without limitation, the following:
(a) Any liability for breaches by Seller or any of its direct or
indirect subsidiaries on or prior to the Closing Date of any contract or any
other instrument, contract or purchase order or any liability for payments or
amounts due under any Contract or any other instrument, contract or purchase
order on or prior to the Closing Date;
(b) Any liability or obligation for Taxes attributable to or imposed
upon Seller or any of its direct or indirect subsidiaries, or attributable to or
imposed upon the Purchased Assets for any period (or portion thereof) through
the Closing Date, including, without limitation, any Taxes attributable to or
arising from the transactions contemplated by this Agreement;
-4-
<PAGE>
(c) Any liability or obligation for or in respect of any loan, other
indebtedness for money borrowed, or account payable of Seller, its shareholders
or any of Seller's direct or indirect subsidiaries, including any such
liabilities owed to Affiliates of Seller;
(d) Any liability or obligation arising as a result of any legal or
equitable action or judicial or administrative proceeding initiated at any time,
to the extent relating to any action or omission on or prior to the Closing Date
by or on behalf of Seller, its shareholders or any of Seller's direct or
indirect subsidiaries, including, without limitation, any liability for
infringement of intellectual property rights, claims of ownership regarding the
Purchased Assets, breach of product warranty, injury or death caused by
products, or violations of federal or state securities or other laws;
(e) Any liability or obligation arising on or prior to the Closing
Date out of any "employee benefit plan," as such term is defined by the Employee
Retirement Income Security Act of 1974 ("ERISA") or other employee benefit
-----
plans;
(f) Any liability or obligation for making payments of any kind
(including as a result of the sale of Purchased Assets or as a result of the
termination of employment or consultancy by Seller of Employees, or other claims
arising out of the terms and conditions of employment or consultancy with
Seller, or for vacation or severance pay or otherwise) to Employees of Seller or
in respect of payroll taxes for Employees of Seller;
(g) Any liability of Seller incurred in connection with the making or
performance of this Agreement and the transactions contemplated hereby;
(h) Any liability of Seller arising out of the violation of or
failure to comply with any federal, state, local or foreign laws and regulations
related to the environment or hazardous materials applicable to any aspect of
the Business; and
(i) Any costs or expenses of Seller incurred in connection with
shutting down, deinstalling and removing equipment not purchased by Buyer, and
the costs associated with all contracts and agreements not assumed by Buyer.
2.5 Purchase Price. Subject to the performance by Seller of all of its
--------------
obligations under this Agreement (including delivering all documents required to
be delivered) at the Closing, in consideration of the acquisition of the
Purchased Assets under Section 2.1, Buyer agrees (a) to deliver to Seller or an
account or accounts designated by Seller $146,104.94, in immediately available
funds (the "Immediate Consideration"); (b) to pay those certain liabilities in
-----------------------
the aggregate amount of $13,572.73, identified on Schedule 2.5(a) (the "Closing
--------------- -------
Liabilities"); (c) to deliver to Imperial Trust Company (the "Escrow Agent") or
- ----------- ------------
an account or accounts designated by Escrow Agent (the "Escrow") $36,526.23
------
payable in immediately available funds (the "Escrow Consideration") which Escrow
--------------------
Consideration shall be subject to the provisions of the Escrow Agreement
attached as Exhibit A to this Agreement (the "Escrow Agreement"); and (d) to
--------- ----------------
assume all the Assumed Liabilities. On January 4, 1999, in further
consideration of the acquisition of the Purchased Assets under Section 2.1,
Buyer agrees to deliver to Seller or an account or accounts designated by Seller
$182,631.17, in immediately available funds (the
-5-
<PAGE>
"Additional Consideration") (the Immediate Consideration, Additional
------------------------
Consideration, Escrow Consideration, and the Closing Liabilities being referred
to collectively as the "Purchase Price").
--------------
2.6 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Purchased Assets as provided in an exhibit to be prepared by Buyer for
purposes of complying with the requirements of Section 1060 of the Code and the
regulations thereunder. As soon as practicable after the delivery of the
Effective Balance Sheet, Buyer shall deliver to Seller a revised allocation,
which revised allocation shall be reasonably consistent with the principles of
the allocation set forth in the exhibit to be attached hereto as determined by
Buyer in its good faith discretion. Buyer and Seller agree to each prepare and
file on a timely basis with the Internal Revenue Service (and applicable state
tax authorities) substantially identical and supplemental Internal Revenue
Service Forms 8594 (and corresponding state tax forms) consistent with Buyer's
allocation of the Purchase Price. If any Tax authority challenges such
allocation, the party receiving notice of such challenge shall give the other
prompt written notice thereof and the parties shall cooperate in order to
preserve the effectiveness of such allocation.
3. Closing
-------
3.1 Closing. Subject to the terms and conditions of this Agreement, the
-------
Closing shall take place on such date, as soon as practicable after all
conditions precedent in Sections 8 and 9 have been satisfied or waived, as the
parties may agree, but in any case, no later than December 9, 1998 (the "Closing
-------
Date").
- ----
3.2 Actions at the Closing. At the Closing, Seller shall deliver the
----------------------
Purchased Assets to Buyer, Buyer shall deliver the Immediate Consideration to
Seller and deliver the Escrow Consideration to the Escrow Agent and Buyer and
Seller shall take such actions and execute and deliver such agreements, bills of
sale, and other instruments and documents as necessary or appropriate to effect
the transactions contemplated by this Agreement in accordance with its terms,
including without limitation the following:
(a) Bill of Sale; Assignment and Assumption Agreement. Seller shall
-------------------------------------------------
deliver to Buyer a general Bill of Sale, substantially in the form attached
hereto, and with respect to each Contract, or item of Intellectual Property, an
Assignment and Assumption, substantially in the form attached hereto, (the
"Transfer Documents") in each case duly executed by Seller, and in the aggregate
------------------
assigning to Buyer all of Seller's right, title and interest in and to the
Purchased Assets. Buyer may designate one or more of its Affiliates as the
recipient of certain of the Purchased Assets, and as the party to assume certain
of the Assumed Liabilities, in which case Seller shall transfer such Purchased
Assets and Assumed Liabilities to Buyer or the Affiliate(s) designated by Buyer
pursuant to such Transfer Documents.
(b) Purchase Price. Buyer shall deliver the Immediate Consideration
--------------
to Seller and the Escrow Consideration to the Escrow Agent.
(c) Title. Seller shall provide reasonable evidence of valid title to
-----
such of the Purchased Assets as Buyer may reasonably request in writing prior to
the Closing, in form and substance reasonably satisfactory to Buyer.
-6-
<PAGE>
(d) Third Party Consents and Assignments. Seller shall deliver to
------------------------------------
Buyer any assignments, and any required consents to assignment, that it has
obtained in respect of the Contracts, duly executed by parties having the
authority to so assign or consent to assign, in form and substance as Buyer
shall reasonably request, as well as a written confirmation from such third
parties that the Contracts are in good standing.
(e) Seller Documents. At the Closing, Seller shall deliver to Buyer
----------------
any and all documents required to satisfy the conditions set forth in Section 9
of this Agreement and any other closing documents reasonably requested by Buyer.
(f) Buyer Documents. At the Closing, Buyer shall deliver to Seller
---------------
any and all documents required to satisfy the conditions set forth in Section 8
of this Agreement and any other closing documents reasonably requested by
Seller.
(g) Post-Closing Actions. Subsequent to the Closing Date, Seller
--------------------
shall, and shall cause any Affiliate of Seller to, from time to time execute and
deliver, upon the request of Buyer, all such other and further materials and
documents and instruments of conveyance, transfer or assignment as may
reasonably be requested by Buyer to effect, record or verify the transfer to and
vesting in Buyer of Seller's and any of Seller's Affiliates' right, title and
interest in and to the Purchased Assets, free and clear of all Liens in
accordance with the terms of this Agreement.
4. Representations and Warranties of Seller and Bosch
--------------------------------------------------
Each representation and warranty set forth below is qualified by any
exception or disclosures set forth in the Seller Disclosure Schedule attached
hereto, which exceptions specifically reference the Section(s) to be qualified.
In all other respects, each representation and warranty set out in this Section
4 is not qualified in any way whatsoever, will not merge on Closing or by reason
of the execution and delivery of any agreement, document or instrument at the
Closing, will remain in force on and after the Closing Date, is given with the
intention that liability is not confined to breaches discovered before Closing,
is separate and independent and is not limited by reference to any other
representation or warranty or any other provision of this Agreement, and is made
and given with the intention of inducing the Buyer to enter into this Agreement.
Each of Seller and Bosch separately represent and warrant to Buyer as follows:
4.1 Organization, Standing and Power. Seller is a corporation duly
--------------------------------
organized and validly existing under the laws of the state of Oregon. Seller
has the requisite corporate power and authority and all necessary permits,
authorizations, consents, and approvals of all Governmental Entities to own,
lease and operate its properties and to carry on the Business as now being
conducted and as proposed to be conducted, except where the failure to have such
power, authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on the Business. Seller is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for failures to be so qualified or licensed and
in good
-7-
<PAGE>
standing that would not, individually or in the aggregate, have a Material
Adverse Effect on the Business.
4.2 Authority. The execution and delivery of this Agreement (and all
---------
other agreements and instruments contemplated under this Agreement) by Seller,
the performance by Seller of its obligations hereunder and thereunder, and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action by the Board of Directors and
shareholders of Seller, and no other act or proceeding on the part of or on
behalf of Seller, its Board of Directors or its shareholders is necessary to
approve the execution and delivery of this Agreement and such other agreements
and instruments, the performance by Seller of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby. The signatory officers of Seller have the power and authority to
execute and deliver this Agreement and all of the other agreements and
instruments to be executed and delivered by Seller pursuant hereto, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by Seller pursuant to the provisions hereof
and thereof.
4.3 Execution and Binding Effect. This Agreement has been duly and
----------------------------
validly executed and delivered by Seller and constitutes, and the other
agreements and instruments to be executed and delivered by Seller pursuant
hereto, upon their execution and delivery by Seller, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof by
Buyer), legal, valid and binding agreements of Seller, enforceable against
Seller in accordance with their respective terms.
4.4 Consents and Approvals of Governmental Entities. Other than the
-----------------------------------------------
Governmental Authorizations there is no requirement applicable to Seller to make
any filing, declaration or registration with, or to obtain any permit,
authorization, consent or approval of, any Governmental Entity as a condition to
the lawful consummation by Seller of the transactions contemplated by this
Agreement and the other agreements and instruments to be executed and delivered
by Seller pursuant hereto or the consummation by Seller of the transactions
contemplated herein or therein.
4.5 No Violation. Neither the execution, delivery and performance of this
------------
Agreement and all of the other agreements and instruments to be executed and
delivered pursuant hereto, nor the consummation of the transactions contemplated
hereby or thereby, will, with or without the passage of time or the delivery of
notice or both, (a) conflict with, violate or result in any breach of the terms,
conditions or provisions of the Articles of Incorporation or Bylaws of Seller,
(b) except as set forth in Schedule 4.6, conflict with or result in a violation
or breach of, or constitute a default or require consent of any Person (or give
rise to any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any contract, notice, bond, mortgage,
indenture, license, franchise, permit, agreement, lease or other instrument or
obligation to which Seller is a party or by which Seller or any of the Purchased
Assets may be bound, (c) violate any statute, ordinance or law or any rule,
regulation, order, writ, injunction or decree of any Governmental Entity
applicable to Seller or by which any properties or assets of Seller may be
bound, or (d) result in any cancellation of, or obligation to repay, any grant,
loan or other
-8-
<PAGE>
financial assistance received by Seller from any Governmental Entity. No "bulk
sales" legislation applies to the transactions contemplated by this Agreement.
4.6 Consents. Schedule 4.6 sets forth each agreement, contract or other
-------- ------------
instrument binding upon Seller requiring a consent as a result of the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, except such consents as would not,
individually or in the aggregate, have a Material Adverse Effect if not received
by the Closing Date (each a "Required Consent").
----------------
4.7 Financial Information. Seller has delivered to Buyer an unaudited
---------------------
balance sheet for the Business at the Closing Date (the "Financial Statements"),
--------------------
a copy of which is set forth in the Seller Disclosure Schedule. The Financial
Statements accurately and correctly discloses the amounts of the Purchased
Assets as of the Closing Date. The Financial Statements have been prepared
consistently for all periods presented, and revenues presented on the Financial
Statements have been recognized in accordance with GAAP, consistently applied.
The Financial Statements present fairly the financial condition, operating
results and cash flows of the Business as of the dates and during the periods
indicated therein, subject to normal year-end adjustments, which will not be
material in amount or significance.
4.8 No Undisclosed Liabilities. Seller does not have any liability,
--------------------------
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, in excess of $1,000 individually or $5,000 in the aggregate, whether
accrued, absolute, contingent, matured, unmatured or other (whether or not
required by GAAP to be reflected in the Financial Statements), which has not
been reflected in the Financial Statements.
4.9 Assets Generally.
----------------
(a) The Purchased Assets include all properties, tangible and
intangible, necessary for Buyer to operate the Business after the Closing Date
in a manner substantially equivalent to the manner in which Seller has operated
the Business prior to and through the Closing Date. Other than the Required
Consents and the Governmental Approvals, no licenses or other consents from, or
payments to, any other Person are or will be necessary for Buyer to operate the
Business and use the Purchased Assets in the manner in which Seller has operated
the same.
(b) Seller holds good and marketable title, license to or leasehold
interest in all of the Purchased Assets and has the complete and unrestricted
power and the unqualified right to sell, assign and deliver the Purchased Assets
to Buyer. Upon consummation of the transactions contemplated by this Agreement,
Buyer will acquire good and marketable title, license or leasehold interest to
the Purchased Assets free and clear of any Liens and there exists no restriction
on the use or transfer of the Purchased Assets, except as may be assumed
hereunder by Buyer as an Assumed Liability. No Person other than Seller has any
right or interest in the Purchased Assets, including the right to grant
interests in the Purchased Assets to third parties, except for Purchased Assets
licensed or leased from third parties which are set forth in the Seller
Disclosure Schedule and identified as such.
-9-
<PAGE>
(c) None of the Purchased Assets that constitute tangible personal
property is held under any lease, security agreement, conditional sales
contract, lien, or other title retention or security arrangement.
(d) Except as provided in this Agreement, no restrictions will exist
on Buyer's right to sell, resell, license or sublicense any of the Purchased
Assets or engage in the Business, nor will any such restrictions be imposed on
Buyer as a consequence of the transactions contemplated by this Agreement or by
any agreement referenced in this Agreement.
(e) All of the Purchased Assets are in good operating condition and
repair, as required for their use in the Business as presently conducted, and
conform to all applicable laws, and no notice of any violation of any law
relating to any of the Purchased Assets or Assumed Liabilities has been received
by Seller.
4.10 Intellectual Property.
---------------------
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby (including without
limitation the continued conduct by Buyer after the Closing Date of the Business
as presently conducted by Seller and the incorporation of any Intellectual
Property in any product of Buyer or an affiliate of Buyer) will not breach,
violate or conflict with any instrument or agreement governing any intellectual
property necessary or required for, or used in, the conduct of the Business as
presently conducted and will not cause the forfeiture or termination or give
rise to a right of forfeiture or termination of any such Intellectual Property
or in any material way impair the right of Buyer or any of its affiliates to
use, sell, license or dispose of, or to bring any action for the infringement
of, any such intellectual property or portion thereof;
(b) Neither the development, manufacture, marketing, license, sale or
use of any product or intellectual property currently licensed, used or sold by
Seller or currently under development violates or will violate any license or
agreement to which Seller is a party or infringes or will infringe any
copyright, patent, trademark, service mark, trade secret or other intellectual
property or other proprietary right of any other party. All registered
trademarks, service marks, patents and copyrights held by Seller are valid and
subsisting. There is no pending or threatened claim or litigation contesting
the validity, ownership or right to use, sell, license or dispose of any of the
Purchased Assets (including without limitation the Intellectual Property)
necessary or required for, or used in, the conduct of the business of Seller as
presently conducted nor to the knowledge of Seller and Bosch is there any basis
for any such claim, nor has Seller received any notice asserting that any such
Purchased Asset (including without limitation the Intellectual Property) or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party, nor is there any basis for any such
assertion. To the knowledge of Seller and Bosch, there is no material
unauthorized use, infringement or misappropriation on the part of any third
party of the Purchased Assets (including without limitation the Intellectual
Property); and
(c) Seller has taken reasonable steps (including, without limitation,
entering into confidentiality and non-disclosure agreements with all officers
and Employees of Seller with
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access to or knowledge of the Purchased Assets (including without limitation the
Intellectual Property) to maintain the secrecy and confidentiality of, and its
proprietary rights in, the Purchased Assets (including without limitation the
Intellectual Property) necessary or required for, or used in, the conduct of the
business of Seller as presently conducted. The Seller Disclosure Schedule
contains a complete and accurate list of all applications, filings and other
formal actions made or taken pursuant to federal, state, local and foreign laws
by Seller to perfect or protect its interest in the Purchased Assets, including,
without limitation, all patents, patent applications, trademarks, trademark
applications, service marks and copyright or mask work registrations.
(d) All fees to maintain Seller's rights in the Intellectual
Property, including, without limitation, patent and trademark registration and
prosecution fees and all professional fees in connection therewith pertaining to
the Intellectual Property due and payable on or before the Closing Date, have
been paid by Seller on or before the Closing Date.
4.11 Service Agreements.
------------------
(a) Schedule 4.11 contains a list which is complete in all material
-------------
respects, of all agreements or other arrangements pursuant to which Seller is
obligated to supply products, perform services or otherwise engage in the
conduct of the Business (such agreements, as supplemented below, are referred to
collectively as the "Service Agreements"). Seller has provided a true and
------------------
complete copy of all Service Agreements to Buyer. All such Service Agreements
are in full force and effect and are valid and effective in accordance with
their respective terms against Seller, as the case may be, and against the other
party thereto. Seller is not in default under any such Service Agreements (or
has caused an event which with notice or lapse of time, or both, would
constitute a default), nor to the knowledge of Seller and Bosch is the other
party thereto in default (or has caused an event which with notice or lapse of
time, or both, would constitute a default) under any such Service Agreements.
(b) Seller has not entered into any agreement under which Seller is
restricted from selling, licensing or otherwise distributing any products or
services to any class of customers, in any geographic area, during any period of
time or in any segment of the market.
(c) After the Closing, Buyer will not be prevented by any act of
Seller from changing prices charged to existing or future customers of any
products or services.
(d) Seller has not granted any third party the right to supply any
products or services of the Business to any other third party. No agreement for
supply of the products or services by Seller obligates Seller, and no agreement
would obligate Buyer after the Closing Date, to provide any change in
specification of such products or services or to provide new products or
services. No agreement pursuant to which Seller has licensed the use of any
products to any third party obligates Seller to provide any change in
specification in the performance of such products or to provide new products or
services.
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4.12 Warranties and Indemnities. The Seller Disclosure Schedule sets
--------------------------
forth a summary of all warranties and indemnities, express or implied, relating
to products sold or services rendered by Seller, and no warranty or indemnity
has been given by Seller which is not listed on the Seller Disclosure Schedule
or which differs therefrom in any respect. Seller is in compliance with all
warranties described in the Seller Disclosure Schedule. The Seller Disclosure
Schedule also indicates all warranty and indemnity claims currently pending
against Seller.
4.13 Real Property. Seller does not own any real property which relates
-------------
to the Business. Seller has terminated, or will terminate prior to Closing,
without further liability all real property leases which relate to the Business.
The Purchased Assets do not include (i) any owned or leased real property or
(ii) any material structures on any real property.
4.14 Inventories. Except for the Intellectual Property, the Purchased
-----------
Assets do not include any raw materials, work-in-process, finished goods,
supplies or other inventories (the "Inventories").
-----------
4.15 Accounts Receivable. To the knowledge of Seller and Bosch, all
-------------------
accounts receivable, notes receivable and other receivables included in the
Purchased Assets are valid, genuine and fully collectible in the aggregate
amount thereof, subject to normal and customary trade discounts less any
reserves for doubtful accounts recorded on the Financial Statements. All
accounts, notes receivable, and other receivables arising out of or relating to
the Business as of October 31, 1998 have been included in the Financial
Statements.
4.16 Licenses and Permits. Seller holds all consents, approvals,
--------------------
registrations, certifications, authorizations, permits and licenses of, and has
made all filings with, or notifications to, all Governmental Entities pursuant
to applicable requirements of all federal, state, local and foreign laws,
ordinances, governmental rules or regulations applicable to the business,
including, but not limited to, all such laws, ordinances, governmental rules or
regulations relating to registration of the products of the Business (at their
current level of development and use) and certification of the facilities of the
Business. The Business is in compliance with all federal, state, local and
foreign laws, ordinances, governmental rules and regulations relating to the
products manufactured by the Business or otherwise related to the Business and
Seller has no reason to believe that any consents, approvals, authorizations,
registrations, certifications, permits, filings or notifications that it has
received or made to operate the Business are invalid or have been or are being
suspended, canceled, revoked or questioned. There is no investigation or
inquiry to which Seller is a party or, to Seller's or Bosch's knowledge, as the
case may be, pending or threatened, relating to the Business and its compliance
with applicable foreign, state, local or foreign laws, ordinances, governmental
rules or regulations. Each such consent, approval, registration, certification,
authorization, permit or license is transferable and shall be transferred to
Buyer in accordance with the terms of this Agreement.
4.17 Employees.
---------
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(a) Schedule 4.17 sets forth the names, home addresses, compensation
-------------
levels, stock option positions in Seller, if any, and job titles of all of the
Employees. All Employees, officers, directors and shareholders of Seller or any
Seller subsidiary that have had access to the Purchased Assets are parties to a
written agreement (a "Confidentiality Agreement"), under which each such person
-------------------------
or entity (i) is obligated to disclose and transfer to Seller, without the
receipt by such person of any additional value therefor (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of employment with or performance of
services for Seller, he or she makes or conceives of either solely or jointly
with others, that relate to any subject matter with which his or her work for
Seller may be concerned, or relate to or are connected with the Business,
products or projects of Seller, or involve the use of the time, material or
facilities of Seller, and (ii) is obligated to maintain the confidentiality of
proprietary information of Seller. None of Seller's Employees, officers or
directors is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
their obligation to promote the interests of Seller with regard to the Business
or the Purchased Assets or that would conflict with the Business or the
Purchased Assets. Neither the execution nor the delivery of this Agreement, nor
the carrying on of the Business by its Employees will conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such persons or
entities are now obligated. It is currently not necessary nor will it be
necessary for Seller to utilize in the Business any inventions of any of such
persons or entities (or people it currently intends to hire) made or owned prior
to their employment by or affiliation with Seller, nor is it or will it be
necessary to utilize any other assets or rights of any such persons or entities
(or people it currently intends to hire) made or owned prior to their employment
with or engagement by Seller, in violation of any registered patents, trade
names, trademarks or copyrights or any other limitations or restrictions to
which any such persons or entity is a party or to which any of such assets or
rights may be subject. To Seller's or Bosch's knowledge, as the case may be,
none of Seller's Employees, officers, directors or shareholders that has had
knowledge or access to information relating to the Purchased Assets has taken,
removed or made use of any proprietary documentation, manuals, products,
materials, or any other tangible item from his or her previous employer relating
to the Purchased Assets by such previous employer which has resulted in Seller's
access to or use of such proprietary items included in the Purchased Assets, and
Seller will not gain access to or make use of any such proprietary items in the
Business, except to the extent that any such activities would not have a
material adverse effect on the Purchased Assets or the Business.
(b) Except for the Confidentiality Agreements, there are no written or
oral contracts of employment or consultancy between Seller and any Employee.
(c) The Seller is not a party to a collective bargaining agreement
with any trade union, the Seller's employees are not members of a trade union
certified as a bargaining agent with the Seller and no proceedings to implement
any such collective bargaining agreement or certifications are pending.
4.18 Employee Benefit and Compensation Plans. Buyer will incur no
---------------------------------------
liability with respect to, or on account of, and Seller will retain any
liability for, and on account of, any
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employee benefit plan of Seller, any of its Affiliates or any predecessor
employer of any Employee, including, but not limited to, liabilities Seller may
have to such Employees under all employee benefit schemes, incentive
compensation plans, bonus plans, pension and retirement plans, vacation, profit-
sharing plans (including any profit-sharing plan with a cash-or-deferred
arrangement) share purchase and option plans, savings and similar plans,
medical, dental, travel, accident, life, disability and other insurance and
other plans or arrangements, whether written or oral and whether "qualified" or
"non-qualified," or to any Employee as a result of termination of employment by
Seller as contemplated by this Agreement. Except as set forth in Schedule 4.18,
Seller has not, with respect to any Employee, maintained or contributed to, or
been obligated or required to contribute to, any retirement or pension plan or
any employee benefit plan. Seller is not a party to any collective bargaining
agreement covering any Employee and Seller knows of no effort to organize any
such Employee as a part of any collective bargaining unit. The Seller has
complied with all of its obligations (including obligations to make
contributions) in respect of the pension funds of which its Employees are
members, there is no outstanding liability of the Seller or any of its
Affiliates to any such funds and all such funds are fully funded to meet all
potential claims for benefits by any and all such employees and any former
employee.
4.19 Taxes. All Taxes have been or will be paid by Seller for all periods
-----
(or portions thereof) prior to and including the Closing Date. Seller and any
other person required to file returns or reports of Taxes have duly and timely
filed (or will file prior to the Closing Date) all returns and reports of Taxes
required to be filed prior to such date, and all such returns and reports are
true, correct, and complete. There are no liens for Taxes on any of the
Purchased Assets. Seller has complied with all record keeping and tax reporting
obligations relating to income and employment taxes due with respect to
compensation paid to employees or independent contractors providing services to
the Business. Seller is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code. There are no pending or, to Seller's or Bosch's
knowledge, as the case may be, threatened proceedings with respect to Taxes, and
there are no outstanding waivers or extensions of statutes of limitations with
respect to assessments of Taxes. No agreement or arrangement regarding
compensation of any employee providing services to the Business provides for any
payments which could result in a nondeductible expense to the Buyer pursuant to
Section 280G of the Code or an excise tax to the recipient of such payment
pursuant to Section 4999 of the Code.
4.20 Compliance with Law. The operation of the Business has been
-------------------
conducted in all material respects in accordance with all applicable laws,
regulations and other requirements of Governmental Entities having jurisdiction
over the same.
4.21 Health, Safety, Employment and Environmental Matters. To the extent
----------------------------------------------------
that failure to do so or be so would have a Material Adverse Effect upon the
Purchased Assets, Seller is in compliance with all federal, state, local and
foreign laws related to health and occupational safety, environment and
hazardous materials and employment practices that are applicable to the Seller
or its business related to the Purchased Assets, and Seller has conducted its
business relating to the Purchased Assets in compliance with the foregoing laws.
4.22 Material Contracts.
------------------
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<PAGE>
(a) Schedule 4.22 contains a list of all Contracts which are material
-------------
to the Business ("Material Contracts"). Material Contracts shall include,
------------------
without limitation, the following and shall be categorized in the Seller
Disclosure Schedule as follows:
(i) each Contract under the terms of which Seller, on behalf of
the Business: (A) paid or otherwise gave consideration of more than $5,000 in
the aggregate during the fiscal year ended December 31, 1997, (B) is likely to
pay or otherwise give consideration of more than $5,000 in the aggregate during
the fiscal year ended December 31, 1998, (C) is likely to pay or otherwise give
consideration of more than $5,000 in the aggregate over the remaining term of
such contract or (D) cannot be canceled without penalty or further payment;
(ii) all contracts and agreements (excluding routine checking
account overdraft agreements involving petty cash amounts) under which the
Business has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness or under which the Business has imposed (or
may impose) a security interest or lien on any of its assets, whether tangible
or intangible, to secure indebtedness;
(iii) all contracts and agreements that limit the ability of any
Person related to the Business, or any of its affiliates, to compete in any line
of business or with any person or in any geographic area or during any period of
time, or to solicit any customer or client;
(iv) all Contracts pursuant to which the Business has agreed to
supply products to a customer at specified prices, whether directly or through a
specific distributor, manufacturer's representative or dealer; and
(v) all other Contracts (A) which are material to the Business,
(B) the absence of which would have a Material Adverse Effect on the Business,
or (C) which are believed by Seller to be of unique value even though not
material to the Business.
(b) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Business, each license, each Material Contract is a legal,
valid and binding agreement, and none of the Material Contracts is in default by
its terms or has been canceled by the other party; Seller is not in receipt of
any claim of default under any such agreement; and Seller does not anticipate
any termination or change to, or receipt of a proposal with respect to, any such
agreement as a result of the transactions contemplated hereby. Seller has
furnished Buyer with true and complete copies of all such agreements together
with all amendments, waivers or other changes thereto.
4.23 Services. Each of the services sold or provided by Seller in
--------
connection with the Business is, and at all times has been, in compliance in all
material respects with all applicable federal, state, local and foreign laws and
regulations and is, and at all relevant times has been, fit for the ordinary
purposes for which it is intended to be used and conforms in all material
respects to any promises or affirmations of fact made in connection with the
sale of such service.
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<PAGE>
4.24 Litigation; Other Claims.
------------------------
(a) There are no claims, actions, suits, inquiries, proceedings, or
investigations against Seller, or any of its officers, directors or
shareholders, relating to the Business, the Purchased Assets or Seller's
Employees which are currently pending or threatened, at law or in equity or
before or by any Governmental Entity, or which challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated hereby,
nor is Seller aware of any basis for such claims, actions, suits, inquiries,
proceedings, or investigations; and no Governmental Entity has at any time
challenged or questioned the legal right of Seller to manufacture, offer or sell
any of its products or services in the present manner or style thereof.
(b) There are no grievance or arbitration proceedings pending or
threatened, and there are no actual or threatened strikes or work stoppages with
respect to the Business, the Purchased Assets or Seller's Employees, nor is
Seller aware of any basis for such proceedings or events.
4.25 Defaults. Seller is not in default under or with respect to any
--------
judgment, order, writ, injunction or decree of any court or any Governmental
Entity which could reasonably be expected to have a Material Adverse Effect on
the Business or any of the Purchased Assets. There does not exist any default
by Seller or by any other Person, or event that, with notice or lapse of time,
or both, would constitute a default under any agreement entered into by Seller
as part of the operations of the Business which could reasonably be expected to
have a Material and Adverse Effect on the Business or the Purchased Assets, and
no notices of breach thereof have been received by Seller.
4.26 Schedules. The schedules describing the Purchased Assets are
---------
complete and accurate and describe the assets in the possession of, or used by
Seller in connection with the Business.
4.27 Full Disclosure. Seller is not aware of any facts pertaining to the
---------------
Purchased Assets which affect the Business or the Purchased Assets in a
materially adverse manner or which will in the future affect the Business or the
Purchased Assets in a materially adverse manner. Neither this Agreement nor any
other agreement, exhibit, schedule or officer's certificate being entered into
or delivered pursuant to this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained in such document not misleading.
4.28 Brokers and Finders. Neither Seller nor any of its officers,
-------------------
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fee, commission or finder's fee in connection with
the transactions contemplated by this Agreement.
4.29 Fair Consideration; No Fraudulent Conveyance. The sale of the
--------------------------------------------
Purchased Assets pursuant to this Agreement is made in exchange for fair and
equivalent consideration. Seller is not now insolvent and will not be rendered
insolvent by the sale, transfer and assignment of the Purchased Assets pursuant
to the terms of this Agreement. Seller is not entering into this Agreement or
any of the other agreements referenced in this Agreement with the intent to
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<PAGE>
defraud, delay or hinder its creditors and the consummation of the transactions
contemplated by this Agreement, and the other agreements referenced in this
Agreement, will not have any such effect. The transactions contemplated in this
Agreement or any agreements referenced in this Agreement will not constitute a
fraudulent conveyance, or otherwise give rise to any right of any creditor of
Seller to any of the Purchased Assets after the Closing.
4.30 Insurance. The Seller Disclosure Schedule lists all insurance
---------
policies and fidelity bonds covering the Purchased Assets. There is no claim by
Seller pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies and bonds.
All premiums due and payable under all such policies and bonds have been paid
and Seller is otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). There is no threatened termination of, or material premium increase
with respect to, any of such policies.
4.31 Year 2000. To the extent applicable, the Purchased Assets,
---------
including, without limitation, any time-and-date-related codes, data entry
features and internal subroutines thereof, are designed (a) to automatically
accommodate the change in the date from December 31, 1999 to January 1, 2000
without negatively affecting the Purchased Assets' performance; and (b) to
accurately accept, reflect and calculate all dates that are relevant to the
Purchased Assets' performance.
5. Representations and Warranties of Buyer
---------------------------------------
Buyer represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation duly formed and validly existing
------------
under the laws of Delaware, and has full corporate power and authority and the
legal right to execute and deliver this Agreement and all of the other
agreements and instruments to be executed and delivered by Buyer pursuant
hereto, and to consummate the transactions contemplated hereby and thereby.
5.2 Authority. The execution and delivery of this Agreement (and all
---------
other agreements and instruments contemplated hereunder) by Buyer, the
performance by Buyer of its obligations hereunder and thereunder, and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action by the Board of Directors of Buyer,
and no other act or proceeding on the part of Buyer or its stockholders is
necessary to approve the execution and delivery of this Agreement and such other
agreements and instruments, the performance by Buyer of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby. The signatory officers of Buyer have the power and
authority to execute and deliver this Agreement and all of the other agreements
and instruments to be executed and delivered by Buyer pursuant hereto, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by Buyer pursuant to the provisions hereof
and thereof.
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<PAGE>
5.3 Execution and Binding Effect. This Agreement has been duly and
----------------------------
validly executed and delivered by Buyer and constitutes, and the other
agreements and instruments to be executed and delivered by Buyer pursuant
hereto, upon their execution and delivery by Buyer, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof by
Seller), legal, valid and binding agreements of Buyer, enforceable against Buyer
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, moratorium, or other laws affecting the
enforcement of creditors' rights generally or provisions limiting competition,
and by equitable principles.
5.4 Consent and Approvals. There is no requirement applicable to Buyer to
---------------------
make any filing, declaration or registration with, or to obtain any permit,
authorization, consent or approval of, any Governmental Entity as a condition to
the lawful consummation by Buyer of the transactions contemplated by this
Agreement and the other agreements and instruments to be executed and delivered
by Buyer pursuant hereto, except for filings (a) which are referred to in the
Buyer Disclosure Schedule or (b) the failure of making which would not have a
Material Adverse Effect on the transactions contemplated hereby.
5.5 No Violation. Neither the execution, delivery and performance of this
------------
Agreement and of all the other agreements and instruments to be executed and
delivered pursuant hereto, nor the consummation of the transactions contemplated
hereby or thereby, will, with or without the passage of time or the delivery of
notice or both, (a) conflict with, violate or result in any breach of the terms,
conditions or provisions of the Certificate of Incorporation or Bylaws of Buyer,
(b) conflict with or result in a violation or breach of, or constitute a default
or require consent of any Person (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any notice, bond, mortgage, indenture, license, franchise, permit, agreement,
lease or other instrument or obligation to which Buyer is a party or by which
Buyer or any of its properties or assets may be bound, or (c) violate any
statute, ordinance or law or any rule, regulation, order, writ, injunction or
decree of any Governmental Entity applicable to Buyer or by which any of its
properties or assets may be bound.
5.6 Full Disclosure. Buyer has fully provided Seller with all the
---------------
information that Seller has requested for deciding whether to consummate the
transactions contemplated hereby and all information that Buyer believes is
reasonably necessary to enable Seller to make such a decision (collectively, the
"Buyer Information"). To Buyer's knowledge, no representation or warranty of
-----------------
Buyer contained in this Agreement and the exhibits attached hereto, any
certificate furnished or to be furnished to Seller at the Closing, or the Buyer
Information (when read together) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.
6. Covenants of the Parties
------------------------
6.1 Post-Closing Access to Information. If, after the Closing Date, in
----------------------------------
order to properly operate the Business or prepare documents or reports required
to be filed with governmental authorities or Buyer's financial statements, it is
necessary that Buyer obtain additional information within Seller's possession
relating to the Purchased Assets or the
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<PAGE>
Business, Seller will furnish or cause its representatives to furnish such
information to Buyer. Such information shall include, without limitation, all
agreements between Seller and any Person relating to the Business. Seller shall
maintain and make available the information and records specified in this
Section 6.1 for a period of four (4) years after the Closing Date.
6.2 Post-Closing Cooperation. Seller agrees that, if reasonably requested
------------------------
by Buyer, it will cooperate with Buyer, at Buyer's expense, in enforcing the
terms of any agreements between Seller and any third party involving the
Business, including without limitation terms relating to confidentiality and the
protection of intellectual property rights. In the event that Buyer is unable
to enforce its intellectual property rights against a third party as a result of
a rule or law barring enforcement of such rights by a transferee of such rights,
Seller agrees to reasonably cooperate with Buyer by assigning to Buyer such
rights as may be required by Buyer to enforce its intellectual property rights
in its own name. If such assignment still does not permit Buyer to enforce its
intellectual property rights against the third party, Seller agrees to initiate
proceedings against such third party in Seller's name, provided that Buyer shall
be entitled to participate in such proceedings and provided further that Buyer
shall be responsible for the expenses of such proceedings.
6.3 Public Announcements. On and after the Closing Date, Buyer and Seller
--------------------
shall advise and confer with each other prior to the issuance of any reports,
statements or releases concerning this Agreement (including the exhibits and
schedules hereto) and the transactions contemplated herein. Neither Buyer nor
Seller will make any public disclosure prior to the Closing or with respect to
the Closing unless both parties agree on the text and timing of such public
disclosure; provided, however, that nothing contained herein shall prevent
-----------------
either party at any time from furnishing any information to any Governmental
Entity.
6.4 Post-Closing Actions. Subsequent to the Closing Date, Seller shall,
--------------------
from time to time, execute and deliver, upon the request of Buyer, all such
other and further materials and documents and instruments of conveyance,
transfer or assignment as may reasonably be requested by Buyer to effect, record
or verify the transfer to, and vesting in Buyer, of Seller's right, title and
interest in and to the Purchased Assets, free and clear of all Liens, in
accordance with the terms of this Agreement.
6.5 Future Agreements. In the event Seller enters into any material
-----------------
agreement between the date of this Agreement and the Closing that relates
primarily to the Business, at the request of Buyer, Seller agrees to include any
such agreement within the Contracts.
6.6 Permits. Seller will assist Buyer in obtaining any licenses, permits
-------
or authorizations required for carrying on the Business but which are not
transferable.
6.7 Taxes. Seller shall be responsible for paying, shall promptly
-----
discharge when due, and shall reimburse, indemnify and hold harmless Buyer from,
any sales or use, transfer, real property gains, excise, stamp, or other similar
Taxes arising from, imposed on or attributable to the transactions contemplated
by this Agreement.
6.8 Non-Competition Agreement.
-------------------------
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(a) In consideration of Buyer entering into this Agreement, Seller
and Bosch each undertake that for two (2) years after the Closing Date and
within the States of Oregon and Washington (the "Territory") neither it nor any
---------
Affiliate of it will:
(i) participate, assist or otherwise be directly or indirectly
involved or concerned, financially or otherwise, as a member, shareholder,
unitholder, director, consultant, adviser, contractor, principal, agent,
manager, beneficiary, partner, associate, trustee, financier or otherwise in any
business or activity which is the same as or substantially similar to the
Business or any material part of it (a "Restricted Business"); provided,
-------------------
however, that Seller may continue to engage in the business of medical bill
auditing other than the Business;
(ii) solicit, canvass, induce or encourage directly or
indirectly any employee of Buyer to leave the employment of Buyer;
(iii) solicit, canvass, approach or accept any offer from any
person or entity who was at any time during the 24 months immediately preceding
the Closing Date a customer or supplier of the Business with a view to
establishing a relationship with or obtaining the patronage of that person or
entity in a Restricted Business;
(iv) interfere or seek to interfere, directly or indirectly,
with any relationship between Buyer and any client, customer, employee or
supplier of the Business.
(b) If any of the separate and independent covenants and restraints
referred to in clause (a) of this Section 6.8 are or become invalid or
unenforceable for any reason then that invalidity or unenforceability will not
affect the validity or enforceability of any other separate and independent
covenants and restraints.
(c) If any prohibition or restriction contained in clause (a) of this
Section 6.8 is judged to go beyond what is reasonable in the circumstances, but
would be judged reasonable if that activity was deleted or that period or area
was reduced, then the prohibitions or restrictions apply with that activity
deleted or period or area reduced by the minimum amount necessary.
(d) Each of Seller and Bosch acknowledges that:
(i) the prohibitions and restrictions contained in clause (a) of
this Section 6.8 are reasonable and necessary; and
(ii) Seller has received valuable consideration for agreeing to
the covenants in clause (a) of this Section 6.8.
(e) Each of Seller, Bosch and Buyer acknowledge and agree that it
will be difficult to compute the amount of damage or loss to Buyer if Seller or
Bosch violated any of their agreements under this Section 6.8, that Buyer will
be without an adequate legal remedy if Seller or Bosch violated the provisions
of this Section 6.8, and that any such violation may cause substantial
irreparable injury and damage to Buyer not fully compensable by monetary
damages. Therefore, each of Seller, Bosch and Buyer agree that in the event of
any violation by Seller or Bosch of this Section 6.8, Buyer shall be entitled
(i) to recover from Seller and/or Bosch
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<PAGE>
monetary damages, (ii) to obtain specific performance, injunctive or other
equitable relief, of either a preliminary or permanent type, and (iii) to seek
any other available rights or remedies at law or in equity which may be
exercised concurrently with the rights granted hereunder.
7. Employee Matters
----------------
7.1 Transferred Employees.
---------------------
(a) Offer of Employment. Subject to and in accordance with the
-------------------
provisions of this Section 7, Buyer may offer employment to any or all of the
employees, consultants or independent contractors who are employed or retained
by Seller in the Business as of the date of this Agreement (collectively, the
"Employees"). Seller agrees that it will cooperate with Buyer to identify those
- ----------
Employees of Seller who are necessary for the conduct the Business. Upon
Closing, Buyer (or any Affiliates designated by Buyer) shall hire those
Employees to whom it has made an offer in accordance with this Section 7.1 and
who accept such offer in the manner and within the time frame reasonably
established by Buyer. Each such Employee who is employed by Seller on the
Closing Date and who actually transfers to employment with Buyer (or any
Affiliate designated by Buyer) at or after the Closing Date as a result of an
offer of employment made by Buyer is hereafter referred to as a "Transferred
-----------
Employee." Transferred Employees shall not include any person on a disability
- --------
leave of more than twenty-six (26) weeks. Buyer shall not be obligated to hire
any employee unless an offer of employment is made to, and accepted by, such
employee; and Buyer shall have no obligation to hire any Employees of Seller
after the Closing Date.
(b) Transition. The employment by Seller of the Transferred
----------
Employees shall end at the close of business on the Closing Date and the
employment of the Transferred Employees by Buyer shall commence at 12:01 a.m. on
the day after the Closing Date. The terms of employment with Buyer (or Buyer's
Affiliates) shall as mutually agreed to between each Transferred Employee and
Buyer (or Buyer's Affiliate, as the case may be), subject to the provisions of
this Section 7.1. Between the date of this Agreement and the Closing Date,
Seller will provide each Transferred Employee with the same level of
compensation as that currently provided by Seller. Buyer shall have no
obligation with respect to payments of salary, compensation, wages, health or
similar benefits, commissions, bonuses (deferred or otherwise), severance, stock
or stock options or any other sums due to any Transferred Employee that accrued
before the Closing Date. Seller will be fully responsible for all amounts
payable to any Employee, including (without limitation) all termination
payments, redundancy compensation, severance pay, accrued vacation pay and other
amounts payable in respect of the termination of employment or consultancy of
any Employee in connection with the sale of the Purchased Assets to the Buyer.
In addition, Seller will be fully responsible for all amounts owing to
Transferred Employees prior to Closing.
7.2 Other Employees of the Business. With respect to each Employee of the
-------------------------------
Business as of the Closing Date who is not a Transferred Employee (each a "Non-
---
Transferred Employee"), Seller agrees to either terminate such Non-Transferred
- --------------------
Employee's employment or consultancy with Seller, effective prior to the Closing
or offer such Non-Transferred Employee employment with Seller in other business
in which Seller is engaged. Seller further
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<PAGE>
acknowledges that the Non-Transferred Employees shall not be employees or
consultants of Buyer after the Closing.
7.3 No Right to Continued Employment or Benefits. No provision in this
--------------------------------------------
Agreement shall create any third party beneficiary or other right in any Person
(including any beneficiary or dependent thereof) for any reason, including,
without limitation, in respect of continued, resumed or new employment with
Seller or Buyer (or any Affiliate of Seller or Buyer) or in respect of any
benefits that may be provided, directly or indirectly, under any plan or
arrangement maintained by Seller, Buyer or any Affiliate of Seller or Buyer.
Except as otherwise expressly provided in this Agreement, Buyer is under no
obligation to hire any Employee of Seller, provide any Employee with any
particular benefits, or make any payments or provide any benefits to those
Employees of Seller whom Buyer chooses not to employ or retain.
7.4 No Solicitation or Hire by Seller. For a period of one year after the
---------------------------------
Closing, Seller will not solicit any Transferred Employee for employment. For
purposes of this Section 7.4, the term "solicit" shall not include the following
activities by Seller: (i) advertising for employment in any bulletin board
(including electronic bulletin boards), newspaper, trade journal or other
publication available for general distribution to the public without specific
reference to any particular employees; (ii) participation in any hiring fair or
similar event open to the public not targeted at Buyer's employees; and (iii)
use of recruiting or employee search firms that have been instructed by Seller
not to target any Transferred Employee.
8. Conditions to Buyer's Obligations
---------------------------------
The obligations of Buyer under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived by Buyer in writing, except as
otherwise provided by law:
8.1 Representations and Warranties True; Performance; Certificate.
-------------------------------------------------------------
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made or given again at and as of the Closing Date;
(b) Seller shall have performed and complied with all of its
agreements, covenants and conditions required by this Agreement to be performed
or complied with by them prior to or on the Closing Date;
(c) The conditions set forth in this Section 8 have been fulfilled or
satisfied, unless otherwise waived in writing by Buyer; and
(d) Buyer shall have received a certificate, dated as of the Closing
Date, signed and verified by an officer of Seller on behalf of Seller certifying
to the matters set forth in Sections 8.1(a) and 8.1(b) above.
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<PAGE>
8.2 Consents. All Governmental Authorizations, Required Consents and
--------
consents required to transfer the Contracts to Buyer on the terms and conditions
provided to Seller, without change as a result of the transfer to Buyer, shall
have been obtained.
8.3 No Proceedings or Litigation.
----------------------------
(a) No preliminary or permanent injunction or other order shall have
been issued by any Governmental Entity, nor shall any statute, rule, regulation
or executive order be promulgated or enacted by any Governmental Entity which
prevents the consummation of the transactions contemplated by this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced and be pending against any of the
parties, or any of their respective Affiliates, associates, officers or
directors, seeking to prevent transactions contemplated by this Agreement,
including, without limitation, the sale of the Purchased Assets or asserting
that the sale of the Purchased Assets would be illegal or create liability for
damages or which may have a Material Adverse Effect on the Business or the
Purchased Assets.
8.4 Documents. This Agreement, the exhibits and schedules attached
---------
hereto, and any other instruments of conveyance and transfer and all other
documents to be delivered by Seller at the Closing and all actions of Seller
required by this Agreement and the exhibit agreements, or incidental thereto,
and all related matters, shall be in form and substance reasonably satisfactory
to Buyer and Buyer's counsel and shall be in full force and effect.
8.5 Governmental Filings. The parties shall have made any required filing
--------------------
with Governmental Entities in connection with this Agreement and the exhibit
agreements, and any approvals related thereto shall have been obtained or any
applicable waiting periods shall have expired. If a proceeding or review
process by a Governmental Entity is pending in which a decision is expected,
Buyer shall not be required to consummate the transactions contemplated by this
Agreement until such decision is reached or rendered, notwithstanding Buyer's
legal ability to consummate the transactions contemplated by this Agreement
prior to such decision being reached or rendered.
8.6 No Material Adverse Change. There shall have been no material adverse
--------------------------
change in the financial condition or results of operations of the Business on
the Closing Date as compared with the date of this Agreement.
8.7 Approval. This Agreement and the transactions it contemplates shall
--------
have been approved and adopted by the shareholders of Seller in accordance with
the provisions of Seller's Articles of Incorporation and Bylaws, and shall have
otherwise been approved by Seller's Board of Directors and otherwise as required
by law and the charter documents of Seller.
8.8 Due Diligence. Buyer shall have received the opportunity to make a
-------------
full investigation of Seller, its business operations, assets, liabilities,
technologies, third party relationships, material contracts and agreements and
any other matter that Buyer deems to be material and such investigation shall be
concluded satisfactory to Buyer, in its sole discretion.
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<PAGE>
8.9 Escrow Agreement. Buyer and Seller shall have entered into an Escrow
----------------
Agreement in substantially the form attached hereto as Exhibit A, and such
---------
agreement shall remain in full force and effect.
8.10 Employment Agreement. Phil Wenstrand shall have entered into an
--------------------
Employment Agreement with Buyer in substantially the form attached hereto as
Exhibit B (the "Wenstrand Employment Agreement").
- --------- ------------------------------
8.11 Legal Opinion. Buyer shall have received a legal opinion from Stoel
-------------
Rives LLP, legal counsel to Seller, dated the Closing Date, in a form
satisfactory to Buyer.
8.12 Oregon Medical Association. Buyer and the Oregon Medical Association
--------------------------
("OMA") shall have entered into an agreement in form and substance satisfactory
---
to Buyer, in its sole discretion, amending and restating the OMA Network
Operation Agreement.
9. Conditions to Seller's Obligations
----------------------------------
The obligations of Seller under this Agreement are subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions, all or any
of which may be waived in writing by Seller, except as otherwise provided by
law:
9.1 Representations and Warranties True; Performance.
------------------------------------------------
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made or given again at and as of the Closing Date;
(b) Buyer shall have performed and complied with all of its
agreements, covenants and conditions required by this Agreement to be performed
or complied with by them prior to or on the Closing Date;
(c) Seller shall have received a certificate, dated as of the Closing
Date, signed and verified by an officer of Buyer on behalf of Buyer certifying
to the matters set forth in Sections 9.1(a) and 9.1(b) above.
9.2 No Proceeding or Litigation.
---------------------------
(a) No preliminary or permanent injunction or other order shall have
been issued by any Governmental Entity, nor shall any statute, rule, regulation
or executive order be promulgated or enacted by any Governmental Entity which
prevents the consummation of the transactions contemplated by this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced and be pending against any of the
parties, or any of their respective Affiliates, associates, officers or
directors, seeking to prevent the sale of the Purchased Assets or asserting that
the sale of the Assets would be illegal or create liability for damages.
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<PAGE>
9.3 Documents. This Agreement, any other instruments of conveyance and
---------
transfer and all other documents to be delivered by Buyer to Seller at the
Closing and all actions of Buyer required by this Agreement or incidental
thereto, and all related matters, shall be in form and substance reasonably
satisfactory to Seller and Seller's counsel.
9.4 Governmental Filings. The parties shall have made any filing required
--------------------
with Governmental Entities, and any approvals shall have been obtained or any
applicable waiting periods shall have expired. If a proceeding or review
process by a Governmental Entity is pending in which a decision is expected,
Seller shall not be required to consummate the transactions contemplated by
this Agreement until such decision is reached or rendered, notwithstanding
Seller's legal ability to consummate the transactions contemplated by this
Agreement prior to such decision being reached or rendered.
9.5 Approval. This Agreement and the transactions it contemplates shall
--------
have been approved and adopted by the Board of Directors of Buyer in accordance
with the provisions of Buyer's Certificate of Incorporation and Bylaws.
10. Escrow; Indemnification
-----------------------
10.1 Survival of Representations and Warranties. All covenants to be
------------------------------------------
performed prior to the Closing Date, and all representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the consummation of the transactions contemplated hereby and continue
until six (6) months following the Closing (the "Escrow Termination Date");
-----------------------
provided that if any claims for indemnification have been asserted with respect
- --------
to any such representations, warranties and covenants prior to the Escrow
Termination Date, the representations, warranties and covenants on which any
such claims are based shall continue in effect until final resolution of any
claims, and provided, further, that representations, warranties and covenants
-------- -------
relating to Taxes shall survive until 30 days after expiration of all applicable
statutes of limitations relating to such Taxes. All covenants to be performed
after the Closing Date shall continue indefinitely or for the period referenced
in such covenant.
10.2 Indemnification. Subject to the limitations set forth in this
---------------
Section 10, from and after the Effective Time, Seller shall protect, defend,
indemnify and hold harmless Buyer and Buyer's Affiliates, officers, directors,
employees, representatives and agents (each of the foregoing Persons is
hereinafter referred to individually as an "Indemnified Person" and collectively
------------------
as "Indemnified Persons") from and against any and all losses, costs, damages,
-------------------
liabilities, fees (including without limitation attorneys' fees) and expenses
(collectively, the "Damages"), that any of the Indemnified Persons incurs or
-------
reasonably anticipates incurring by reason of or in connection with any claim,
demand, action or cause of action (i) relating to any liabilities or obligations
of Seller not specifically assumed by Buyer hereunder, (ii) alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of the Seller contained in
this Agreement, including any exhibits or schedules attached hereto, known to
Buyer prior to the Escrow Termination Date and (ii) relating to the termination
prior to Closing of any Employees of Seller. Damages in each
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<PAGE>
case shall be net of the amount of any insurance proceeds and indemnity and
contribution actually recovered by Buyer.
10.3 Indemnification Damages Threshold. Notwithstanding the foregoing,
---------------------------------
Buyer may not receive any amount of the Escrow Consideration from the Escrow
based on a claim for indemnification unless and until a certificate signed by an
officer of Buyer (an "Officer's Certificate") identifying Damages in the
---------------------
aggregate amount in excess of $15,000 has been delivered to the Escrow Agent and
such amount is determined pursuant to this Section 10 to be payable, in which
case Buyer shall receive from the Escrow Agent an amount equal in value to the
full amount of such Damages and any subsequent Damages without deduction in the
following manner: first, such amount shall come from the Escrow Consideration;
second, to the extent any Damages remain unpaid, from other assets, if any,
constituting the Escrow Consideration. In determining the amount of any Damages
attributable to a breach, any materiality standard contained in a
representation, warranty or covenant of Seller shall be disregarded.
10.4 Escrow Consideration Period. Subject to the following requirements
---------------------------
and the terms of the Escrow Agreement, the Escrow Consideration shall be
retained by the Escrow Agent until the Escrow Consideration Termination Date.
Upon the Escrow Consideration Termination Date, the Escrow Agent shall deliver
to the Seller all remaining Escrow Consideration provided, however, that the
-------- -------
amount of Escrow Consideration, which, in the reasonable judgment of Buyer,
subject to the objection of the Escrow Agent and the subsequent arbitration of
the claim in the manner provided in the Escrow Agreement, is necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate delivered
to the Escrow Agent prior to the Escrow Consideration Termination Date with
respect to facts and circumstances existing on or prior to the Escrow
Consideration Termination Date shall remain in the possession of the Escrow
Agent until such claims have been resolved. As soon as all such claims have
been resolved, any remaining Escrow Consideration not required to satisfy such
claims shall be distributed to the Seller.
10.5 Method of Asserting Claims. All claims for indemnification by the
--------------------------
Buyer or any other Indemnified Person pursuant to this Section 10 shall be made
in accordance with the provisions of the Escrow Agreement.
11. Termination.
-----------
11.1 Termination of Agreement. This Agreement may be terminated at any
------------------------
time prior to the Closing:
(a) By mutual written consent of Buyer and Seller;
(b) By either party, if the other party goes into liquidation, has an
application or order made for its winding up or dissolution, has a resolution
passed or steps taken to pass a resolution for its winding up or dissolution,
becomes unable to pay its debts as and when they fall due, or has a receiver,
receiver and manager, administrator, liquidator, provisional liquidator,
official manager or administrator appointed to it or any of its assets; or
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<PAGE>
(c) By Buyer or Seller if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement; or
(d) By either party if the Closing does not occur by December 31,
1998.
11.2 Procedure and Effect of Termination. In the event of termination of
-----------------------------------
this Agreement by any or all of the parties pursuant to Section 11.1, written
notice shall be given to each other party specifying the provision of Section
11.1, pursuant to which such termination is made and shall become void and there
shall be no liability on the part of Buyer or Seller (or their respective
officers, directors, partners or Affiliates), except as a result of any breach
of this Agreement by such party or to the extent such a party is entitled to
indemnification under Section 10 of this Agreement.
12. Miscellaneous.
-------------
12.1 Amendments and Waivers. Any term of this Agreement may be amended or
----------------------
waived with the written consent of the parties or their respective successors
and assigns. Any amendment or waiver effected in accordance with this Section
12.1 shall be binding upon the parties and their respective successors and
assigns.
12.2 Successors and Assigns. The terms and conditions of this Agreement
----------------------
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
12.3 Governing Law; Jurisdiction. This Agreement and all acts and
---------------------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Washington, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of King
County, Washington.
12.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
12.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
12.6 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as
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<PAGE>
set forth below, or as subsequently modified by written notice, and if to Buyer,
with a copy to Sonya Erickson, Venture Law Group, 4750 Carillon Point, Kirkland,
WA 98033.
12.7 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
12.8 Entire Agreement. This Agreement and the documents referred to
----------------
herein are the product of both of the parties hereto, and constitute the entire
agreement between such parties pertaining to the subject matter hereof and
thereof, and merge all prior negotiations and drafts of the parties with regard
to the transactions contemplated herein and therein. Any and all other written
or oral agreements existing between the parties hereto regarding such
transactions are expressly canceled.
12.9 Advice of Legal Counsel. Each party acknowledges and represents
-----------------------
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its behalf
has read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
[Signature pages follows]
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<PAGE>
This Agreement has been duly executed and delivered by the duly authorized
officers of Seller and Buyer as of the date first above written.
POINTSHARE CORPORATION
By: /s/ Timothy J. Kilgallon
Name:_________________________________
Title:________________________________
Address: 1300 114th Ave. SE, Suite 100
Bellevue, WA 98004
PEREGRIN MEDICAL REVIEW, INC.
By: /s/ Samuel H. Bosch
Name: ________________________________
Title:________________________________
Address: 1600 NW Compton Dr.
Beaverton, OR 97006
SAMUEL H. BOSCH
/s/ Samuel H. Bosch
Samuel H. Bosch
Address: ____________________
____________________
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
<PAGE>
Exhibit A
Escrow Agreement
<PAGE>
Exhibit B
Wenstrand Employment Agreement
<PAGE>
Seller Disclosure Schedule
<PAGE>
Buyer Disclosure Schedule
<PAGE>
Schedule 2.1
Purchased Assets
<PAGE>
Schedule 2.2
Excluded Assets
1. The trade name Peregrin; and corporate name Peregrin Medical Review, Inc.
2. The Peregrin website.
<PAGE>
Schedule 2.3(a)
Assumed Liabilities
Schedule 2.3(a)
Assumed Liabilities
-------------------
Description Amount
- ----------- ------
Lightwave (A) $ 5,000
US West (B) 4,000
Workers compensation insurance premium (C) 2,000
Compliance with State of Oregon Contract:
Y2K readiness (D) 25,000
"Development Costs" (E) 13,000
Monthly maintenance fee, annualized (F) 12,000
T1 cost and related hardware (G) ?
Costs related to resolving "technical issues" for currently ?
non-paying customers (H)
---------
Total [$61,000]
=========
Notes:
- ---
(A) Amounts paid and disputed by Oregon Medical Association.
(B) [Need explanation].
(C) Estimate of annual premium cost for existing three employees to comply with
Contract with Regence Blue Cross Blue Shield.
(D) Estimated cost to comply with State of Oregon Contract regarding Y2k
readiness. Penalty of $100,000 for non-compliance. (Section 3.1).
(E) Payment obligation to State of Oregon relating to reimbursement for
"development costs". [Estimated range of between $13,000 and $66,000]
(Section 3.2.1)
(F) Payment obligation to State of Oregon for monthly "maintenance cost".
(Section 3.2.2)
(G) Estimated cost of a terminal and T-1 line required to be provided for the
exchange of eligibility data. (Sections 3.4a,b)
<PAGE>
EXHIBIT 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
POINTSHARE CORPORATION
The undersigned, Timothy J. Kilgallon and Christopher A. Pesch, hereby
certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of Pointshare Corporation, a Delaware corporation (the
"Corporation").
-----------
2. The Certificate of Incorporation of the Corporation was originally
filed with the Secretary of State of Delaware on July 17, 1997 under the name
HealthKnowledge Corporation.
3. The Certificate of Incorporation of the Corporation (the "Certificate
-----------
of Incorporation") shall be amended and restated to read in full as follows:
- ----------------
"I.
NAME
The name of the Corporation is Pointshare Corporation (the "Corporation").
-----------
II.
DURATION
The Corporation is organized under the General Corporation Law of Delaware
and shall have perpetual existence.
III.
REGISTERED OFFICE AND AGENT
The Corporation's Registered Office in the state of Delaware shall be
located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The Registered Agent in
charge thereof shall be The Corporation Trust Company.
IV.
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware, or any amendment thereto or substitute therefor.
<PAGE>
V.
STOCK AND STOCKHOLDERS
5.1 Classes of Stock. The total number of shares of all classes of
----------------
capital stock which the Corporation shall have authority to issue is Eighty Five
million (85,000,000) of which Fifty Million (50,000,000) shares, par value $.001
per share, shall be Common Stock (the "Common Stock") and Thirty Five Million
------------
(35,000,000) shares, par value $.001 per share, shall be Preferred Stock (the
"Preferred Stock").
---------------
The first series of Preferred Stock shall be designated "Series A Preferred
------------------
Stock" and shall consist of Seven Million One Hundred Twenty-Five Thousand
- -----
(7,125,000) shares. The second series of Preferred Stock shall be designated
"Subordinated Preferred Stock" and shall consist of Two Million Nine Hundred
----------------------------
Fifty Thousand Five Hundred (2,950,500) shares of the Preferred Stock. The
third series of Preferred Stock shall be designated "Series B Preferred Stock"
------------------------
and shall consist of Seven Million Two Hundred-Thousand (7,200,000) shares. The
fourth series of Preferred Stock shall be designated "Series C Preferred Stock"
------------------------
and shall consist of Fifteen Million (15,000,000) shares. The fifth series of
Preferred Stock shall be designated "Series D Preferred Stock" and shall consist
------------------------
of One Million Two Hundred Five Thousand (1,205,000) shares. Subject to
compliance with the terms of Section 5.2.5 below and protective voting rights
which may be granted to any other series of Preferred Stock in Certificates of
Designation or the Corporation's Certificate of Incorporation as amended from
time to time (collectively, "Protective Provisions"), the Corporation's board of
---------------------
directors (the "Board of Directors") is hereby authorized to fix or alter the
------------------
powers, preferences and rights, and the qualifications, limitations and
restrictions granted to or imposed upon additional series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or of any of them. Subject to compliance with the terms of Section
5.2.5 below and with any other applicable Protective Provisions, but
notwithstanding any other rights of the Series A Preferred Stock, the
Subordinated Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock, or any other series of Preferred
Stock, the powers, preferences and rights of, and the qualifications,
limitations and restrictions on, any such additional series may be subordinated
to, pari passu with (including, without limitation, inclusion in provisions with
---- -----
respect to liquidation and acquisition preferences and/or approval of matters by
vote or written consent), or senior to any of those of any present or future
class or series of Preferred or Common Stock. Subject to compliance with the
terms of Section 5.2.5 below and any other applicable Protective Provisions, the
Board of Directors is also authorized to increase or decrease the number of
shares of any series (other than the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Subordinated Preferred Stock), prior or subsequent to the issue of any shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
5.2 Rights Preferences and Restrictions of the Preferred Stock. The
----------------------------------------------------------
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock and the Subordinated Preferred Stock shall
have the voting power, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, as follows:
-2-
<PAGE>
1. Dividend Provisions. The holders of shares of Series C Preferred
-------------------
Stock and Series D Preferred Stock shall be entitled to receive dividends out of
any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock of
the Corporation) on the Series A Preferred Stock, Series B Preferred Stock,
Common Stock or any other junior equity security of the Corporation, at the rate
of (i) $0.22 per share of Series C Preferred Stock per annum, and (ii) $0.40 per
share of Series D Preferred Stock per annum payable when, as and if declared by
the Board of Directors. Dividends with respect to the Series C Preferred Stock
and Series D Preferred Stock, if declared, must be declared and paid with
respect to both the Series C Preferred Stock and Series D Preferred Stock,
contemporaneously, and, if less than full dividends are declared, the same
percentage of the dividend rate will be payable to both the Series C Preferred
Stock and Series D Preferred Stock. Upon the payment of such dividend to the
holders of Series C Preferred Stock and Series D Preferred Stock, the holders of
shares of Series A or Series B Preferred Stock shall be entitled to receive
dividends out of any assets legally available therefor, prior and in preference
to any declaration of payment of any dividend (payable other than in Common
Stock of the Corporation) on the Subordinated Preferred Stock, Common Stock or
any other junior equity security of the Corporation, at the rate of (i) $0.064
per share of Series A Preferred Stock per annum and (ii) $0.10 per share of
Series B Preferred Stock per annum, payable when, as and if declared by the
Board of Directors. Dividends shall not be cumulative. Dividends, with respect
to the Series A Preferred Stock and Series B Preferred Stock, if declared, must
be declared and paid with respect to both the Series A Preferred Stock and
Series B Preferred Stock, contemporaneously, and if less than full dividends are
declared, the same percentage of the dividend rate will be payable to both the
Series A Preferred Stock and Series B Preferred Stock. The holders of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall also be entitled to receive ratably any dividends
declared on the Common Stock.
The holders of shares of Subordinated Preferred Stock shall not be entitled
to any preference in receipt of dividends, but may, subject to the rights of
holders of Preferred Stock other than the Subordinated Preferred Stock, receive
dividends ratably with holders of shares of Common Stock, when as and if
declared by the Board of Directors.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary (collectively, a
"Liquidation"), subject to the rights of series of Preferred Stock that may from
-----------
time to time come into existence, the holders of the Series C Preferred Stock
and Series D Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the Corporation to the
holders of Series A Preferred Stock, Series B Preferred Stock, Subordinated
Preferred or Common Stock by reason of their ownership thereof, an amount per
share equal to (i) $2.75 for each outstanding share of Series C Preferred Stock
(the "Original Series C Issue Price") held and (ii) $5.00 for each outstanding
-----------------------------
shares of Series D Preferred Stock (the "Original Series D Issue Price") held,
-----------------------------
plus declared but unpaid dividends on each share. If, upon the occurrence of a
Liquidation, the assets and funds thus distributed on a pro rata basis among the
holders of the Series C Preferred Stock and Series D Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Preferred Stock
that may from time to time come into existence, the entire assets and funds of
the Corporation legally
-3-
<PAGE>
available for distribution shall be distributed among the holders of the Series
C Preferred Stock and Series D Preferred Stock in proportion to the product of
the liquidation preference of each such share and the number of shares held by
each such holder.
(b) Upon the completion of the distribution required by Section
2(a) above and any other distribution that may be required with respect to
series of Preferred Stock that may from time to time come into existence, upon a
Liquidation the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of the Corporation to the holders of Common Stock or other junior
equity security by reason of their ownership thereof, an amount per share equal
to the sum of (i) $.80 for each outstanding share of Series A Preferred Stock
(the "Original Series A Issue Price") held and (ii) $1.25 for each outstanding
-----------------------------
share of Series B Preferred Stock (the "Original Series B Issue Price") held,
-----------------------------
plus all declared but unpaid dividends on each such share. If upon the
occurrence of a Liquidation, the assets and funds thus distributed among the
holders of such Series A Preferred Stock and Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Preferred Stock
that may from time to time come into existence, the entire assets and funds of
the Corporation legally available for distribution shall be distributed on a pro
rata basis among the holders of Series A Preferred Stock and Series B Preferred
Stock in proportion to the product of the liquidation preference of each such
share and the number of shares held by each such holder.
(c) Upon the completion of the distribution required by sections
(a) and (b) above, upon a Liquidation if assets remain in the Corporation, the
holders of Subordinated Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock or any other junior equity security by reason of their
ownership thereof, an amount per share equal to the sum of $.10 for each
outstanding share of Subordinated Preferred Stock (the "Original Subordinated
---------------------
Preferred Issue Price").
- ---------------------
(d) Upon the completion of the distribution required by sections
(a), (b) and (c) above, upon a Liquidation if assets remain in the Corporation,
such remaining assets of the Corporation available for distribution to
stockholders shall be distributed among the holders of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Subordinated Preferred Stock and Common Stock based on the number of shares of
Common Stock held by each holder thereof (assuming conversion of all such Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, and Subordinated Preferred Stock) until (i) with respect to the
holders of Series A Preferred Stock, such holders shall have received an
aggregate of $1.60 per share (including amounts paid pursuant to Section
5.2.2(b) above), (ii) with respect to the holders of Series B Preferred Stock,
such holders shall have received an aggregate of $2.50 per share (including
amounts paid pursuant to Section 5.2.2(b) above), (iii) with respect to the
holders of Series C Preferred Stock, such holders shall have received an
aggregate of $5.50 per share (including amounts paid pursuant to Section
5.2.2(a) above), (iv) with respect to the holders of Series D Preferred Stock,
such holders shall have received an aggregate of $10.00 per share (including
amounts paid pursuant to Section 5.2.2(a) above), and (v) with respect to the
holders of Subordinated Preferred Stock, such holders shall have received an
aggregate of $0.20 per share (including amounts paid pursuant to Section
5.2.2(c) above); thereafter, subject to the rights of series of Preferred Stock
-4-
<PAGE>
that may from time to time come into existence in compliance with the terms
hereof, if assets remain in the Corporation, the holders of the Common Stock of
the Corporation shall receive all of the remaining assets of the Corporation pro
rata based on the number of shares of Common Stock held by each.
(e) A consolidation or merger of the Corporation or sale of all
or substantially all of its assets (a "Corporate Transaction") shall be deemed
---------------------
to be a Liquidation for all purposes of this Section 5.2, unless stockholders of
the Corporation are holders of more than 50% of the voting equity securities of
the surviving corporation, and provided, further, that with respect to
distributions pursuant to Section 5.2.2(a), a Corporate Transaction shall not be
deemed to be a Liquidation if the holders of a majority of the Series C
Preferred Stock voting as a separate class and a majority of the Series D
Preferred Stock voting as a separate class so elect.
(f) Any securities to be delivered to the holders of Preferred
Stock and Common Stock pursuant to this Section 5.2 shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 10-day period ending three days prior to the closing;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the 10-day
period ending three days prior to the closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
corporation and the holders of not less than a majority of the then outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock, voting together as a single class.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i) (A),
(B) or (C) to reflect the approximate fair market value thereof, as mutually
determined by the Corporation and the holders of a majority of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, and Series D Preferred Stock, voting together as a single
class.
(g) In the event the requirements of this Section 5.2 are not
complied with, the Corporation shall forthwith either:
(i) cause such closing to be postponed until such time as
the requirements of this Section 5.2 have been complied with, or
(ii) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in subsection 2(h) hereof.
-5-
<PAGE>
(h) The Corporation shall give each holder of record of
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 5.2, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
earlier than twenty (20) days after the Corporation has given the first notice
provided for herein or earlier than ten days after the Corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of a majority
of the shares of the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock then outstanding, voting together
as a single class.
3. Conversion. The holders of Series A Preferred Stock, Series B
----------
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Subordinated Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
-----------------
(a) Right to Convert.
----------------
(i) Subject to subsection (c) below, each share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Subordinated Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for such series of
Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Series A Issue Price, the
Original Series B Issue Price, the Original Series C Issue Price, the Original
Series D Issue Price or the Original Subordinated Preferred Issue Price, as the
case may be, by the Conversion Price (as defined below) at the time in effect
for such series. The initial conversion price per share for shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and the Subordinated Preferred Stock shall be the Original
Series A Issue Price, the Original Series B Issue Price, the Original Series C
Issue Price, the Original Series D Issue Price and the Original Subordinated
Preferred Issue Price (each, a "Conversion Price"), respectively; provided,
----------------
however, that the Conversion Price for shares of each such series of Preferred
Stock shall be subject to adjustment as set forth in subsection (c) below.
(ii) Each share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Subordinated Preferred Stock shall automatically be converted into shares of
Common Stock at the Conversion Price at the time in effect for such series
immediately upon
(x) the consummation of the Corporation's sale of its
Common Stock in a bona fide firm commitment underwriting pursuant to a
registration statement on Form S-1 (or successor form) under the Securities Act
of 1933, as amended, which results in gross offering proceeds to the Corporation
of at least $25 million, the public offering price (before any underwriting
commissions) of which was not less than $5.00 per share (adjusted to reflect
subsequent stock dividends, stock splits or recapitalizations); or
-6-
<PAGE>
(y) the approval of holders of at least a majority of
the outstanding shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, voting together in
accordance with Section 4 hereof; provided, however, the approval of holders of
at least a majority of the outstanding shares of Series C Preferred Stock and
Series D Preferred Stock, each voting as a separate class shall be required to
automatically convert each share of Series C Preferred Stock and Series D
Preferred Stock, respectively.
(b) Mechanics of Conversion. Before any holder of shares of a
-----------------------
series of Preferred Stock shall be entitled to convert the same into shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for such series of Preferred Stock, and shall give written notice by mail,
postage prepaid, to the Corporation at its principal corporate office, of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of such series of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of such series of Preferred
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
If the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering shares of such series of Preferred
Stock for conversion, be conditioned upon the closing with the underwriter of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock issuable upon such conversion of shares of
such series of Preferred Stock shall not be deemed to have converted such shares
of such series of Preferred Stock until immediately prior to the closing of such
sale of securities.
(c) Conversion Price Adjustments of the Series A Preferred
------------------------------------------------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
- -----------------------------------------------------------------------------
Stock and Subordinated Preferred Stock. The Conversion Price of the Series A
- --------------------------------------
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Subordinated Preferred Stock shall be subject to adjustment
from time to time as follows:
(i) (A) If the Corporation shall issue after the date upon
which the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock was initially issued (the "Purchase Date" with
-------------
respect to such series) any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion Price
for such series in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for such series in effect immediately prior to each
such issuance shall automatically be adjusted as set forth in this Section
5.2(3)(c).
Whenever the Conversion Price is adjusted pursuant to this
Section 5.2(3)(c), the new Conversion Price shall be determined by multiplying
the Conversion Price then in effect immediately prior to the issuance of
Additional Stock by a fraction:
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<PAGE>
(x) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance (for
purposes of this calculation only, including the number of shares of Common
Stock then issuable upon the conversion of all outstanding shares of Preferred
Stock at the Conversion Price for such shares in effect immediately prior to
such issuance of Additional Stock) plus the number of shares of Common Stock
equivalents which the aggregate consideration received by the Corporation for
the shares of such Additional Stock so issued would purchase at the Conversion
Price for the shares of the series of Preferred Stock with respect to which the
adjustment is being made; and
(y) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance (for
purposes of this calculation only, including the number of shares of Common
Stock then issuable upon the conversion of all outstanding shares of Preferred
Stock at the Conversion Prices for such shares in effect immediately prior to
such issuance of Additional Stock) plus the number of such shares of Additional
Stock so issued.
Any series of issuances of Additional Stock consisting of Common Stock or
the same series of Preferred Stock, issued at the same price and occurring
within a three-month period, shall be treated as one issuance of Additional
Stock for the purposes of this calculation.
(B) No adjustment of the Conversion Price for
such series of Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in subsections
(E)(3) and (E)(4) below, no adjustment of such Conversion Price for such series
of Preferred Stock pursuant to this subsection 3(c)(i) shall have the effect of
increasing the Conversion Price for such series of Preferred Stock above the
Conversion Price for such series in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before,
on or after a Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
-8-
<PAGE>
(1) The aggregate maximum number of shares
of Common Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at the time
such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections 3(c)(i)(C) and
(c)(i)(D)) above, if any, received by the Corporation upon the issuance of such
options or rights plus the minimum purchase price provided in such options or
rights for the Common Stock covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the Corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 3(c)(i)(C) and (c)(i)(D) above).
(3) In the event of any change in the number
of shares of Common Stock deliverable or any increase in the consideration
payable to the Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the antidilution
provisions thereof, the Conversion Price of such series of Preferred Stock
obtained with respect to the adjustment which was made upon the issuance of such
options, rights or securities, and any subsequent adjustments based thereon,
shall be recomputed to reflect such change, but no further adjustment shall be
made for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the conversion
or exchange of such securities; provided, however, that this section shall not
have any effect on any conversion of such series of Preferred Stock prior to
such change or increase.
(4) Upon the expiration of any such options
or rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of such series of Preferred Stock obtained with
respect to the adjustment which was made upon the issuance of such options,
rights or securities or options or rights related to such securities, and any
subsequent adjustments based thereon, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such options or rights upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities; provided, however, that this section shall not have any effect on
any conversion of such series of Preferred Stock prior to such expiration or
termination.
(ii) "Additional Stock" shall mean any shares of Common
----------------
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by the Corporation after the date of the issuance of the Series A Preferred
Stock, other than:
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<PAGE>
(A) Common Stock issued pursuant to a transaction
described in subsection 3(c)(iii) hereof,
(B) Common Stock issued or issuable to the
Corporation's officers, directors, employees, or consultants under stock option
and restricted stock purchase agreements on terms and conditions approved by the
Board of Directors of the Corporation,
(C) Common Stock issued or issuable upon conversion of
the Preferred Stock,
(D) Capital stock, or options or warrants to purchase
capital stock, issued to lending institutions or lessors in connection with
commercial credit arrangements, equipment financings or similar transactions, or
in corporate partnering arrangements, as unanimously approved by the Board of
Directors,
(E) Shares of Common Stock or Preferred Stock issuable
upon exercise of options, notes, warrants or other rights outstanding as of the
date of this Certificate of Incorporation,
(F) Shares of Common Stock issued or issuable in a
public offering prior to or in connection with which all outstanding shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock will be converted to Common Stock, or
(G) Capital stock or warrants or options to purchase
capital stock issued in connection with bona fide acquisitions, mergers or
similar transactions, the terms of which are approved by the Board of Directors.
(iii) In the event the Corporation should at any time or from
time to time after the effective date hereof fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
------------------------
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then as of such record date (or the date of
such dividend distribution split or subdivision if no record date is fixed), the
Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and the Subordinated
Preferred Stock shall be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
increased in proportion to such increase of outstanding shares determined in
accordance with subsection 3(c)(i)(E) above.
(iv) If the number of shares of Common Stock outstanding at
any time after the effective date hereof is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for each series of Preferred Stock shall be
appropriately increased so that the number of shares of
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<PAGE>
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
(v) Notwithstanding anything herein to the contrary, the
operation of, and any adjustment of the Conversion Prices pursuant to, the
provisions of subsection 3(c)(i) above may be waived with respect to any
specific share or shares of Preferred Stock, either prospectively or
retroactively and either generally or in a particular instance by a writing
executed by the registered holder of such share or shares. Any waiver pursuant
to this subsection 3(c)(v) shall bind all future holders of the shares of
Preferred Stock for which rights have been waived. In the event that a waiver of
adjustment of Conversion Price under this subsection 3(c)(v) results in
different Conversion Prices for shares of a series of Preferred Stock, the
Secretary of the Corporation shall maintain a written ledger identifying the
Conversion Price for each share of such series of Preferred Stock. Such
information shall be made available to any person upon request.
(d) Other Distributions. In the event the Corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii) above,
then, in each such case for the purpose of this subsection 3(d), the holders of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and the Subordinated Preferred Stock shall be entitled
to a proportionate share of any such distribution as though they were the
holders of the number of shares of Common Stock of the Corporation into which
their shares of such series of Preferred Stock, as the case may be, are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(e) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, the Series
D Preferred Stock and Subordinated Preferred Stock shall thereafter be entitled
to receive upon conversion of such series of Preferred Stock the number of
shares of stock or other securities or property of the Corporation or otherwise,
to which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 3 with
respect to the rights of the holders of such series of Preferred Stock after the
recapitalization to the end that the provisions of this Section 3 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of such series of Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(f) No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred
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<PAGE>
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and the Subordinated Preferred Stock against impairment.
(g) Fractional Shares and Certificate as to Adjustments.
---------------------------------------------------
(i) No fractional shares shall be issued upon conversion of
shares of a series of Preferred Stock, and the number of shares of Common Stock
to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of such series of Preferred Stock the holder
is at the time converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Subordinated Preferred
Stock, pursuant to this Section 5.3, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of such series of Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of such
series of Preferred Stock furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of such series of Preferred Stock.
(h) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Subordinated Preferred
Stock at least ten (10) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Subordinated Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of such series of
Preferred Stock; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of such series of Preferred Stock, in addition to such other
remedies as shall be available to the holder of such series of Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
-12-
<PAGE>
(j) Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Subordinated Preferred Stock shall be deemed given if deposited in the United
States mail, first class postage prepaid, and addressed to each holder of record
at such holder's address appearing on the books of the Corporation.
4. Voting Rights. The holder of each share of Series A Preferred
-------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Subordinated Preferred Stock shall have the right to one vote for each
share of Common Stock into which such Preferred Stock could be converted on the
record date for the vote or written consent of stockholders. In all cases any
fractional share, determined on an aggregate conversion basis, shall be rounded
to the nearest whole share. With respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the bylaws of
the Corporation, and shall be entitled to vote, together with holders of Common
Stock as a single voting group, with respect to any question upon which holders
of Common Stock have the right to vote.
5. Protective Provisions.
---------------------
(a) Preferred Stock Protective Provisions. In addition to any
-------------------------------------
approvals required by law, so long as any shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
are outstanding, the Corporation shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting
together as a single class on an as-converted basis:
(i) sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge with or into or
consolidate with any other corporation (other than a wholly owned subsidiary
corporation) in which the Corporation is not the surviving corporation or effect
any transaction or series of related transactions in which more than 50% of the
voting power of the Corporation is disposed of; or
(ii) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock so as to affect adversely such
shares; or
(iii) increase or decrease (other than by conversion) the
authorized number of shares of Preferred Stock or the designated number of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock or Subordinated Preferred Stock; or
(iv) authorize or create (by reclassification or
otherwise) any new class or series of stock;
(v) pay or declare any dividend on its Common Stock or
any other junior equity security other than a dividend in Common Stock of the
Corporation;
-13-
<PAGE>
(vi) redeem or repurchase its Common Stock or any other
junior equity security, except for shares repurchased upon termination of an
officer, employee, director or consultant pursuant to a restricted stock
purchase agreement or similar agreement;
(vii) increase the size of its Board of Directors beyond
nine (9) members;
(viii) amend or waive any provision of its Certificate of
Incorporation or bylaws;
(ix) approve any business combinations or acquisitions
unless (i) approved by at least fifty percent (50%) of the Investor Directors as
defined in the Amended and Restated Voting Agreement dated on or about September
9, 1999, or (ii) the aggregate value (as determined by the Board of Directors)
of all such combinations and acquisitions in the previous six months is less
than $5,000,000.00; or
(x) authorize the issuance of any shares of capital stock
unless approved by a majority of the Investor Directors as defined in the
Amended and Restated Voting Agreement dated on or about September 9, 1999.
(b) Series C Preferred Stock Protective Provisions. In addition
----------------------------------------------
to any approvals required by law and approvals required by section (a) above, so
long as at least 1,000,000 shares of Series C Preferred Stock are outstanding,
the Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Series C Preferred Stock, voting as a separate
class:
(i) amend its Certificate of Incorporation or bylaws to
affect adversely the rights, preferences or privileges of the Series C Preferred
Stock; or
(ii) redeem or repurchase its capital stock, except for
shares repurchased upon termination of an officer, employee, director or
consultant pursuant to a restricted stock purchase agreement or similar
agreement; or
(iii) authorize or create (by reclassification or
otherwise) any class or series of stock that would be senior in any respect to
the Series C Preferred Stock.
(c) Series D Preferred Stock Protective Provisions. In addition
----------------------------------------------
to any approvals required by law and approvals required by sections (a) and (b)
above, so long as at least 1,000,000 shares of Series D Preferred Stock are
outstanding, the Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series D Preferred Stock, voting as a
separate class:
(i) amend its Certificate of Incorporation or bylaws to
affect adversely the rights, preferences or privileges of the Series D Preferred
Stock; or
-14-
<PAGE>
(ii) redeem or repurchase its capital stock, except for
shares repurchased upon termination of an officer, employee, director or
consultant pursuant to a restricted stock purchase agreement or similar
agreement; or
(iii) authorize or create (by reclassification or
otherwise) any class or series of stock that would be senior in any respect to
the Series D Preferred Stock.
6. Status of Converted Stock. In the event any shares of Series A
-------------------------
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Subordinated Preferred Stock shall be converted pursuant to
Section 3 hereof, the shares so converted shall be canceled and shall not be
issuable by the Corporation, and the Certificate of Incorporation of the
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
7. No Preemptive Rights. The holders of the Series A Preferred
--------------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Subordinated Preferred Stock shall not solely by virtue of this
Certificate of Incorporation have any preemptive rights.
5.3 Common Stock.
------------
1. Relative Rights of Preferred Stock and Common Stock. All
---------------------------------------------------
preferences, voting powers, relative, participating optional or other special
rights and privileges, and qualifications, limitations, or restrictions of the
Common Stock are expressly made subject and subordinate to those that may be
fixed with respect to any shares of the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this
-------------
Certificate of Incorporation, each holder of Common Stock shall have one vote in
respect of each share of stock held by such holder of record on the books of the
corporation for the election of directors and on all matters submitted to a vote
of stockholders of the Corporation.
3. Dividends. Subject to the preferential rights of the Preferred
---------
Stock, the holders of shares of Common Stock shall be entitled to receive, when
and if declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
Liquidation, after distribution in full of the preferential amounts, if any, to
be distributed to the holders of shares of the Preferred Stock, holders of
Common Stock shall be entitled to participate in any distribution of the assets
of the Corporation in accordance with Section 5.2.2.
5. No Preemptive Rights. The holders of the Common Stock shall not
--------------------
solely by virtue of this Certificate of Incorporation have any preemptive
rights.
VI.
BOARD OF DIRECTORS
6.1 The number of directors of the Corporation shall be fixed as provided
in the bylaws and, subject to Section 5.2.5 may be changed from time to time by
amending the bylaws.
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<PAGE>
6.2 The election of directors need not be by written ballot, unless
otherwise provided in the bylaws of the Corporation.
6.3 Subject to (i) the limitations of the General Corporation Law of
Delaware, (ii) the limitations of Section 5.2.5, and (iii) the power of the
stockholders of the Corporation to change or repeal the bylaws, the Board of
Directors is expressly authorized to make, amend, or repeal the bylaws of the
Corporation unless the stockholders in adopting, amending or repealing a
particular bylaw have provided expressly that the Board of Directors may not
amend or repeal that bylaw.
VII.
INDEMNIFICATION
7.1 Each person who is or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
----------
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director or
officer or in any other capacity while serving as a director or officer, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by Section 145 of the Delaware General Corporation Law as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of his
or her heirs, executors and administrators; provided, however, that, except as
provided in Section 7.2, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this section
shall be a contract right and shall include the right to be paid by the
Corporation any expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if Section 145 of the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
7.2 If a claim under Section 7.1 is not paid in full by the Corporation
within thirty (30) days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and,
-16-
<PAGE>
if successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
Section 145 of the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 145 of the Delaware General Corporation Law, nor an actual determination
by Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
7.3 The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
7.4 The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under Section 145 of the Delaware General Corporation Law.
VIII.
DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
IX.
MISCELLANEOUS
9.1 Except as otherwise provided in this Certificate of Incorporation, as
amended from time to time, the Corporation reserves the right to amend, alter,
change, or repeal any provisions contained in this Certificate of Incorporation
in any manner now or hereafter prescribed or permitted by statute. All rights
of stockholders of the Corporation are subject to this reservation. A
stockholder of the Corporation does not have a vested property right resulting
from any provision of this Certificate of Incorporation.
-17-
<PAGE>
9.2 The Corporation shall have authority to correct clerical errors in any
documents filed with the Secretary of State of Delaware, including this
Certificate of Incorporation or any amendments hereto, without the necessity of
special stockholder approval of such corrections."
* * *
-18-
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by the Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Bellevue, Washington, on February 28, 2000.
/s/ Timothy J. Kilgallon
__________________________________________
Timothy J. Kilgallon
President
/s/ Christopher A. Pesch
__________________________________________
Christopher A. Pesch
Secretary
-19-
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
POINTSHARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I - CORPORATE OFFICES............................................................................................ 1
1.1 Registered Office......................................................................................... 1
1.2 Other Offices............................................................................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................................................................... 1
2.1 Place Of Meetings......................................................................................... 1
2.2 Annual Meeting............................................................................................ 1
2.3 Special Meeting........................................................................................... 2
2.4 Notice Of Stockholders' Meetings.......................................................................... 2
2.5 Advance Notice of Stockholder Nominees and Other Stockholder.............................................. 2
2.6 Quorum.................................................................................................... 4
2.7 Adjourned Meeting; Notice................................................................................. 4
2.8 Conduct Of Business....................................................................................... 4
2.9 Voting.................................................................................................... 4
2.10 Waiver Of Notice.......................................................................................... 5
2.11 Record Date For Stockholder Notice; Voting................................................................ 5
2.12 Proxies................................................................................................... 5
ARTICLE III - DIRECTORS.................................................................................................. 6
3.1 Powers.................................................................................................... 6
3.2 Number Of Directors....................................................................................... 6
3.3 Election, Qualification And Term Of Office Of Directors................................................... 6
3.4 Resignation And Vacancies................................................................................. 6
3.5 Place Of Meetings; Meetings By Telephone.................................................................. 7
3.6 Regular Meetings.......................................................................................... 7
3.7 Special Meetings; Notice.................................................................................. 8
3.8 Quorum.................................................................................................... 8
3.9 Waiver Of Notice.......................................................................................... 8
3.10 Board Action By Written Consent Without A Meeting......................................................... 9
3.11 Fees And Compensation Of Directors........................................................................ 9
3.12 Approval Of Loans To Officers............................................................................. 9
3.13 Removal Of Directors...................................................................................... 9
3.14 Chairman Of The Board Of Directors........................................................................ 9
ARTICLE IV - COMMITTEES.................................................................................................. 10
4.1 Committees Of Directors................................................................................... 10
4.2 Committee Minutes......................................................................................... 10
4.3 Meetings And Action Of Committees......................................................................... 10
ARTICLE V - OFFICERS..................................................................................................... 11
5.1 Officers.................................................................................................. 11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.2 Appointment Of Officers................................................................................... 11
5.3 Subordinate Officers...................................................................................... 11
5.4 Removal And Resignation Of Officers....................................................................... 11
5.5 Vacancies In Offices...................................................................................... 12
5.6 Chief Executive Officer................................................................................... 12
5.7 President................................................................................................. 12
5.8 Vice Presidents........................................................................................... 12
5.9 Secretary................................................................................................. 12
5.10 Chief Financial Officer................................................................................... 13
5.11 Representation Of Shares Of Other Corporations............................................................ 13
5.12 Authority And Duties Of Officers.......................................................................... 13
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS......................................... 14
6.1 Indemnification Of Directors And Officers................................................................. 14
6.2 Indemnification Of Others................................................................................. 14
6.3 Payment Of Expenses In Advance............................................................................ 14
6.4 Indemnity Not Exclusive................................................................................... 14
6.5 Insurance................................................................................................. 15
6.6 Conflicts................................................................................................. 15
ARTICLE VII - RECORDS AND REPORTS........................................................................................ 15
7.1 Maintenance And Inspection Of Records..................................................................... 15
7.2 Inspection By Directors................................................................................... 16
7.3 Annual Statement To Stockholders.......................................................................... 16
ARTICLE VIII - GENERAL MATTERS........................................................................................... 16
8.1 Checks.................................................................................................... 16
8.2 Execution Of Corporate Contracts And Instruments.......................................................... 16
8.3 Stock Certificates; Partly Paid Shares.................................................................... 16
8.4 Special Designation On Certificates....................................................................... 17
8.5 Lost Certificates......................................................................................... 17
8.6 Construction; Definitions................................................................................. 18
8.7 Dividends................................................................................................. 18
8.8 Fiscal Year............................................................................................... 18
8.9 Seal...................................................................................................... 18
8.10 Transfer Of Stock......................................................................................... 18
8.11 Stock Transfer Agreements................................................................................. 18
8.12 Registered Stockholders................................................................................... 19
ARTICLE IX - AMENDMENTS.................................................................................................. 19
</TABLE>
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
POINTSHARE CORPORATION
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Registered Office.
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is Corporation Trust Company.
1.2 Other Offices.
-------------
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 Place Of Meetings.
-----------------
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 Annual Meeting.
--------------
(a) The annual meeting of stockholders shall be held on such date,
time and place, either within or without the State of Delaware, as may be
designated by resolution of the Board of Directors each year. At the meeting,
directors shall be elected and any other proper business may be transacted.
(b) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be transacted by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice with respect to such meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of the notice
provided for in this Section 2.2, who is entitled to vote at the meeting and who
has complied with the notice procedures set forth in this Section 2.2.
<PAGE>
(c) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (iii) of paragraph (b) of
this Section 2.2, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation, as provided in Section 2.5, and
such business must be a proper matter for stockholder action under the General
Corporation Law of Delaware.
(d) Only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in these Bylaws. The chairman of the meeting shall
determine whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any proposed
nomination or business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall not be
presented for stockholder action at the meeting.
(e) Nothing in this Section 2.2 shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
2.3 Special Meeting.
---------------
A special meeting of the stockholders may be called at any time by the
Board of Directors, the chairman of the board, the president or by one or more
stockholders holding shares in the aggregate entitled to cast not less than
twenty-five (25) percent of the votes at that meeting.
2.4 Notice Of Stockholders' Meetings; Affidavit of Notice'.
-----------------------------------------------------
All notices of meetings of stockholders shall be in writing and shall
be sent or otherwise given in accordance with this Section 2.4 of these Bylaws
not less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting (or such longer or shorter time as
is required by Section 2.5 of these Bylaws, if applicable). The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the Corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.5 Advance Notice of Stockholder Nominees and Other Stockholder
------------------------------------------------------------
Proposals.
---------
(a) Only persons who are nominated in accordance with the procedures
set forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the
-2-
<PAGE>
Board of Directors, shall be made pursuant to timely notice in writing to the
secretary of the Corporation. Stockholders may bring other business before the
annual meeting, provided that timely notice is provided to the secretary of the
Corporation in accordance with this section, and provided further that such
business is a proper matter for stockholder action under the General Corporation
Law of Delaware. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 90 days nor more than 120 days prior to the anniversary date of the
prior year's meeting; provided, however, that in the event that (i) the date of
the annual meeting is more than 30 days prior to or more than 60 days after such
anniversary date, and (ii) less than 60 days notice or prior public disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a directors, (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934
(including, without limitation, such person's written consent to being name in
the proxy statement as a nominee and to serving as a director if elected); (b)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of such business, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the proposal is made (i) the name and address of the
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned
of record by such stockholder and beneficially by such beneficial owner. At the
request of the Board of Directors any person nominated by the Board of Directors
for election as a director shall furnish to the secretary of the Corporation
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. 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 procedures prescribed by the Bylaws, and if he
or she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the president or the chairman of the board, the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president, or
the secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the
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request. If the notice is not given within twenty (20) days after the receipt of
the request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph of this Section 2.3 shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
2.6 Quorum.
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (a) the chairman of the meeting or (b)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 Adjourned Meeting; Notice.
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 Conduct Of Business.
-------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
2.9 Voting.
------
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
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2.10 Waiver Of Notice.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.11 Record Date For Stockholder Notice; Voting.
------------------------------------------
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the Board of Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.12 Proxies.
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, electronic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is
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irrevocable shall be governed by the provisions of Section 212(e) of the General
Corporation Law of Delaware.
ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 Number Of Directors.
-------------------
Upon the adoption of these bylaws, the number of directors
constituting the entire Board of Directors shall be eight. Thereafter, this
number may be changed by a resolution of the Board of Directors or of the
stockholders, subject to Section 3.4 of these Bylaws. No reduction of the
authorized number of directors shall have the effect of removing any director
before such director's term of office expires.
3.3 Election, Qualification And Term Of Office Of Directors.
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws and unless otherwise
provided in the certificate of incorporation, directors shall be elected at each
annual meeting of stockholders to hold office until the next annual meeting.
Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 Resignation And Vacancies.
-------------------------
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies,
unless otherwise provided in the certificate of incorporation and subject to the
rights of any holders of preferred stock then outstanding.
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<PAGE>
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 Place Of Meetings; Meetings By Telephone.
----------------------------------------
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
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3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by facsimile, it shall be delivered personally or by telephone or
by facsimile at least forty-eight (48) hours before the time of the holding of
the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 Quorum.
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 Waiver Of Notice.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
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<PAGE>
3.10 Board Action By Written Consent Without A Meeting.
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee. Written consents representing actions taken by the
board or committee may be executed by telex, telecopy or other facsimile
transmission, and such facsimile shall be valid and binding to the same extent
as if it were an original.
3.11 Fees And Compensation Of Directors.
----------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
3.12 Approval Of Loans To Officers.
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 Removal Of Directors.
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 Chairman Of The Board Of Directors.
----------------------------------
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
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ARTICLE IV
COMMITTEES
----------
4.1 Committees Of Directors.
-----------------------
The Board of Directors may designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The Board may
designate 1 or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors, or in these Bylaws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority to (a) amend the Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (b) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (c) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, (d) recommend to
the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or (e) amend the Bylaws of the Corporation; and, unless the board
resolution establishing the committee, the Bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 Committee Minutes.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 Meetings And Action Of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with
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such changes in the context of such provisions as are necessary to substitute
the committee and its members for the Board of Directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the Board of Directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the Board of Directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The Board of Directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these Bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the Board of Directors, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 Appointment Of Officers.
-----------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 Subordinate Officers.
--------------------
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
5.4 Removal And Resignation Of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice,
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the acceptance of the resignation shall not be necessary to make it effective.
Any resignation is without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party.
5.5 Vacancies In Offices.
--------------------
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 Chief Executive Officer.
-----------------------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these bylaws.
5.7 President.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the corporation. He or she shall have the
general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 Vice Presidents.
---------------
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
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The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law or
by these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the bylaws.
5.11 Representation Of Shares Of Other Corporations.
----------------------------------------------
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the Board of
Directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by the person having such
authority.
5.12 Authority And Duties Of Officers.
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the Board of Directors or the stockholders.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
-------------------------------------------------------------------
6.1 Indemnification Of Directors And Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (a) who is or was
a director or officer of the corporation, (b) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 Indemnification Of Others.
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (a) who is or was an employee or
agent of the corporation, (b) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 Payment Of Expenses In Advance.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an
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official capacity and as to action in another capacity while holding such
office, to the extent that such additional rights to indemnification are
authorized in the certificate of incorporation.
6.5 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 or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 Conflicts.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance And Inspection Of Records.
-------------------------------------
The corporation shall, either at its principal executive offices or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under
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<PAGE>
oath shall be directed to the corporation at its registered office in Delaware
or at its principal place of business.
7.2 Inspection By Directors.
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and records,
the stock ledger, and the stock list and to make copies or extracts therefrom.
The Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 Annual Statement To Stockholders.
--------------------------------
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 Checks.
------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 Execution Of Corporate Contracts And Instruments.
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 Stock Certificates; Partly Paid Shares.
--------------------------------------
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the
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<PAGE>
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the 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 a certificate has 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 or she were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 Special Designation On Certificates.
-----------------------------------
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the 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.
8.5 Lost Certificates.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft
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<PAGE>
or destruction of any such certificate or the issuance of such new certificate
or uncertificated shares.
8.6 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 Dividends.
---------
The directors of the corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 Fiscal Year.
-----------
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 Seal.
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 Transfer Of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 Stock Transfer Agreements.
-------------------------
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the
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<PAGE>
transfer of shares of stock of the corporation of any one or more classes owned
by such stockholders in any manner not prohibited by the General Corporation Law
of Delaware.
8.12 Registered Stockholders.
-----------------------
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
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<PAGE>
EXHIBIT 4.2
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is made as of the 29th day of February, 2000 by and among
---------
Pointshare Corporation, a Delaware corporation (the "Company"), the founder set
-------
forth on Exhibit A hereto (the "Founder"), the investors listed on Exhibit B
--------- ------- ---------
hereto (each of which is herein referred to as an "Investor" or collectively,
--------
the "Investors") and the former shareholders of Health Trade Links, Inc. listed
---------
on Exhibit C hereto (the "Health Trade Links Holders").
--------- --------------------------
RECITALS
--------
A. The Company, the Founder and certain of the Investors entered into an
Amended and Restated Investors' Rights Agreement on February 2, 2000 in
connection with the Health Trade Links, Inc., transaction (the "Existing
--------
Agreement"), pursuant to which the Founder and Investors were granted certain
- ---------
rights.
B. The Company and certain of the Investors (the "Series D Investors")
------------------
have entered into a Series D Preferred Stock Purchase Agreement (the "Purchase
--------
Agreement") of even date herewith pursuant to which the Company desires to sell
- ---------
to such Series D Investors and such Series D Investors desire to purchase from
the Company shares of the Company's Series D Preferred Stock (the "Series D
--------
Preferred Stock"). A condition to such Series D Investors' obligations under
- ---------------
the Purchase Agreement is that the Company, the Founder and the Investors enter
into this Agreement in order to provide (i) certain rights to register shares of
the Company's Common Stock issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D
Preferred Stock held by the Investors and Common Stock held by the Health Trade
Links Holders, (ii) certain rights to receive or inspect information pertaining
to the Company, and (iii) a right of first offer with respect to certain
issuances by the Company of its securities.
C. The Company, the Investors and the Founder each desire to induce the
Series D Investors to purchase shares of Series D Preferred Stock pursuant to
the Purchase Agreement by agreeing to the terms and conditions set forth herein.
D. The Founder and the Investors are holders of at least a majority of the
Registrable Securities of the Company (as defined in the Existing Agreement) and
desire to amend and restate the Existing Agreement in its entirety.
<PAGE>
AGREEMENT
---------
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
--------------
registration statement or document;
(b) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock, (ii)
the shares of Common Stock issued to the shareholders of Heath Trade Links
Holders; provided, however, that for purposes of Sections 1.2, 1.12 and 1.14
such stock shall not be deemed Registrable Securities and the Health Trade Links
Holders shall not be deemed Holders and (iii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Preferred Stock or Common
Stock, excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which such person's registration rights are not
assigned;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are exercisable or
convertible into, Registrable Securities;
(d) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof; and
(e) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC in lieu of Form S-3 which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(f) The term "Qualified IPO" means an initial public offering of
shares of Common Stock of the Company at a price per share (before any
underwriting commissions) of at least $5.00 and gross offering proceeds to the
Company, after deducting underwriters' commissions and expenses, of at least
$25,000,000 and shall exclude a registration statement relating either to the
sale of securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction.
-2-
<PAGE>
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of
(i) July 1, 2002 or (ii) six months after the effective date (the "Effective
---------
Date") of the Qualified IPO, and in either case prior to the third anniversary
- ----
date of the Effective Date, a written request from the Holders of at least 40%
of the Registrable Securities then outstanding that the Company file a
registration statement under the Securities Act covering the registration of (i)
in the case of the Qualified IPO, at least 20% of the Registrable Securities
then outstanding (or a lesser percent if the anticipated aggregate offering
price, net of underwriting discounts and commission, would exceed $15,000,000)
or (ii) in the case of any demand other than the Qualified IPO, any number of
Registrable Securities, then the Company shall, within 10 days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 1.2(b), file as soon as practicable, and in any
event within 90 days of the receipt of such request, a registration statement
under the Securities Act covering all Registrable Securities which the Holders
request to be registered within 20 days of the mailing of such notice by the
Company in accordance with Section 4.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
------------------
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). In such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and consented to by the Company (which
consent shall not be unreasonably withheld). Notwithstanding any other
provision of this Section 1.2, if the underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
(c) The Company is obligated to effect only two such
registrations pursuant to this Section 1.2; provided, however, that the Company
shall not be obligated to effect a registration pursuant to this Section 1.2 if
within the six months immediately preceding a request hereunder the Company has
effected a demand registration under this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2 a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the
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<PAGE>
Company it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than 90 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any 12-month period.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Securities Act in connection with the public
offering of such securities solely for cash other than a registration relating
solely to the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within 20 days after mailing of such notice
by the Company in accordance with Section 4.5, the Company shall, subject to the
provisions of Section 1.8, cause to be registered under the Securities Act all
of the Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the
-4-
<PAGE>
managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration
of Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.5 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to Sections 1.2, 1.3 and
1.12 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of the Registrable Securities.
1.6 Expenses of Demand Registration. All expenses, other than
-------------------------------
underwriting discounts and commissions, but including the fees and disbursements
of one counsel for the selling Holders, incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses), unless the Holders of
a majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 1.2; provided further, however, that if
at the time of such withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company from that known to
the Holders at the time of their request, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to Section
1.2.
-5-
<PAGE>
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the first two
registrations pursuant to Section 1.3 for each Holder (which right may be
assigned as provided in Section 1.13), including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the Holders and other
selling stockholders according to the total amount of securities entitled to be
included therein owned by each Holder and selling stockholder or in such other
proportions as shall mutually be agreed to by such Holders and selling
stockholders).
1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), against any losses, claims, damages or liabilities (joint or several) to
- ---
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a
---------
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law;
-6-
<PAGE>
and the Company will reimburse each such Holder, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities in such registration statement or any of
its directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, or underwriter or controlling
person, or other such Holder or director, officer or controlling person may
become subject, under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or controlling person,
other Holder, officer, director, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 1.10(b) exceed the net
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within
-7-
<PAGE>
a reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.10.
(d) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act. With a view to making
-------------------------------------
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken simultaneously with the Company's initial public offerings or
as soon as practicable thereafter;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
-8-
<PAGE>
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 1.12: (i) if Form S-3 is
not available for such offering by the Holders; (ii) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (iii) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
Registration Statement for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any 12-month
period; (iv) if the Company has, within the six-month period preceding the date
of such request, already effected a registration on Form S-3 for the Holders
pursuant to this Section 1.12 and other similar provisions granting rights to
registration on Form S-3; (v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance; or (vi) if the Holders hold in the aggregate less than 1% of the
outstanding shares of the Company's capital stock.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. The Company shall pay all expenses (other
than underwriting discounts and commissions) incurred in connection with the
first two registrations requested pursuant to Section 1.12, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of one counsel for all selling
Holders and counsel for the Company. All expenses incurred in additional
registrations pursuant to this Section 1.12 shall be borne pro rata by the
Holder or Holders participating in the Form S-3 Registration. Registrations
effected pursuant to this Section 1.12 shall not be counted as demands for
registration effected pursuant to Section 1.2.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned by a Holder to (i) any partner or retired partner of any Holder which
is a partnership, (ii) any family member or trust for the benefit of any
individual Holder, and (iii) a transferee or assignee of at least 20% of such
Holder's Registrable Securities; provided, in each case, the Company is, within
a reasonable time
-9-
<PAGE>
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 hereof
unless, under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of such holder's securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within 120 days of the effective date of any registration effected
pursuant to Section 1.2.
1.15 Amendment of Registration Rights. Any provision of this Section
--------------------------------
1 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and the holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder, and each
future holder of Registrable Securities and the Company.
1.16 Termination of Registration Rights. The Company's obligations
----------------------------------
pursuant to this Section 1 (other than its obligations pursuant to Section 1.11)
shall terminate as to any Holder of Registrable Securities on the earlier of (i)
when the Holder can sell all of such Holder's shares pursuant to Rule 144 under
the Securities Act during any 90-day period or (ii) on the fifth anniversary of
the closing of the Company's sale of its Common Stock in a bona fide, firm
commitment underwriting pursuant to a registration statement on Form S-1 under
the Securities Act which results in gross offering proceeds of at least
$25,000,000.
2. Covenants.
---------
2.1 Delivery of Financial Statements.
--------------------------------
(a) The Company shall deliver to each Investor so long as such
Investor holds at least 175,000 shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, or Series D Preferred Stock of the
Company or Common Stock issued upon conversion of such Preferred Stock:
(i) as soon as practicable, but in any event within 90 days
after the end of each fiscal year of the Company, a statement of operations for
such fiscal year, a balance sheet of the Company as of the end of such year, and
a statement of cash flows for such year, such year-end financial reports to be
in reasonable detail, prepared in accordance with
-10-
<PAGE>
generally accepted accounting principles ("GAAP"), and audited and certified by
----
independent public accountants of nationally recognized standing selected by the
Company;
(ii) as soon as practicable after the end of each of the
first three quarters of the fiscal year, but in any event within 45 days after
the end of each such quarter, the Company's unaudited statement of operations,
statement of cash flows and balance sheet for and as of the end of such quarter;
(iii) as soon as practicable after the end of each month but
in any event within 20 days of the end of each month, an unaudited statement of
operations, statement of cash flows and balance sheet for and as of the end of
such month, in reasonable detail; such monthly statements shall also contain the
foregoing information on a year-to-date basis, shall compare actual performance
to budget and shall contain a report on business trends by the President of the
Company;
(iv) as soon as practicable after the end of each fiscal
year of the Company but in any event within 30 days after the end of such fiscal
year, a capitalization summary of the Company, by investor; and
(v) not less than 30 days prior to the close of each
fiscal year, a comprehensive operating budget for the next fiscal year
forecasting the Company's revenues, expenses and cash position, prepared on a
monthly basis, including balance sheets and sources and applications of funds
statements for such months and, promptly following approval by the Board of
Directors, any other comprehensive operating budgets or revised such budgets
prepared by the Company.
(b) For purposes of determining the number of shares held by an
Investor for purposes of Sections 2.1 and 2.2 hereof, each Investor shall be
deemed to hold the shares of Common Stock and Preferred Stock held by any
affiliate of such Investor.
2.2 Inspection. For so long as an Investor holds at least 175,000
----------
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock of the Company or Common Stock issued upon
conversion of such series of Preferred Stock, the Company shall permit such
Investor, at such Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by Investor; provided, however, that the
Company shall not be obligated pursuant to this Section 2.2 to provide access to
any information which it reasonably considers to be a trade secret or similar
confidential information. The inspection privileges set forth in this Section
2.2 shall not be assignable.
2.3 Termination of Covenants. The covenants set forth in Sections
------------------------
2.1 and 2.2 hereof shall terminate and be of no further force or effect upon the
earlier of (i) when the sale of securities pursuant to a registration statement
filed by the Company under the Securities Act in connection with the firm
commitment underwritten offering of its securities to the general public
-11-
<PAGE>
is consummated or (ii) when the Company first becomes subject to the periodic
reporting requirements of Section 13(a) or 15(d) of the Exchange Act.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to Dennis Schmuland,
M.D. and to each Investor (collectively, the "Offerees" and each an "Offeree") a
-------- -------
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). Each Offeree shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for, any class of its capital stock
(collectively, "Shares"), other than the sale of Series D Preferred Stock
------
contemplated by the Purchase Agreement, the Company shall first make an offering
of such Shares to each Offeree in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to each Offeree stating (i) its bona fide intention to offer or issue
------
such Shares, (ii) the number of such Shares to be offered, and (iii) the price,
if any, for which it proposes to offer such Shares.
(b) Within 15 calendar days after receipt of the Notice, the
Offeree may elect to purchase or obtain, at the price and on the terms specified
in the Notice, up to that portion of such Shares which equals the proportion
that the number of shares of Common Stock issued and held, or issuable upon
conversion of the shares of the Company's Preferred Stock then held, by such
Offeree bears to the total number of shares of outstanding Common Stock and
Common Stock issuable upon conversion of the Preferred Stock then outstanding.
The Company shall promptly, in writing, inform each Offeree which purchases all
the shares available to it ("Fully Exercising Offeree") of any other Offeree's
------------------------
failure to do likewise. During the 10-day period commencing after receipt of
such information, each Fully Exercising Offeree shall be entitled to obtain that
portion of the shares subject to such right of first refusal and not subscribed
for by the Offerees which is equal to the proportion that the number of shares
of Common Stock issued and held, or issuable upon conversion of the Preferred
Stock then held, by such Fully Exercising Offeree bears to the total number of
shares of Common Stock issued and held, or issuable upon conversion of the
Preferred Stock then held, by all Fully Exercising Offerees who wish to purchase
some of the unsubscribed shares.
(c) If all such Shares referred to in the Notice are not elected
to be obtained as provided in subsection 2.4(b) hereof, the Company may, during
the 60-day period following the expiration of the period provided in subsection
2.4(b) hereof, offer the remaining unsubscribed Shares to any person or persons
at a price not less than that, and upon terms no more favorable to the offeree
than those, specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Offerees in accordance herewith.
-12-
<PAGE>
(d) The right of first offer granted in this Section 2.4 shall
not be applicable (i) to the issuance or sale of shares of Common Stock (or
options therefor) to employees, directors, consultants or advisors of the
Company, provided that each such person executes an agreement with respect to
such issuance or sale, in substantially the form as approved by the Company's
Board of Directors, (ii) to the issuance or sale of shares of Common Stock or
Preferred Stock pursuant to currently outstanding options, warrants or other
securities exercisable or convertible into Common Stock or Preferred Stock of
the Company, (iii) to the issuance or sale of shares of Common Stock or
Preferred Stock, or options or warrants to purchase shares of Common Stock or
Preferred Stock, issued to lending institutions or lessors in connection with
commercial credit arrangements, equipment financings or similar transactions, or
in corporate partnering transactions as unanimously approved by the Board of
Directors, and (iv) to or after consummation of a Qualified IPO.
2.5 Further Covenants. The Company further covenants that from and
-----------------
after the date hereof:
(a) it will maintain term life insurance from financially sound
and reputable insurers on each of the lives of Dennis P. Schmuland, M.D. and
Timothy J. Kilgallon in the amount of $2,000,000 per person. Such policies shall
name the Company as loss payee and shall not be cancelable by the Company
without the prior approval of the holders of a majority of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock voting together as a single class; and
(b) it will cause all employees and consultants of the Company to
execute a proprietary information agreement, in a form previously provided to
special counsel to the Investors, which provides for the protection of the
Company's proprietary and confidential information and the assignment of
intellectual property rights to the Company; and
3. "Market Stand-Off" Agreement.
----------------------------
3.1 Until the third anniversary of the Effective Date (as defined
Section 1.2(a)), each Investor hereby agrees that it shall not, to the extent
requested by the Company or an underwriter of Common Stock (or other securities)
of the Company, sell or otherwise transfer or dispose (other than to donees who
agree to be similarly bound) of any securities of the Company (other than
securities purchased in the open market and not otherwise in breach of this
Section 3) for a period of up to 180 days following the effective date of the
first registration statement filed by the Company under the Securities Act and
declared effective by the Securities and Exchange Commission; provided that all
officers and directors of the Company and all other persons with registration
rights (whether or not pursuant to this Agreement) enter into similar
agreements.
3.2 Legends. In order to enforce the foregoing covenant, the Company
-------
may impose stop-transfer instructions with respect to the securities of the
Company (other than securities purchased in the open market and not otherwise in
breach of this Section 3) held by Investor (and the shares or securities of
every other person subject to the foregoing restriction) until the end of such
period. Additionally, each certificate representing the Series A Preferred
-13-
<PAGE>
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Common Stock held by the Health Trade Links Holders and the Common
Stock issuable upon conversion of the Preferred Stock shall be endorsed by the
Company with a legend reading as follows:
"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO AN INVESTORS' RIGHTS
AGREEMENT WHICH RESTRICTS THE TRANSFERABILITY OF THE SHARES. A COPY
OF THE INVESTORS' RIGHTS AGREEMENT MAY BE OBTAINED FROM THE COMPANY."
4. Miscellaneous.
-------------
4.1 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.2. Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of Washington (irrespective of its choice
of law principles).
4.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or five days after deposit in the United States mail or one
day after deposit with an air courier, postage prepaid and properly addressed to
the party to be notified as set forth on the signature page hereof or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties hereto. Notwithstanding the foregoing, notice may
be given by telex or telecopy, provided that appropriate confirmation of receipt
is received.
4.6 Amendments and Waivers. Except as specified in Section 1.15 and
----------------------
Section 4.9, any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of a majority of the Common Stock issued
or issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock; provided, however,
that no such amendment or waiver shall adversely affect rights of the holders of
a class or series of the Company's stock under this Agreement without the prior
written consent of a majority-in-interest of such adversely affected class or
series. Amendment to Section 2.4 hereof shall
-14-
<PAGE>
additionally require the written consent of Dennis P. Schmuland, M.D. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities, and the Company.
4.7 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
4.8 Aggregation of Stock. All Registrable Securities held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
4.9 Additional Investors. In the event the Company sells additional
--------------------
shares of Series D Preferred Stock after the date hereof, each party to this
Agreement hereby consents to the Company, in its sole discretion and without any
requirement of providing notice to or obtaining any additional consent of any
other existing Holders, may add the additional investors and the additional
shares of Series D Preferred Stock to this Agreement and, with respect to such
additional shares, the additional investor shall have all the rights and
obligations of an Investor and of a Holder of Registrable Securities hereunder.
[Signature page follows]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
POINTSHARE CORPORATION,
a Delaware corporation
/s/ Timothy J. Kilgallon
By: _________________________________________
Timothy J. Kilgallon
President and Chief Executive Officer
Address: 1300 - 114th Avenue SE
Suite 100
Bellevue, WA 98004
FOUNDER:
/s/ Dennis P. Schmuland
_____________________________________________
Dennis P. Schmuland, M.D.
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
/s/
_____________________________________________
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
Address: ___________________________________
___________________________________
___________________________________
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
Exhibit A
---------
<TABLE>
<CAPTION>
Founder Number of Shares
- ------- ----------------
<S> <C>
Dennis P. Schmuland, M.D. 2,255,200
</TABLE>
<PAGE>
Exhibit B
---------
<TABLE>
<CAPTION>
Investor Number of Shares
- -------- ----------------
<S> <C>
Morgenthaler Venture Partners IV 4,707,273
Domain Partners III, L.P. 1,818,660
Biotechnology Investments Limited 1,881,579
DP III Associates, L.P. 62,918
Cardinal Health Partners, L.P. 2,657,273
Patrick F. Latterell Living Trust 188,158
BMC HK Partners, L.P. 1,032,000
Utah Ventures II, L.P. 2,054,545
Trustees of Boston University c/o
Community Technology Fund 581,818
VLG Investments 1999 20,364
Sonya F. Erickson 6,836
Child Health Investment Corporation 90,909
Phoenix Leasing Incorporated (Warrant) 36,000
Robert Kingsbook (Warrant) 52,000
Seligman New Technologies Fund, Inc. 1,221,818
Seligman Communications and Information 363,637
Fund, Inc.
Seligman Investment Opportunities
(Master) Fund - NTV Portfolio 232,727
ABS Capital Partners III, L.P. 3,636,364
BB BioVentures L.P. 1,563,637
MPM BioVentures Parallel Fund, L.P. 235,636
MPM Asset Management Investors 1999 LLC
18,909
HLM/CB Fund, L.P. 545,455
HLM/UH Fund, L.P. 909,091
Van Wagoner Capital Management 1,090,909
Salix Ventures 727,273
John Robertson 1,055
Gordon Empey 1,000
Neoforma.com, Inc. 600,000
Computer Sciences Corporation 500,000
52nd Street Associates, Inc. 105,000
Imperial Ventures, Inc. 90,909
Brown McMillan IV, L.P. 1,672,728
David R. Holbrooke, M.D. 72,727
Hugh Y. Rienhoff, Jr. 5,546
Alan Seelenfreund 54,546
BancBoston Robertson Stephens, Inc. 146,357
</TABLE>
<PAGE>
Exhibit C
---------
Health Trade Links Holders
<TABLE>
<CAPTION>
Name Number of Shares
- ---- ----------------
<S> <C>
Gerald W. Kring 68,182
E.J. Lawrence 68,182
</TABLE>
<PAGE>
Exhibit 4.3
NEITHER THE SECURITY EVIDENCED BY THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT (COLLECTIVELY, THE
"SECURITIES LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES (I) ARE
REGISTERED UNDER THE SECURITIES LAWS OR (11) ARE EXEMPT FROM REGISTRATION UNDER
THE SECURITIES LAWS AND THE CORPORATION IS PROVIDED AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
No._______ WARRANT TO PURCHASE ___________
ISSUED: July 18, 1997 SHARES OF COMMON STOCK
HOLDER:______
HealthKnowledge Corporation
COMMON STOCK PURCHASE WARRANT
THIS IS TO CERTIFY that, for value received and subject to the terms and
conditions of this Warrant, the person whose name appears as holder above, or
such other person to whom this Warrant may be transferred pursuant to Section 7
of this Warrant (the "Holder"), is entitled, at any time prior to the
termination of this Warrant as provided in Section 4 (the "Exercise Period"), to
subscribe for and purchase upon exercise of this Warrant ____________ fully paid
and nonassessable shares (the "Warrant Stock") of Common Stock of
HealthKnowledge Corporation, a Delaware corporation (the "Corporation"), at a
price of Eight Cents ($0.08) per share (the "Unit Price").
This Warrant is subject to the following additional terms and conditions:
1. Method of Exercise. This Warrant may be exercised in whole at any time
------------------
or from time to time in part, but not as to a fractional share of Common Stock,
by delivering to the Corporation during the Exercise Period (i) the attached
form of "Election to Purchase," duly completed and executed by the Holder, (ii)
this warrant certificate, and (iii) payment of the Unit Price, in cash or by
check, for each share being purchased.
2. Delivery of Stock Certificates. Within ten (10) days after the
------------------------------
exercise of this Warrant (in full or in part), the Corporation at its expense
(except for the payment of any applicable issue taxes) shall issue in the name
of and deliver to the Holder (a) a certificate or certificates for the number of
fully paid and nonassessable shares of Warrant Stock to which the Holder shall
be entitled upon such exercise, and (b) unless this Warrant has expired, a new
Warrant representing the number of shares (except a remaining fractional share)
of Warrant Stock, if any, with respect to which this
<PAGE>
Warrant shall not have been exercised. The Holder shall for all purposes be
deemed to have become the holder of record of such shares of Warrant Stock on
the date on which this Warrant is surrendered and payment On the Warrant Price
is made, irrespective of the date of delivery of the certificate or certificates
representing the Warrant Stock; provided, that if the date of such surrender and
--------
payment is a date when the stock transfer books of the Corporation are closed,
such person shall be deemed to have become the holder of record of such shares
of Warrant Stock at the close of business on the next succeeding date on which
the stock transfer books are open.
3. Covenants as to Warrant Stock. The Corporation covenants and agrees
-----------------------------
that all shares of Warrant Stock issued pursuant to the terms of this Warrant
will, upon their issuance, be validly issued and outstanding, fully paid and
nonassessable. The Corporation further covenants and agrees that the Corporation
will at all times have authorized and reserved a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Termination.
-----------
(a) Upon a merger, consolidation, acquisition of all or substantially
all of the property or stock, reorganization or liquidation of the Corporation
(collectively, a "Reorganization"), as a result of which the shareholders of the
Corporation receive cash, stock or other property in exchange for their shares
of Common Stock, this Warrant shall be canceled and all rights granted hereunder
shall terminate; provided, however, that the Corporation shall have delivered to
--------
the Holder notice of the Reorganization no less than fifteen (15) business days
before the date scheduled for the Reorganization and that the Holder shall have
the right immediately prior to the Reorganization to exercise this Warrant.
(b) If not sooner canceled pursuant to the provisions of Section
4(a), this Warrant shall be canceled and the rights granted hereunder shall
terminate at the close of business on the fifth (5th) anniversary of the
issuance of the Warrant.
(c) The date of termination of this Warrant as provided in Sections
4(a) and 4(b) shall be referred to herein as the "Termination Date."
5. Adjustments Affecting Common Stock.
----------------------------------
(a) Reclassification. In the case of any reclassification or change
----------------
of the Common Stock issuable upon exercise of this Warrant, the Corporation
shall execute a new Warrant, providing that the Holder of this Warrant shall
have the right to exercise such new Warrant, in substantially the form hereof,
and upon such exercise to receive, in lieu of each share of Common Stock
theretofore issuable upon exercise of this Warrant, the number and kind of
shares of stock, other securities, money or property receivable upon such
reclassification or change by a holder of
2
<PAGE>
shares of Common Stock. Such new Warrant shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 5.
(b) Exercise Price. If any of the following events shall occur at any
--------------
time or from time to time prior to the exercise in full of this Warrant or the
Termination Date, the following adjustments shall be made to the Unit Price:
(1) Split, Subdivision or Combination of Shares. If the
-------------------------------------------
Corporation at any time while this Warrant remains outstanding and unexpired
shall split, subdivide or combine its Common Stock issuable upon exercise of
this Warrant, the Unit Price shall be proportionately decreased in the case of a
split or subdivision or increased in the case of a combination.
(2) Stock Dividends and Distributions. If the Corporation at any
---------------------------------
time while this Warrant is outstanding and unexpired shall pay a stock dividend
or other stock distribution with respect to the Common Stock (except any
distribution specifically provided for in Section 5(a) or 5(b)(1) above), then
the Unit Price shall be adjusted, from and after the date of determination of
the shareholders entitled to receive such dividend or distribution, to that
price determined by multiplying the Unit Price in effect immediately prior to
such date of determination by a fraction (i) the numerator of which shall be the
total number of shares of the Common Stock outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of the Common Stock outstanding immediately after such dividend
or distribution.
(c) Adjustment to Number of Shares. After any adjustment of the Unit
------------------------------
Price pursuant to Section 5(b), the number of shares of Warrant Stock issuable
at the new Unit Price shall be adjusted to the number obtained by (i)
multiplying the number of shares of Warrant Stock issuable upon exercise of this
Warrant immediately before such adjustment by the Unit Price in effect
immediately before such adjustment and (ii) dividing the product so obtained by
the new Unit Price.
6. Fractional Shares. No fractional shares shall be issued upon the
-----------------
exercise of this Warrant. In lieu of fractional shares, the Corporation shall
pay the Holder a sum in cash equal to the fair market value of the fractional
shares (as determined by the Corporation's Board of Directors) on the date of
exercise.
7. Restrictions on Transfer. Neither this Warrant nor any securities
------------------------
purchased upon exercise of this Warrant may be transferred unless (a) such
transfer is registered under the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities or blue sky laws, (b) the
Corporation has received a legal opinion reasonably satisfactory to the
Corporation to the effect that the transfer is exempt from the prospectus
delivery and registration requirements of the Securities
3
<PAGE>
Act and any applicable state securities or blue sky laws, or (c) the Corporation
otherwise satisfies itself that such transfer is exempt from registration.
8. Legend. A legend setting forth or referring to the above restrictions
------
and the restriction imposed by Section 14 below shall be placed on this Warrant,
any replacement hereof and any certificate representing a security issued
pursuant to the exercise of this Warrant and a stop transfer restriction or
order may be placed on the books of the Corporation and with any transfer agent
until such securities may be legally sold or otherwise transferred,
9. Holder as Owner. The Corporation may deem and treat the holder of
---------------
record of this Warrant as the absolute owner hereof for all purposes regardless
of any notice to the contrary.
10. No Rights as Shareholder. This Warrant shall not entitle the Holder to
------------------------
any voting rights or to any other rights as a shareholder of the Corporation or
to any other rights whatsoever except the rights stated herein; and no cash
dividend or interest shall be payable or shall accrue in respect of this Warrant
or the Warrant Stock purchasable hereunder unless, until and to the extent that
this Warrant shall be exercised.
11. Construction. The validity and interpretation of the terms and
------------
provisions of this Warrant shall be governed by the laws of the State of
Washington. The descriptive headings of the several sections of this Warrant are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions thereof.
12. Expiration. This Warrant shall be void and all rights represented
----------
hereby shall cease unless exercised on or before the Termination Date. All
restrictions set forth herein on the shares of capital stock issued upon
exercise of any rights hereunder shall survive such exercise and expiration of
the rights granted hereunder.
13. Exchange of Warrant. This Warrant is exchangeable upon the surrender
-------------------
hereof by the Holder at the office of the Corporation for new Warrants of like
tenor but of different denominations representing in the aggregate the rights to
subscribe for and purchase the number of shares which may be subscribed for and
purchased hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by the
Holder at the time of such surrender.
14. Right of First Refusal. Before any shares of Warrant Stock registered
----------------------
in the name of Holder may be sold or transferred, such shares shall first be
offered to the Corporation as follows:
4
<PAGE>
(a) Holder shall promptly deliver a notice ("Notice") to the
Corporation stating (i) his bona fide intention to sell or transfer such shares,
(ii) the number of such shares to be sold or transferred, and the basic terms
and conditions of such sale or transfer, (iii) the price for which he proposes
to sell or transfer such shares, (iv) the name of the proposed purchaser or
transferee, and (v) proof satisfactory to the Corporation that the proposed sale
or transfer will not violate any applicable Federal or state securities laws.
The Notice shall be signed by both Holder and the proposed purchaser or
transferee and must constitute a binding commitment subject to the Corporation's
rights of first offer as set forth herein.
(b) Within 30 days after receipt of the Notice, the Corporation may
elect to purchase all of the shares to which the Notice refers, at the price per
share specified in the Notice. If the Corporation elects not to purchase all
such shares, the Corporation shall assign its right to purchase all such shares
to the holders of the Corporation's Series A Convertible Preferred Stock (the
"Investors"). The assignees may elect within 30 days after receipt by the
Corporation of the Notice to purchase all shares to which the Notice refers, at
the price per share specified in the Notice. An election to purchase shall be
made by written notice to Holder. Payment for all shares elected to be purchased
pursuant to this Section 14 shall be made within 30 days of the receipt by the
Corporation of the Notice.
(c) If the shares to which the Notice refers are not elected to be
purchased, as provided in Section 14(b) hereof, the Holder may sell the shares
to any person named in the Notice at the price specified in the Notice, provided
that such sale or transfer is consummated within three months of the date of
said Notice to the Corporation, and provided, further, that any such sale is
made in compliance with applicable Federal and state securities laws and not in
violation of any other contractual restrictions to which the Holder is bound.
The third-party Holder shall acquire the shares of stock free and clear of the
Corporation's right of first refusal.
(d) Any proposed transfer on terms and conditions different from
those set forth in the notice of transfer, as well as any subsequent proposed
transfer, shall again be subject to the Corporation's right of first offer and
shall require compliance with the procedures described in this Section 14.
(e) Holder agrees to cooperate affirmatively with the Corporation, to
the extent reasonably requested by the Corporation, to enforce rights and
obligations pursuant to this Agreement.
(f) Notwithstanding the above, neither the Corporation nor any
assignee of this Corporation under this Section 14 shall have any right under
this Section 14 at any time subsequent to the closing of a public offering of
the common stock of the Corporation pursuant to a registration statement
declared effective under the Securities Act of 1933, as amended (the "Act").
5
<PAGE>
(g) This Section 14 shall not apply to a transfer by will or
interstate succession.
15. Lost Warrant Certificate. If this Warrant is lost, stolen, mutilated
------------------------
or destroyed, the Corporation shall issue a new Warrant of like denomination,
tenor and date as this Warrant, subject to the Corporation's right to require
the Holder to give the Corporation a bond or other satisfactory security
sufficient to indemnify the Corporation against any claim that may be made
against it {including any expense or liability) on account of the alleged loss,
theft, mutilation or destruction of this Warrant or the issuance of such new
Warrant.
16. Waivers and Amendments. This Warrant or any provision hereof may be
----------------------
changed, waived, discharged or terminated only by a statement in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought.
17. Notices. All notices or other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by United States mail first-
class postage prepaid, or by registered or certified mail with return receipt
requested, addressed as follows:
If to the Holder:
To the address last furnished in writing to the Corporation by
the Holder.
If to the Corporation:
HealthKnowledge Corporation
8723 142nd Avenue NE
Redmond, Washington 98052
Attention: Dr. Dennis P. Schmuland, Chairman
Each of the foregoing parties shall be entitled to specify a different
address by giving five (5) days' advance written notice as aforesaid to the
other party.
IN WITNESS WHEREOF, the Corporation has executed this certificate as of the
date first written above.
HealthKnowledge Corporation
By
----------------------------------------
Name, Title
6
<PAGE>
ELECTION TO PURCHASE
--------------------
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for ____________ shares of Common Stock of HealthKnowledge Corporation,
on the terms and conditions specified in this Warrant, and requests that a
certificate for the shares hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
___________________________, whose address is ________________________________,
and, if such shares shall not include all of the shares into which this Warrant
is exercisable, that a new Warrant of like tenor and date for the balance of the
shares issuable hereunder be delivered to the undersigned.
Dated:_____________
___________________________________
Signature of Registered Owner
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
7
<PAGE>
EXHIBIT 4.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
Warrant No. PB-___ Number of Shares: ________
Date of Issuance: August 26, 1999
POINTSHARE CORPORATION
Preferred Stock Purchase Warrant
--------------------------------
Pointshare Corporation (the "Company"), for value received, hereby
-------
certifies that ____________________________, or its registered assignee (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
-----------------
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to ________ shares of
Series B Preferred Stock (as adjusted from time to time pursuant to the
provisions of this Warrant), at a purchase price of $1.25. The shares
purchasable upon exercise of this Warrant and the purchase price per share, as
adjusted from time to time pursuant to the provisions of this Warrant, are
sometimes hereinafter referred to as the "Warrant Stock" and the "Purchase
------------- --------
Price" respectively.
This Warrant is issued pursuant to a Senior Loan and Security Agreement
dated July 30, 1999 between the Company and Phoenix Leasing Incorporated
(collectively, the "Loan Agreement").
--------------
1. Exercise.
--------
(a) Manner of Exercise. This Warrant may be exercised by the
------------------
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase form appended hereto as Exhibit A duly executed by such Registered
---------
Holder or by such Registered Holder's duly authorized attorney, at the principal
office of the Company, or at such other office or agency as the Company may
designate, accompanied by payment in full of the Purchase Price payable in
respect of the number of shares of Warrant Stock purchased upon such exercise.
The Purchase Price may be paid by cash, check, wire transfer or by the surrender
of promissory notes or other instruments representing indebtedness of the
Company to the Registered Holder.
(b) Effective Time of Exercise. Each exercise of this Warrant shall
--------------------------
be deemed to have been effected immediately prior to the close of business on
the day on which this
<PAGE>
Warrant shall have been surrendered to the Company as provided in Section 1(a)
above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise as provided
in Section 1(d) below shall be deemed to have become the holder or holders of
record of the Warrant Stock represented by such certificates.
(c) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election in which event the Company shall issue to such Holder a
number of shares of Warrant Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Warrant Stock to be issued to the
Registered Holder.
Y = The number of shares of Warrant Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Warrant Stock (at the date
of such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value
of Warrant Stock on the date of calculation shall mean with respect to each
share of Warrant Stock:
(A) if the exercise is in connection with an initial
public offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per share shall
be the product of (x) the initial "Price to Public" specified in the final
prospectus with respect to the offering and (y) the number of shares of Common
Stock into which each share of Warrant Stock is convertible at the date of
calculation;
(B) if this Warrant is exercised after, and not in
connection with, the Company's initial public offering, and if the Company's
Common Stock is traded on a securities exchange or The Nasdaq Stock Market or
actively traded over-the-counter:
(1) if the Company's Common Stock is traded on a
securities exchange or The Nasdaq Stock Market, the fair market value shall be
deemed to be the product of (x) the average of the closing prices over a thirty
(30) day period ending three days before date of calculation and (y) the number
of shares of Common Stock into which each share of Warrant Stock is convertible
on such date; or
-2-
<PAGE>
(2) if the Company's Common Stock is actively traded over-
the-counter, the fair market value shall be deemed to be the product of (x) the
average of the closing bid or sales price (whichever is applicable) over the
thirty (30) day period ending three days before the date of calculation and (y)
the number of shares of Common Stock into which each share of Warrant Stock is
convertible on such date; or
(C) if neither (A) nor (B) is applicable, the fair market value
of Warrant Stock shall be at the highest price per share which the Company could
obtain on the date of calculation from a willing buyer (not a current employee
or director) for shares of Warrant Stock sold by the Company, from authorized
but unissued shares, as determined in good faith by the Board of Directors,
unless the Company is at such time subject to an acquisition as described in
Section 5(b) below, in which case the fair market value of Warrant Stock shall
be deemed to be the value received by the holders of such stock pursuant to such
acquisition.
(d) Delivery to Holder. As soon as practicable after the exercise of
------------------
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in Section 1(b) or 1(d) above.
2. Adjustments.
-----------
(a) Redemption or Conversion of Preferred Stock. If all of the
-------------------------------------------
Preferred Stock is redeemed or converted into shares of Common Stock, then this
Warrant shall automatically become exercisable for that number of shares of
Common Stock equal to the number of shares of Common Stock that would have been
received if this Warrant had been exercised in full and the shares of Preferred
Stock received thereupon had been simultaneously converted into shares of Common
Stock immediately prior to such event, and the Exercise Price shall be
automatically adjusted to equal the amount obtained by dividing (i) the
aggregate Purchase Price of the shares of Preferred Stock for which this Warrant
was exercisable immediately prior to such redemption or conversion, by (ii) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after such redemption or conversion.
(b) Stock Splits and Dividends. If outstanding shares of the
--------------------------
Company's Preferred Stock shall be subdivided into a greater number of shares or
a dividend in Preferred Stock shall be paid in respect of Preferred Stock, the
Purchase Price in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the
-3-
<PAGE>
effectiveness of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of Preferred Stock
shall be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of shares of
Warrant Stock purchasable upon the exercise of this Warrant shall be changed to
the number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(c) Reclassification, Etc. In case there occurs any reclassification,
---------------------
merger or change of the outstanding securities of the Company or of any
reorganization of the Company (or any other corporation the stock or securities
of which are at the time receivable upon the exercise of this Warrant) or any
similar corporate reorganization on or after the date hereof, then and in each
such case the Registered Holder, upon the exercise hereof at any time after the
consummation of such reclassification, change, or reorganization shall be
entitled to receive, in lieu of the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities or property to which such Holder would have been entitled upon
such consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment pursuant to the provisions of this
Section 2.
(d) Adjustment Certificate. When any adjustment is required to be
----------------------
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.
(e) Acknowledgement. In order to avoid doubt, it is acknowledged that
---------------
the holder of this Warrant shall be entitled to the benefit of all adjustments
in the number of shares of Common Stock of the Company issuable upon conversion
of the Preferred Stock of the Company which occur prior to the exercise of this
Warrant, including without limitation, any increase in the number of shares of
Common Stock issuable upon conversion as a result of a dilutive issuance of
capital stock.
3. Transfers.
---------
(a) Unregistered Security. Each holder of this Warrant acknowledges
---------------------
that this Warrant, the Warrant Stock and the Common Stock of the Company have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and agrees not to sell, pledge, distribute, offer for sale,
--------------
transfer or otherwise dispose of this Warrant, any Warrant Stock issued upon its
exercise or any Common Stock issued upon conversion of the Warrant Stock in the
absence of (i) an effective registration statement under the Act as to this
Warrant, such Warrant Stock or such Common Stock and registration or
qualification of this Warrant, such Warrant Stock or such Common Stock under any
applicable U.S. federal or state securities law then in effect, or (ii) an
opinion of counsel, satisfactory to the Company, that such
-4-
<PAGE>
registration and qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.
(b) Transferability. Subject to the provisions of Section 3(a)
---------------
hereof, this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of the Warrant with a properly executed assignment (in the
form of Exhibit B hereto) at the principal office of the Company provided,
--------- --------
however, that this Warrant may not be transferred in part unless the transferee
- -------
acquires the right to purchase at least 50,000 shares (as adjusted pursuant to
Section 2) of Warrant Stock hereunder.
(c) Warrant Register. The Company will maintain a register containing
----------------
the names and addresses of the Registered Holders of this Warrant. Until any
transfer of this Warrant is made in the warrant register, the Company may treat
the Registered Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if this Warrant is properly assigned in blank,
-------- -------
the Company may (but shall not be required to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
5. Termination. This Warrant (and the right to purchase securities upon
-----------
exercise hereof) shall terminate upon the later to occur of the following (the
"Expiration Date"): (a) August __, 2009, or (b) the fifth anniversary of the
---------------
closing of a firm commitment underwritten public offering pursuant to a
registration statement under the Securities Act.
6. Notices of Certain Transactions. In case:
-------------------------------
(a) the Company shall take a record of the holders of its Preferred
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or
-5-
<PAGE>
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) of any redemption of the Preferred Stock or mandatory conversion
of the Preferred Stock into Common Stock of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Preferred Stock (or such other
stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion) are to be determined. Such notice shall
be mailed at least ten (10) days prior to the record date or effective date for
the event specified in such notice.
7. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
8. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Preferred Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. Mailing of Notices. Any notice required or permitted pursuant to this
------------------
Warrant shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or sent by courier, overnight delivery service or confirmed
facsimile, or forty-eight (48) hours after being deposited in the regular mail,
as certified or registered mail (airmail if sent internationally), with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b) if
to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
-6-
<PAGE>
11. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
12. No Fractional Shares. No fractional shares of Preferred Stock will be
--------------------
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Preferred Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
13. Amendment or Waiver. Any term of this Warrant may be amended or waived
-------------------
only by an instrument in writing signed by the party against which enforcement
of the amendment or waiver is sought.
14. Market Stand-Off Agreement.
--------------------------
(a) Registered Holder hereby agrees that, during the period of
duration (up to, but not exceeding, 180 days) specified by the Company and an
underwriter of Common Stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the
Securities Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration.
(b) In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the securities of Registered
Holder until the end of such period, and Registered Holder agrees that, if so
requested, Registered Holder will execute an agreement in the form provided by
the underwriter containing terms which are essentially consistent with the
provisions of this Section 14.
15. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
16. Registration Rights. The Company shall cause Holder to become a party
-------------------
to the Company's Amended and Restated Registration Rights Agreement dated as of
January 12, 1999 (the "Rights Agreement") and the Holder shall be deemed a
----------------
"Holder", as defined therein and the Warrant Shares to be included as
Registrable Securities for all purposes of the Rights Agreement and will cause
Holder to be deemed a "Holder", by amending such Rights Agreement within 90 days
of the date hereof. Failure to so amend the Rights Agreement shall constitute
an Event of Default under the Loan Agreement.
17. Financial Information. The Company shall deliver to Holder,
---------------------
concurrent with delivery to any of the Investors, as defined in Section 2.1 of
the Rights Agreement, all information delivered to any of the Investors pursuant
to Section 2.1 of the Rights Agreement and all other information delivered to
any of the Investors from time to time pursuant to the
-7-
<PAGE>
Rights Agreement as in effect from time to time during the term hereof. If the
Rights Agreement is terminated for any reason, and for so long as Company is not
subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the
Exchange Act, the Company shall deliver to Holder all information that was
required to be delivered to any of the Investors, as defined in the Rights
Agreement, pursuant to the Section 2.1 of the Rights Agreement, as in effect on
the date hereof.
18. Governing Law. This Warrant shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.
POINTSHARE CORPORATION
By
-----------------------------
Address: 1300 - 114th Avenue SE
Suite 100
Bellevue, WA 98004
Fax Number: (425) 635-0301
Agreed and accepted:
By: ______________________
Title: ___________________
-8-
<PAGE>
Exhibit 4.5
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED.
- --------------------------------------------------------------------------------
Warrant No._____________ Number of Shares: __________
Date of Issuance: February 2, 2000 (subject to adjustment)
POINTSHARE CORPORATION
Common Stock Purchase Warrant
-----------------------------
Pointshare Corporation (the "Company"), for value received, hereby
-------
certifies that ________________________ or its registered assigns (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
-----------------
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to _______ shares (as
adjusted from time to time pursuant to the provisions of this Warrant) of Common
Stock of the Company, at a purchase price of $8.25 per share. The shares
purchasable upon exercise of this Warrant and the purchase price per share, as
adjusted from time to time pursuant to the provisions of this Warrant, are
sometimes hereinafter referred to as the "Warrant Stock" and the "Purchase
------------- --------
Price," respectively.
- -----
This Warrant is issued pursuant to a Stock Purchase Agreement dated
February 1, 2000 between the Company and Health Trade Links, Inc. (the "Purchase
--------
Agreement") and is subject to the terms and conditions of the Purchase
- ---------
Agreement.
1. Exercise.
--------
(a) Manner of Exercise. This Warrant may be exercised by the
------------------
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
---------
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon such
exercise. The Purchase Price may be paid by cash, check, wire transfer or by
the surrender of promissory notes or other instruments representing indebtedness
of the Company to the Registered Holder.
(b) Effective Time of Exercise. Each exercise of this Warrant shall
--------------------------
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be
<PAGE>
issuable upon such exercise as provided in Section 1(d) below shall be deemed to
have become the holder or holders of record of the Warrant Stock represented by
such certificates.
(c) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election on the purchase/exercise form appended hereto as
Exhibit A duly executed by such Registered Holder or such Registered Holder's
- ---------
duly authorized attorney, in which event the Company shall issue to holder a
number of shares of Common Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Common Stock to be issued to the
Registered Holder.
Y = The number of shares of Common Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Common Stock (at the date of
such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value
of one share of Common Stock on the date of calculation shall mean:
(A) if the exercise is in connection with an initial
public offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per share of
Common Stock shall be the initial "Price to Public" specified in the final
prospectus with respect to the offering;
(B) if (A) is not applicable, the fair market value shall
be at the highest price per share which the Company could obtain on the date of
calculation from a willing buyer (not a current employee or director) for shares
of Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by the Board of Directors, unless the Company is at
such time subject to an acquisition as described in Section 5(b) below, in which
case the fair market value per share of Common Stock shall be deemed to be the
value of the consideration per share received by the holders of such stock
pursuant to such acquisition.
(d) Delivery to Holder. As soon as practicable after the exercise of
------------------
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its
-2-
<PAGE>
expense will cause to be issued in the name of, and delivered to, the Registered
Holder, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in Section 1(a) above.
2. Adjustments.
-----------
(a) Stock Splits and Dividends. If outstanding shares of the
--------------------------
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) Reclassification, Etc. In case of any reclassification or change
----------------------
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 2(a); and in each such case, the terms of this Section 2
shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
(c) Adjustment Certificate. When any adjustment is required to be
----------------------
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of
-3-
<PAGE>
stock or other securities or property into which this Warrant shall be
exercisable after such adjustment.
3. Transfers.
---------
(a) Unregistered Security. Each holder of this Warrant acknowledges
---------------------
that this Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and agrees not to
--------------
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an
effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant or such Warrant
Stock under any applicable U.S. federal or state securities law then in effect
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.
(b) Transferability. Subject to the provisions of Section 3(a) hereof
---------------
and of Section 3.1 of the Investors' Rights Agreement dated January ____, 2000
among the Company and certain holders of the Company's securities, this Warrant
and all rights hereunder are transferable, in whole or in part, upon surrender
of the Warrant with a properly executed assignment (in the form of Exhibit B
---------
hereto) at the principal office of the Company provided, however, that this
-------- -------
Warrant may not be transferred in part unless the transferee acquires the right
to purchase at least 50,000 shares (as adjusted pursuant to Section 2) of
Warrant Stock hereunder.
(c) Warrant Register. The Company will maintain a register
----------------
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
-------- -------
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
5. Termination. This Warrant (and the right to purchase securities upon
-----------
exercise hereof) shall terminate on January __, 2003.
6. Notices of Certain Transactions. In case:
-------------------------------
-4-
<PAGE>
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation or winding-up) are to be determined.
Such notice shall be mailed at least ten (10) days prior to the record date or
effective date for the event specified in such notice.
7. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
8. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon
-5-
<PAGE>
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
10. Notices. Any notice required or permitted by this Warrant shall be in
-------
writing and shall be deemed sufficient upon receipt, when delivered personally
or by courier, overnight delivery service or confirmed facsimile, or forty-eight
(48) hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, addressed (a) if to
the Registered Holder, to the address of the Registered Holder most recently
furnished in writing to the Company and (b) if to the Company, to the address
set forth below or subsequently modified by written notice to the Registered
Holder.
11. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
12. No Fractional Shares. No fractional shares of Common Stock will be
--------------------
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
13. Amendment or Waiver. Any term of this Warrant may be amended or
-------------------
waived upon written consent of the Company and the Registered Holders.
14. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. Governing Law. This Warrant shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.
POINTSHARE CORPORATION
By ___________________________
Address: 1300 - 114th Avenue SE
Suite 100
Bellevue, WA 98004
Fax Number: (425) 635-0301
-6-
<PAGE>
EXHIBIT 4.6
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED.
- --------------------------------------------------------------------------------
Warrant No. CSW-23 Number of Shares:
Date of Issuance: February 2, 2000 up to 34,091 shares
POINTSHARE CORPORATION
Common Stock Purchase Warrant
-----------------------------
Pointshare Corporation (the "Company"), for value received, hereby
-------
certifies that Washoe Professional Center or its registered assigns (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
-----------------
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to 34,091 shares (as
adjusted from time to time pursuant to the provisions of this Warrant) of Common
Stock of the Company, at a purchase price of $0.01 per share. The shares
purchasable upon exercise of this Warrant and the purchase price per share, as
adjusted from time to time pursuant to the provisions of this Warrant, are
sometimes hereinafter referred to as the "Warrant Stock" and the "Purchase
------------- --------
Price," respectively.
- -----
This Warrant is issued pursuant to the Addendum Agreement to Collaboration
Agreement dated February 2, 2000 (the "Addendum") and is subject to the terms
--------
and conditions of the Addendum.
1. Exercise.
--------
(a) Number of Shares. This Warrant is exercisable for that number of
----------------
shares of Common Stock (but in no case more than 34,091 shares of Common Stock
in the aggregate) determined as follows and as may be adjusted pursuant to
Section 2:
(i) 17,045 shares of common stock upon the signing of the
Addendum; and
(ii) 17,046 shares of common stock upon the execution of a
Services Agreement between Pointshare and Washoe Professional Center on
mutually agreeable terms, provided that such agreement is executed by
August 1, 2000. If Washoe and Pointshare do not execute a services
agreement on or before August 1, 2000, then these 17,046 shares subject to
the warrant will be forfeited and cancelled.
<PAGE>
(b) Manner of Exercise. This Warrant may be exercised by the
------------------
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
---------
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon such
exercise. The Purchase Price may be paid by cash, check, wire transfer or by
the surrender of promissory notes or other instruments representing indebtedness
of the Company to the Registered Holder.
(c) Effective Time of Exercise. Each exercise of this Warrant shall
--------------------------
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(d) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election on the purchase/exercise form appended hereto as Exhibit
-------
A duly executed by such Registered Holder or such Registered Holder's duly
- -
authorized attorney, in which event the Company shall issue to holder a number
of shares of Common Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Common Stock to be issued to the
Registered Holder.
Y = The number of shares of Common Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Common Stock (at the date
of such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value of
one share of Common Stock on the date of calculation shall mean:
(A) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission,
-2-
<PAGE>
then the fair market value per share of Common Stock shall be the initial "Price
to Public" specified in the final prospectus with respect to the offering;
(B) if (A) is not applicable, the fair market value shall
be at the highest price per share which the Company could obtain on the date of
calculation from a willing buyer (not a current employee or director) for shares
of Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by the Board of Directors, unless the Company is at
such time subject to an acquisition as described in Section 5(b) below, in which
case the fair market value per share of Common Stock shall be deemed to be the
value of the consideration per share received by the holders of such stock
pursuant to such acquisition.
(e) Delivery to Holder. As soon as practicable after the exercise of
------------------
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in Section 1(a) above.
2. Adjustments.
-----------
(a) Stock Splits and Dividends. If outstanding shares of the
--------------------------
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) Reclassification, Etc. In case of any reclassification or change
----------------------
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each
-3-
<PAGE>
such case the holder of this Warrant, upon the exercise hereof at any time after
the consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 2(a); and in each such case, the terms of this Section 2
shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
(c) Adjustment Certificate. When any adjustment is required to be
----------------------
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.
3. Transfers.
---------
(a) Unregistered Security. Each holder of this Warrant acknowledges
---------------------
that this Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and agrees not to
--------------
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an
effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant or such Warrant
Stock under any applicable U.S. federal or state securities law then in effect
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.
(b) Transferability. Subject to the provisions of Section 3(a)
---------------
hereof, this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of the Warrant with a properly executed assignment (in the
form of Exhibit B hereto) at the principal office of the Company provided,
--------- --------
however, that this Warrant may not be transferred in part unless the transferee
- -------
acquires the right to purchase at least 25,000 shares (as adjusted pursuant to
Section 2) of Warrant Stock hereunder.
(c) Warrant Register. The Company will maintain a register
----------------
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
-------- -------
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
-4-
<PAGE>
(d) Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing such offering of the Company's securities, Purchaser
agrees not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any securities of the Company (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
4. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
5. Termination. This Warrant (and the right to purchase securities upon
-----------
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) February 2, 2002.
---------------
6. Notices of Certain Transactions. In case:
-------------------------------
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon such
-5-
<PAGE>
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up) are to be determined. Such notice shall be mailed at
least ten (10) days prior to the record date or effective date for the event
specified in such notice.
7. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
8. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. Notices. Any notice required or permitted by this Warrant shall be in
-------
writing and shall be deemed sufficient upon receipt, when delivered personally
or by courier, overnight delivery service or confirmed facsimile, or forty-eight
(48) hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, addressed (a) if to
the Registered Holder, to the address of the Registered Holder most recently
furnished in writing to the Company and (b) if to the Company, to the address
set forth below or subsequently modified by written notice to the Registered
Holder.
11. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
12. No Fractional Shares. No fractional shares of Common Stock will be
--------------------
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
13. Amendment or Waiver. Any term of this Warrant may be amended or
-------------------
waived upon written consent of the Company and the Registered Holders.
-6-
<PAGE>
14. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. Governing Law. This Warrant shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.
POINTSHARE CORPORATION
/s/ Christopher P. Dishman
By _________________________________
Address: 1300 - 114th Avenue SE
Suite 100
Bellevue, WA 98004
Fax Number: (425) 635-0301
-7-
<PAGE>
EXHIBIT 4.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933
- -----------------------------------------------------------------------------
Warrant No. PC-1 Number of Shares: See below.
Date of Issuance: July 28, 1999
POINTSHARE CORPORATION
Preferred Stock Purchase Warrant
--------------------------------
Pointshare Corporation (the "Company"), for value received, hereby
-------
certifies that Imperial Bancorp, or registered assignee (the "Registered
----------
Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company, at any time after the date hereof and on or before the Expiration
Date (as defined in Section 5 below), up to that number of shares set forth
below (as adjusted from time to time pursuant to the provisions of this Warrant,
the "Number of Shares") of the class or series of stock of the Company sold by
----------------
the Company in its next Venture Capital Financing (the "Series Next Stock"), at
-----------------
a purchase price equal to the per share purchase price of the Series Next Stock
in the next Venture Capital Financing; provided, however, if the next Venture
Capital Financing does not close by December 31, 1999, this Warrant shall be
exercisable for shares of the Company's Series B Preferred Stock at a purchase
price of $1.25 per share. The shares purchasable upon exercise of this Warrant
and the purchase price per share, as adjusted from time to time pursuant to the
provisions of this Warrant, are sometimes hereinafter referred to as the
"Warrant Stock" and the "Purchase Price" respectively.
- -------------- --------------
The Number of Shares purchasable upon exercise of this Warrant, as
adjusted from time to time pursuant to the provisions of this Warrant, shall be
equal to (i) Eight Thousand Seven Hundred Fifty Dollars ($8,750), divided by
(ii) the Purchase Price.
As used herein, "Venture Capital Financing" means a sale of the
-------------------------
Company's equity securities by the Company to venture capital, corporate or
institutional investors, in which the gross proceeds to the Company are greater
than One Million Dollars ($1,000,000).
This Warrant is issued pursuant to a Loan and Security Agreement dated
July 15, 1998, as amended by that certain First Amendment and Waiver to Loan and
Security Agreement dated as of July 5, 1999 and that certain Second Amendment to
Loan and Security Agreement dated as of July 28, 1999 between the Company and
the Registered Holder (collectively, the "Loan Agreement").
--------------
1
<PAGE>
1. Exercise.
--------
(a) Manner of Exercise. This Warrant may be exercised by the Registered
------------------
Holder, in whole or in part, by surrendering this Warrant, with the purchase
form appended hereto as Exhibit A duly executed by such Registered Holder or by
---------
such Registered Holder's duly authorized attorney, at the principal office of
the Company, or at such other office or agency as the Company may designate,
accompanied by payment in full of the Purchase Price payable in respect of the
number of shares of Warrant Stock purchased upon such exercise. The Purchase
Price may be paid by cash, check, wire transfer or by the surrender of
promissory notes or other instruments representing indebtedness of the Company
to the Registered Holder.
(b) Effective Time of Exercise. Each exercise of this Warrant shall be
--------------------------
deemed to have been effected immediately prior to the close of business on the
day on which this Warrant shall have been surrendered to the Company as provided
in Section 1(a) above. At such time, the person or persons in whose name or
names any certificates for Warrant Stock shall be issuable upon such exercise as
provided in Section 1(d) below shall be deemed to have become the holder or
holders of record of the Warrant Stock represented by such certificates.
(c) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election in which event the Company shall issue to holder a
number of shares of Warrant Stock computed using the following formula:
X = Y(A - B)
--------
A
Where X = The number of shares of Warrant Stock to be issued to the
Registered Holder.
Y = The number of shares of Warrant Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Warrant Stock (at the
date of such calculation).
B = The Purchase Price (as adjusted to the date of such
calculation).
(ii) For purposes of this Section 1(c), the fair market value of
one share of Warrant Stock on the date of calculation shall mean:
(A) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per share shall
be the product of (x) the initial "Price to Public"
2
<PAGE>
specified in the final prospectus with respect to the offering and (y) the
number of shares of Common Stock into which each share of Warrant Stock is
convertible at the date of calculation;
(B) if (A) is not applicable, the fair market value shall be
at the highest price per share which the Company could obtain on the date of
calculation from a willing buyer (not a current employee or director) for shares
of Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by the Board of Directors, unless the Company is at
such time subject to an acquisition as described in Section 5(b) below, in which
case the fair market value per share of Common Stock shall be deemed to be the
value of the consideration per share received by the holders of such stock
pursuant to such acquisition.
(d) Delivery to Holder. As soon as practicable after the exercise of
------------------
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in Section 1(a) above.
2. Adjustments.
-----------
(a) Stock Splits and Dividends. If outstanding shares of the Company's
--------------------------
Warrant Stock shall be subdivided into a greater number of shares or a dividend
in Warrant Stock shall be paid in respect of Warrant Stock, the Purchase Price
in effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Warrant Stock shall be combined into a smaller number
of shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase in effect
immediately after such adjustment.
(b) Reclassification, etc. In case of any reclassification or change
---------------------
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
Registered Holder of this Warrant, upon the exercise hereof at any time after
the
3
<PAGE>
consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock it other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such Registered
Holder would have been entitled upon consummation if such Registered Holder had
exercised this Warrant immediately thereto, all subject to further adjustment as
provided in Section 2(a); and, in each such case, the terms of this Section 2
shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
(c) Adjustment Certificate. When any adjustment is required to be made
----------------------
in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.
3. Transfers.
---------
(a) Unregistered Security. Each Registered Holder of this Warrant
---------------------
acknowledges that this Warrant and the Warrant Stock have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and agrees
--------------
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of this Warrant or any Warrant Stock issued upon its exercise (other than to its
affiliates) in the absence of (i) an effective registration statement under the
Act as to this Warrant or such Warrant Stock and registration or qualification
of this Warrant or such Warrant Stock under any applicable U.S. federal or state
securities law then in effect or (ii) an opinion of counsel, satisfactory to the
Company, that such registration and qualification are not required. Each
certificate or other instrument for Warrant Stock issued upon the exercise of
this Warrant shall bear a legend substantially to the foregoing effect.
(b) Transferability. Subject to the provisions of Section 3(a) hereof,
---------------
this Warrant and all rights hereunder are transferable, in whole or in part,
upon surrender of the Warrant with a properly executed assignment (in the form
of Exhibit B hereto) at the principal office of the Company provided, however,
--------- -------- -------
that this Warrant may not be transferred in part unless the transferee acquires
the right to purchase at least 10,000 shares (as adjusted pursuant to Section 2)
of Warrant Stock hereunder.
(c) Warrant Register. The Company will maintain a register containing
----------------
the name and addresses of the Registered Holder of this Warrant. Until any
transfer of this Warrant is made in the warrant register, the Company may treat
the Registered Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if this Warrant is properly assigned in blank,
-----------------
the Company may (but shall not be required to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. No Impairment. The Company will not, by amendment of its charter
-------------
or through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action,
4
<PAGE>
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment.
5. Termination. This Warrant (and the right to purchase securities
-----------
upon exercise hereof) shall terminate upon the earliest to occur of the
following (the "Expiration Date"): (a) July 28, 2004, (b) the sale, conveyance,
---------------
disposal, or encumbrance of all or substantially all of the Company's property
or business or the Company's merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary corporation) or any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, provided that this
--------
Section 5(b) shall not apply to a merger effected exclusively for the purpose if
changing the domicile of the Company, or (c) the closing of a firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act.
6. Notices of certain Transactions. In case the Company shall take a
-------------------------------
record:
(a) of the holders of its Common Stock (or the other stock or
securities at the time deliverable upon the exercise of this Warrant) for the
purpose of entitling or enabling them to receive any dividend or other
distribution, or to receive any right to subscribe for or purchase any shares of
stock of any class or any other securities, or to receive any other right, to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any transaction described in clause (b) or
clause (c) of Section 5 hereof, any consolidation or merger of the Company with
or into another corporation (other than a consolidation or merger in which the
Company is the surviving entity), or any transfer of all or substantially all of
the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then, and in each such case, the Company will mail or
cause to be mailed to the Registered Holder of this Warrant a notice specifying,
as the case may be, (i) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the effective date on
which such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Warrant Stock (or such other
stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up) are to be determined. Such notice shall be mailed at least ten (10)
days prior to the record date or effective date for the event specified in such
notice.
7. Reservation of Stock. The Company will at all times reserve and
--------------------
keep available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant
5
<PAGE>
Stock and other stock, securities and property, as from time to time shall be
issuable upon the exercise of this Warrant.
8. Exchange of Warrants. Upon the surrender of the Registered Holder
--------------------
of any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Warrant Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. Notices. Any notice required or permitted by this Warrant shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid,
addressed (a) if to the Registered Holder, to the address of the Registered
Holder most recently furnished in writing to the Company and (b) if to the
Company, to the address set forth below or subsequently modified by written
notice to the Registered Holder.
11. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
12. No Fractional Shares. No fractional shares of Warrant Stock will
--------------------
be issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Warrant Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
13. Amendment or Waiver. Any term of this Warrant may be amended or
-------------------
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
14. Headings. The headings in this Warrant are for purposes of
--------
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
15. Market Stand-Off Agreement. The Registered Holder hereby agrees
--------------------------
that, until January 12, 2002, during the period of duration specified by the
Company or an underwriter of Common Stock or other securities of the Company,
following the effective date of the first two
6
<PAGE>
registration statements of the Company filed under the Securities Act, he shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period; provided, however, that:
-------- -------
(a) all executive officers and directors of the Company and holders of
more than one percent of the Company's capital stock enter into similar
agreements; and
(b) such period shall not exceed one hundred eighty (180) days
beginning the day after the effective date of such registration statement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the securities of the Company
held by the Registered Holder until the end of such period.
16. Registration Rights. The Company will use its best efforts to amend
-------------------
the Investors' Rights Agreement (as defined below) such that upon exercise of
this Warrant, the Warrant Stock shall be deemed to be "Registrable Securities"
for purposes of Section 1.3 of the Amended and Restated Investors' Rights
Agreement dated as of January 12, 1999 among the Company and the persons named
therein (the "Investors' Rights Agreement"), and the Registered Holder shall
---------------------------
have all the rights, subject to all the obligations, of a holder of Registrable
Securities pursuant to Section 1.3 of that certain Investors' Rights Agreement,
and shall be treated for all purposes as a holder of Registrable Securities
under and subject to the terms of Section 1.3 of the Investors' Rights
Agreement.
7
<PAGE>
17. Governing Law. This Warrant shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.
POINTSHARE CORPORATION
By: /s/
--------------------------
Address: 1300-114th Avenue SE
Suite 100
Bellevue, WA 98004
Fax Number: (425) 635-0301
Agreed and accepted:
IMPERIAL BANCORP
By: /s/ J.P. Michael
----------------
Title: Vice President
----------------
8
<PAGE>
EXHIBIT A
---------
PURCHASE FORM
-------------
To: Pointshare Corporation Dated:
------------
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. PC-1 (the "Warrant"), hereby irrevocably elects to purchase
shares of the Series Preferred Stock covered by such Warrant
- -------- -----------
and herewith makes payment of $ ,representing the full purchase price
---------
for such shares at the price per share provided for in such Warrant.
The undersigned further acknowledges that it has reviewed the market
standoff provisions set forth in Section 15 of the Warrant and agrees to be
bound by such provisions.
Signature:
-----------------------
Name (print):
--------------------
Title (if applic.):
--------------
Company (if applic.):
------------
9
<PAGE>
EXHIBIT B
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED,
--------------------------------------------
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant with respect to the number of shares of Series
----------
Preferred Stock covered thereby set forth below, to:
Name of Assignee Address/Fax Number No. of Shares
---------------- ------------------ -------------
Dated: Signature:
----------------- ------------------
------------------
Witness:
------------------
10
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement (the "Agreement") is made as of
---------
_______________, by and between (CompanyName), a Delaware corporation (the
"Company"), and (IndemniteeName) (the "Indemnitee").
------- ----------
RECITALS
--------
The Company and Indemnitee recognize the increasing difficulty in obtaining
liability insurance for directors, officers and key employees, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance. The Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting directors,
officers and key employees to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
Indemnitee does not regard the current protection available as adequate under
the present circumstances, and Indemnitee and agents of the Company may not be
willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
---------
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. 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 Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. No Employment Rights. Nothing contained in this Agreement is intended
--------------------
to create in Indemnitee any right to continued employment.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section l(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in
-2-
<PAGE>
writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company and
shall be given in accordance with the provisions of Section 12(d) below. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the
Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees
-3-
<PAGE>
of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (i) Indemnitee shall have the right to employ counsel
in any such proceeding at Indemnitee's expense; and (ii) if (A) the employment
of counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he or she may have ceased
to serve in any such capacity at the time of any action, suit or other covered
proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
---
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
-4-
<PAGE>
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from time
----------------------------------------
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this
-5-
<PAGE>
Agreement, if a court of competent jurisdiction determines that each of the
material assertions made by Indemnitee in such proceeding was not made in good
faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) Claims under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
-------
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
-----------------
shall include employee benefit plans; references to "fines" shall include any
-----
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
-------------------------------------
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
---
opposed to the best interests of the Company" as referred to in this Agreement.
- --------------------------------------------
11. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to
-6-
<PAGE>
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
12. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) Notices. Any notice, demand or request required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or fax, or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, and addressed to the party to be notified at such party's
address as set forth below or as subsequently modified by written notice.
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
to effectively bring suit to enforce such rights.
[Signature Page Follows]
-7-
<PAGE>
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
(CompanyName)
By: _______________________________________
Title: _______________________________________
Address: (CompanyAddress1)
(CompanyAddress2)
AGREED TO AND ACCEPTED:
(IndemniteeName)
________________________________
(Signature)
Address: (IndemniteeAddress1)
(IndemniteeAddress2)
-8-
<PAGE>
EXHIBIT 10.2
POINTSHARE CORPORATION
1996 AMENDED AND RESTATED
STOCK OPTION PLAN
(amended as of February 16, 2000)
1. Purposes of the Plan. The purposes of this 1996 Amended and Restated
--------------------
Stock Option Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to
Employees and Consultants of the Company and its Subsidiaries and to promote the
success of the Company's business. Options granted under the Plan may be
incentive stock options (as defined under Section 422 of the Code) or non-
statutory stock options, as determined by the Administrator at the time of grant
of an option and subject to the applicable provisions of Section 422 of the
Code, as amended, and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(aa) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Pointshare Corporation, a Delaware corporation.
-------
<PAGE>
(g) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means the
----------------------------------------------
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless re-
employment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(i) "Control Transaction" means:
-------------------
(i) any merger, consolidation, or statutory or contractual
share exchange in which there is no group of persons who held a majority of the
outstanding Common Stock immediately prior to the transaction who continue to
hold, immediately following the transaction, at least a majority of the combined
voting power of the outstanding shares of that class of capital stock (herein,
"Voting Stock") which ordinarily (and apart from rights accruing under special
------------
circumstances) has the right to vote in the election of directors of the Company
(or of any other corporation or entity whose securities are issued in such
transaction wholly or partially in exchange for Common Stock);
(ii) any liquidation or dissolution of the Company;
(iii) any transaction (or series of related transactions)
involving the sale, lease, exchange or other transfer not in the ordinary course
of business of all, or substantially all, of the assets of the Company; or
(iv) any transaction (or series of related transactions) in
which any person (including, without limitation, any natural person, any
corporation or other legal entity, and any person as defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act, other than the Company or any
employee benefit plan sponsored by the Company):
(A) purchases any Common Stock (or securities convertible
into Common Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer subject to the requirements of the Exchange Act,
or
(B) directly or indirectly becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of securities of the Company
which, when aggregated with such person's beneficial ownership prior to such
transaction, either (x) represent
-2-
<PAGE>
30% or more (50% or more if the Company is not then subject to the requirements
of the Exchange Act) (the "Control Percentage") of the combined voting power of
the then outstanding Voting Stock of the Company, or (y) if such person's
beneficial ownership prior to such transaction already exceeded the applicable
Control Percentage, result in an increase in such holder's beneficial ownership
percentage (all such percentages being calculated as provided in Rule 13d-3(d)
under the Exchange Act with respect to rights to acquire the Company's
securities).
All references in this definition to specific sections of or rules
promulgated under the Exchange Act shall apply whether or not the Company is
then subject to the requirements of the Exchange Act.
(j) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee by the
Company to a director shall not be sufficient to constitute "employment" of such
director by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq"), its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq (but not on the
National Market thereof) or regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable option agreement.
-3-
<PAGE>
(mm) "Listed Security" means any security of the Company that is
---------------
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(nn) "Named Executive" means any individual who, on the last day of
---------------
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable option
agreement.
(o) "Option" means a stock option granted pursuant to the Plan.
------
(p) "Option Agreement" means a written agreement between an Optionee
----------------
and the Company reflecting the terms of an Option granted under the Plan and
includes any documents attached to such Option Agreement, including, but not
limited to, a notice of stock option grant and a form of exercise notice.
(q) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(r) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(s) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(t) "Plan" means this 1996 Amended and Restated Stock Option Plan.
----
(u) "Reporting Person" means an officer, director, or greater than
----------------
ten percent (10%) stockholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(v) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.
(w) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(x) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(y) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
-4-
<PAGE>
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 5,250,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
In addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise price for such Option or
any withholding taxes due with respect to such exercise shall be treated as not
issued and shall continue to be available under the Plan. Shares repurchased by
the Company pursuant to any repurchase right which the Company may have shall
not be available for future grant under the Plan.
4. Administration of the Plan
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Common Stock becomes a Listed Security, the Plan shall be administered by the
Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Common Stock
------------------------------------------------------------------
Becomes a Listed Security.
- -------------------------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to directors, non-
director officers and Employees or Consultants who are not Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With
------------------------------------------------
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3, or (B) a Committee designated by
the Board to make grants to Reporting Persons under the Plan, which Committee
shall be constituted in such a manner as to permit grants under the Plan to
comply with Rule 16b-3. Once appointed, such Committee shall continue to serve
in its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all members
of the committee and thereafter directly make grants to Reporting Persons under
the Plan, all to the extent permitted by Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who
- ---------
are not Reporting Persons, the Plan shall be administered by (A) the Board or
(B) a committee designated by the Board, which committee shall be constituted in
such a manner as to satisfy the Applicable Laws. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the
-5-
<PAGE>
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(x) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to participants who are
foreign nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(c) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
-6-
<PAGE>
5. Eligibility
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares subject to an Incentive Stock Option shall be determined as
of the date of the grant of such Option.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with such Optionee's right or the Company's right
to terminate his or her employment or consulting relationship at any time, with
or without cause.
(e) Subject to adjustment as provided in Section 11 below, the maximum
number of Shares that may be subject to Options granted to any one Employee
under this Plan for any fiscal year of the Company shall be 500,000, provided
that this Section 5(e) shall apply only after such time, if any, as the Common
Stock becomes a Listed Security.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
8. Option Exercise Price and Consideration
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
-7-
<PAGE>
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of the grant if
required by the Applicable Laws and, if not so required, shall be such price as
is determined by the Administrator;
(B) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to any other eligible person, the per Share
exercise price shall be no less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant if required by the Applicable Laws
and, if not so required, shall be such price as is determined by the
Administrator;
(C) granted on or after the date, if any, on which the
Common Stock becomes a Listed Security to any eligible person, the per share
Exercise Price shall be such price as determined by the Administrator provided
that if such eligible person is, at the time of the grant of such Option, a
Named Executive of the Company, the per share Exercise Price shall be no less
than 100% of the Fair Market Value on the date of grant if such Option is
intended to qualify as performance-based compensation under Section 162(m) of
the Code.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) delivery of Optionee's promissory note with such recourse,
interest, security and redemption provisions as the Administrator determines to
be appropriate (subject to the provisions of Section 153 of the Delaware General
Corporation Law), (iv) other
-8-
<PAGE>
Shares that (x) in the case of Shares acquired, directly or indirectly, from the
Company, have been owned by the Optionee for more than six months on the date of
surrender (or such other period as may be required to avoid a charge to the
Company's earnings), and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which such Option
shall be exercised, (v) authorization for the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (vi)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and a securities broker approved by the
Company shall require to effect an exercise of the Option and prompt delivery to
the Company of the sale or loan proceeds required to pay the exercise price and
any applicable withholding or employment taxes, (vii) delivery of an irrevocable
subscription agreement for the Shares that irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (viii) any combination of the
foregoing methods of payment, or (ix) such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator and reflected in the Option Agreement which
may include vesting requirements and/or including performance criteria with
respect to the Company and/or the Optionee; provided, however, that if required
by the Applicable Laws, any Option granted prior to the date, if any, upon which
the Common Stock becomes a Listed Security shall become exercisable at the rate
of at least twenty percent (20%) per year over five (5) years from the date the
Option is granted. In the event that any of the Shares issued upon exercise of
an Option (which exercise occurs prior to the date, if any, upon which the
Common Stock becomes a Listed Security) should be subject to a right of
repurchase in the Company's favor, such repurchase right shall, if required by
the Applicable laws, lapse at the rate of at least twenty percent (20%) per year
over five (5) years from the date the Option is granted. Notwithstanding the
above, in the case of an Option granted to an officer, Director or Consultant of
the Company or any Parent or Subsidiary of the Company, the Option may become
fully exercisable, or a repurchase right, if any, in favor of the Company shall
lapse, at any time or during any period established by the Administrator.
An Option may not be exercised for a fraction of a Share. The
Administrator my require that an Option be exercised as to a minimum number of
Shares, provided that such requirement shall not prevent an Optionee from
exercising the full number of Shares as to which the option is then exercisable.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with
-9-
<PAGE>
respect to which the Option is exercised. Full payment may, as authorized by the
Board, consist of any consideration and method of payment allowable under
Section 8(b) of the Plan. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to the Optioned Stock, not withstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
----------------------------------------------------
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) Disability of Optionee
----------------------
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), such Optionee may, but only within twelve (12)
months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), such Optionee may, but only within six (6) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the
-10-
<PAGE>
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that the
Optionee does not exercise such Option to the extent so entitled within six (6)
months from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant, or within
thirty (30) days following the termination of the Optionee's Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to exercise the Option at the date of death or, if
earlier, the date of termination of the Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
10. Taxes; Stock Withholding to Satisfy Withholding Tax Obligations.
---------------------------------------------------------------
(a) As a condition of the exercise of an Option granted under the
Plan, the Participant (or in the case of the Participant's death, the person
exercising the Option) shall make such arrangements as the Administrator may
require for the satisfaction of any applicable federal, state, local or foreign
withholding tax obligations that may arise in connection with the exercise of
the Option and the issuance of Shares. The Company shall not be required to
issue any Shares under the Plan until such obligations are satisfied. If the
Administrator allows the withholding or surrender of Shares to satisfy a
Participant's tax withholding obligations under this Section 12 (whether
pursuant to Section 12(c), (d) or (e), or otherwise), the Administrator shall
not allow Shares to be withheld in an amount that exceeds the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option.
(c) This Section 12(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other
-11-
<PAGE>
arrangement and to the extent permitted under the Applicable Laws, the
Participant shall be deemed to have elected to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having
a Fair Market Value determined as of the applicable Tax Date (as defined below)
equal to the amount required to be withheld. For purposes of this Section 12,
the Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "Tax Date").
--------
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option by surrendering to the Company Shares that have a Fair Market Value
determined as of the applicable Tax Date equal to the amount required to be
withheld. In the case of shares previously acquired from the Company that are
surrendered under this Section 12(d), such Shares must have been owned by the
Participant for more than six (6) months on the date of surrender (or such other
period of time as is required for the Company to avoid adverse accounting
charges). Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 12(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 12(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option is exercised but such
Participant shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions
------------------------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided
-12-
<PAGE>
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Control Transaction. In the event of a Control Transaction, each
-------------------
outstanding Option shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation (the "Successor Corporation"), unless the Successor
---------------------
Corporation does not agree to assume outstanding Options or to substitute an
equivalent option, in which case such Option shall terminate upon the
consummation of the transaction. In addition, each of the following provisions
shall apply:
(i) Each Optionee shall be entitled to exercise the vested
portion of the Option at any time prior to consummation of a Control
Transaction. In addition, the vesting of each outstanding Option shall be
accelerated such that all of the unvested Optioned Stock shall be fully vested
upon consummation of the Control Transaction conditioned upon the Optionee
remaining employed by the Company through the date of such consummation.
(ii) Any exercise may be made contingent upon consummation of a
Control Transaction if so elected by the Optionee in his or her notice of
exercise, and must be made contingent upon such consummation with respect to any
portion of an Option entitled to accelerated vesting under the second sentence
of Section 11(c)(i) above.
(iii) In the event of a Control Transaction with respect to which
the Successor Corporation does not agree to assume outstanding Options, the
Company shall provide each Optionee with notice of the pendency of such Control
Transaction (A) at least thirty (30) days prior to the expected date of
consummation of such Control Transaction if such Control Transaction has been
approved or recommended by the Board, or (B) promptly after the Board becomes
aware of the pendency or occurrence of a proposed or completed Control
Transaction that has not been approved or recommended by the Board, provided,
however, that in the case of either (A) or (B) such notice may be given within
such lesser period of time prior to the expected date of the consummation of
such Control Transaction as necessary to assure that Optionees are not provided
with material nonpublic information with respect to such Control Transaction
solely by operation of the notice requirement in this Section 11(c)(iii).
For purposes of this Section 11(c), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon a Control Transaction, each holder of an Option would be
entitled to receive upon exercise of the award the same number and kind of
shares of stock or the same amount of property, cash or securities as such
holder would have been entitled to receive upon the occurrence of the
transaction if the holder had been, immediately prior to such transaction, the
holder of the number of Shares of
-13-
<PAGE>
Common Stock covered by the award at such time (after giving effect to any
adjustments in the number of Shares covered by the Option as provided for in
this Section 11); provided that if such consideration received in the
transaction is not solely common stock of the Successor Corporation, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon exercise of the award to be solely common
stock of the Successor Corporation equal to the Fair Market Value of the per
Share consideration received by holders of Common Stock in the transaction.
12. Non-Transferability of Options.
------------------------------
(a) General. Except as set forth in this Section 12, Options may not
--------
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution. The
designation of a beneficiary by an Optionee will not constitute a transfer. An
Option may be exercised, during the lifetime of the holder of Option, only by
such holder or a transferee permitted by this Section 12.
(b) Limited Transferability Rights. Notwithstanding anything else in
------------------------------
this Section 12, prior to the date, if any, on which the Common Stock becomes a
Listed Security, the Administrator may in its discretion grant Nonstatutory
Stock Options that may be transferred by instrument to an inter vivos or
testamentary trust in which the Options are to be passed to beneficiaries upon
the death of the trustor (settlor) or by gift to "Immediate Family" (as defined
below), on such terms and conditions as the Administrator deems appropriate.
Following the date, if any, on which the Common Stock becomes a Listed Security,
the Administrator may in its discretion grant transferable Nonstatutory Stock
Options pursuant to Option Agreements specifying the manner in which such
Nonstatutory Stock Options are transferable. "Immediate Family" means any
----------------
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.
13. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board;
provided, however, that in the case of any Incentive Stock Option, the grant
date shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
-14-
<PAGE>
requirements of any Stock Exchange), the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
18. Stockholder Approval. If required by the Applicable laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the degree and manner required under
the Applicable Laws. All Options issued under the Plan shall become void in the
event such approval is not obtained.
19. Information and Documents to Optionees. To the extent required by
--------------------------------------
Applicable Laws, the Company shall provide financial statements at least
annually to each Optionee during the period such Optionee has one or more
Options outstanding, and in the case of an individual who acquired Shares
pursuant to the Plan, during the period such individual owns such Shares. 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 in connection
with the Company assure their access to equivalent information. In addition, at
the time of issuance of
-15-
<PAGE>
any securities under the Plan, the Company shall provide to the Optionee a copy
of the Plan and any agreement(s) pursuant to which securities granted under the
Plan are issued.
-16-
<PAGE>
EXHIBIT 10.3
POINTSHARE CORPORATION
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants and
to promote the success of the Company's business. Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant of an option and subject to the
applicable provisions of Section 422 of the Code and the regulations promulgated
thereunder. Stock purchase rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or its Committee appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as defined
---------
below) which, together with the Company, is under common control of a third
person or entity.
(c) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Cause" for termination of a Participant's Continuous Service
-----
will exist if the Participant is terminated for any of the following reasons:
(i) Participant's willful failure substantially to perform his or her duties and
responsibilities to the Company or deliberate violation of a Company policy;
(ii) Participant's commission of any act of fraud, embezzlement, dishonesty or
any other willful misconduct that has caused or is reasonably expected to result
in material injury to the Company; (iii) unauthorized use or disclosure by
Participant of any proprietary information or trade secrets of the Company or
any other party to whom the Participant owes an obligation of nondisclosure as a
result of his or her relationship with the Company; or (iv) Participant's
willful breach of any of his or her obligations under any written agreement or
covenant with the Company. The determination as to whether a Participant is
being terminated for Cause shall be made in good faith by the Company and shall
be final and binding on the Participant. The foregoing definition does not in
any way limit the Company's ability to terminate a Participant's employment or
consulting relationship at any time as provided
<PAGE>
in Section 5(d) below, and the term "Company" will be interpreted to include any
Subsidiary, Parent, Affiliate or successor thereto, if appropriate.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
(g) "Committee" means one or more committees or subcommittees of the
---------
Board appointed by the Board to administer the Plan in accordance with Section 4
below.
(h) "Common Stock" means the Common Stock of the Company.
------------
(i) "Company" means Pointshare Corporation, a Delaware corporation.
-------
(j) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent, Subsidiary or Affiliate to render services
and is compensated for such services, and any director of the Company whether
compensated for such services or not.
(k) "Continuous Service" means the absence of any interruption or
------------------
termination of service as an Employee or Consultant. Continuous Service as an
Employee or Consultant shall not be considered interrupted in the case of: (i)
sick leave; (ii) military leave; (iii) any other leave of absence approved by
the Administrator, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its Parents,
Subsidiaries, Affiliates or their respective successors. A change in status
from an Employee to a Consultant or from a Consultant to an Employee will not
constitute an interruption of Continuous Service.
(l) "Control Transaction" means
-------------------
(i) any merger, consolidation, or statutory or contractual share
exchange in which there is no group of persons who held a majority of the
outstanding Common Stock immediately prior to the transaction who continue to
hold, immediately following the transaction, at least a majority of the combined
voting power of the outstanding shares of that class of capital stock (herein,
"Voting Stock") which ordinarily (and apart from rights accruing under special
------------
circumstances) has the right to vote in the election of directors of the Company
(or of any other corporation or entity whose securities are issued in such
transaction wholly or partially in exchange for Common Stock);
(ii) any liquidation or dissolution of the Company;
-2-
<PAGE>
(iii) any transaction (or series of related transactions)
involving the sale, lease, exchange or other transfer not in the ordinary course
of business of all, or substantially all, of the assets of the Company; or
(iv) any transaction (or series of related transactions) in
which any person (including, without limitation, any natural person, any
corporation or other legal entity, and any person as defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act, other than the Company or any
employee benefit plan sponsored by the Company):
(A) purchases any Common Stock (or securities convertible
into Common Stock) for cash, securities or any other consideration pursuant
to a tender offer or exchange offer subject to the requirements of the
Exchange Act, or
(B) directly or indirectly becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of securities of the
Company which, when aggregated with such person's beneficial ownership
prior to such transaction, either (x) represent 30% or more (50% or more if
the Company is not then subject to the requirements of the Exchange Act)
(the "Control Percentage") of the combined voting power of the then
------------------
outstanding Voting Stock of the Company, or (y) if such person's beneficial
ownership prior to such transaction already exceeded the applicable Control
Percentage, result in an increase in such holder's beneficial ownership
percentage (all such percentages being calculated as provided in Rule 13d-
3(d) under the Exchange Act with respect to rights to acquire the Company's
securities).
All references in this definition to specific sections of or rules
promulgated under the Exchange Act shall apply whether or not the Company is
then subject to the requirements of the Exchange Act.
(m) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation and includes a
Change of Control.
(n) "Director" means a member of the Board.
--------
(o) "Employee" means any person employed by the Company or any
--------
Parent, Subsidiary or Affiliate, with the status of employment determined based
upon such factors as are deemed appropriate by the Administrator in its
discretion, subject to any requirements of the Code or the Applicable Laws. The
payment by the Company of a director's fee to a Director shall not be sufficient
to constitute "employment" of such Director by the Company.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
-3-
<PAGE>
(q) "Fair Market Value" means, as of any date, the fair market value
-----------------
of the Common Stock, as determined by the Administrator in good faith on such
basis as it deems appropriate and applied consistently with respect to
Participants. Whenever possible, the determination of Fair Market Value shall
be based upon the closing price for the Shares as reported in the Wall Street
-----------
Journal for the applicable date.
- -------
(r) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(s) "Involuntary Termination" means termination of a Participant's
-----------------------
Continuous Service under the following circumstances: (i) termination without
Cause by the Company or a Subsidiary, Parent, Affiliate or successor thereto, as
appropriate; or (ii) voluntary termination by the Participant within 30 days
following (A) a material reduction in the Participant's job responsibilities,
provided that neither a mere change in title alone nor reassignment following a
Change of Control to a position that is substantially similar to the position
held prior to the Change of Control shall constitute a material reduction in job
responsibilities; (B) relocation by the Company or a Subsidiary, Parent,
Affiliate or successor thereto, as appropriate, of the Participant's work site
to a facility or location more than 50 miles from the Participant's principal
work site for the Company at the time of the Change of Control; or (C) a
reduction in Participant's then-current base salary by at least 20%, provided
that an across-the-board reduction in the salary level of all other employees or
consultants in positions similar to the Participant's by the same percentage
amount as part of a general salary level reduction shall not constitute such a
salary reduction.
(t) "Listed Security" means any security of the Company that is
---------------
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(u) "Named Executive" means any individual who, on the last day of
---------------
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(v) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(w) "Option" means a stock option granted pursuant to the Plan.
------
(x) "Option Agreement" means a written document, the form(s) of which
----------------
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated
-4-
<PAGE>
into such Option Agreement, including, but not limited to, a notice of stock
option grant and a form of exercise notice.
(y) "Option Exchange Program" means a program approved by the
-----------------------
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price or are amended to decrease the exercise price as a result of a
decline in the Fair Market Value of the Common Stock.
(z) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(aa) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(bb) "Parent" means a "parent corporation,", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(cc) "Participant" means any holder of one or more Options or Stock
-----------
Purchase Rights, or the Shares issuable or issued upon exercise of such awards,
under the Plan.
(dd) "Plan" means this 2000 Stock Plan.
----
(ee) "Reporting Person" means an officer, Director, or greater than
----------------
ten percent stockholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.
(ff) "Restricted Stock" means Shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(gg) "Restricted Stock Purchase Agreement" means a written document,
-----------------------------------
the form(s) of which shall be approved from time to time by the Administrator,
reflecting the terms of a Stock Purchase Right granted under the Plan and
includes any documents attached to such agreement.
(hh) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as amended from time to time, or any successor provision.
(ii) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 14 of the Plan.
(jj) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
-5-
<PAGE>
(kk) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(ll) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
(mm) "Ten Percent Holder" means a person who owns stock representing
------------------
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be sold under the Plan
is 6,500,000 Shares of Common Stock. The Shares may be authorized, but
unissued, or reacquired Common Stock. If an award should expire or become
unexercisable for any reason without having been exercised in full, or is
surrendered pursuant to an Option Exchange Program, the unpurchased Shares that
were subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. In addition, any Shares of Common
Stock which are retained by the Company upon exercise of an award in order to
satisfy the exercise or purchase price for such award or any withholding taxes
due with respect to such exercise or purchase shall be treated as not issued and
shall continue to be available under the Plan. Shares issued under the Plan and
later repurchased by the Company pursuant to any repurchase right which the
Company may have shall not be available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) General. The Plan shall be administered by the Board or a
-------
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board may
authorize one or more officers to make awards under the Plan.
(b) Committee Composition. If a Committee has been appointed pursuant
---------------------
to this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan in
accordance with the requirements of Rule 16b-3 or Section 162(m) of the Code, to
the extent permitted or required by such provisions.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
-6-
<PAGE>
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(q) of the Plan, provided that such determination shall
be applied consistently with respect to Participants under the Plan;
(ii) to select the Employees and Consultants to whom Options
and Stock Purchase Rights may from time to time be granted;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights are granted;
(iv) to determine the number of Shares of Common Stock to be
covered by each award granted;
(v) to approve the form(s) of agreement(s) used under the
Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when awards may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option, Optioned Stock, Stock
Purchase Right or Restricted Stock, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(c) instead of Common Stock;
(viii) to implement an Option Exchange Program on such terms and
conditions as the Administrator in its discretion deems appropriate, provided
that no amendment or adjustment to an Option that would materially and adversely
affect the rights of any Optionee shall be made without the prior written
consent of the Optionee;
(ix) to adjust the vesting of an Option held by an Employee or
Consultant as a result of a change in the terms or conditions under which such
person is providing services to the Company;
(x) to construe and interpret the terms of the Plan and awards
granted under the Plan, which constructions, interpretations and decisions shall
be final and binding on all Participants;
(xi) to make any adjustment or amendment to the Plan or to an
outstanding award with or without a Participant's consent if such adjustment or
amendment is necessary to avoid the Company's incurring adverse accounting
charges; and
(xii) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
Participants
-7-
<PAGE>
who are foreign nationals or employed outside of the United States in order to
recognize differences in local law, tax policies or customs.
5. Eligibility.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options and Stock
--------------------
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees, provided that Employees of Affiliates
shall not be eligible to receive Incentive Stock Options.
(b) Type of Option. Each Option shall be designated in the Option
--------------
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
(c) ISO $100,000 Limitation. Notwithstanding any designation under
-----------------------
Section 5(b), to the extent that the aggregate Fair Market Value of Shares with
respect to which Options designated as Incentive Stock Options are exercisable
for the first time by any Optionee during any calendar year (under all plans of
the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options
shall be treated as Nonstatutory Stock Options. For purposes of this Section
5(c), Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of the Shares subject to an
Incentive Stock Option shall be determined as of the date of the grant of such
Option.
(d) No Employment Rights. The Plan shall not confer upon any
--------------------
Participant any right with respect to continuation of an employment or
consulting relationship with the Company, nor shall it interfere in any way with
such Participant's right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without Cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
------------
Board of Directors. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 16 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided that the term shall be no more than ten years
from the date of grant thereof or such shorter term as may be provided in the
Option Agreement and provided further that, in the case of an Incentive Stock
Option granted to a person who at the time of such grant is a Ten Percent
Holder, the term of the Option shall be five years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as provided
---------------------------------
in Section 14 below, the maximum number of Shares that may be subject to Options
and Stock Purchase Rights granted to any one Employee under this Plan for any
fiscal year of the Company shall be 6,500,000, provided that this Section 8
shall apply only after such time, if any, as the Common Stock becomes a Listed
Security.
-8-
<PAGE>
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator and set forth in the Option Agreement, but shall be subject
to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who at the time of grant is a
Ten Percent Holder, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant; or
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per share
Exercise Price shall be such price as determined by the Administrator provided
that if such eligible person is, at the time of the grant of such Option, a
Named Executive of the Company, the per share Exercise Price shall be no less
than 100% of the Fair Market Value on the date of grant if such Option is
intended to qualify as performance-based compensation under Section 162(m) of
the Code.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) Permissible Consideration. The consideration to be paid for the
-------------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash; (2) check; (3) delivery of Optionee's promissory note with such
recourse, interest, security and redemption provisions as the Administrator
determines to be appropriate (subject to the provisions of Section 153 of the
Delaware General Corporation Law); (4) cancellation of indebtedness; (5) other
Shares that have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the Option is exercised,
provided that in the case of Shares acquired, directly or indirectly, from the
Company, such Shares must have been owned by the Optionee for more than six
months on the date of surrender (or such other period as may be required to
avoid the Company's incurring an adverse accounting charge); (6) delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and a securities broker approved by the Company shall require to
effect exercise of the Option and prompt delivery to the Company of the sale or
loan proceeds required to pay the exercise price and any applicable withholding
taxes; (7) any combination of the foregoing methods of payment; or (8) such
other consideration and method of payment for the issuance of
-9-
<PAGE>
Shares to the extent permitted under the Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company and the Administrator may, in its sole discretion, refuse to
accept a particular form of consideration at the time of any Option exercise.
10. Exercise of Option.
------------------
(a) General.
-------
(i) Exercisability. Any Option granted hereunder shall be
--------------
exercisable at such times and under such conditions as determined by the
Administrator, consistent with the term of the Plan and reflected in the Option
Agreement, including vesting requirements and/or performance criteria with
respect to the Company and/or the Optionee. The Administrator shall have the
discretion to determine whether and to what extent the vesting of Options shall
be tolled during any unpaid leave of absence; provided however that in the
absence of such determination, vesting of Options shall be tolled during any
such leave.
(ii) Minimum Exercise Requirements. An Option may not be
-----------------------------
exercised for a fraction of a Share. The Administrator may require that an
Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent an Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
(iii) Procedures for and Results of Exercise. An Option shall be
--------------------------------------
deemed exercised when written notice of such exercise has been given to the
Company in accordance with the terms of the Option by the person entitled to
exercise the Option and the Company has received full payment for the Shares
with respect to which the Option is exercised. Full payment may, as authorized
by the Administrator, consist of any consideration and method of payment
allowable under Section 9(b) of the Plan, provided that the Administrator may,
in its sole discretion, refuse to accept any form of consideration at the time
of exercise.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(iv) Rights as Stockholder. Until the issuance (as evidenced by
---------------------
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 14 of the
Plan.
-10-
<PAGE>
(b) Termination of Continuous Service. Except as otherwise set forth
---------------------------------
in this Section 10(b), the Administrator shall establish and set forth in the
applicable Option Agreement the terms and conditions upon which an Option shall
remain exercisable, if at all, following termination of an Optionee's Continuous
Service, and the terms and conditions of such exercise, which provisions may be
waived or modified by the Administrator at any time in the Administrator's sole
discretion, provided that no Option shall be exercisable later than the
expiration of the term of such option as set forth in the Option Agreement. To
the extent that the Optionee is not entitled to exercise an Option at the date
of his or her termination of Continuous Service, or if the Optionee (or other
person entitled to exercise the Option) does not exercise the Option to the
extent so entitled within the time specified in the Option Agreement or below
(as applicable), the Option shall terminate and the Optioned Stock underlying
the unexercised portion of the Option shall revert to the Plan. In no event may
any Option be exercised after the expiration of the Option term as set forth in
the Option Agreement (and subject to Section 7).
The following provisions shall apply to the extent an Option Agreement does
not specify the terms and conditions upon which an Option shall terminate upon
termination of an Optionee's Continuous Service:
(i) Termination other than Upon Disability or Death or for
------------------------------------------------------
Cause. In the event of termination of an Optionee's Continuous Service, such
- -----
Optionee may exercise an Option for 30 days following such termination to the
extent the Optionee was entitled to exercise it at the date of such termination.
No termination shall be deemed to occur and this Section 10(b)(i) shall not
apply if (i) the Optionee is a Consultant who becomes an Employee, or (ii) the
Optionee is an Employee who becomes a Consultant.
(ii) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Service as a result of his or her disability, such
Optionee may exercise an Option at any time within 12 months following such
termination to the extent the Optionee was entitled to exercise it at the date
of such termination, provided that if the disability is not a disability within
the meaning of Section 22(e)(3) of the Code, an Incentive stock Option not
exercised within 3 months following such termination will be treated as a
Nonstatutory Stock Option.
(iii) Death of Optionee. In the event of the death of an
-----------------
Optionee during the period of Continuous Service since the date of grant of the
Option, or within 30 days following termination of Optionee's Continuous
Service, the Option may be exercised by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance at any time
within 12 months following the date of death, but only to the extent of the
right to exercise that had accrued at the date of death or, if earlier, the date
the Optionee's Continuous Service terminated.
(iv) Termination for Cause. In the event of termination of an
---------------------
Optionee's Continuous Service for Cause, any Option (including any exercisable
portion
-11-
<PAGE>
thereof) held by such Optionee shall immediately terminate in its entirety upon
first notification to the Optionee of termination of the Optionee's Continuous
Service. If an Optionee's employment or consulting relationship with the Company
is suspended pending an investigation of whether the Optionee shall be
terminated for Cause, all the Optionee's rights under any Option likewise shall
be suspended during the investigation period and the Optionee shall have no
right to exercise any Option.
(c) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares an Option previously granted under the Plan
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. When the Administrator determines that it
------------------
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer,
including the number of Shares that such person shall be entitled to purchase,
the price to be paid, and the time within which such person must accept such
offer. The offer to purchase Shares subject to Stock Purchase Rights shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option.
-----------------
(i) General. Unless the Administrator determines otherwise, the
-------
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original purchase price paid by the purchaser and may be
paid by cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at such rate as the Administrator may determine.
(ii) Termination for Cause. In the event of termination of a
---------------------
Participant's Continuous Service for Cause, the Company shall have the right to
repurchase from the Participant vested Shares issued upon exercise of a Stock
Purchase Right at the Participant's original cost for the Shares. Such
repurchase shall be effected pursuant to such terms and conditions, and at such
time, as the Administrator shall determine. Nothing in this Section 11(b)(ii)
shall in any way limit the Company's right to purchase unvested Shares as set
forth in the applicable Restricted Stock Purchase Agreement.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions
-12-
<PAGE>
of Restricted Stock Purchase Agreements need not be the same with respect to
each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. Taxes.
-----
(a) As a condition of the exercise of an Option or Stock Purchase
Right granted under the Plan, the Participant (or in the case of the
Participant's death, the person exercising the Option or Stock Purchase Right)
shall make such arrangements as the Administrator may require for the
satisfaction of any applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of the Option or
Stock Purchase Right and the issuance of Shares. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied. If the Administrator allows the withholding or surrender of Shares
to satisfy a Participant's tax withholding obligations under this Section 12
(whether pursuant to Section 12(c), (d) or (e), or otherwise), the Administrator
shall not allow Shares to be withheld in an amount that exceeds the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option or Stock Purchase Right.
(c) This Section 12(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Participant shall be deemed to
have elected to have the Company withhold from the Shares to be issued upon
exercise of the Option or Stock Purchase Right that number of Shares having a
Fair Market Value determined as of the applicable Tax Date (as defined below)
equal to the amount required to be withheld. For purposes of this Section 12,
the Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "Tax Date").
--------
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option or Stock
-13-
<PAGE>
Purchase Right by surrendering to the Company Shares that have a Fair Market
Value determined as of the applicable Tax Date equal to the amount required to
be withheld. In the case of shares previously acquired from the Company that are
surrendered under this Section 12(d), such Shares must have been owned by the
Participant for more than six (6) months on the date of surrender (or such other
period of time as is required for the Company to avoid adverse accounting
charges).
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 12(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 12(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. Non-Transferability of Options and Stock Purchase Rights.
--------------------------------------------------------
(a) General. Except as set forth in this Section 13, Options and
-------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution. The designation of a beneficiary by an Optionee will
not constitute a transfer. An Option or Stock Purchase Right may be exercised,
during the lifetime of the holder of Option or Stock Purchase Right, only by
such holder or a transferee permitted by this Section 13.
(b) Limited Transferability Rights. Notwithstanding anything else in
------------------------------
this Section 13, prior to the date, if any, on which the Common Stock becomes a
Listed Security, the Administrator may in its discretion grant Nonstatutory
Stock Options that may be transferred by instrument to an inter vivos or
testamentary trust in which the Options are to be passed to beneficiaries upon
the death of the trustor (settlor) or by gift to "Immediate Family" (as defined
below), on such terms and conditions as the Administrator deems appropriate.
Following the date, if any, on which the Common Stock becomes a Listed Security,
the Administrator may in its discretion grant transferable Nonstatutory Stock
Options pursuant to Option Agreements specifying the manner in which such
Nonstatutory Stock Options are transferable. "Immediate Family" means any
----------------
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.
-14-
<PAGE>
14. Adjustments Upon Changes in Capitalization, Merger or Certain Other
-------------------------------------------------------------------
Transactions.
- ------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, the numbers of Shares set forth
in Sections 3(a)(i) and 8 above, and the number of Shares of Common Stock that
have been authorized for issuance under the Plan but as to which no Options or
Stock Purchase Rights have yet been granted or that have been returned to the
Plan upon cancellation or expiration of an Option or Stock Purchase Right, as
well as the price per Share of Common Stock covered by each such outstanding
Option or Stock Purchase Right, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock, or any other increase
or decrease in the number of issued Shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares of Common Stock subject to an
Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the dissolution or
--------------------------
liquidation of the Company, each Option and Stock Purchase Right will terminate
immediately prior to the consummation of such action, unless otherwise
determined by the Administrator.
(c) Corporate Transaction. In the event of a Corporate Transaction,
---------------------
each outstanding Option or Stock Purchase Right shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation (the "Successor
---------
Corporation"), unless the Successor Corporation does not agree to assume the
- -----------
award or to substitute an equivalent option or right, in which case (i) the
vesting and exercisability of each outstanding Option and Stock Purchase Right
shall accelerate such that the Options and Stock Purchase Rights shall become
vested and exercisable to the extent of 100% of the Shares subject to each
outstanding Option or Stock Purchase Right, and any repurchase right of the
Company with respect to shares issued upon exercise of an Option or Stock
Purchase Right shall lapse as to 100% of the Shares initially subject to such
repurchase right, in each case effective as of immediately prior to consummation
of the transaction, and (ii) to the extent that an Option or Stock Purchase
Right is not exercised prior to consummation of a Control Transaction in which
the Option or Stock Purchase Right is not being assumed or substituted, such
Option or Stock Purchase Right shall terminate upon such consummation and the
Administrator shall notify the Optionee or holder of such fact at
-15-
<PAGE>
least five (5) days prior to the date on which the Option or Stock Purchase
Right terminates.
Notwithstanding the above, in the event (i) of a Control Transaction,
and (ii) a Participant holding an Option or Stock Purchase Right assumed or
substituted by the Successor Corporation in the Control Transaction, or holding
Restricted Stock issued upon exercise of an Option or Stock Purchase Right with
respect to which the Successor Corporation has succeeded to a repurchase right
as a result of the Control Transaction, is Involuntarily Terminated by the
Successor Corporation without Cause in connection with, or within 12 months
following consummation of, the transaction, then any assumed or substituted
Option held by the terminated Participant at the time of termination shall
accelerate and become exercisable as to the number of Shares that would
otherwise have vested and been exercisable as of the date 24 months from the
date of termination assuming the Participant remained in Continuous Service for
such 24-month period, and any repurchase right applicable to any Shares shall
lapse as to the number of Shares as to which the repurchase right would
otherwise have lapsed as of the date 24 months from the date of termination
assuming the Participant remained in Continuous Service for such 24-month
period. The acceleration of vesting and lapse of repurchase rights provided for
in the previous sentence shall occur immediately prior to the effective date of
the Participant's termination.
For purposes of this Section 14(c), an Option or a Stock Purchase
Right shall be considered assumed, without limitation, if, at the time of
issuance of the stock or other consideration upon a Corporate Transaction or a
Change of Control, as the case may be, each holder of an Option or Stock
Purchase Right would be entitled to receive upon exercise of the award the same
number and kind of shares of stock or the same amount of property, cash or
securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to such
transaction, the holder of the number of Shares of Common Stock covered by the
award at such time (after giving effect to any adjustments in the number of
Shares covered by the Option or Stock Purchase Right as provided for in this
Section 14); provided that if such consideration received in the transaction is
not solely common stock of the Successor Corporation, the Administrator may,
with the consent of the Successor Corporation, provide for the consideration to
be received upon exercise of the award to be solely common stock of the
Successor Corporation equal to the Fair Market Value of the per Share
consideration received by holders of Common Stock in the transaction.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
15. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which
-16-
<PAGE>
the Administrator makes the determination granting such Option or Stock Purchase
Right, or such other date as is determined by the Administrator, provided that
in the case of any Incentive Stock Option, the grant date shall be the later of
the date on which the Administrator makes the determination granting such
Incentive Stock Option or the date of commencement of the Optionee's employment
relationship with the Company. Notice of the determination shall be given to
each Employee or Consultant to whom an Option or Stock Purchase Right is so
granted within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
-------------------------------------
(a) Authority to Amend or Terminate. The Board may at any time amend,
-------------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation (other than an adjustment pursuant to Section 14 above) shall
be made that would materially and adversely affect the rights of any Optionee or
holder of Stock Purchase Rights under any outstanding grant, without his or her
consent. In addition, to the extent necessary and desirable to comply with the
Applicable Laws, the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall materially and adversely affect Options or Stock Purchase
Rights already granted, unless mutually agreed otherwise between the Optionee or
holder of the Stock Purchase Rights and the Administrator, which agreement must
be in writing and signed by the Optionee or holder and the Company.
(c) Accounting Issues. Notwithstanding anything else to the contrary
-----------------
in this Section 16, the Administrator may at any time amend or adjust the Plan
or an outstanding award issued under the Plan without the consent of the
affected Participant(s) if such amendment or adjustment is necessary to avoid
the Company's incurring adverse accounting charges.
17. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may require the
person exercising the award to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
-17-
<PAGE>
19. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
Option Agreements and Restricted Stock Purchase Agreements, respectively, in
such form(s) as the Administrator shall from time to time approve.
20. Stockholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.
21. Information and Documents to Optionees and Purchasers. Prior to the
-----------------------------------------------------
date, if any, upon which the Common Stock becomes a Listed Security and if
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
pursuant to the Plan, during the period such Optionee or purchaser has one or
more Options or Stock Purchase Rights outstanding, and in the case of an
individual who acquired Shares pursuant to the Plan, during the period such
individual owns such Shares. The Company shall not be required to provide such
information if the issuance of Options or Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information.
22. Awards Granted to California Residents. Prior to the date, if any,
--------------------------------------
upon which the Common Stock becomes a Listed Security, Options or Stock Purchase
Rights granted under the Plan to persons resident in California shall be subject
to the provisions set forth in Attachment A hereto. To the extent the
------------
provisions of the Plan conflict with the provisions set forth on Attachment A,
------------
the provisions on Attachment A shall govern the terms of such Options.
------------
-18-
<PAGE>
Attachment A
------------
Provisions Applicable to Award Recipients
-----------------------------------------
Resident in California
----------------------
Until such time as any security of the Company becomes a Listed Security
and if required by Applicable Laws, the following additional terms shall apply
to Options and Stock Purchase Rights, and Shares issued upon exercise of such
awards, granted under the Pointshare Corporation 2000 Stock Plan (the "Plan") to
----
persons resident in California as of the grant date of any such award (each such
person, a "California Recipient"):
--------------------
1. In the case of an Option, whether an Incentive Stock Option or a
Nonqualified Stock Option, that is granted to granted to a California Recipient
who, at the time of the grant of such Option, owns stock representing more than
10% of the total combined voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value on the grant date.
2. In the case of a Nonqualified Stock Option that is granted to any
other California Recipient, the per Share exercise price shall be no less than
85% of the Fair Market Value per Share on the grant date.
3. In the case of a Stock Purchase Right granted to a California
Recipient, the purchase price applicable to stock purchased under such Stock
Award shall not be less than 85% of the Fair Market Value of the Shares as of
the Grant Date, or, in the case of a person owning stock representing more than
10% of the total combined voting power of all classes of stock of the Company or
any Parent or Subsidiary, the price shall not be less than 100% of the Fair
Market Value of the Shares as of the grant date.
4. With respect to an Option or Stock Purchase Right issued to any
California Recipient who is not an Officer, Director or Consultant, such Option
or Stock Purchase Right shall become exercisable, or any repurchase option in
favor of the Company shall lapse, at the rate of at least 20% per year over five
years from the grant date.
5. The following rules shall apply to an Option issued to any California
Recipient or to stock issued to a California Recipient upon exercise of a Stock
Purchase Right, in the event of termination of the California Recipient's
employment or services with the Company:
(a) If such termination was for reasons other than death or
disability, the California Recipient shall have at least 30 days after the date
of such termination (but in no event later than the expiration of the term of
such Option established by the Plan Administrator as of the grant date) to
exercise such Option.
(b) If such termination was on account of the death or disability of
the California Recipient, the holder of the Option may, but only within six
months from the date of such termination (but in no event later than the
expiration date of the term of such Option established by the Plan Administrator
as of the grant date), exercise the Option to the extent the California
Recipient was otherwise entitled to exercise it at the date of such termination.
To the extent that the California Recipient was not entitled to exercise the
Option at the date of
<PAGE>
termination, or if the holder does not exercise such Option to the extent so
entitled within six months from the date of termination, the Option shall
terminate and the Common Stock underlying the unexercised portion of the Option
shall revert to the Plan.
(c) Section 10(b)(iv) of the Plan shall apply with equal effect to
vested Shares acquired upon exercise of an Option granted prior to the date, if
any, upon which the Common Stock becomes a Listed Security to a person other
than an Officer, Director or Consultant, in that the Company shall have the
right to repurchase such Shares from the Participant upon the following terms:
(A) the repurchase is made within 90 days of termination of the Participant's
Continuous Service for Cause at the Fair Market Value of the Shares as of the
date of termination, (B) consideration for the repurchase consists of cash or
cancellation of purchase money indebtedness, and (C) the repurchase right
terminates upon the effective date of the Company's initial public offering of
its Common Stock. With respect to vested Shares issued upon exercise of an
Option granted to any Officer, Director or Consultant, the Company's right to
repurchase such Shares upon termination of the Participant's Continuous Service
for Cause shall be made at the Participant's original cost for the Shares and
shall be effected pursuant to such terms and conditions, and at such time, as
the Administrator shall determine. Nothing in this Section 10(b)(iv) shall in
any way limit the Company's right to purchase unvested Shares issued upon
exercise of an Option as set forth in the applicable Option Agreement.
(d) In the event of termination of a Participant's Continuous Service
for Cause, the Company shall have the right to repurchase from the Participant
vested Shares issued upon exercise of a Stock Purchase Right granted prior to
the date, if any, upon which the Common Stock becomes a Listed Security to any
person other than an Officer, Director or Consultant prior to the date, if any,
upon which the Common stock becomes a Listed Security upon the following terms:
(A) the repurchase must be made within 90 days of termination of the
Participant's Continuous Service for Cause at the Fair Market Value of the
Shares as of the date of termination, (B) consideration for the repurchase
consists of cash or cancellation of purchase money indebtedness, and (C) the
repurchase right terminates upon the effective date of the Company's initial
public offering of its Common Stock. With respect to vested Shares issued upon
exercise of a Stock Purchase Right granted to any officer, Director or
Consultant, the Company's right to repurchase such Shares upon termination of
such Participant's Continuous Service for Cause shall be made at the
Participant's original cost for the Shares and shall be effected pursuant to
such terms and conditions, and at such time, as the Administrator shall
determine.
6. The Company shall provide financial statements at least annually to
each California Recipient during the period such person has one or more Options
or Stock Awards outstanding, and in the case of an individual who acquired
Shares pursuant to the Plan, during the period such individual owns such Shares.
The Company shall not be required to provide such information if the issuance of
awards under the Plan is limited to key employees whose duties in connection
with the Company assure their access to equivalent information.
7. Unless defined below or otherwise in this Attachment, Capitalized
terms shall have the meanings set forth in the Plan. For purposes of this
Attachment, "Officer" means a person who is an officer of the Company within the
meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
-20-
<PAGE>
EXHIBIT 10.4
POINTSHARE CORPORATION
----------------------
1998 AMENDED AND RESTATED DIRECTORS' STOCK OPTION PLAN
------------------------------------------------------
(as amended February 16, 2000)
1. Purposes of the Plan. The purposes of this 1998 Amended and Restated
--------------------
Directors' Stock Option Plan are to attract and retain the best available
personnel for service as Directors of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Pointshare Corporation, a Delaware
-------
corporation.
(e) "Continuous Status as a Director" shall mean the absence of any
-------------------------------
interruption or termination of service as a Director.
(f) "Control Transaction" means:
-------------------
(i) any merger, consolidation, or statutory or contractual share
exchange in which there is no group of persons who held a majority of the
outstanding Common Stock immediately prior to the transaction who continue to
hold, immediately following the transaction, at least a majority of the combined
voting power of the outstanding shares of that class of capital stock (herein,
"Voting Stock") which ordinarily (and apart from rights accruing under special
- -------------
circumstances) has the right to vote in the election of directors of the Company
(or of any other corporation or entity whose securities are issued in such
transaction wholly or partially in exchange for Common Stock);
(ii) any liquidation or dissolution of the Company;
(iii) any transaction (or series of related transactions)
involving the sale, lease, exchange or other transfer not in the ordinary course
of business of all, or substantially all, of the assets of the Company; or
(iv) any transaction (or series of related transactions) in which
any person (including, without limitation, any natural person, any corporation
or other legal entity, and any person as defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act, other than the Company or any employee benefit
plan sponsored by the Company):
<PAGE>
(A) purchases any Common Stock (or securities convertible into Common
Stock) for cash, securities or any other consideration pursuant to a tender
offer or exchange offer subject to the requirements of the Exchange Act, or
(B) directly or indirectly becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of securities of the Company which, when
aggregated with such person's beneficial ownership prior to such transaction,
either (x) represent 30% or more (50% or more if the Company is not then subject
to the requirements of the Exchange Act) (the "Control Percentage") of the
------------------
combined voting power of the then outstanding Voting Stock of the Company, or
(y) if such person's beneficial ownership prior to such transaction already
exceeded the applicable Control Percentage, result in an increase in such
holder's beneficial ownership percentage (all such percentages being calculated
as provided in Rule 13d-3(d) under the Exchange Act with respect to rights to
acquire the Company's securities).
All references in this definition to specific sections of or rules
promulgated under the Exchange Act shall apply whether or not the Company is
then subject to the requirements of the Exchange Act.
(g) "Director" shall mean a member of the Board.
--------
(h) "Employee" shall mean any person, including any officer or
--------
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(j) "Fair Market Value" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system including without limitation the National Market of the
National Association of Securities Dealers, Inc. Automated Quotation System
("Nasdaq"), its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported), as quoted on such system
or exchange, or the exchange with the greatest volume of trading in Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is quoted on the Nasdaq (but not on the
National Market thereof) or regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for the Common Stock for the last
market trading day prior to
<PAGE>
the time of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(jj) "IPO Effective Date" shall mean the effectiveness date of a
------------------
registration statement under the Securities Act of 1933 relating to the
Company's initial public offering of securities.
(k) "Option" shall mean a stock option granted pursuant to the Plan.
------
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(l) "Optioned Stock" shall mean the Common Stock subject to an Option.
--------------
(m) "Optionee" shall mean an Outside Director who receives an Option.
--------
(n) "Outside Director" shall mean a Director who is not an Employee.
----------------
(o) "Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 1998 Amended and Restated Directors' Stock
----
Option Plan.
(q) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(r) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(s) "Subsidiary" shall mean a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 700,000 Shares (the "Pool") of Common Stock. The Shares may
----
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
-3-
<PAGE>
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director who has not previously been granted
an Option under this Plan shall be automatically granted an Option to purchase
Shares (the "First Option") as follows: (A) with respect to persons who are
------------
Outside Directors on May 5, 1998 (the "Plan Effective Date"), 25,000 Shares on
-------------------
the Plan Effective Date and (B) with respect to any other person, 25,000 Shares
on the date on which such person first becomes an Outside Director, whether
through election by the stockholders of the Company or appointment by the Board
of Directors to fill a vacancy.
(iii) Prior to the IPO Effective Date, after the First Option has
been granted to an Outside Director, such Outside Director shall thereafter be
automatically granted an Option to purchase 10,000 Shares (a "Subsequent
----------
Option") on each anniversary date of the Plan Effective Date, provided that, on
such date, he or she is serving on the Board and shall have served on the Board
for at least six (6) months prior to such anniversary date. Following the IPO
Effective Date, the Subsequent Option shall be granted on the date of each
Annual Meeting of the Company's stockholders immediately following which such
Outside Director is serving on the Board, provided that, on such date, he or she
shall have served on the Board for at least six (6) months prior to the date of
such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (b) and (c)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares remaining
available for grant by the number of Outside Directors receiving an Option on
such date on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan shall be conditioned upon obtaining such
stockholder approval of the Plan.
(vi) The terms of each First Option granted hereunder shall be
as follows:
-4-
<PAGE>
(A) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
hereof;
(B) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the First Option, determined in
accordance with Section 2(j) hereof;
(C) the First Option for Outside Directors who are Directors on the
Plan Effective Date shall vest immediately as to 50% of the Shares subject to
the First Option and the remaining Shares subject to the First Option shall vest
on the first anniversary of the date of grant of the First Option.
(D) the First Option for Outside Directors who become Directors after
the Plan Effective Date shall vest in accordance with the following schedule:
1/3rd of the Shares subject to the First Option shall vest on the first
anniversary of the date of grant, 1/3rd of the Shares subject to the First
Option shall vest on the second anniversary of the date of grant and the
remaining 1/3rd of the Shares subject to the First Option shall vest on the
third anniversary of the date of grant of the First Option; provided, however,
that as to any First Option granted prior to February 16, 2000, the vesting
schedule shall be as follows: 25% of the Shares subject to the First Option
shall be immediately vested on the date of grant; 25% of the Shares subject to
the First Option whall vest on the first anniversary of the date of grant and
the remaining 50% of the Shares subject to the First Option shall vest on the
second anniversary of the date of grant.
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(A) the Subsequent Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
hereof;
(B) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the Subsequent Option, determined in
accordance with Section 2(j) hereof; and
(C) the Subsequent Option shall vest as to 100% of the Shares subject
to the Subsequent Option on the first anniversary of the date of grant.
(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
2(j) of the Plan, the Fair Market Value of the Common Stock; (ii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
-5-
<PAGE>
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or his or
-----------------------------------
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
approval of the Board of Directors and shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof.
8. Exercise Price and Consideration
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the Fair Market Value
per Share on the date of grant of the Option.
(b) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall
-6-
<PAGE>
have been held for at least six months), or any combination of such methods of
payment and/or any other consideration or method of payment as shall be
permitted under applicable corporate law.
9. Exercise of Option
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth by (i) the
Administrator with respect to Options granted prior to the IPO Effective Date
and (ii) subject to Section 4(b) hereof with respect to Options granted after
the IPO Effective Date; provided, however, that after the IPO Effective Date, no
Options shall be exercisable prior to any stockholder approval of the Plan in
accordance with Section 17.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as a Director. If an Outside Director
-----------------------------------
ceases to serve as a Director, he or she may, but only within ninety (90) days
after the date he or she ceases to be a Director of the Company, exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Option
be exercised after its term set forth in Section 7 has expired. To the extent
that such Outside Director was not entitled to exercise an Option at the date of
such termination, or does not exercise such Option (which he or she was entitled
to exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement) from the date of such termination,
exercise his or her Option to the extent he or she was entitled to exercise it
at the date of such termination.
-7-
<PAGE>
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (which he or she was entitled to exercise) within the
time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as a Director since the date of grant of
the Option, or within thirty (30) days following termination of Optionee's
Continuous Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise Shares that are not subject to repurchase that had accrued at
the date of death or, if earlier, the date of termination of Optionee's
Continuous Status as a Director. To the extent that Optionee was not entitled
to exercise the Option at the date of death or termination, as the case may be,
or if Optionee does not exercise such Option to the extent so entitled within
the time specified herein, the Option shall terminate.
10. Nontransferability of Options. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder);
provided, however, that after the IPO Effective Date Options shall be
transferable under the terms and conditions as established by the Administrator
to the following recipients: a family trust established by the Optionee, a
family limited partnership established by the optionee, a member of the
Optionee's immediate family or a partnership or other entity of which Optionee
is a general partner or in which optionee plays a similar managerial role. Any
such transfer shall be subject to the applicable laws. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised during the lifetime of an Optionee only by the Optionee or a
transferee permitted by this Section 10.
11. Adjustments Upon Changes in Capitalization, Merger or Certain Other
-------------------------------------------------------------------
Transactions.
- ------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option, the number of Shares specified in Section 4(b), and the
number of Shares of Common Stock that have been authorized for issuance under
the Plan but as to which no Options have yet been granted or that have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination, recapitalization or reclassification of the Common
Stock, or any other increase or decrease in the number of issued Shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive.
-8-
<PAGE>
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Control Transaction. In the event of a Control Transaction, each
-------------------
outstanding Option shall be assumed or an equivalent option shall be substituted
by such successor corporation or a parent or subsidiary of such successor
corporation (the "Successor Corporation"), unless the Successor Corporation does
---------------------
not agree to assume outstanding Options or to substitute an equivalent option,
in which case such Option shall terminate upon the consummation of the
transaction.
(i) In the event of a Control Transaction, the Company shall
provide each Optionee with notice of the pendency of such Control Transaction
(A) at least thirty (30) days prior to the expected date of consummation of such
Control Transaction if such Control Transaction has been approved or recommended
by the Board, or (B) promptly after the Board becomes aware of the pendency or
occurrence of a proposed or completed Control Transaction that has not been
approved or recommended by the Board, provided, however, that in the case of
either (A) or (B) such notice may be given within such lesser period of time
prior to the expected date of the consummation of such Control Transaction as
necessary to assure that Optionees are not provided with material nonpublic
information with respect to such Control Transaction solely by operation of the
notice requirement in this Section 11(c)(i).
(ii) Each Optionee shall be entitled to exercise the vested
portion of the Option at any time prior to consummation of a Control
Transaction. In addition, the vesting of each outstanding Option shall be
accelerated such that all of the unvested Optioned Stock shall be fully vested
upon consummation of the Control Transaction conditioned upon the Optionee
remaining in Continuous Status as a Director of the Company through the date of
such consummation.
(iii) In the event of a Control Transaction, any exercise may be
made contingent upon consummation of a Control Transaction if so elected by the
Optionee in his or her notice of exercise, and must be made contingent upon such
consummation with respect to any portion of an Option entitled to accelerated
vesting under the Section 11(c)(i) or (ii) above.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
-9-
<PAGE>
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
- -------- ---
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation. Notwithstanding
the foregoing, the provisions set forth in Section 4 of this Plan (and any other
Sections of this Plan that affect the formula award terms required to be
specified in this Plan by Rule 16b-3) shall not be amended more than once every
six months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. Inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
-10-
<PAGE>
17. Stockholder Approval. If required by the applicable laws,
--------------------
continuance of the Plan shall be subject to approval by the stockholders of the
Company. Such stockholder approval shall be obtained in the manner and to the
degree required under the applicable laws. Options may be granted, but not
exercised, before such stockholder approval.
-11-
<PAGE>
EXHIBIT 10.5
POINTSHARE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
----
The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of Pointshare Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means Pointshare Corporation, a Delaware corporation.
-------
(e) "Compensation" means all regular straight time gross earnings and
------------
shall include commissions or payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation. Compensation
shall exclude one-time payments such as relocation or hiring bonuses, severance
pay as well as stock option proceeds.
(f) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Plan
Administrator, provided that such leave is for a period of not more than 90
days, unless reemployment upon the expiration of such leave is guaranteed by
contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or (iv) in the case of transfers between locations of
the Company or between the Company and its Designated Subsidiaries.
(g) "Contributions" means all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(i) "Designated Subsidiaries" means the Subsidiaries which have been
-----------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the
<PAGE>
Plan; provided however that the Board shall only have the discretion to
designate a Subsidiary if the issuance of options to such Subsidiary's Employees
pursuant to the Plan would not cause the Company to incur adverse accounting
charges.
(j) "Employee" means any person, including an Officer, who is
--------
regularly scheduled to work at least an average of twenty (20) hours per week
and whose customary employment is for more than five (5) months in a calendar
year by the Company or any of the Designated Subsidiaries.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined by the Board in its discretion based on the closing sales price
of the Common Stock for such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading day), as reported by
the National Association of Securities Dealers Automated Quotation (Nasdaq)
National Market or, if such price is not reported, the mean of the bid and asked
prices per share of the Common Stock as reported by Nasdaq or, in the event the
Common Stock is listed on a stock exchange, the Fair Market Value per share
shall be the closing sales price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading day), as reported in The Wall Street Journal. For purposes of the
Offering Date of the first Offering Period under the Plan, the Fair Market Value
of a share of the Common Stock of the Company shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission pursuant
to Rule 424 under the Securities Act of 1933, as amended, for the initial public
offering of the Company's Common Stock (the "Registration Statement").
----------------------
(m) "Offering Date" means the first business day of each Offering
-------------
Period of the Plan.
(n) "Offering Period" means a period of months not exceeding twenty-
---------------
seven (27) months, as determined by the Board. The duration and timing of the
Offering Periods may be changed pursuant to Section 5 of the Plan.
(o) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Payroll Period" means the cycle under which the Company processes
--------------
normal, regular employee paychecks.
(q) "Plan" means this Employee Stock Purchase Plan.
----
(r) "Plan Administrator" means the Board or Committee designated in
------------------
accordance with Section 15 with authority to administer the Plan.
(s) "Purchase Date" means the last day of each Purchase Period of the
-------------
Plan.
-2-
<PAGE>
(t) "Purchase Period" means a period of six (6) months within an
---------------
Offering Period, except for the first Purchase Period as set forth in Section
5(b).
(u) "Purchase Price" means with respect to a Purchase Period an amount
--------------
equal to 85% of the Fair Market Value (as defined in Section 2(l) above) of a
Share of Common Stock on the Offering Date or on the Purchase Date, whichever is
lower; provided, however, that in the event (i) of any increase in the number of
Shares available for issuance under the Plan (including without limitation an
automatic increase pursuant to Section 3 below or as a result of a stockholder-
approved amendment to the Plan), and (ii) all or a portion of such additional
Shares are to be issued with respect to one or more Offering Periods that are
underway at the time of such increase ("Additional Shares"), and (iii) the Fair
-----------------
Market Value of a Share of Common Stock on the date of such increase is higher
than the Fair Market Value on the Offering Date for any such Offering Period,
then in such instance the Purchase Price with respect to such Additional Shares
shall be 85% of the Fair Market Value of a Share of Common Stock on the date of
such increase or the Fair Market Value of a Share of Common Stock on the
Purchase Date, whichever is lower.
(v) "Share" means a share of Common Stock, as adjusted in accordance
-----
with Section 20 of the Plan.
(w) "Subsidiary" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. Stock Subject to the Plan. Subject to adjustment as provided in
-------------------------
Section 20, the maximum number of Shares which may be made available for sale
under the Plan shall be 500,000 Shares, subject to further adjustment pursuant
to Section 20 below, plus an annual increase on the first day of each of the
Company's fiscal years beginning in 2001 and continuing thereafter for each
fiscal year during the term of the Plan as set forth in Section 24 (unless the
Plan is earlier terminated in accordance with Section 21) equal to the lesser of
(i) 500,000 Shares subject to further adjustment pursuant to Section 20 below,
(ii) one percent (1%) of the Shares outstanding on the last day of the
immediately preceding fiscal year, or (iii) such lesser number of Shares as may
be determined by the Board.
4. Eligibility. Any person who is an Employee as of the Offering Date of
-----------
a given Offering Period shall be eligible to participate in such Offering Period
under the Plan, subject to the requirements of Section 6(a), the limitations of
Section 7(b) and the limitations imposed by Section 423(b) of the Code; provided
however that Employees may not participate in more than one Offering Period at a
time.
5. Offering Periods and Purchase Periods.
-------------------------------------
(a) Offering Periods. The Plan shall be implemented by a series of
----------------
Offering Periods generally of twenty-four (24) months duration, with new
Offering Periods commencing on or about May 1 and November 1 of each year (or at
such other time or times as may be determined by the Board of Directors). The
first Offering Period shall commence on the
-3-
<PAGE>
beginning of the effective date of the Registration Statement on Form S-1 for
the initial public offering of the Company's Common Stock (the "IPO Date") and
--------
continue until April 30, 2002. The Plan shall continue until terminated in
accordance with Section 20 hereof. The Board of Directors of the Company shall
have the power to change the duration and/or the frequency of Offering Periods
with respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected, and provided that no Offering Period shall be
extended to a period beyond twenty-seven (27) months.
(b) Purchase Periods. Each Offering Period shall generally consist of
----------------
consecutive purchase periods of six (6) months' duration. The last day of each
Purchase Period shall be the "Purchase Date" for such Purchase Period. A
-------------
Purchase Period commencing on May 1 shall end on the next October 31. A
Purchase Period commencing on November 1 shall end on the next April 30. The
first Purchase Period shall commence on the IPO Date and shall end on October
31, 2000. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without stockholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Purchase Period to be
affected.
6. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period.
(b) The subscription agreement shall set forth the Employee's
participation election in the form of a designation of the percentage of the
participant's Compensation to be paid as Contributions pursuant to the Plan,
which percentage shall be not less than one percent (1%) and not more than
fifteen percent (15%) or such greater percentage as the Board may establish from
time to time before an Offering Date, which percentage shall not exceed twenty
percent (20%) of such participant's Compensation on each payday during the
Offering Period.
(c) A participant's subscription shall be effective for each
successive Offering Period in which he or she is eligible to participate, unless
the participant withdraws in accordance with Section 12(a).
-4-
<PAGE>
7. Grant of Option; Limitations.
----------------------------
(a) Grant. On the Offering Date of each Offering Period, each
-----
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date a number of Shares of the Company's
Common Stock determined by dividing such Employee's Contributions accumulated
prior to such Purchase Date and retained in the participant's account as of the
Purchase Date by the applicable Purchase Price.
(b) Limitations. Any provisions of the Plan to the contrary
-----------
notwithstanding, all rights to purchase Shares of the Company's Common Stock
under this Plan shall be subject to the limitation set forth in Section 3, and
shall be further limited as follows, as applicable:
(i) The Board may establish limits on the number of shares an
Employee may elect to purchase with respect to any Offering Period if such
limit is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected.
(ii) No Employee shall be granted an option under the Plan if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the
Code) would own capital stock of the Company and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of
any subsidiary of the Company.
(iii) No Employee shall be granted an option under the Plan if
such option would permit his or her rights to purchase stock under all
employee stock purchase plans (described in Section 423 of the Code) of the
Company and its Subsidiaries to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of the Fair Market Value (as defined in Section
2(l) above) of such stock (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time.
(iv) If the Board determines that, on a given Purchase Date, the
number of Shares with respect to which options are to be exercised may
exceed (A) the number of Shares of Common Stock that were available for
sale under the Plan on the Offering Date of the applicable Offering Period
(after deduction of all Shares for which options have been exercised or are
then outstanding), or (B) the number of shares available for sale under the
Plan on such Purchase Date (after deduction of all Shares for which options
have been exercised or are then outstanding), the Board may, in its sole
discretion, provide that the Shares of Common Stock available for purchase
on such Offering Date or Purchase Date, as applicable, shall be allocated
pro rata, in as uniform a manner as shall be practicable and as it shall
determine in its sole discretion to be equitable among all participants
exercising options to purchase Common Stock on such Purchase Date and (C)
continue all Offering Periods then in effect or (D) pursuant to Section 21
below, terminate any or all Offering Periods then in effect. The Board may
direct that the Shares available on the Offering Date of any applicable
Offering Period pursuant to the preceding sentence be allocated pro rata,
notwithstanding any authorization of additional
-5-
<PAGE>
Shares for issuance under the Plan by the Company's stockholders subsequent
to such Offering Date.
8. Method of Payment of Contributions.
----------------------------------
(a) A participant's payment of contributions to the Plan shall be made
by payroll deductions made on each payday during the Offering Period, commencing
on the first payroll following the Offering Date and shall end on the last
payroll paid on or prior to the last Purchase Period of the Offering Period to
which the subscription agreement is applicable, unless sooner terminated by as
provided in Section 12(a) or 13(b). All payroll deductions made by a
participant shall be credited to his or her account under the Plan.
(b) A participant may discontinue his or her participation in the Plan
as provided in Section 12(a), or, on one occasion only during the Offering
Period may [increase or] decrease the rate of his or her Contributions with
respect to the Offering Period by completing and filing with the Company a new
subscription agreement authorizing a change in the payroll deduction rate. The
change in rate shall be effective as of the beginning of the next payroll period
following the date of filing of the new subscription agreement, if the agreement
is filed at least ten (10) business days prior to such date and, if not, as of
the beginning of the next succeeding payroll period.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 7(b)(ii) or (iii), a
participant's payroll deductions may be decreased by the Company to 0% at any
time during a Purchase Period. Payroll deductions shall re-commence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 12(a). In addition,
a participant's payroll deductions may be decreased by the Company to 0% at any
time during a Purchase Period in order to avoid unnecessary payroll
contributions as a result of application of a maximum Share limitation
established by the Board under Section 7(b)(i), in which case payroll deductions
shall re-commence at the rate provided in such participant's subscription
agreement at the beginning of the next Purchase Period, unless terminated as
provided in Section 12(a) or 13(b).
(d) In the event a participant's contributions cannot be made by
payroll deduction because such participant is on an unpaid military leave, sick
leave or other approved leave of absence not exceeding 90 days, or during a
longer approved leave so long as the participant's right to reemployment with
the Company is guaranteed by statute or by contract, such participant's payment
of contributions to the Plan shall be suspended during such unpaid leave. Upon
such participant's return to active service, such participant's contributions
shall recommence in accordance with the participant's participation election.
9. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 12(a) or Section 13, his or her option for the purchase of Shares will
be exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the
-6-
<PAGE>
option will be purchased at the applicable Purchase Price with the
accumulated Contributions in his or her account. No fractional Shares may be
purchased or issued. The Shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the participant on the Purchase Date.
During his or her lifetime, a participant's option to purchase Shares hereunder
is exercisable only by him or her.
(b) Any cash remaining to the credit of a participant's account under
the Plan after a purchase by him or her of Shares at the termination of each
Purchase Period which is insufficient to purchase a full Share shall be carried
over to the next Purchase Period if the Employee continues to participate in the
Plan, or if the Employee does not continue to participate, shall be returned to
the participant. Any other amounts left over in a participant's account after a
Purchase Date shall be returned to the participant.
10. Withholding Tax Obligations. At the time the option is exercised, in
---------------------------
whole or in part, or at the time some or all of the Company's Common Stock
issued under the Plan is disposed of, the participant must make adequate
provision for payment to the Company of the Company's federal, state or other
tax withholding obligations, if any, which arise upon the exercise of the option
or the disposition of the Common Stock. At any time, the Company may withhold
from the participant's compensation the amount necessary for the Company to meet
applicable federal, state and other withholding obligations, including any
withholding required to make available to the Company any tax deductions or
benefits attributable to the sale or early disposition of Common Stock by the
participant.
11. Rights as Stockholder; ESPP Stock Account; Delivery of Certificate.
------------------------------------------------------------------
(a) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised. Once Shares
are purchased on behalf of a participant on a Purchase Date, the participant
shall have the rights equivalent to those of a stockholder with respect to such
Shares.
(b) The Company may require that all Shares purchased under the Plan
be held in an account (the participant's "ESPP Stock Account) established in the
name of the participant (or in the name of the participant and his or her
spouse, as designated by the participant on his or her subscription agreement).
In such event the Company or, in the event the Plan Administrator designates or
approves a stock brokerage or other financial services firm (an "ESPP Broker")
to hold Shares purchased under the Plan for the accounts of participants, then
such ESPP Broker, shall hold all Shares purchased by a participant under the
Plan in his or her ESPP Stock Account and the participant (and his or her
spouse, if applicable) shall be the beneficial owner of the Shares in his or her
ESPP Stock Account. The following rules shall apply to ESPP Stock Accounts:
(i) Promptly following each Purchase Date the number of Shares
purchased by each participant shall be deposited into the participant's
ESPP Stock Account.
-7-
<PAGE>
(ii) Each participant shall receive periodic statements of his
or her ESPP Stock Account.
(iii) A Participant shall be free to undertake a disposition of
the Shares in his or her ESPP Stock Account at any time by giving notice to
the ESPP Broker (or the Company, if the Company maintains the account) in
such form and manner as determined by the Plan Administrator.
(iv) In the absence of a disposition by the participant, such
Shares shall remain in the participant's ESPP Stock Account. A participant
may transfer Shares to another brokerage account of the participant's
choosing, or may request that a stock certificate be issued and delivered
to him or her with respect to Shares in the participant's ESPP Stock
Account.
(v) Dividends paid in the form of Shares with respect to Shares
in a participant's ESPP Stock Account shall be credited to such account.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
12. Voluntary Withdrawal.
--------------------
(a) A participant may withdraw all but not less than all of the
Contributions credited to his or her account under the Plan at any time prior to
a Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current Offering Period will be automatically terminated, and no
further Contributions for the purchase of Shares will be made during and with
respect to such Offering Period.
(b) A participant's voluntary withdrawal from the Plan with respect to
an Offering Period will not have any effect upon his or her eligibility to
participate in a succeeding Offering Period or in any similar plan which may
hereafter be adopted by the Company.
13. Automatic Withdrawal.
--------------------
(a) Termination of Employment. Upon termination of the participant's
-------------------------
Continuous Status as an Employee prior to the Purchase Date of an Offering
Period for any reason, including retirement or death, he or she will
automatically be withdrawn from the Plan effective as of the date of such
termination of his or her Continuous Status as an Employee, the Contributions
credited to his or her account will be returned to him or her or, in the case of
the participant's death, to the person or persons entitled thereto under Section
16, and his or her option will be automatically terminated.
(b) Reduction of Hours. In the event a participant fails to remain
-------------------
in Continuous Status as an Employee of the Company for at least an average of
twenty (20) hours per week during the Offering Period in which the employee is a
participant, he or she will be
-8-
<PAGE>
deemed to have elected to withdraw from the Plan and the Contributions credited
to his or her account will be returned to him or her and his or her option
terminated. Notwithstanding the preceding sentence, if such participant's
reduction in hours is on account of an unpaid military leave, sick leave or
other approved leave of absence not exceeding ninety (90) days, or during a
longer approved leave so long as the participant's right to reemployment with
the Company is guaranteed by statute or by contract (including a temporary
reduction in hours for purposes of a leave taken under the Family Medical Leave
Act or similar applicable state law), such participant shall not be deemed to
have withdrawn from the Plan during such leave. A participant who fails to
return to active employment following such leave shall be deemed to have
withdrawn from the Plan on the 91st day following the commencement of the leave
or, if later, the date such participant ceases to have a right to reemployment
with the Company guaranteed by statute or contract.
(c) Reduction in Fair Market Value. To the extent permitted by any
------------------------------
applicable laws, regulations or stock exchange rules, if the Fair Market Value
of the Shares on an Offering Date for an Offering Period commencing within an
Offering Period then in progress is lower than was the Fair Market Value of the
Shares on the Offering Date for such Offering Period then in progress, then
every participant in such Offering Period then in progress shall automatically
(i) be deemed to have withdrawn from such Offering Period then in progress at
the close of the Purchase Period immediately preceding the new Offering Period
with the lower Fair Market Value on its corresponding Offering Date, and (ii) be
deemed to have enrolled in such new Offering Period with the lower Fair Market
Value on its corresponding Offering Date. All payroll deductions accumulated in
a participant's account as of such withdrawal date pursuant to this Section
13(c) shall be retained in the participant's account.
14. Interest. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
15. Administration. The Board, or a committee named by the Board (the
--------------
"Plan Administrator"), shall supervise and administer the Plan and shall have
- -------------------
full power to adopt, amend and rescind any rules deemed desirable and
appropriate for the administration of the Plan and not inconsistent with the
Plan, to construe and interpret the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The Plan
Administrator may delegate its duties to such of the Company's officers as it so
determines.
16. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and/or cash, if any, from the participant's account
under the Plan in the event of such participant's death prior to delivery to him
or her of such Shares and/or cash. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective. Such designation of beneficiary may be changed
by the participant (and his or her spouse, if any) at any time by written
notice.
(b) In the event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
participant's death, the
-9-
<PAGE>
Company shall deliver such Shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such Shares and/or cash to the spouse or to any one or
more dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
17. Transferability. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 16) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 12(a).
18. Use of Funds. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
19. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
20. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the number of Shares set forth in
--------
Section 3 above, and the price per Share covered by each option under the Plan
which has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of Shares effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
(b) Corporate Transactions.
----------------------
-10-
<PAGE>
(i) In the event of a dissolution or liquidation of the
Company, any Purchase Period and Offering Period then in progress will
terminate immediately prior to the consummation of such action, unless
otherwise provided by the Board.
(ii) In the event of a Corporate Transaction, each option
outstanding under the Plan shall be assumed or an equivalent option shall
be substituted by the successor corporation or a parent or Subsidiary of
such successor corporation. In the event that the successor corporation
refuses to assume or substitute for outstanding options, each Purchase
Period and Offering Period then in progress shall be shortened and a new
Purchase Date shall be set (the "New Purchase Date"), as of which date any
-----------------
Purchase Period and Offering Period then in progress will terminate. The
New Purchase Date shall be on or before the date of consummation of the
transaction and the Board shall notify each participant in writing, at
least ten (10) days prior to the New Purchase Date, that the Purchase Date
for his or her option has been changed to the New Purchase Date and that
his or her option will be exercised automatically on the New Purchase Date,
unless prior to such date he or she has withdrawn from the Offering Period
as provided in Section 12(a) or Section 13.
(iii) For purposes of this Section 20(b), an option granted
under the Plan shall be deemed to be assumed, without limitation, if, at
the time of issuance of the stock or other consideration upon a Corporate
Transaction, each holder of an option under the Plan would be entitled to
receive upon exercise of the option the same number and kind of shares of
stock or the same amount of property, cash or securities as such holder
would have been entitled to receive upon the occurrence of the transaction
if the holder had been, immediately prior to the transaction, the holder of
the number of Shares of Common Stock covered by the option at such time
(after giving effect to any adjustments in the number of Shares covered by
the option as provided for in this Section 20); provided however that if
the consideration received in the transaction is not solely common stock of
the successor corporation or its parent (as defined in Section 424(e) of
the Code), the Board may, with the consent of the successor corporation,
provide for the consideration to be received upon exercise of the option to
be solely common stock of the successor corporation or its parent equal in
Fair Market Value to the per Share consideration received by holders of
Common Stock in the transaction.
(iv) The Board may, if it so determines in the exercise of its
sole discretion, also make provision for adjusting the Reserves, as well as
the price per Share covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of Shares of its outstanding
Common Stock, and in the event of the Company's being consolidated with or
merged into any other corporation.
21. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason amend or terminate
the Plan. Except as provided in Section 20, no such amendment or termination of
the Plan may affect options previously granted, provided that the Plan or an
Offering Period may be terminated
-11-
<PAGE>
by the Board on a Purchase Date or by the Board's setting a new Purchase Date
with respect to an Offering Period and Purchase Period then in progress if the
Board determines that termination of the Plan and/or the Offering Period is in
the best interests of the Company and the stockholders or if continuation of the
Plan and/or the Offering Period would cause the Company to incur adverse
accounting charges as a result of a change after the effective date of the Plan
in the generally accepted accounting rules applicable to the Plan. Except as
provided in Section 20 and in this Section 21, no amendment to the Plan shall
make any change in any option previously granted which adversely affects the
rights of any participant. In addition, to the extent necessary to comply with
Rule 16b-3 under the Exchange Act, or under Section 423 of the Code (or any
successor rule or provision or any applicable law or regulation), the Company
shall obtain stockholder approval in such a manner and to such a degree as so
required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, increase or limit the frequency and/or number of changes a participant
may make in the rate of his or her Contributions with respect to an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
22. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
23. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
-12-
<PAGE>
24. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 20.
25. Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-13-
<PAGE>
POINTSHARE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
----------------------
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
Pointshare 2000 Employee Stock Purchase Plan (the "Plan") for the Offering
----
Period commencing _____________, ____ and each successive Offering Period, and
subscribe to purchase shares of the Company's Common Stock in accordance with
this Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase
on each payday. I understand that this amount must not be less than 1% and not
more than 15% of my Compensation during the Offering Period. (Please note that
no fractional percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on each
Purchase Date of each Offering Period unless I otherwise withdraw from the
Offering Period prior to a Purchase Date by giving written notice to the Company
for such purpose.
4. I understand that at any time prior to a Purchase Date I may
discontinue my participation in an Offering Period under the Plan by withdrawing
from the Offering Period as provided in Section 12 of the Plan, and that if I do
so I will not be permitted to renew participation in such Offering Period. I
also understand that I may decrease the rate of my Contributions on one occasion
only during any Offering Period, by completing and filing a new Subscription
Agreement with such decrease taking effect as of the beginning of the [calendar
month] [payroll period] following the date of filing of the new Subscription
Agreement, if filed at least ten (10) business days prior to the beginning of
such [month] [payroll period]. Further, I understand that I may change the rate
of deductions for future Offering Periods in which I am eligible to participate
by filing a new Subscription Agreement during the applicable enrollment period,
and any such change will be effective as of the beginning of the next Offering
Period in which I am eligible to participate commencing after the new
Subscription Agreement is filed.
I understand that unless I discontinue my participation in an Offering
Period as provided in Section 12 of the Plan or change the rate of deductions by
filing a new Subscription Agreement, my election made under this Subscription
Agreement will continue to be effective for each successive Offering Period in
which I am eligible to
<PAGE>
participate commencing after the termination of an Offering Period in which I
have participated.
5. In connection with the initial public offering of the Company's
securities and upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, I agree not to sell, make any
short sale of, loan, grant any option for the purchase of , or otherwise dispose
of any securities of the Company, however or whenever acquired, without the
prior written consent of the Company or such underwriters, as the case may be,
for such period of time (not to exceed 180 days) from the effective date of such
registration as may be requested by the Company or such managing underwriters
and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the public offering.
6. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "Pointshare Corporation 2000 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan. I have also received a copy of the
Prospectus for the Plan.
7. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _______________________________________________
(First) (Middle) (Last)
______________________ _______________________________________________
(Relationship) (Address)
_______________________________________________
Summary of Tax Treatment on Sale of Shares
------------------------------------------
The following information regarding the federal tax treatment on sale
---------------------------------------------------------------------
of shares acquired under the Plan is only a summary and is subject to change,
- -----------------------------------------------------------------------------
and is not intended to represent or provide tax advice to the participant, his
- ------------------------------------------------------------------------------
or her spouse or beneficiaries. You should consult a tax advisor concerning the
- --------------------------------------------------------------------------------
tax implications of the purchase and sale of stock under the Plan.
- -----------------------------------------------------------------
If any shares received pursuant to the Plan are sold or otherwise disposed
of within two (2) years after the first day of the Offering Period during which
you purchased such shares or within one (1) year after the Purchase Date, the
excess of the fair market value of the shares on
-2-
<PAGE>
the Purchase Date over the price paid for the shares on such Purchase Date will
be treated for federal income tax purposes as ordinary compensation income at
the time of such disposition, regardless of the amount received on sale or other
disposition of the shares, even if such amount is less than their fair market
value at the Purchase Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
If any shares received pursuant to the Plan are sold or otherwise disposed
of at any time after expiration of the 2-year and 1-year holding periods, the
lesser of 15% of the fair market value of the shares on the Offering Date or the
excess of the fair market value of the shares at the time of such sale or
disposition over the price paid for the shares on the Purchase Date will be
treated for federal income tax purposes as ordinary compensation income. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.
9. I hereby agree to notify the Company in writing within 30 days after
the date of any disposition of shares within two (2) years after the first day
of the Offering Period during which I purchased such shares or within one (1)
year after the Purchase Date, and I will make adequate provision for federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE:
----------------------------
SOCIAL SECURITY #:
--------------------
DATE:
---------------------------------
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
- --------------------------------------
(Signature)
- --------------------------------------
(Print name)
-3-
<PAGE>
POINTSHARE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the Pointshare Corporation 2000 Employee Stock Purchase Plan (the "Plan") for
----
the Offering Period that began on _________ ___, _____. This withdrawal covers
all Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current Offering Period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
I further understand and agree that I shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Dated:
----------------------- -----------------------------------
Signature of Employee
-----------------------------------
Social Security Number
<PAGE>
EXHIBIT 10.6
AGREEMENT
This Alliance Agreement ("Agreement") is effective as of this sixth (6th) day of
October, 1998 (the "Effective Date"), between WASHINGTON HOSPITAL SERVICES, INC.
("WHS") with its principal offices at 300 Elliot Avenue West, Suite 300,
Seattle, Washington 98119-4118 and POINTSHARE CORPORATION ("Pointshare"), with
its principal offices at 1300 114th Avenue SE, Suite 100, Bellevue, Washington
98004.
1. RECITALS
a) Pointshare provides on-line services for the healthcare industry.
b) WHS is engaged in offering innovative and cost-saving programs to hospitals
and other health service providers (hereinafter referred to as
"Providers").
c) WHS is a wholly owned subsidiary of the Washington State Hospital
Association ("WSHA"). WHS contracts with vendors in order to make their
services and products available to Providers.
d) The parties desire to set forth the terms and conditions under which WHS
and Pointshare will cooperate to develop and market the Member Services (as
defined below) in Washington State.
In consideration of the foregoing and the agreements contained herein, the
parties agree as follows:
2. DEFINITIONS
a) "WSHA.net Statewide Intranet Services" shall mean the services provided by
Pointshare to WSHA as set forth in Attachment A.
b) "WSHA.net Statewide Intranet" shall mean the WSHA.net web site and secure
member connections provided by Pointshare.
c) "WSHA Authorized User" WSHA or WHS employees or contractors who are
authorized by WSI-IA to access and use the WSHA.net Statewide Intranet
Services.
d) "Member" shall mean WA State hospitals that are members of the Washington
State Hospital Association, and other "WHS Non-hospital Web Clients" as set
forth on Attachment C; but shall exclude "Existing Pointshare Hospital
Clients and Active Sales Prospects" as also set forth on Attachment C.
e) "Medical Intranet" shall mean Pointshare's community medical intranets
across Washington State through which Pointshare delivers its services.
f) "Online Services" shall mean services that may be accessed using a standard
web browser for the purpose of viewing and retrieving informational content
or performing transactions; but shall not mean services accessed using a
web browser that require data integration to customers' information systems
(e.g., interfacing into a hospital information system). Examples of "Online
Services" include eligibility verification, referral processing, organized
access to Internet informational content, purchasing sites, and online
provider directory services. "Online Services" include the services
described in the Online Service Package described in Attachment B (Package
2)
g) "Member Services" shall mean Pointshare services provided to Members as set
forth in Attachment B.
h) "Member Set-up Receipts" shall mean receipts from initial, set-up services
requested and paid for by WSHA Members, such services being described in
the Set-up columns of the sample Member packages set forth in Attachment B.
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i) "Subscriber" shall mean a Provider that enters into an agreement with
Pointshare to receive Member Services.
j) "Member User" shall mean an individual Member Subscriber or individual
employed by a Member Subscriber who is provided with an account and is
authorized to access and use the Member Services.
k) "Proprietary Rights" shall mean all rights in the WSHA.net Services and
Member Services, and Pointshare's Confidential Information, including, but
not limited to, patents, copyrights, authors' rights, trademarks, trade
names, know-how and trade secrets, irrespective of whether such rights
arise under U.S. or international intellectual property, unfair competition
or trade secret laws.
l) "Confidential Information" of a party shall mean any information disclosed
by that party to the other party pursuant to this Agreement which is in
written, graphic, machine readable or other tangible form and is marked
"Confidential," "Proprietary" or in some other manner to indicate its
confidential nature. Confidential Information may also include oral
information disclosed by one party to the other pursuant to this Agreement,
provided that such information is designated as confidential at the time of
disclosure and is reduced to writing by the disclosing party within a
reasonable time (not to exceed thirty (30) days) after its oral disclosure,
and such writing is marked in a manner to indicate its confidential nature
and delivered to the receiving party.
3. POINTSHARE'S RIGHTS AND RESPONSIBILITIES
a) WSHA.net Statewide Intranet Services. Pointshare will provide the WSHA.net
Statewide Intranet Services to WSHA and WSHA Authorized Users in a timely
and professional manner.
b) Member Services. Pointshare will provide the Member Services to Subscribers
in a timely and professional manner.
c) Program Manager. Pointshare will assign a full-time program manager to
oversee the sales and marketing efforts of the strategic alliance in
addition to coordinating Pointshare technical and project management
resources required to deliver the WSHA.net Statewide Intranet Services and
the Member Services.
d) Quality Program. Pointshare will maintain a quality program dedicated to
the continuous improvement of Pointshare online services to WSHA and its
Members.
e) WSHA Recognition. Pointshare will publicly recognize the Washington State
Hospital Association as a value-added sponsor of Pointshare services as
well as a valued Pointshare client. Additionally, Pointshare will
prominently display WSHA's logo and name on supplemental marketing
literature directed to WSHA members.
f) Member Contracts. Pointshare will contract directly with WSHA Members for
the Member Services.
g) Network Access. Pointshare will use reasonable commercial efforts to
provide the WSHA.net Statewide Intranet Services 24 hours per day, 7 days
per week.
h) Help Desk Support. Pointshare will provide Help Desk support to WSHA
Authorized Users and Member Users during normal business hours (Monday --
Friday, 8AM -- 5PM PT). Additionally, Pointshare will provide on call
technical support for the purpose of responding to mission critical,
downtime issues outside of normal business hours.
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i) Network Security. Pointshare will use reasonable commercial efforts to
maintain the security of the WSHA.net Statewide intranet Services.
4. WHS RIGHTS AND RESPONSIBILITIES
a) Marketing and Promotion. With the exception of Online Services, WHS will
actively market and promote Pointshare and Pointshare Member Services to
WSHA Members including announcements in WSIIA newsletters, direct mail
correspondences, Web sites, e-mail, annual meetings, and educational
seminars.
b) Endorsement of Online Services. WHS will provide an endorsement by WSHA of
Pointshare's Online Services and will permit Pointshare to publish such
endorsement freely. Further, WHS will publish the WHSA endorsement of
Pointshare's Online Services to WSHA Members on WSHA.net and in other
publications and marketing materials in which other WSHA and WHS endorsed
service offerings and vendors are presented.
c) WHS Marketing Resource Commitment. WHS will assign a partial (no less than
half time) or full-time program manager to generate and qualify Member
Service sales leads, oversee the promotional and marketing efforts of WSHA,
and to work with Pointshare's marketing department on future collateral
materials, mailings, and events.
d) WHS Technical Resource Commitment. WHS will provide access to WHS or WSHA
technical resources as required to implement and maintain the services
proposed.
e) Equipment Access. WHS will provide Pointshare with access to any equipment
on WHS's premises twenty-four (24) hours a day, seven days a week that is
required by Pointshare to fulfill Pointshare's obligations under this
Agreement. In the event that service interruptions arise solely due to
WHS's unauthorized modification of any of the WSHA.net Statewide Intranet
equipment or services, Pointshare will charge WHS for time and materials
required to correct the service interruptions.
f) WSHA.net Virtual Community Content. WHS will provide content (text,
graphics, and internet links) for their Virtual Communities as described in
Attachment A.
g) Circuit Purchase and Assignment. WHS will purchase a frame relay circuit
from US West and assign agency to Pointshare to direct its configuration.
This is required to maintain network security.
h) Member Circuits. With respect to circuits between Member facilities and
WSHA.net Statewide Intranet servers, WHS may negotiate volume discounts
with the local telecommunication vendors on behalf of members who
contractually agree to assign circuit agency to WHS's agent of choice, with
Pointshare designated as the agent of choice during the term of this
Agreement. Members who refuse WHS circuit ownership or agency assignment
will not be precluded from participating in the WSHA.net Statewide Intranet
Services.
i) Exclusivity. Except with respect to Online Services, during the term of
this Agreement WHS agrees that neither WHS nor WHSA will enter into any
agreement or arrangement with any third party concerning the offering,
marketing or promoting of services or products that are competitive with
the Member Services.
j) Promotion of Online Services. During the term of this Agreement, WHS agrees
that neither WHS nor WHSA will enter into any agreement or arrangement with
any third party concerning the offering of Online Services to the extent
such agreement or arrangement includes any terms (including any terms
affecting how WHS or WHSA markets, promotes or offers such third party
Online Services) that are more favorable than the terms on which WHS
endorses Pointshare's Online Services.
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k) Future Offerings. Both parties agree to notify each other and enter into
discussions in good faith concerning mutual incentive arrangements on
future Member Service offerings and potential incentive programs for WHS's
establishment of similar alliance agreements with Allied Healthcare
Association Services or other state hospital associations.
5. PAYMENTS, MARKETING COMMISSIONS, AND PRICING.
a) WSHA.net State Intranet Service Payments. WHS will pay the fees for the
WSHA.net State Intranet Services set forth on Attachment A within thirty
(30) days of receipt of an invoice. Fees identified as "Set-up" fees in
Attachment A will be invoiced 50% on the Effective Date and 50% after ten
days of successful live operation following the installation of the
WSHA.net Statewide Intranet Services. All other fees will be invoiced on a
monthly basis. Any amounts that remain unpaid for thirty (30) days after
the date of an invoice will be subject to late penalty fees equal to one
and one-half percent (11/2%) per month from the due date until such amount
is paid.
b) WHS Marketing Commissions. During the term of this Agreement, Pointshare
will pay a marketing commission to WHS on a quarterly basis, equal to
[* * *] of Member Set-up Receipts. The WHS marketing commission will be
paid in consideration of WHS's marketing obligations under this Agreement.
c) Marketing Commissions Disbursement. Pointshare shall remit to WHS all
marketing commissions accrued from the previous calendar quarter along with
a report detailing the Member Set-up Receipts for such quarter within 30
days following the end of the previous calendar quarter.
d) WHS Price Changes. During the first year of this Agreement, the WSHA.net
Statewide Intranet Services fees described in Attachment A will remain in
effect unless otherwise mutually agreed upon in writing by both parties.
Following the first anniversary of the Effective Date of this Agreement,
Pointshare will have the right, upon ninety (90) days prior written notice,
to increase or decrease the WSHA.net Statewide Intranet Services fees.
Increases, if any, to WHSA.net Statewide Intranet Services fees shall not
exceed [* * *] per year on a cumulative basis unless unforeseen market
price increases in excess of [* * *] occur in Internet access fees or frame
relay circuit costs.
e) Member Services Price Changes. After the initial term of a Member Contract
(typically one year), Pointshare will have the right, upon ninety (90) days
prior written notice, to increase or decrease the fees and change the other
terms and conditions of the Member Contracts.
f) Member Service Pricing Publishing. With the exception of pricing for Member
access to the WSHA.net Statewide Intranet Services, both parties agree not
to publish or disclose to any third party the sample pricing set forth in
Attachment B. Both parties understand and agree that the pricing for the
Online Service Package, Hospital Intranet Package, Hospital Extranet
Package, and Hospital Internet Access as described in Attachment B may
increase or decrease based on market conditions.
6. TERM AND TERMINATION.
a) Agreement Term. The term of this Agreement will commence on the Effective
Date and continue for a period of five (5) years (the "Initial Term") and
thereafter shall automatically renew annually unless terminated by either
party upon ninety (90) days written notice to the other party prior to and
effective on the expiration of the current term.
b) Termination. Either party may terminate this Agreement prior to expiration
of the term: (1) if either party fails to perform any of its material
obligations under this Agreement and such failure remains uncured for
thirty (30) days (or in the case of failure to make a required payment, ten
(10) days) after receipt of written
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notice of default from the other party; or (2) if either party ceases to
conduct business, becomes or is declared insolvent or bankrupt, files a
petition in bankruptcy, is the subject of any proceeding relating to its
bankruptcy, liquidation or insolvency which is not dismissed within thirty
(30) days, appoints a receiver or liquidator of any of its properties or
assets or makes an assignment for the benefit of its creditors, or (3) if
at any time after a period of two years, either party is unsatisfied with
sales results of this relationship and cannot in good faith resolve the
unsatisfactory sales results.
c) WSHA.net Statewide Intranet Services Termination. WHS may terminate the
portion of this Agreement relating to the WSHA.net Statewide Intranet
Services if at any time after a period of two years WHS identifies a
service provider who can provide WSHA.net Statewide Intranet Services which
are either more suited to WSHA's needs as determined solely by WSHA or are
less expensive than the WSHA.net Statewide Intranet Services under this
Agreement, or both, and Pointshare declines to either revise its services
or lower its prices, or both, to meet the competing services..
d) Effect of Termination. If this Agreement is terminated under Section
6.b)(3), then it shall be terminated only as to Sections 4.a), 4.b), 4.c),
4.1), 4.j), 4.k), 5.b), 5.c), 5.e) and 5.0, and all other provisions of the
Agreement shall remain in effect. If this Agreement is terminated under
Section 6.c), then it shall be terminated only as to Sections 3.a), 3.g),
3.h), 3.1), 4.d), 4.e), 4.0, 4.g), 4.h), 5.a), 5.d), 8.a), 8.b), 8.c),
9.a), 9.b), and 10), and all other provisions of the Agreement shall remain
in effect. In all other circumstances, upon termination of this Agreement,
all of Pointshare's service obligations (including WSHA.net Statewide
Intranet Services) and WHS's right to market Pointshare services (including
any further right to receive marketing commissions) shall terminate. Except
as otherwise provided in this Agreement, within thirty (30) days after
termination, each party will pay all fees and other charges due to the
other party under this Agreement and will destroy or return to the other
party all full or partial copies of the other party's software products,
hardware products and associated documentation (including materials
relating to the Member Services) and Confidential Information in its
possession or control.
e) Limitation of Liability. In the event of termination by either party in
accordance with any of the provisions of this Agreement, neither party
shall be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of
prospective profits or anticipated sales or on account of expenditures,
inventory, investments, leases or commitments in connection with the
business or goodwill of either party. Termination shall not, however,
relieve either party of any obligations incurred prior to the termination,
including, without limitation, the obligation of either party to pay to the
other party the amounts owed as set forth in Section 5 arising prior to
such termination.
f) Survival of Certain Terms. The provisions of Sections 2, 6, 7, 11, 12, 13
and 14 of this Agreement, and all payment obligations accrued during the
term of this Agreement, shall survive the expiration or termination of this
Agreement for any reason. All other rights and obligations of the parties
shall cease upon termination of this Agreement.
7. OWNERSHIP OF INTELLECTUAL PROPERTY AND EQUIPMENT
a) Ownership of Works. Except as stated below, the patents, copyrights, trade
secrets and other intellectual property rights (the "IP Rights") in any and
all tangible or intangible works and materials developed by Pointshare in
connection with the WSHA.net Statewide Intranet Services and Member
Services including but not limited to systems, solutions, processes,
formulae, designs, inventions, algorithms, computer source and/or object
code (the "Works") will be owned by and the property of Pointshare
("Pointshare Intellectual Property"). The IP Rights in any and all Works
provided by WHS in connection with the WSHA.net Statewide Intranet Services
will be owned by and the property of WHS ("WHS Intellectual Property").
With respect to any Web development services provided by Pointshare to WHS
under this Agreement, WHS will own the IP Rights in any graphics, text,
images, music and other material of the Web Site which
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is visible to WWW browsers and any software, other than Developer Tools (as
defined below), developed to implement the Web Site. Pointshare will own
the IP Rights in any software tools or design templates of general
application, which are used to develop the Web Site (the "Developer
Tools").
b) Pointshare Software and Third Party Software. Title, ownership and
intellectual property rights in and to the software, including third party
software, all associated documentation and any enhancements and updates to
such software, provided by Pointshare in connection with the WSHA.net
Statewide Intranet Services (the "Pointshare Software") will remain in
Pointshare, its suppliers, and/or such other third party.
8. LICENSES
a) License to End Users. The WSHA Authorized Users will be granted a
revocable, non-exclusive and non-transferable license, without right to
sublicense, to use Pointshare Software and any part of Pointshare
Intellectual Property that Pointshare installs in the Medical Intranet,
solely in connection with WI-IS's use of the WSHA.net Statewide Intranet
during the term of the Agreement.
b) WHS's Obligations. WHS agrees not to (a) sell, assign, transfer, or
sublicense the Pointshare Software; (b) copy the Pointshare Software except
for backup or archival purposes; or (c) cause or permit modification,
disassembly, decompilation, or reverse engineering of the Pointshare
Software. These restrictions apply to partial or complete copies of the
Pointshare Software as well as the originals. WHS agrees to ensure that all
copies of the Pointshare Software made by WHS bear all proprietary rights
notices appearing on the original copy.
c) Compilation Copyright. Pointshare retains a copyright on the Medical
Intranet as a collective work in accordance with the United States
Copyright laws.
9. MEDICAL INTRANET
With respect to WSHA Authorized Users, WHS agrees to implement, maintain and
enforce ongoing computing and security policies and procedures that include at
least the following practices:
a) Minimum Security Requirements.
i) Individual Authentication of WSHA Authorized Users. Every individual
in an organization must have a unique identifier (or log-on ID) for
use in logging onto the organization's information systems. Password
discipline must be exercised, requiring users to change passwords on a
regular basis and to select passwords that cannot easily be guessed.
Procedures should be established to (1) revoke the identifiers of
employees who leave the organization; and (2) ensure that only
legitimate users are granted access to the organization's information
system. WSHA Authorized Users will not be authorized to provide their
login and or password to anyone except WSHA's chief information
officer (CIO).
ii) Physical Security. WHS will take steps to limit unauthorized physical
access to its PCs, Local Area Networks ("LANs") and Wide Area
Networks. WHS will not have direct access to any workstations or WHS's
LANs by the Internet without a firewall system approved by Pointshare.
WHS will not allow direct access to its PCs or LANs by outside
organizations via direct dial-up unless appropriate security (approved
by Pointshare) is in place.
iii) Education and Training Programs. WHS will establish education and
training programs to ensure that all WSHA Authorized Users receive
some minimum level of training in relevant security
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practices and knowledge regarding existing confidentiality policies.
All WSHA Authorized Users should complete such training before being
granted access to any information systems.
b) Usage and Compliance with Laws. WHS agrees that Intranet and Internet
access is not to be used for any unlawful purpose. WHS agrees to prohibit
WSHA Authorized Users from transmitting any material in a manner that
violates any U.S. or state regulation. This prohibition applies to, but is
not limited to, copyrighted material, material legally judged to be
threatening or obscene, material protected by trade secret laws, and
confidential health information.
10. EQUIPMENT RISKS.
WHS agrees to be responsible for any equipment and services purchased from
sources other than Pointshare. In the event that the additional equipment and
services are faulty and cause Pointshare to suffer delays, incur expenses or
provide replacement equipment, Pointshare will be entitled to reasonable fees
for replacement and/or rental equipment and services not described in Attachment
A.
11. NONDISCLOSURE.
Neither party shall, without first obtaining the written consent of the other
party, disclose the terms and conditions of this Agreement, except as may be
required to implement and enforce the terms of this Agreement, or as may be
required by legal procedures or by law. Neither party will disclose (the
"Disclosing Party") to any third party, or use for any purposes other than those
set forth in this Agreement, for a period of five (5) years beyond the term of
this Agreement, any technical information and any customer lists, business or
marketing plans, or non-public information provided to the other party (the
"Receiving Party") and identified as confidential or proprietary by the
Disclosing Party ("Confidential Information"). No other information exchanged
between the parties will be deemed confidential unless the parties otherwise
agree in writing. The foregoing restrictions will not apply to information that:
(i) is known to the Receiving Party at the time it receives Confidential
Information; (ii) has become publicly known through no wrongful act of the
Receiving Party; (iii) has been rightfully received by the Receiving Party from
a third party authorized to make such communication without restriction; (iv)
has been approved for release by written authorization of the Disclosing Party;
or (v) is required by law to be disclosed; provided, however, that the Receiving
Party takes all reasonable actions to maintain the confidential nature of all
Confidential Information.
12. WARRANTIES, INDEMNIFICATION, LIMITATION OF LIABILITY.
a) WARRANTIES. POINTSHARE MAKES NO REPRESENTATIONS OR WARRANTIES OTHER THAN
THOSE EXPRESSLY CONTAINED IN THIS AGREEMENT. POINTSHARE EXPRESSLY DISCLAIMS
ANY IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
POINTSHARE IS NOT THE CREATOR OF THIRD PARTY SOFTWARE AND DOES NOT GIVE ANY
WARRANTY, EXPRESS OR IMPLIED. WHS RELEASES POINTSHARE FROM ANY AND ALL
RESPONSIBILITY FOR ANY ERRORS, DAMAGES, OR FAILURE OF THIRD PARTY SOFTWARE
OR CAUSED BY THIRD PARTIES. NEITHER POINTSHARE NOR ANY OF ITS INFORMATION
PROVIDERS, LICENSORS, EMPLOYEES, OR AGENTS WARRANT THAT THE SERVICES WILL
BE UNINTERRUPTED OR ERROR FREE. POINTSHARE SHALL NOT BE LIABLE FOR ANY
DELAY, FAILURE IN PERFORMANCE OR INTERRUPTION OF SERVICES RESULTING
DIRECTLY OR INDIRECTLY FROM ANY CAUSE BEYOND ITS REASONABLE CONTROL.
b) Indemnification. WHS agrees to indemnify, defend and hold Pointshare and
its suppliers harmless from and against any and all liability, claims,
suits, demands, losses, and expenses (including reasonable attorneys fees,
legal expenses, and interest) arising from the performance or non-
performance of any obligations under this Agreement, breaches of Medical
Intranet security, or authorized or unauthorized use of the
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Medical Intranet by WHS or any WHSA Authorized User. Pointshare agrees to
indemnify, defend and hold WHS and WSHA harmless from and against any and
all liability, claims, suits, demands, losses, and expenses (including
reasonable attorneys fees, legal expenses, and interest) arising from the
performance or non-performance by Pointshare of any of Pointshare's
obligations under this Agreement.
c) Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL, RELIANCE OR COVER DAMAGES,
INCLUDING LOSS OF PROFITS, REVENUE, DATA, OR USE INCURRED BY EITHER PARTY
OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE
OTHER PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. Pointshare's total liability for damages hereunder for any cause
whatsoever will in no event exceed the amounts received by Pointshare from
WHS within the twelve (12) month period prior to the date that the cause of
action arose.
13. WEB DEVELOPMENT
a) Ownership of supplied material. WHS represents and warrants that with
respect to all information supplied by WHS to Pointshare for electronic
publication: (i) WHS holds the copyright and trademark, or explicit written
transfer of all necessary rights in digital and/or print media; (ii) WHS
does not make any defamatory, libelous, or other actionable statements; and
(iii) WHS makes no statements that contravene local or federal law in the
State of Washington, or in the United States of America, including
statements or information about products for sale.
b) Product Liability. With the exception of advertising for Pointshare's
products and services, WHS assumes full liability for any failures to
conform to product liability and advertising laws, failure to fulfill
product warranties, and failure to deliver goods or services advertised on
WHS's electronic and/or print materials.
c) Indemnification. WHS agrees to indemnify Pointshare consistent with its
indemnification obligations above for any legal action brought against
Pointshare arising out of a breach by WHS of this Section 13.
d) Copyright ownership. WHS retains copyright on all materials supplied by WHS
to Pointshare. Pointshare retains copyright on all materials rendered
retrievable from Pointshare, but Pointshare assigns full use of said
materials to WHS for WHS's use under this Agreement. Copyright of all
materials supplied by third party vendors will be retained by them, but use
rights will be negotiated prior to assignment of work.
14. GENERAL PROVISIONS
a) Dispute Resolution. If any dispute, controversy, or claim arises out of
this Agreement, or if either party alleges breach by the other ("Dispute"),
both parties will participate in a mediation conducted by a recognized
neutral third-party professional mediation service and selected by both
parties. The cost of the mediation service will be borne equally by the
parties. Both parties agree to negotiate in good faith a resolution through
such mediation prior to commencing any legal action. If any legal action
following the unsuccessful mediation of the dispute is instituted, the
prevailing party will be entitled to reasonable attorney's fees.
b) Survival. All provisions of this Agreement relating to confidentiality,
nondisclosure, limitation of liability, warranty disclaimer and
indemnification will survive the termination of this Agreement.
c) Amendments and Waivers. Any term of this Agreement may be amended or waived
only with the written consent of the parties or their respective permitted
successors and assigns. Any amendment or waiver
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effected in accordance with this Section 13(a) shall be binding upon the
parties and their respective successors and assigns.
d) Governing Law. This Agreement is governed by and construed in accordance
with the laws of the State of Washington and all disputes arising under
this Agreement will be heard in the state courts of Washington in the
County of King.
e) Force Majeure. In no event will Pointshare be liable to WHS for any delay
or failure to perform under this Agreement to the extent such failure or
delay encountered by Pointshare is beyond Pointshare' s reasonable control.
f) Independent Contractor Relationship. This Agreement does not create a joint
venture or partnership between the parties. Pointshare is an independent
contractor.
g) Government Restricted Rights. Any Pointshare products or software provided
to the US Government (or any of its agencies) will be provided with
"Restricted Rights" and the party distributing such software products will
affix to any media containing such product the following restricted rights
legend: "This Program is provided with Restricted Rights. Use, duplication
or disclosure by the Government is subject to the restrictions set forth in
DFARs 252.227-70l3(c)(1)(ii) and 48 CFR 52.227-1 9(c)( 1) and (2) or
applicable successor provisions."
h) Invalidity. If a court holds any provision of this Agreement to be invalid
or unenforceable, the other provisions of this Agreement will remain in
effect.
i) Entire Agreement. This Agreement constitutes the entire agreement of the
parties pertaining to the subject matter hereof, and merges all prior
negotiations and drafts of the parties with regard to the transactions
contemplated herein. Any and all other written or oral agreements existing
between the parties hereto regarding such transactions are expressly
canceled.
15. NOTICES
All notices or other communications required or permitted under this
Agreement shall be in writing and deemed received upon receipt. All such
communications shall be to a party at its address set forth below or such
other address as indicated by at least ten (10) days prior written notice.
Pointshare: Washington Hospital Services:
---------- ----------------------------
Pointshare Corporation Washington Hospital Services
1300-114th Avenue SE 300 Elliott Ave. W.
Suite 100 Suite 300
Bellevue, WA 98004 Seattle, WA 98119
Attn: CEO Attn: CEO
16. ATTACHMENTS AND EXHIBITS
The following Attachments are incorporated herein by reference:
Attachment A: WSHA.net Statewide Intranet Services and Fees
Attachment B: Sample Member Service Packages and Pricing
Attachment C: Listing of WHS non-hospital WEB clients and Pointshare's
existing hospital clients and active hospital sales
prospects.
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This Agreement and the Attachments, upon your written acceptance, are the
binding agreement between us with respect to the WSHA.net Statewide lntranet
Services and marketing alliance and constitute the entire agreement between us
on this subject matter and supersede any prior discussions, agreements,
proposals, or representations. This Agreement may be changed only by mutual
agreement of the parties in writing. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
shall constitute together but one and the same document.
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Pointshare Corporation Washington Hospital Services, Inc.
Signature: /s/ TKilgallon Signature: /s/ Robb Menanl
------------------- ----------------------
Name: Timothy J. Kilgallon Name: Robb Menanl
------------------------ ---------------------------
Title: CEO Title: President
----------------------- --------------------------
Date: 6 October 1998 Date: Oct. 6, 1998
------------------------ ---------------------------
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ATTACHMENT A
WSHA.net Statewide Intranet Services and Pricing
<TABLE>
<CAPTION>
<S> <C>
WSHA.net Statewide Intranet
- -------------------------------------------------------------------------------------------------------------------------
Service Description Set-up * Monthly *
- ---------------------------------------------------------------------------------------------
WSHA Administrative Offices Connection 256KBPS $[* * *] $[* * *]
- -------------------------------------------------------------------------------------------------------------------------
Intranet Browser Access and E-Mail for all WSHA staff included
- ---------------------------------------------------------------------------------------------
Unlimited Internet Access for WSHA staff included
- ---------------------------------------------------------------------------------------------
Router set-up, programming, and maintenance included
- ---------------------------------------------------------------------------------------------
General monthly usage report included
- ---------------------------------------------------------------------------------------------
WSHA Site Development, Hosting, and Maintenance $[* * *] $[* * *]
- -------------------------------------------------------------------------------------------------------------------------
Assumptions: Initial development estimate is based on approximately 200 hours
of HTML development, graphic design, testing and project management. The
estimate assumes that the WSHA.net site will include a landing page and 7
Virtual Communities pages for the Hospital CEO, Hospital CFO, Hospital CIO/MIS
Dept., Human Resources, Business Office, Quality Assurance, and Managed Care.
Each Virtual Community Page will have links to a Forum for that specialty, a
News page with internet links, and other links and services provided by the
Hospital Association. It further assumes that text is provided by WSHA
electronically and that graphics are provided either electronically or ready to
scan. Ongoing monthly maintenance for site changes assumes no more than four
hours of HTML development per month. Monthly hosting service assumes no more
than 4MB storage and 4Gb of throughput.)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
*Does not include travel, lodging, and hospital telco costs.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
AGREEMENT
ATTACHMENT B
Sample Member Service Packages and Pricing
<TABLE>
<CAPTION>
<S> <C> <C>
Package 1. Hospital Access to WSHA.net Set-up* Monthly*
- ----------------------------------------------------------------------------------------------------------------
Each Hospital connection to the WSHA.net web server includes router installation
and set-up, programming, coordination of circuit provisioning, connection to
hospital LAN, testing, set-up, and IS support. $[* * *] +
$[* * *]/user
- ----------------------------------------------------------------------------------------------------------------
Monthly fees = Base + $X/user
- ----------------------------------------------------------------------------------------------------------------
Monthly Base Fees
- ----------------------------------------------------------------------------------------------------------------
56 KBPS Frame Relay Connection $[* * *]
- ----------------------------------------------------------------------------------------------------------------
128 KBPS Frame Relay Connection $[* * *]
- ----------------------------------------------------------------------------------------------------------------
256 KBPS Frame Relay Connection $[* * *]
- ----------------------------------------------------------------------------------------------------------------
1.544 MBPS Frame Relay Connection $[* * *]
- ----------------------------------------------------------------------------------------------------------------
Fractional DS-3 TBD
- ----------------------------------------------------------------------------------------------------------------
WSHA.net Forum and E-mail Administration User Fees
- ----------------------------------------------------------------------------------------------------------------
10-99 Users $[* * *]/user+
- ----------------------------------------------------------------------------------------------------------------
100-199 Users $[* * *]/user+
- ----------------------------------------------------------------------------------------------------------------
200-299 Users $[* * *]/user+
- ----------------------------------------------------------------------------------------------------------------
* Does not include travel, lodging, and member telco costs.
- ----------------------------------------------------------------------------------------------------------------
+Add $[* * *]/user for WSHA.net +Internet e-mail accounts
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
13
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<PAGE>
AGREEMENT
ATTACHMENT B
Sample Member Service Packages and Pricing (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Package 2. Pointshare Online Service Package Set-up* Monthly*
- ----------------------------------------------------------------------------------------------------------------------
Pointshare Online Services include CheckPoint Eligibility, ContactPoint Online Healthcare Directory, ReferralPoint
Referral Management Service, InfoPoint, and PurchasePoint.
- ----------------------------------------------------------------------------------------------------------------------
Per User Online Service Subscription Fees
- ----------------------------------------------------------------------------------------------------------------------
10-19 Users $[* * *]/user $[* * *]/user
- ------------------------------------------------------------------------------------
20-49 Users $[* * *]/user
- ------------------------------------------------------------------------------------
50-99 Users $[* * *]/user
- ----------------------------------------------------------------------------------------------------
100-249 Users $[* * *]/user $[* * *]/user
- ------------------------------------------------------------------------------------
250-499 Users $[* * *]/user
- ------------------------------------------------------------------------------------
500-999 Users $[* * *]/user
- ----------------------------------------------------------------------------------------------------
1,000-2,499 Users $[* * *]/user
- ------------------------------------------------------------------------------------
2,50-4,999 Users $[* * *]/user $[* * *]/user
- ------------------------------------------------------------------------------------
5,000 - 9,999 Users $[* * *]/user
- ----------------------------------------------------------------------------------------------------
* Does not include travel, lodging, and member telco costs.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
14
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WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
AGREEMENT
ATTACHMENT B
Sample Member Service Packages and Pricing (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Package 3. Hospital Internet Access
- ----------------------------------------------------------------------------------------------------------------
Service Description Set-up* Monthly*
- ----------------------------------------------------------------------------------------------------------------
High speed, unlimited Internet Access per hospital
- ----------------------------------------------------------------------------------------------------------------
56 KBPS Frame Relay Connection $[* * *] $[* * *]
- ----------------------------------------------------------------------------------------------------------------
128 KBPS Frame Relay Connection $[* * *] $[* * *]
- ----------------------------------------------------------------------------------------------------------------
256 KBPS Frame Relay Connection $[* * *] $[* * *]
- ----------------------------------------------------------------------------------------------------------------
512 KBPS Frame Relay Connection $[* * *] $[* * *]
- ----------------------------------------------------------------------------------------------------------------
1.544 MBPS Frame Relay Connection $[* * *] $[* * *]
- ----------------------------------------------------------------------------------------------------------------
Web Development Services (pre-defined templates and custom
development) @ $[* * *]-[ * * *]/hr
- ----------------------------------------------------------------------------------------------------------------
Web Hosting Services. Varies depending on
traffic & space
- ----------------------------------------------------------------------------------------------------------------
Co-location Services. Varies depending on
traffic & space
- ----------------------------------------------------------------------------------------------------------------
Professional Consulting Services @ $[* * *]-[* * *]/hr: Usage, Security,
Confidentiality, Guidelines, Policies and Procedures
- ----------------------------------------------------------------------------------------------------------------
* Does not include travel, lodging, and member telco costs.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
15
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WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
AGREEMENT
ATTACHMENT B
Sample Member Service Packages and Pricing (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Package 4. Hospital Intranet Package
- -------------------------------------------------------------------------------------------------------------
Service Description Set-up * Monthly *
- -------------------------------------------------------------------------------------------------------------
Hospital Intranel Package for internal communications and information
dissemination within the hospital enterprise. Bundle includes:
hardware, software, departmental content consulting,
train-the-trainer training, basic monthly network activity, security
and usage reports, support and a pre-defined number of hours of site
update development/month. The "packages" below are examples. Actual
package pricing is based on the actual needs of each hospital. Secure
Internet access is also provided assuming Internet Service package is
also purchased directly through Pointshare.
- -------------------------------------------------------------------------------------------------------------
Package A $[* * *] $[* * *]
- -------------------------------------------------------------------------------------------------------------
Package B $[* * *] $[* * *]
- -------------------------------------------------------------------------------------------------------------
Package C $[* * *] $[* * *]
- -------------------------------------------------------------------------------------------------------------
Package D $[* * *] $[* * *]
- -------------------------------------------------------------------------------------------------------------
Package E $[* * *] $[* * *]
- -------------------------------------------------------------------------------------------------------------
Large or decentralized organizations Case-by-case Case-by-case
- -------------------------------------------------------------------------------------------------------------
Additional Project Management Services Pricing $[* * *]-[* * *]/hr
- -------------------------------------------------------------------------------------------------------------
Additional Intranet Consulting Services Pricing $[* * *]-[* * *]/hr
- -------------------------------------------------------------------------------------------------------------
Additional HTML Development (average) $[* * *]-[* * *]/hr
- -------------------------------------------------------------------------------------------------------------
* Does not include travel, lodging, and member telco costs. Pricing assumes e-mail administration by client
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Package A Recommended for small hospitals (less than$20M in Annual Gross
Operating Expenses): Includes NT Server hardware with high
availability features (redundant Pentium Pro CPUs, redundant hot-
swappable power supplies, RAID-0 mirrored disk arrays), web
server software, and e-mail server software. It also includes
installation and set-up of server hardware and software, 60 hours
of project management, 120 hours of content consulting and
training, and 180 hours of HTML development. Recurring monthly
services include management reporting and 14 hours of consulting
and HTML development.
Package B Recommended for small to mid-sized hospitals ($20M - $50M in
Annual Gross Operating Expenses): Includes NT Server hardware
with high availability features (redundant Pentium Pro CPUs,
redundant hot-swappable power supplies, RAID-0 mirrored disk
arrays), web server software, and e-mail server software. It also
includes installation and set-up of server hardware and software,
80 hours of project management, 180 hours of consulting and
training, and 220 hours of HTML development. Recurring monthly
services include management reporting and 18 hours of consulting
and HTML development.
Package C Recommended for mid-sized hospitals ($50M - $100M in Annual Gross
Operating Expenses): Includes NT Server hardware with high
availability features (redundant Pentium Pro CPUs, redundant hot-
swappable power supplies, RAID-O mirrored disk arrays), web
server software, and e-mail server software. It also includes
installation and set-up of server hardware and software, 100
hours of project management, 220 hours of consulting and
training, and 350 hours of HTML development. Recurring monthly
services include management reporting and 20 hours of consulting
and HTML development.
Package D Recommended for moderately-sized hospitals ($1 DOM - $200M in
Annual Gross Operating Expenses): Includes NT Server hardware
with high availability features (redundant Pentium Pro CPUs,
redundant hot-swappable power supplies, RAID-0 mirrored disk
arrays), web server software, and e-mail server software. It also
includes installation and set-up of server hardware and software,
125 hours of project management, 240 hours of consulting and
training, and 400 hours of HTML development. Recurring monthly
services include management reporting and 24 hours of consulting
and HTML development.
Package E Recommended for large hospitals ($200M - $300M in Annual Gross
Operating Expenses): Includes NT Server hardware with high
availability features (redundant Pentium Pro CPUs, redundant hot-
swappable power supplies, RAID-0 mirrored disk arrays), web
server software, and e-mail server software. It also includes
installation and set-up of server hardware and software, 150
hours of project management, 260 hours of consulting and
training. and 500 hours of HTML development. Recurring monthly
services include management reporting and 30 hours of consulting
and HTML development.
16
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WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
AGREEMENT
Attachment B
Sample Member Service Packages and Pricing (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Package 5. Hospital Extranet Package
- -----------------------------------------------------------------------------------------------------------------------
Service Description Set-up* Monthly*
- -----------------------------------------------------------------------------------------------------------------------
Hospital Extranet Package includes a secure connection to community
physicians and other healthcare partners along with the ReferralPoint
service (Referring and Consulting Provider views) and the Clinical
Messaging Service. Package prices listed assume a 256 KBPS connection
and up to four data interfaces
- -----------------------------------------------------------------------------------------------------------------------
Active Staff less than 100 $[* * *] $[* * *]
- -----------------------------------------------------------------------------------------------------------------------
Active Staff: 100 - 199 $[* * *] $[* * *]
- -----------------------------------------------------------------------------------------------------------------------
Active Staff: 200 - 299 $[* * *] $[* * *]
- -----------------------------------------------------------------------------------------------------------------------
Active Staff: 300 - 399 $[* * *] $[* * *]
- -----------------------------------------------------------------------------------------------------------------------
Active Staff: 400 - 599 $[* * *] $[* * *]
- -----------------------------------------------------------------------------------------------------------------------
Active Staff: 600 - 799 $[* * *] $[* * *]
- -----------------------------------------------------------------------------------------------------------------------
Active Staff: 800 - 1000 $[* * *] $[* * *]
- -----------------------------------------------------------------------------------------------------------------------
Active Staff less than 1000 $[* * *] $[* * *]/physician
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
* Does not include local telco circuit costs. Pricing assumes e-mail administration by client
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Existing Pointshare Hospital Clients and Active Sales Prospects
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<PAGE>
AGREEMENT
ATTACHMENT C
WHS Non-Hospital WEB Customers
------------------------------
Seattle American Medical Response
Tacoma Diagnostic Imaging Northwest
Portland Legacy Health Systems
Seattle Medalia Healthcare
Olympia Memorial Clinic
Seattle Minor & James Clinic
Portland Oregon Health Sciences University
Portland Pacific Gateway Hospital
Seattle Pacific Medical Center
Seattle Polyclinic
Seattle Puget Sound Radiology
Spokane Rockwood Clinic
Lewiston St. Joseph Medical Center
Tacoma Tacoma Radiology
Federal Way Valley Radiologists
Vancouver Vancouver Clinic
Vancouver Columbia River Mental Health
Kirkland Evergreen Pharmaceuticals
Spokane Evergreen Pharmaceuticals East
Seattle Group Health Cooperative
Seattle Seattle/King County Public Health
Fife Baby First Steps Foundation, Inc.
Seattle CHAP
Seattle King County Youth Services
Fort Worth, TX Professional medical Services
Puyallup Puyallup Tribal Health Authority
Spokane Spokane County Health District
Richland Summit Healthcare
Toppenish Yakima Val. Farm Workers
Seattle HHL Financial/Paralign
Woodinville Medical Supply Incorporated
Seattle Pacific Medicaid
Seattle Puget Sound NHC
Existing Pointshare Hospital Clients and Active Sales Prospects
---------------------------------------------------------------
Client Swedish Medical Center
Client Evergreen Community Health (hospital & clinics)
Client Yakima Memorial Hospital
Prospect Overlake Hospital
Prospect Sunnyside Medical Center
Prospect Providence (Yakima)
Prospect Holy Family Hospital (Spokane)
18
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<PAGE>
EXHIBIT 10.7
ADDENDUM AGREEMENT
BETWEEN
WASHINGTON HOSPITAL SERVICES, INC.
AND
POINTSHARE CORPORATION
THIS ADDENDUM, executed this 3/rd/ day of June, 1999, modifies the Alliance
Agreement between Washington Hospital Services, Inc. and Pointshare Corporation
effective October 6, 1998 ("Original Agreement"). In the event that there shall
be any inconsistency relating to the subject matter between any term or
condition of this Addendum and any term or condition of the Original Agreement,
the term or condition of the Addendum shall govern and control.
1. The following new section is added to the Original Agreement as Section
4(1):
"1) Promotion outside Washington. The Washington State Hospital Association
----------------------------
(WSHA) and Washington Hospital Services (WHS) agree to use their best
efforts to assist Pointshare in launching the Member Services and other
Pointshare services in states other than Washington. Such assistance shall
include, but not limited to, out of state speaking engagements, being a
reference, giving recommendations and providing a general endorsement, and
introductions to keys persons in other state hospital associations and
their for-profit affiliates."
2. The following new section is added to the Original Agreement as Section 5,
and all subsequent Sections are re-numbered accordingly:
"5. COLLABORATION ON HEALTH.NET INITIATIVE
a) Web Site Development. WHS and Pointshare will collaborate on the
--------------------
development and delivery of a Washington Health.Net web site as more
fully described on Attachment D.
b) Governance Committee. WSHA/WHS and Pointshare will establish a joint
--------------------
goverance committee comprised of two management members from each of
WHS and Pointshare to oversee the development and delivery of the
Washington Health.Net web site. All actions by the Governance
Committee are subject to the approval of the majority of the members,
including any decision to give online content and transactional
trading partner access to the Washington Health.Net web site. If the
goverance committee is deadlocked on a decision, at Pointshare's
discretion, the decision shall be tabled for a period of at least one
year.
c) Advisory Committee. WSHA/WHS and Pointshare will establish an advisory
------------------
committee comprised of one management member from each of WHS and
Pointshare as well as other mutually agreed upon healthcare industry
leaders to provide advice and recommendations on the development and
services offered through the Washington Health.Net web site. The
advisory committee's recommendations are advisory only and shall not
be binding upon either party.
d) Private-Label Sites. Nothing herein shall be construed as precluding
-------------------
or restricting Pointshare from continuing to provide other portals to
Pointshare content and services on a private-label basis."
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<PAGE>
1. Section 5(b) and (c) of the Original Agreement are hereby deleted and
replaced in their entirety with the following sections 6(b), (c) and (d);
the remainder of section 6 is renumbered accordingly:
"b) Revenue Sharing.
---------------
1. Definitions.
-----------
"Hospital Receipts" means revenues collected by Pointshare from hospitals
located in Washington state for any services including but not limited to
services for hospitals, physicians, MSOs, OP reference labs and other
providers that are either owned by the hospital or for whom the hospital
sponsors services. For purposes of this Agreement, "owned" shall mean
control of at least 50% of the voting interests of an entity.
"Government Receipts" means revenues collected by Pointshare from the
specific government and non-government entities and agencies listed on
Attachment F that are located or doing business in Washington State, and
which relates to the activities of those entities and agencies in WA State,
as such list is updated from time to time by mutual agreement of the
parties; provided, however, revenues from the following entities or
constituents shall not be included in Government Receipts: health insurance
companies, health insurance third party administrators, physicians, home
health agencies, suppliers or other organizations that provide health care
directly to patients.
"Non-Hospital Receipts" means all revenues collected by Pointshare from
sources other than hospitals located in Washington State. These other
sources consist primarily of physician revenue paid directly by physician
groups.
"Net Receipts" means receipts less charges for Third Party services. For
example, if Pointshare or WHS collects $1,000 from subscribers for the MD
Consult third party service, and MD Consult is, in turn, paid $800 for the
use of the content by Pointshare, the Net Receipt is $200.
"Pointshare-developed Applications" means those online services developed
exclusively by Pointshare including but not limited to Multi-payer
Eligibility Verification Service, ReferralPoint, ContactPoint, InfoPoint,
Hospital Community Outreach services, Clinical Messaging and Pre-admit
authorizations.
"Third Party Services" means those online services provided by parties
other than Pointshare and WHS including but not limited to CodeCorrect,
QuadraMed and MD Consult that are accessed by Washington Health.Net
subscribers from the Washington Heath.Net site.
"WHS-developed Content" means those online services developed exclusively
by WHS including but not limited to Washington Electronic Billing ("WEB")
Services.
2. Revenues Sharing.
----------------
(A) During the term of the Agreement, Pointshare shall pay WHS a fee equal
to [***] of all Hospital Receipts and Government Receipts paid in
connection with Pointshare-developed Applications. Pointshare is
entitled to retain the balance of such Hospital Receipts and
Government Receipts.
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<PAGE>
(B) During the term of the Agreement, WHS shall pay Pointshare a fee equal
to [***] of all Hospital Receipts, Government, and Non-Hospital
Receipts paid in connection with WHS-developed Content. WHS is
entitled to retain the balance of such Hospital Receipts, Government
Receipts, and Non-Hospital Receipts received in connection with WHS-
developed Content.
(C) During the term of the Agreement, Pointshare shall pay WHS a fee equal
to [***] and WHS shall pay Pointshare a fee equal to [***] of all net
receipts from Hospital Receipts, Government Receipts, and Non-Hospital
Receipts received by either party in connection with Third Party
Services.
(D) With the exception of WHS-developed Content, neither party will be
obligated to pay the other party any fee in connection with Non-
Hospital Receipts received by such party.
"c) Payments. Payments owed in connection with Section 6(b) above shall be
--------
payable to the other party within thirty (30) days following receipt of the
applicable Hospital Receipts.
"d) Warrant. In consideration of WSH and WSHA's collaboration and efforts
-------
regarding Section 4(1), Promotion Outside Washington, Pointshare will grant
WHS, subject to Board approval, a warrant to purchase up to 5,000 shares of
Pointshare's Common Stock at an exercise price equal to $0.250, or such price as
is determined by Pointshare's Board of Directors to be the appropriate value for
the company's common stock as of the date of the board approval. The warrant
will have a term of five (5) years."
4. A new Section 7 is added to the Original Agreement as follows, and all
subsequent Sections are re-numbered accordingly:
"7. Non-Compete.
-----------
Except with WHS prior written consent, Pointshare shall not market or
sell any services in WA State that are directly competitive with the "WEB
Services" currently offered by WHS as described more fully in Attachment E.
5. Section 6(b) of the Original Agreement (which after renumbering under this
Addendum will be Section 8(b)) is amended to add the following phrase to
the end of the last sentence in such Section:
";provided that annual Hospital Receipts and Government Receipts, in the
aggregate of $1.0 million or more after the second anniversary of this
Agreement shall be deemed satisfactory sales results by the parties."
6. Section 6(f) of the Original Agreement (which after renumbering under this
Addendum will be Section 8(f)) is amended as follows:
"f) Survival of Terms. The provisions of Sections 2, 8, 9, 13, 14, 15, and
16 of this Agreement, and all payment obligations accrued during the term
of this Agreement, shall survive the expiration or termination of this
Agreement for any reason. All other rights and obligations for the parties
shall cease upon termination of this Agreement."
7. A new Section 18 is added to the Original Agreement as follows:
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<PAGE>
"19. ASSIGNMENT
Neither party may assign any of its rights or obligations under this
Agreement to any other party without first obtaining the other party's
written approval; provided, however, that either party may assign this
Agreement to a successor entity pursuant to a merger, acquisition, asset
sale or other corporate reorganization. The terms and conditions of this
Agreement inure to the benefit of and are binding upon the respective
permitted successors and assigns of the parties."
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of
the day and year above mentioned, intending to be legally bound.
For: WASHINGTON HOSPITAL SERVICES, INC.
By: /s/ R. Menard
--------------------------
Position: President
--------------------------
For: POINTSHARE CORPORATION
By: /s/ Timothy Kilgallon
--------------------------
Position: CEO
--------------------------
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<PAGE>
Attachment D
------------
Washington Health.Net
1. Washington Health.Net: WHS and Pointshare will collaborate on the
---------------------
development and delivery of a Washington Health.Net web site that will be
the default landing page available for all WA state hospitals, payers, and
providers. This will be a subscription web site with secure network
connections from Pointshare, WSHA, WA hospitals, providers, and payers.
The site will include links to WSHA virtual communities and other content,
a pre-packaged bundle of Pointshare online service channels including but
not limited to multi-payer Eligibility, ContactPoint Electronic Healthcare
Directory, InfoPoint, and Pointshare and other third party premium
channels.
2. Other Enterprise Landing Pages: The larger supernet (statewide healthcare
------------------------------
network connecting physicians, hospitals, health plans and other
participants) is a collection of many subnets securely linked to Pointshare
today. Pointhshare will continue to provide other portals to the same
Pointshare content also available on Washington Health.net when clients
want their own private-labeled site for a landing page. Examples include
Providence Health Systems, Inland Northwest Health Services (INHS), Cascade
Healthcare Alliance, Evergreen Community Health, the WA State Academy of
Family Practice, and others.
3. WEB Services. Pointshare and WHS will work together to evaluate
------------
web-enabling the WEB services (described in Attachment E) and integrating
such WEB services with the Pointshare services. If and to the extent
Pointshare and WHS develop a web-enabled WEB service, the parties will a)
negotiate in good faith a revenue sharing arrangement that reflects the
relative contribution of the parties and b) Pointshare will work with WHS
to develop a plan for Pointshare to install and support any new web--
enabled version of the WEB services for Pointshare subscribers. WHS shall
pay a reasonable fee to Pointshare for installation and professional
services provided by Pointshare in connection with the web-enabled version
of WEB.
5
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<PAGE>
Attachment E
------------
Following is a description of the WEB services offered by WHS;
(a) Direct entry of fee-for-service claims into the state's Medicaid
----------------------------------------------------------------
Management Information System (MMIS). Claims are keyed directly into
------------------------------------
the system that DSHS uses to adjudicate, thus passing through the
exact edits that must be satisfied in order for payment to be assured.
Once through these edits, a claim is usually paid in 7-10 days.
(b) Direct entry of claims in the state's Labor and Industries (L&I)
----------------------------------------------------------------
Medical Information Payment System (MIPS). Claims are keyed directly
-----------------------------------------
into the system that L&I uses to adjudicate, thus passing through the
exact edits that must be satisfied in order for payment to be assured.
Once through these edits, a claim is usually paid in 7-10 days.
(c) Claim status inquiries for L&I claims. Allows providers to track where
-------------------------------------
claims are in the L&I adjudication process.
6
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<PAGE>
Attachment F
------------
Following is a list of government organizations located in the state of
Washington from which revenues will constitute "Government Receipts":
State of Washington
-------------------
Department of Services for the Blind
Department of Corrections
Office of the Economic and Revenue Forecast Council
Office of the Family and Children's Ombudsman
Office of Financial Management
Office of the Forecast Council Board of Registration for Funeral Directors and
Embalmers
Board of Health
Department of Health
Health Care Authority
Health Care Facilities Authority
Department of Information Services
Office of the Insurance Commissioner
Department of Labor and Industries
Washington State Legislature
Medical Quality Assurance Commission
Military Department
Office of the Family and Children's Ombudsman
Washington State Board of Pharmacy
Department of Revenue
Department of Social and Health Services
Washington State Patrol
Department of Veterans Affairs
Local Government
----------------
Local Public Health Departments such as:
Seattle-King County Department of Public Health
Kitsap County Health District
Chelan-Douglas Health District
Spokane Regional Health District
Tacoma-Pierce County Health Department
Federal Government
------------------
Department of Social and Health Services
Department of Health and Human Services
Other Entities
--------------
Healthcare standards setting organizations such as:
Joint Commission on Accreditation of Healthcare Organizations
7
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<PAGE>
Local healthcare advocacy organizations such as:
Healthy Mothers Healthy Babies
Community Health Access Program
Northwest Aids Foundation
Babies First Steps
Aids Care Access Program
Washington Health Foundation
Local chapters of national health advocacy and disease-specific organizations
such as:
American Diabetes Association
American Heart Association
American Red Cross
American Cancer Society
Local and local chapters of national administrative healthcare professional
societies such as:
Healthcare Financial Management Association
American College of Healthcare Executives
Pacific Northwest Health Educators
8
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<PAGE>
EXHIBIT 10.9
ALLIANCE AGREEMENT
This alliance Agreement ("Agreement") is entered into effective as of December
---------
9, 1998 (the "Effective Date"), between Oregon Medical Association ("OMA") with
-------------- ---
its principal offices at 5210 S.W. Corbett Avenue, Portland, OR 97201 and
Pointshare Corporation ("Pointshare"), with its principal offices at 1300 114th
----------
Avenue SE, Suite 100, Bellevue, Washington 98004.
1. RECITALS.
a) Pointshare provides online services for the healthcare industry.
b) The OMA promotes and has contracts with Peregrin Medical Review, Inc.
("Peregrin") for the operation of an electronic network in Oregon commonly
--------
known as OMEN (the "Existing Network") and is engaged in offering
----------------
innovative and cost-saving programs to physicians whose principal place of
business is in Oregon (hereinafter referred to as "Oregon Physicians").
-----------------
c) Concurrently with the execution of this Agreement, with the consent of the
OMA, (as represented by that certain Termination Agreement, the form of
which is attached as Attachment E), Pointshare is acquiring all of the
assets and business of Peregrin and desires to amend and restate Peregrin's
relationship with the OMA under that certain agreement dated November 1,
1997 between the OMA and Peregrin (the "Peregrin/OMA Agreement") as set
----------------------
forth in this Agreement.
d) The parties desire to set forth the terms and conditions under which
the OMA will transfer operation of the Existing Network to Pointshare and
the OMA and Pointshare will cooperate in the marketing of the Pointshare
Services (as defined below) in the State of Oregon.
In consideration of the foregoing and the agreements contained herein, the
parties agree as follows:
2. DEFINITIONS.
a) "Confidential Information" of a party shall mean any information disclosed
------------------------
by that party to the other party pursuant to this Agreement which is in
written, graphic, machine readable or other tangible form and is marked
"Confidential," "Proprietary" or in some other manner to indicate its
confidential nature. Confidential Information may also include oral
information disclosed by one party to the other pursuant to this Agreement,
provided that such information is designated as confidential at the time of
disclosure and is reduced to writing by the disclosing party within a
reasonable time (not to exceed thirty (30) days) after its oral disclosure,
and such writing is marked in a manner to indicate its confidential nature
and delivered to the receiving party.
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b) "Existing Network" shall mean the electronic network currently operated by
----------------
Peregrin under the Peregrin/OMA Agreement which shall be transferred to and
become part of Pointshare's Services under this Agreement.
c) "Pointshare Services" shall mean Pointshare services provided to Physician
-------------------
Subscribers pursuant to individual agreements between Pointshare and each
Physician Subscriber. Such Services will include those referenced in
Attachment C and such future services as the OMA and Pointshare may
mutually agree to offer to Physician Subscribers or groups of Physician
Subscribers.
d) "Proprietary Rights" shall mean all rights in the Pointshare Services,
------------------
and OMA/OMEN and Pointshare's Confidential Information, including, but not
limited to, patents, copyrights, authors' rights, trademarks, trade names,
know-how and trade secrets, irrespective of whether such rights arise under
U.S. or international intellectual property, unfair competition or trade
secret laws.
e) "Physician Subscriber" shall mean all Oregon Physicians who directly,
--------------------
or who have been included in a group or institution which enters into an
agreement with Pointshare to receive Pointshare Services.
3. TERMINATION OF PEREGRIN/OMA AGREEMENT. By a separate agreement between
Peregrin, the OMA and Pointshare (the form of which is attached as
Attachment E), the Peregrin/OMA Agreement is hereby terminated and of no
further force and effect. The OMA represents that there is no other
agreement in effect between the OMA and Peregrin, or any other parties,
either oral or written, relating to the Existing Network not previously
disclosed to Pointshare. Pointshare represents that it will pay directly
to the OMA (and withhold from Peregrin) the unpaid account owed the OMA by
Peregrin as described in Attachment E.
4. TRANSFER OF EXISTING NETWORK. The OMA hereby transfers to Pointshare, any
remaining rights that it may have to own and operate the Existing Network,
including but not limited to circuits, software, content, hardware and
existing Physician Subscribers and payer clients; provided, however that
the OMA will retain ownership of existing OMA Equipment referenced in
Paragraph 10. The OMA commits to facilitate the assignment of
relationships and agreements by payers and Providers currently
participating on the Existing Network.
5. POINTSHARE'S RIGHTS AND RESPONSIBILITIES.
a) Pointshare Services. Pointshare will provide the Pointshare Services to
-------------------
Physician Subscribers in a timely and professional manner pursuant to
individual agreements between Pointshare and each of the Physician
Subscribers.
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b) Program Resources. Pointshare will assign and manage sufficient staff
-----------------
in at least one Oregon office as necessary to deliver the Pointshare
Services in Oregon.
c) OMA Recognition. In its promotional materials, Pointshare shall have
---------------
the right to refer to the OMA as "Official Sponsor" of the Pointshare
Services in Oregon and will publicly recognize the Oregon Medical
Association as a value-added sponsor of Pointshare Services. Additionally,
Pointshare will prominently display OMA's logo and name on supplemental
marketing literature directed to potential Physician Subscribers; provided,
however, that OMA shall have the right to reasonable and timely opportunity
to review and to approve or disapprove in writing all such marketing
materials and advertising before use and implementation (such approval not
to be unreasonably withheld). If OMA fails to respond to Pointshare within
ten (10) business days after receiving marketing materials for approval,
OMA shall be deemed to have approved such materials.
6. OMA RIGHTS AND RESPONSIBILITIES.
a) Sponsorship and Promotion. OMA will sponsor and promote Pointshare's
-------------------------
services to Oregon Physicians and their community health partners such as
payers, reference labs, pharmacies, home health, imaging centers,
hospitals, and their respective state organizations. Promotional
activities to physicians will be as mutually agreed to and include
providing newsworthy reports in the OMA monthly newsletter, promoting on
the OMA web site, facilitating positioning for Pointshare in quarterly
promotional inserts and at OMA meetings where exhibit space is available,
and direct mail correspondences, all of which shall be at Pointshare's
expense. Sponsorship activities to community health partners will include
telephone calls and some fact-to-face meetings. The OMA shall without
additional charge include newsworthy reports in the OMA newsletter and
promotional materials on the OMA web site. Pointshare shall fund OMA
meeting exhibitor expenses, direct mail correspondences, and the production
and cost of mailing promotional materials inserted with quarterly
correspondences. The OMA reserves the right not to sponsor products,
services or discounted offerings under Purchase Point (Attachment C).
b) Exclusivity. Except for the agreements entered into prior to the
-----------
Effective Date and identified on Attachment B, relating to goods and
services under which the OMA already endorses and sponsors, the OMA
represents and warrants that the OMA has not entered into, and the OMA
agrees that it will not enter into during the term of this Agreement, any
agreement or arrangement with any third party concerning the offering,
sponsoring, or promoting of on-line network services or products that are
competitive with the Pointshare Services listed on Attachment C.
c) OMA Assistance and Cooperation in Providing Information.
-------------------------------------------------------
i. At the request of Pointshare, and upon reasonable notice,
representatives from the
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OMA will attend Network steering committee meetings and meetings with
prospective participants (such as insurance companies, laboratories,
pharmacies, etc.);
ii. The OMA will provide Pointshare with all periodic updates of its
Physician Directory data for the purpose of use within on-line
Services set forth in Attachment C and sales activities, which
information is understood to be confidential information.
d) Advisory Board Participation. During the term of this Agreement, a
----------------------------
mutually agreed representative from the OMA will serve on Pointshare's
Oregon Online Healthcare Services Advisory Board, and the OMA will use
reasonable efforts to support and contribute to such advisory board. It is
estimated that the time commitment shall be no more than 20 hours a year.
e) OMA Use of OMEN\Pointshare. While this Agreement is in effect the OMA
--------------------------
shall, without change, have the right to access the Service for the purpose
of review and providing feedback to Pointshare. Such access shall be
through the OMA's existing 56 KBPS frame connection, at OMA's expense. Any
increase in access bandwidth or usage shall be mutually agreed to by both
parties, and any additional costs for increased bandwidth or usage will be
the responsibility of the OMA.
7. SPONSORSHIP REIMBURSEMENTS.
a) Reimbursement to OMA for Sponsorship Activities. During the term of
-----------------------------------------------
this Agreement, Pointshare will reimburse the OMA for sponsorship
activities on a quarterly basis, based on the cumulative number of
Physician Subscribers at the end of each calendar month, as set forth on
Attachment A.
b) Sponsorship Reimbursements. Pointshare shall remit to OMA all sponsorship
--------------------------
reimbursements accrued from the previous calendar quarter along with a
report detailing the sponsorship reimbursements and Physician Subscribers
for such quarter within 30 days following the end of the previous calendar
quarter.
c) Audit Right. To verify the accuracy of sponsorship reimbursement due
-----------
under Section 7.a), Pointshare shall keep accurate books and records
reflecting the names and numbers of Physician Subscribers as defined in
2.e) above. Pointshare shall permit an independent certified public
accountant selected by the OMA to inspect such records at all reasonable
times upon 48 hours' prior written notice at OMA's expense. Pointshare
shall pay the accountant fees if the inspection reveals an underpayment of
reimbursements of more than ten percent (10%) in any quarterly reporting
period. Upon termination of this agreement, the OMA will have 90 days to
conduct a final audit.
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8. TERM AND TERMINATION.
a) Agreement Term. The term of this Agreement will commence on the
--------------
Effective Date and continue for a period of five (5) years (the "Initial
Term") and thereafter shall automatically renew annually unless terminated
by either party upon ninety (90) days written notice to the other party
prior to and effective on the expiration of the current term.
b) Termination. Either party may terminate this Agreement prior to expiration
-----------
of the term: (a) if either party fails to perform any of its material
obligations under this Agreement and such failure remains uncured for
ninety (90) days (or in the case of failure to make a required payment,
twenty (20) days) after receipt of written notice of default from the other
party; or (b) if either party ceases to conduct business, becomes or is
declared insolvent or bankrupt, files a petition in bankruptcy, is the
subject of any proceeding relating to its bankruptcy, liquidation or
insolvency which is not dismissed within thirty (30) days, appoints a
receiver or liquidator of any of its properties or assets or makes an
assignment for the benefit of its creditors.
c) OMA recognizes that maintaining OMEN participation by health plans
("Plans") as well as increasing the number of those Plans participating are
important elements in the continued success of the network. Pointshare
recognizes that while the OMA plays a key role in this process, OMA can
neither assure continued participation nor cause other Plans to
participate. However, OMA will use its best efforts to educate presently
participating Plans to the enhancements and benefits of transition of the
OMEN network to Pointshare's stewardship. OMA will further use its best
efforts to attract the interest of other Plans and will assist Pointshare
in identifying and arranging meetings with Plan principals so Pointshare
can make its case for participation. In the event a Plan signals its intent
to withdraw from participation, OMA will use its best efforts to discourage
withdrawal.
d) Effect of Termination. Upon termination of this Agreement, all of
---------------------
Pointshare's service obligations (including Pointshare Services) to OMA and
OMA's sponsorship of Pointshare Services (including any further right to
receive sponsorship reimbursements) shall terminate. Except as otherwise
provided in this Agreement, within thirty (30) days after termination, each
party will pay all fees and other charges due to the other party under this
Agreement and will destroy or return to the other party all full or partial
copies of the other party's Confidential Information and unused promotional
materials in its possession or control.
e) Limitation of Liability. In the event of termination by either party in
-----------------------
accordance with any of the provisions of this Agreement, neither party
shall be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of
prospective profits or anticipated sales or on account of expenditures,
inventory, investments, leases or commitments in connection with the
business or goodwill of either party. Termination shall not, however,
relieve either party of any obligations incurred prior
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to the termination, including, without limitation, the obligation of either
party to pay to the other party the amounts owed as set forth in Section 4
arising prior to such termination.
f) Survival of Certain Terms. The provisions of Section 2, 7c, 8, 9, 10, 12,
-------------------------
13 and 14 of this Agreement, and all payment obligations accrued during the
term of this Agreement, shall survive the expiration or termination of This
Agreement for any reason provided that provisions of Section 7c shall
survive for only ninety (90) days following termination. All other rights
and obligations of the parties shall cease upon termination of this
Agreement.
g) Return of Property Other than Confidential Information. Upon termination,
------------------------------------------------------
Pointshare shall, within 10 days, return to the OMA the hardware and
software (including upgrades) and other property transferred by Peregrin
and the OMA through this Agreement as set forth in Attachment D.
9. OPTION TO BUY-OUT AGREEMENT. At any time following after six (6) months
----------------------------
but before twenty four (24) months of this Agreement, Pointshare may elect
to buy-out its remaining rights and obligations under this Agreement from
OMA, by paying a one-time cash payment of [* * *] to OMA (the "Buy-Out
-------
Amount"). Upon payment of the Buy-Out Amount, (i) further obligations of
------
the OMA in this Agreement will include Sections 6 a), b), c), d) and e) for
the duration of the initial term of this Agreement and (ii) Pointshare
will have no obligation to pay any further sponsorship reimbursements to
OMA pursuant to Section 7. Such a buy-out shall act as a termination of
this Agreement.
10. OWNERSHIP OF INTELLECTUAL PROPERTY AND EQUIPMENT.
a) Ownership of Works. Except as stated below, the patents, copyrights, trade
------------------
secrets and other intellectual property rights (the "IP Rights") in any and
---------
all tangible or intangible works and materials developed by Pointshare in
connection with the Pointshare Services including but not limited to
systems, solutions, processes, formulae, designs, inventions, algorithms,
computer source and/or object code (the "Works") will be owned by and the
-----
property of Pointshare ("Pointshare Intellectual Property"). The IP Rights
--------------------------------
in any and all content provided by OMA in connection with Pointshare
Services will be owned by and the property of OMA ("OMA Intellectual
----------------
Property"). With respect to any Web development services provided by
--------
Pointshare to OMA under this Agreement, OMA will own the IP Rights in any
graphics, text, images, music and other material of the Web Site which is
visible to WWW browsers and any software, other than Developer Tools (as
defined below), developed to implement the Web Site. Pointshare will own
the IP Rights in any software tools or design templates of general
application, which are used to develop the Web Site (the "Developer
---------
Tools").
-----
b) Pointshare Software and Third Party Software. Title, ownership and
--------------------------------------------
intellectual property rights in and to the software, including third party
software, all associated documentation and any enhancements and updates to
such software, provided by Pointshare in connection
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with the Pointshare Services (the "Pointshare Software") will remain in
-------------------
Pointshare, its suppliers, and/or such other third party.
c) Equipment. OMA will own all right, title and interest in the hardware and
---------
equipment owned by the OMA on the Effective Date ("OMA Equipment") as set
-------------
forth in Attachment d. Pointshare may use the OMA Equipment during the
term of this Agreement to provide the Pointshare Services to Physician
Subscribers but will return all OMA Equipment to the OMA upon cessation of
use or termination of this Agreement.
11. TRADEMARK LICENSE. Subject to the terms and conditions of this Agreement
and the terms and conditions of the OMA Agreement with Ohio State
University, the OMA hereby grants to Pointshare a nonexclusive, non-
transferable right and license to use the trademark "OMEN", the Existing
Network's domain name ("OMEN.org") and the OMEN logo for purposes related
--------
to this Agreement.
12. NONDISCLOSURE.
Neither party shall, without first obtaining the written consent of the
other party, disclose the terms and conditions of this Agreement, except as
may be required to implement and enforce the terms of this Agreement, or as
may be required by legal procedures or by law. Neither party shall
disclose to any third party, or use for any purposes other than those set
forth in this Agreement, for a period of five (5) years beyond the term of
the Agreement, any technical information and any customer lists, business
or marketing plans, or non-public information provided to the other party
and identified as confidential or proprietary by the other party
("Confidential Information"). No other information exchanged between the
parties will be deemed confidential unless the parties otherwise agree in
writing. The foregoing restrictions will not apply to information that:
(i) is known to the party at the time it receives Confidential Information;
(ii) has become publicly known through no wrongful act of the party; (iii)
has been rightfully received by the party from a third party authorized to
make such communication without restriction; (iv) has been approved for
release by written authorization of the party; or (v) is required by law to
be disclosed; provided, however, that the party takes all reasonable
actions to maintain the confidential nature of all confidential
Information.
13. REPRESENTATIONS, WARRANTIES, INDEMNIFICATION, LIMITATION OF LIABILITY.
a) Representation. Each party hereto represents and warrants to the other
--------------
that it has the full power and legal right and authority to execute,
deliver and perform this Agreement and that this Agreement does not
conflict with any other agreement by which such party is bound, that has
not been disclosed to the other party.
b) WARRANTIES. NEITHER PARTY MAKES ANY REPRESENTATIONS OR
----------
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WARRANTIES OTHER THAN THOSE EXPRESSLY CONTAINED IN THIS AGREEMENT. BOTH
PARTIES EXPRESSLY DISCLAIM ANY IMPLIED WARRANTIES, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
c) Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
-----------------------
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL, RELIANCE OR COVER DAMAGES,
INCLUDING LOSS OF PROFITS, REVENUE, DATA, OR USE INCURRED BY EITHER PARTY
OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE
OTHER PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
14. GENERAL PROVISIONS.
a) Dispute Resolution. If any dispute, controversy, or claim arises out of
------------------
this Agreement, or if either party alleges breach by the other ("Dispute"),
both parties will participate in a mediation conducted by a recognized
neutral third-party professional mediation service and selected by both
parties. The cost of the mediation service will be borne equally by the
parties. Both parties agree to negotiate in good faith a resolution
through such mediation for at least 30 days prior to commencing any legal
action. If any legal action following the unsuccessful mediation of the
dispute is instituted, the prevailing party will be entitled to reasonable
attorney's fees.
b) Survival. All provisions of this Agreement relating to confidentiality,
--------
nondisclosure, limitation of liability, warranty disclaimer and
indemnification will survive the termination of this Agreement. This
Agreement shall be binding on the parties' successors and assigns, but
shall not be assigned without the prior written consent of the other party
including a sale of all or substantially all of a party's assets or
business which consent shall not be unreasonably withheld.
c) Amendments and Waivers. Any term of this Agreement may be amended or
----------------------
waived only with the written consent of the parties or their respective
permitted successors and assigns. Any amendment or waiver effected in
accordance with this Section 15(a) shall be binding upon the parties and
their respective successors and assigns.
d) Force Majeure. In no event will either party be liable to each other for
any delay or failure to perform under this Agreement to the extent such
failure or delay encountered by either party is caused by a natural
disaster, an act of war or similar circumstance.
e) Governing Law. This Agreement is governed by and construed in accordance
-------------
with the laws of the State of Oregon and all disputes arising under this
Agreement will be heard in the state courts of Oregon in the County of
Multnomah.
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f) Independent Contractor Relationship. This Agreement does not create a
-----------------------------------
joint venture or partnership between the parties. Pointshare is an
independent contractor.
g) Invalidity. If a court holds any provision of this Agreement to be invalid
----------
or unenforceable, the other provisions of this Agreement will remain in
effect.
h) Entire Agreement. This Agreement constitutes the entire agreement of the
----------------
parties pertaining to the subject matter hereof, and merges all prior
negotiations and drafts of the parties with regard to the transactions
contemplated herein. Any and all other written or oral agreements existing
between the parties hereto regarding such transactions are expressly
canceled.
15. NOTICES.
All notices or other communications required or permitted under this
Agreement shall be in writing and deemed received upon receipt. All such
communications shall be to a party at its address set forth below or such
other address as indicated by at least ten (10) days prior written notice.
Pointshare: Oregon Medical Association
---------- --------------------------
Pointshare Corporation Oregon Medical Association
1300-114th Avenue SE, Suite 100 5210 SW Corbett Avenue
Bellevue, WA 98004 Portland, OR 97201
Attn: CEO Attn: Executive Director
16. ATTACHMENTS AND EXHIBITS
The following Attachments are incorporated herein by reference:
Attachment A: Sponsorship Reimbursement Schedule
Attachment B: OMA Existing Sponsorship Agreements
Attachment C: Pointshare Services
Attachment D: OMA Equipment
Attachment E: OMA/Peregrin Termination Agreement
This Agreement and the Attachments, upon your written acceptance, are the
binding agreement between us with respect to the Existing Network and OMA's
Sponsorship and constitute the entire agreement between us on this subject
matter and supersede any prior discussions or agreements. This Agreement may be
changed only by mutual agreement of the parties in writing. This Agreement may
be executed in any number of counterparts, each of which shall be an original
and all of which shall constitute together but one and the same document.
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Pointshare Corporation Oregon Medical Association
Signature: /s/ Signature: /s/
Name: Name:
Title: Title:
Date: Date:
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ATTACHMENT A
------------
SPONSORSHIP REIMBURSEMENT SCHEDULE*
------------------------------------------------------------------------
Physician Subscribers Monthly Sponsorship
Reimbursement* For
Each Physician
Subscriber
------------------------------------------------------------------------
When there are 1-500 Physician Subscribers, $[***] for each
reimbursement is:
------------------------------------------------------------------------
When there are 501-1,000 Physician Subscribers, $[***] for each
reimbursement increases for all to:
------------------------------------------------------------------------
When there are 1,001-1,500 Physician $[***] for each
Subscribers, reimbursement increases for all to:
------------------------------------------------------------------------
When there are 1,501-2,000 Physician $[***] for each
Subscribers, reimbursement increases for all to:
------------------------------------------------------------------------
When there are 2,001-2,500 Physician $[***] for each
Subscribers, reimbursement increases for all to
------------------------------------------------------------------------
When there are 2,501 or more Physician $[***] for each
Subscribers, reimbursement increases for all to:
------------------------------------------------------------------------
*Monthly sponsorship reimbursements paid to OMA shall be calculated on the
number of Physician Subscribers as of the last day of each calendar month.
Thus, if on the last day of a given month 2,500 Physician Subscribers
participated, then $[***] in reimbursements would be paid for that month. If
on the last day of the next month Physician Subscriber participation increased
to 2510, then $[***] would be paid for that month.
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ATTACHMENT B
------------
OMA EXISTING SPONSORSHIP AGREEMENTS
1. CNA INSURANCE - Professional Liability Insurance coverage.
2. Kerr Cruikshank Agency - Life, Disability, Group Health Insurance.
3. Liberty Mutual Insurance Company - Group Workers' Comp insurance.
4. Quick Collect - Account collection services
5. Affinity Fund - Discounted long distance services
6. Enterprise - Discounted car rental services
7. Entertainment Oregon - Coupon books for restaurants, lodging and
entertainment.
8. LL Publications - Publishers of OMA's membership roster
9. OMA Magazine Plan - A Glen Cove, NY company providing discounted
subscriptions.
10. OMA Management Service - Printing and mailing services.
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ATTACHMENT C
------------
POINTSHARE SERVICES
. AccessPoint - Dial-up or high-speed digital access to e-mail, participating
-----------
medical community intranet sites, the Internet, 3rd party premium services,
and other Pointshare online services.
. CheckPoint Eligibility - Web-based, online patient eligibility information
----------------------
derived from a number of participating private and government health plans.
. ReferralPoint - Web-based, online workflow service to manage the referral
-------------
process including: referral creation, transmission, authorizations (by
participating health plans), receipt of consultative reports, and progress
tracking between providers.
. ContactPoint - Web-based, interactive healthcare directly of physicians,
------------
ancillary healthcare providers, professional service providers and
suppliers.
. Clinical Messaging - Clinical information exchange between physician
------------------
subscribers and participating hospitals, reference laboratories, and
diagnostic imaging services.
. InfoPoint - Organized and relevant collection of links to medical
---------
reference, educational, and news sites on the World Wide Web.
. PurchasePoint - Access to suppliers providing discounted offerings to
-------------
Subscribers.
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ATTACHMENT D
------------
OMA EQUIPMENT
See attached list entitled, "LIST OF HARDWARE" which is pages 8 and 9 of the
Network Operation Agreement between Peregrin Medical Review and Oregon Medical
Association dated November 1, 1977.
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ATTACHMENT E
------------
TERMINATION AGREEMENT
Date: December 9, 1998
Parties: Oregon Medical Association (OMA)
Peregrin Medical Review, Inc. (Peregrin)
Pointshare Corporation (Pointshare)
WHEREAS, the OMA and Peregrin previously entered into an agreement of
April 5, 1995 and a Memorandum of Understanding of November 10, 1997; and
WHEREAS, Peregrin desires to transfer its OMA/OMEN(TM) relationship and
assets to Pointshare; and
WHEREAS, the OMA is agreeable to such a transfer subject to the execution
of this Agreement.
NOW, THEREFORE, it is agree that:
1. The OMA/Peregrin previous contractual arrangements are terminated upon
execution of an agreement between Pointshare and OMA.
2. The OMA and Peregrin agree that the winding up of their affairs is
necessary and in that regard, Peregrin agrees to account for and pay all
royalties accrued through the effective date of this termination.
3. Peregrin further agrees to pay telephone charges of U.S. West for
Circuit Nos. 503-D07-7426-426, 503-D08-7678-678, and 541-D08-7261-261 through
November 4, 1998 and any accruing charges through the effective date of the
termination. The present charges accrued through November 4, 1998 to the
knowledge of the OMA, are $5,448.61. Peregrin further agrees to pay charges for
GTE Circuit No. CLS72.QGEA.02964. The OMA believes that the charges accrued as
of October 13, 1998 are $815.83.
4. In consideration of the OMA's consent to the transfer of assets and
the OMEN(TM) Network from Peregrin to Pointshare, Peregrin agrees to hold
harmless the OMA from any liability, including costs of defense that the OMA may
incur arising out of or relating to
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Peregrin's operation and use of the OMEN(TM) Network through the effective date
of the termination of their relationship.
5. The OMA consents to and authorizes the transfer by Peregrin to
Pointshare of the hardware, software and OMEN Project to Pointshare
Corporation.
6. The effective date of the termination of this Agreement shall be the
9th day of December, 1998.
OREGON MEDICAL ASSOCIATION PEREGRIN MEDICAL REVIEW, INC.
/s/ Robert Dernedde /s/ Samuel H. Bosch
By:__________________________ By:___________________________
Robert Dernedde Samuel H. Bosch
Executive Director
Dated: 12-3-98 Dated: 12-9-98
POINTSHARE CORPORATION
/s/ Timothy Kilgallon
By:______________________________
Timothy J. Kilgallon
President and CEO
Dated: 12-8-98
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EXHIBIT 10.11
FOURTH AMENDMENT TO LEASE
Expansion of Leased Premises
THIS FOURTH AMENDMENT TO THE LEASE is made this 21/st/ of February, 2000 by
and between Spieker Properties, L.P., a California Limited Partnership, (the
"Landlord") and Pointshare Corporation, a Washington corporation, (the
"Tenant").
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated February
3, 1999 (the "Lease") and amended thereafter for certain premises located at
1300 114th Ave. S.E., Bellevue, Washington 98004 (the "Premises"), as more fully
described in the Lease; and
WHEREAS, Landlord and Tenant desire to expand the Premises and modify the
Lease accordingly;
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties hereby mutually agree as follows:
1. PREMISES: Effective on March 1, 2000, the Premises shall include
--------
approximately 3,277 rentable square feet located in Suites 110 and 245 in
that certain building commonly known as Mercer Canal Building "L", 1300
114/th/ Avenue SE, Bellevue, Washington, as outlined in Exhibit B attached
hereto, for a total of approximately 22,312 rentable square feet for Suites
L/100, L/110, L/208, L/232, L/240, L/245, L/250 of the Mercer Canal Building
and I/220 of the Conifer Building (hereinafter defined as the "Entire
Premises").
Effective on March 1, 2002, the Entire Premises shall consist of
approximately 22,570 rentable square feet.
2. COMMENCEMENT DATE: The scheduled term commencement date for Suites L/110 and
-----------------
L/245 shall be March 1, 2000, as defined in Paragraph 24 of the Lease.
3. RENT: Effective on March 1, 2000, the Base Rent for the Entire Premises as
----
defined in Paragraph 6 of the Lease shall be adjusted to reflect the
following:
03/01/00 - 08/31/00 $43,146.00 per month
09/01/00 - 02/28/01 $46,411.00 per month
03/01/01 - 02/28/02 $47,803.00 per month
03/01/02 - 02/29/03 $50,005.00 per month
03/01/03 - 02/28/04 $51,648.00 per month
03/01/04 - 02/28/05 $52,969.00 per month
4. TENANT'S PROPORTIONATE SHARE OF PROJECT:
---------------------------------------
Effective on March 1, 2000, Tenant's Proportionate Share of the Project shall
be 4.824%.
Effective on March 1, 2002, Tenant's Proportionate Share of the Project shall
be 4.880%.
5. SECURITY DEPOSIT: Upon execution of this Fourth Amendment to Lease, Tenant
----------------
shall deposit the sum of Eight Thousand Ninety and no/100 Dollars ($8,090.00)
in accordance with provisions of Paragraph 19 of the Lease. Upon deposit by
the Tenant of the sum herein required, the security deposit held by Landlord
shall total Fifty-Two Thousand Eight Hundred Seventy-Four and no/100 Dollars
($52,874.00). Upon Tenant's deposit of Fifteen Thousand Two Hundred Thirty-
Three and no/100 Dollars ($15,233.00) on or before September 1, 2000, as
outlined in the First Amendment, the security deposit held by the Landlord
shall total Sixty-Eight Thousand One Hundred Seven and no/100 Dollars
($68,107.00).
7. PARKING: Effective on March 1, 2000, Landlord will identify three (3)
-------
additional covered reserved parking stalls for Tenant's use at the Mercer
Canal Building. Tenant shall pay Landlord $40.00 per month per additional
covered stall as additional rent, subject to increase over the term of the
Lease.
8. IMPROVEMENTS BY LANDLORD: Landlord shall deliver Suites L/110 and L/245 in
------------------------
the Mercer Canal Building to Tenant in "as is" condition, except that
Landlord shall provide the following tenant improvements to Suites L/110 and
L/245 at Landlord's cost, utilizing building standard materials, finishes and
colors, as follows:
Suite L/110:
-----------
. Create doorway between Suites 110 and 100 as shown on Exhibit C-1
Suite L/245:
-----------
. New carpet and rubber base
. New paint on all walls
Page 1 of 2
<PAGE>
Landlord shall provide any additional improvements not listed herein at
Tenant's sole cost and expense and as specified in a space plan to be
mutually approved by Landlord and Tenant and hereby incorporated into the
Lease in the form of an Addendum to the Fourth Amendment to the Lease as
necessary.
9. SPACE PLANNING: Landlord, at Tenant's sole cost, will engage an
--------------
architectural firm for the preparation of any space plans and other
drawings, along with City permits and approvals which the Landlord, in its
sole discretion, determines to be necessary to do the space construction.
10. BROKER: Landlord and Tenant agree that no commission shall be due from
------
Landlord to an outside party in connection with the Lease herein proposed
and that both parties shall indemnify the other against any claims by an
outside broker.
11. CONTINGENCY: Tenant acknowledges that Landlord has notified Tenant that
-----------
Suites L/110 and L/245 in the Mercer Canal Building are currently leased by
third party tenants. This Lease is subject to Landlord regaining possession
of Suites L/110 and L/245 from said third party tenants on terms and
conditions satisfactory to Landlord in its sole discretion.
Except as expressly modified above, all terms and conditions of the Lease
remain in full force and effect and are hereby ratified and confirmed.
LANDLORD: TENANT:
Spieker Properties, L. P. Pointshare Corporation,
a California limited partnership a Washington corporation
By: Spieker Properties, Inc.,
a Maryland corporation
Its: General Partner
/s/ Richard Gervais /s/ Christopher P. Dishman
- -------------------------------- ----------------------------------
By: Richard P. Gervais By: Christopher P. Dishman
Its: Vice President Its: Vice President, Finance &
Administration
Date:___________________________ Date: 2/24/00
-----------------------------
Fourth Lease Amendment dated Page 2 of 2
2/18/00
Pointshare Corporation
<PAGE>
STATE OF Washington )
-----------------
) ss.
COUNTY OF King )
-----------------
On this 24th day of February , 2000 , personally appeared before me
------- --------------- ---
Christopher P. Dishman , to me known to be the Vice President, Finance of the
- -------------------------- ------------------------
corporation that executed the within and foregoing instrument, and acknowledged
said instrument to be the free and voluntary act and deed of said corporation,
for the uses and purposes therein mentioned, and on oath stated that __he was
authorized to execute said instrument and that the seal affixed (if any) is the
corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal the day and year first above written.
/s/ Lisa Y. Leitner
------------------------------------------------
Print Name: Lisa Y. Leitner
-------------------------------------
[SEAL] NOTARY PUBLIC in and for the State of
Washington , residing at
-----------------------
King County
-----------------------------------.
My commission expires: May 23, 2002
--------------------------
STATE OF ________________)
) ss.
COUNTY OF ________________)
On this __________ day of ______________, 20__, personally appeared before
me Richard P. Gervais, to me known to be the Vice President of the corporation
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute this instrument and that the seal affixed (if any) is the
corporate seal of said corporation.
________________________________________________
Print Name:_____________________________________
NOTARY PUBLIC in and for the State of
_______________________, residing at
___________________________________.
My commission expires:__________________________
Pointshare Corporation Lease Amendment dated 02/21/00 for Premises located at
Mercer Canal Building, Suites 110 and 245
<PAGE>
EXHIBIT B
---------
PREMISES
MERCER CANAL BUILDING "L", SUITES 110 and 245
POINTSHARE CORPORATION
Cross hatched portion outlined in red reflects the Premises as referenced in
Paragraph 1 of the Lease. As built condition may vary from plan. Not to scale.
[FIRST FLOOR PLAN]
[SECOND FLOOR PLAN]
Landlord ________
Tenant CPD
--------
<PAGE>
EXHIBIT C
---------
IMPROVEMENTS
MERCER CANAL BUILDING "L", SUITES 110 AND 245
POINTSHARE CORPORATION
A. Landlord's Work
---------------
Premises shall be delivered to Tenant in "As Is" condition, except that
Landlord, at Landlord's sole cost and expense, shall provide certain
improvements to be made in the Premises, as specifically described herein.
Tenant agrees to provide Landlord with information and approvals as may be
requested by Landlord in connection with Landlord's obligations pursuant to
this paragraph, including, but not limited to, materials, locations,
approvals and selections requested by Landlord from Tenant, on a timely
basis and in a time frame consistent with Landlord's construction and
delivery schedule. Notwithstanding anything contained herein to the
contrary, Landlord shall not be responsible to move, furnish or install
appliances, furniture, files, moveable partitions or systems furniture or
office equipment to Tenant or the Premises. Landlord's work shall be
completed utilizing Building Standard materials, finishes and colors.
Landlord may re-use materials and/or supplies in its sole discretion.
Improvements provided by Landlord shall consist of the following work in
the Premises to be completed on a schedule determined by Landlord in its
sole discretion (hereinafter referred to as "Landlord's Work"):
Suite 110:
---------
. Create doorway between Suites 110 and 100 as shown in Exhibit C-1
Suite 245:
---------
. New carpet and rubber base
. New paint on all walls
B. Tenant's Work
-------------
Landlord shall make reasonable efforts to coordinate with Tenant's
construction project manager in scheduling installation of Tenant's cabling
and telecom equipment by Tenant's contractors and/or employees in the
Premises at Tenant's sole cost and expense (hereinafter referred to as
"Tenant's Work"). Tenant shall obtain at its sole cost and expense, permits
and other governmental approvals as may be required for the completion of
Tenant's Work. Building permits and any other governmental approvals for
Tenant's work shall be drawn separate and apart from those drawn by
Landlord for completion of the tenant improvements. Tenant's Work shall not
be performed under building permits or other approvals related to the work
performed by Landlord. Tenant agrees not to interfere with or cause delay
in the completion of tenant improvement work by Landlord and/or its
contractors. Tenant, its employees and/or contractors shall not perform any
Tenant's Work in the Premises without prior approval of Landlord. All such
approved Tenant Work performed prior to the Lease Commencement Date shall
be subject to all of the terms and conditions of the Lease except for the
payment of Base Rent which shall not be due until the Commencement Date.
Notwithstanding anything stated herein, if Tenant's Work causes a delay or
otherwise increases the cost of Landlord's Work, Tenant shall reimburse
Landlord for said costs on or before the Lease Commencement Date.
All improvements shall be subject to applicable codes, laws and other
governmental regulations which may apply.
Tenant's occupancy of the Premises shall be deemed acceptance of the Tenant
Improvements herein described and Landlord shall be deemed to have fulfilled its
obligations with respect to Tenant Improvements.
Landlord ________
Tenant CPD
--------
<PAGE>
EXHIBIT C-1
-----------
IMPROVEMENTS
MERCER CANAL BUILDING "L", SUITE 110
POINTSHARE CORPORATION
[FLOOR PLAN]
Landlord ______
Tenant CPD
------
<PAGE>
EXHIBIT 10.12
SUBLEASE AGREEMENT
1. PARTIES This Sublease is entered into as of the 13th day of July, 1997, by
and between Baugh Industrial Contractors, Inc., a Washington Corporation
("Sublessor"), and HealthKnowledge Corporation, a Washington Corporation
("Sublessee"), as a Sublease under the Lease (the "Lease") dated May 25, 1995,
entered into by Sublessor and Spieker Properties, L.P. ("Master Landlord"). A
copy of the Lease is attached hereto, marked Exhibit A, and incorporated herein
by reference.
2. PROVISIONS CONSTITUTING SUBLEASE
2.1 Assumption of Obligations. This Sublease is subject to all of the terms and
-------------------------
conditions of the Lease in Exhibit A, except for Sections 3(a), 32(a), 36 and
Exhibit C of the Lease which are specifically excluded and except as otherwise
specifically exempted herein. Subject to said limitations, Sublessee shall
assume and perform the obligations of Sublessor as Lessee in the Lease for the
benefit of Sublessor, and Sublessor shall assume and perform to the extent
possible the obligations of Master Landlord as Lessor in the Lease for the
benefit of Sublessee, to the extent said terms and conditions are applicable to
the Premises (defined below) subleased pursuant to this Sublease. Sublessee
shall be entitled to receive all of the rights and benefits reserved for the
Sublessor as Lessee under the Master Lease including use of the seven parking
spaces in the building garage.
2.2 Exceptions. Notwithstanding anything contained herein to the contrary, (i)
----------
Sublessee's duties and obligations hereunder apply only to acts and omissions
occurring during the term of this Sublease; (ii) Sublessee's duties and
obligations in regard to the condition of the Premises shall be performed based
on the condition of the Premises when the Premises are delivered to and accepted
by Sublessee hereunder and not on their condition upon the commencement of the
Lease; (iii) nothing contained in this Sublease shall affect the duties and
obligations of Sublessor under the Lease, and Sublessor shall continue to
perform all of its obligations under the Lease; and (iv) the exclusion of
Section 32(a) of the Lease from the terms of this Sublease shall not affect any
rights Sublessor may have under RCW 60.72.010.
2.3 Mutual Covenants. Neither Sublessor nor Sublessee shall commit or permit to
----------------
be committed on the Premises or otherwise any act or omission which shall
violate, or constitute breach of or default under any term or condition of the
Lease. Sublessor and Sublessee shall make their respective best efforts to cause
Master Landlord to perform all of its obligations under the Lease, and to keep
the Lease in full force and effect.
1
<PAGE>
2.4 Lease Termination. In the event of the termination of Sublessor's interest
-----------------
as Lessee under the Lease for any reason, then this Sublease shall terminate
coincidentally therewith without any liability of Sublessor to Sublessee, except
for any liability relating to Sublessor's breach of the terms of this Sublease,
if any.
2.5 Cooperation. Sublessor shall cooperate with Sublessee in regard to any
-----------
efforts by Sublessee to obtain consents and approvals from Master Landlord which
may be required under the Lease.
3. PREMISES
3.1 Description. Sublessor leases to Sublessee and Sublessee leases from
-----------
Sublessor all of the premises leased from Master Landlord to Sublessor under the
Lease as described in the Lease and Exhibits B and E thereto (the "Premises")
situated in the City of Bellevue, County of King, State of Washington. The floor
plan of the Premises is attached hereto as Exhibit B and made a part hereof.
3.2 Condition. Prior to the commencement of the term of this Sublease,
---------
Sublessor shall cause the Premises to be in good condition and repair, and to
paint interior wails and woodwork (except for areas which Sublessee and
Sublessor mutually agree are not in need of fresh paint), to clean all carpets
(which may be completed on the date the Sublease term commences), to replace
damaged ceiling tiles, and to patch, sand and paint walls damaged by the removal
of cabinets and fixtures.
4. TERM
4.1 Term. The term of this Sublease shall be for a period commencing on July
----
13, 1997, and ending on August 30, 2000, unless sooner terminated pursuant to
any provision hereof; provided, however, this Sublease shall not become
effective until and unless Master Landlord consents to the terms hereof by
signing below and Sublessor receives from Sublessee acceptable evidence that
Sublessee has obtained new private placement financing of not less than
$2,000,000.
4.2 Delay in Commencement. Notwithstanding the provisions of Section 4.1 above,
---------------------
if for any reason Sublessor cannot deliver possession of the Premises to
Sublessee on July 13, 1997, Sublessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Sublease or the
obligations of Sublessee hereunder or extend the term hereof, but in such case
Sublessee shall not be obligated to pay rent until possession of the Premises is
tendered to Sublessee; provided, however, that (i) Sublessor shall use its best
efforts to deliver possession of the Premises to Sublessee on July 13, 1997; and
(ii) if Sublessor shall not have delivered possession of the Premises to
Sublessee on or before August 15, 1997, Sublessee may, at Sublessee's option, by
notice in writing to
2
<PAGE>
Sublessor given on or before August 27, 1997, cancel this Sublease. If this
Lease is canceled as herein provided, Sublessor shall return any monies
previously deposited by Sublessee and the parties shall be discharged from all
obligations hereunder.
5. RENT Sublessee shall pay to Sublessor as rent for the Premises equal monthly
installments of Twelve Thousand One Hundred Twenty Four and No/100 Dollars
($12,124.00), in advance, on the first day of each calendar month of the term
hereof. Sublessee shall pay Sublessor upon the full execution hereof by
Sublessee and Sublessor (and upon Master Landlord's written consent to this
Sublease in conformance with the substance of the consent form shown at the end
of this Sublease) the sum of Twelve Thousand One Hundred Twenty Four and No/100
Dollars ($12,124.00) as rent for August, 2000. Rent for any period during the
term hereof which is for less than one month shall be a pro rata portion of the
monthly installment. Rent shall be payable without notice or demand and without
any deduction, offset, or abatement in lawful money of the United States of
America to Sublessor at the address stated herein or to such other persons or at
such other places as Sublessor may designate in writing.
6. SECURITY DEPOSIT
6.1 Amount and Purpose. Sublessee shall deposit with Sublessor upon the full
------------------
execution hereof by Sublessee, Sublessor and Master Landlord the sum of
Seventeen Thousand Seven Hundred Ninety and No/100 Dollars ($17,790.00) as
security for Sublessee's faithful performance of Sublessee's obligations
hereunder. If Sublessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Sublease, Sublessor may
use, apply or retain all or any portion of said deposit for the payment of any
rent or other charge in default or for the payment of any other sum to which
Sublessor may become obligated by reason of Sublessee's default, or to
compensate Sublessor for any loss or damage which Sublessor may suffer thereby.
If Sublessor so uses or applies all or any portion of said deposit, Sublessee
shall within ten (10) days after written demand therefor deposit cash with
Sublessor in the amount sufficient to restore said deposit to the full amount
hereinabove stated (minus the amounts previously applied to rent as provided
below) and Sublessee's failure to do so shall be a breach of this Sublease, and
Sublessor may at its option terminate this Sublease.
6.2 Refund. Sublessor shall not be required to keep said deposit separate from
------
its general accounts. If there remains no uncured default of Sublessee hereunder
twelve (12) months after the commencement of the term of this Sublease, one-
third (1/3) of said deposit or so much thereof as had not theretofore been
applied by Sublessor shall be applied to the payment of the thirteenth (13th)
installment of the rent coming due hereunder; if there remains no uncured
default of Sublessee
3
<PAGE>
hereunder twenty-four (24) months after the commencement of the term of this
Sublease, one-half ( 1/2) of the then remaining balance of the deposit shall be
applied to the payment of the twenty-fifth (25th) installment of rent coming due
hereunder; and if there remains no uncured default of Sublessee thereafter, all
of the then remaining balance of the deposit shall be refunded to Sublessee
within ten (10) days following the expiration of this Sublease.
7. USE The Premises shall be used and occupied only for general office use.
8. COMMISSION In accordance with the listing agreement dated March 13, 1997
between Sublessor and Leibsohn & Company ("Broker"), Sublessor shall remit a
brokerage commission to Broker upon Sublessee's occupancy of the Premises.
9. MISCELLANEOUS
9.1 Notices. Any notice under this Sublease shall be deemed given if delivered
-------
personally or sent by reputable courier service providing proof of delivery
(e.g., Federal Express, DHL, etc.), registered mail, postage prepaid, addressed
- ------
to the other party at the address set forth below or at such other address as
designated by the party by written notice, or by confirmed facsimile.
SUBLESSOR BAUGH INDUSTRIAL CONTRACTORS, INC.
900 Poplar Place South
Seattle, WA 98144
Attn: Alan Cornell
Fax: (206) 328-9235
SUBLESSEE HEALTHKNOWLEDGE CORPORATION
1300 114th Ave. S.E., Ste. 100
Bellevue, WA 98004
Attn: Chief Financial Officer
Fax:_______________________
9.2. Dispute Resolution. Any and all disputes arising between Sublessee and
------------------
Sublessor in connection with this Sublease shall be resolved in the following
order: (i) by good faith negotiation between the representatives of Sublessee
and Sublessor who have authority to fully and finally resolve the dispute; or
(ii) by litigation. In the event of any action to enforce or for breach of this
Sublease, the prevailing party shall be entitled to recover such sums as the
court may adjudge reasonable as attorneys' fees and litigation expenses,
including fees and expenses that may be incurred in any appellate proceeding.
4
<PAGE>
9.3 Assignment. Notwithstanding Section 9 of the Lease to the contrary, a
----------
transfer by the present majority shareholders of Sublessee of ownership and
control of Sublessee's voting stock shall not be deemed an assignment for the
purposes of Section 9(a) of the Lease, and as incorporated herein, to the extent
such transfer results from a private placement.
EXECUTED as of the date first above written.
SUBLESSOR:
BAUGH INDUSTRIAL CONTRACTORS, INC.
Name: /s/ Curt C. Wagner
----------------------------
Name: CURT C. WAGNER
---------------------
Title: VICE PRESIDENT
--------------------
SUBLESSEE:
HEALTHKNOWLEDGE CORPORATION
Name: /s/ Dennis Schmuland
-----------------------------
Name: Dennis Schmuland
---------------------
Title: Chairman
--------------------
List of Exhibits
- ----------------
Exhibit A: Lease
Exhibit B: Floor Plan
5
<PAGE>
EXHIBIT A
Basic Lease Information
Bellefield Office Park
OFFICE LEASE
<TABLE>
<S> <C> <C>
Lease Date: May 25, 1995
Landlord Spieker Properties, L.P.,
a California limited partnership
Address of Landlord: 915 118/th/ Ave. S.E., Suite 110
Bellvue, WA 98004
Tenant: Baugh Industrial Contractors, Inc.
a Washington corporation
Address of Tenant: 1300 114/th/ Ave. S.E., Suite 100
Bellvue, WA 98004
Contact: E. Scott Dahlgreen
Paragraph 1 Premises: Approximately 7,461 rentable Square Feet located in Suite 100
(formerly known as Suites 112, 113, 114, 116 & 118),
Building "L". See Addendum.
------------
Building: "Mercer Canal" Building "L": 1300 114/th/ Ave. SE, Bellevue WA
Project: that certain office park commonly known as Bellefield Office Park
located in Bellevue, Washington on the Property containing 12
office buildings, including the building, as it may be changed from
time to time.
Property: The real property on which the building is located, as more fully
and legally described on Exhibit E attached.
Paragraph 2 Lease Term: The period commencing on September 1, 1995 and ending on the date
------------------------------------------ --------
which is the last day of the sixtieth (60/th/) month following the
------------------------------------------------------------------
Rent commencement Date. SEE ADDENDUM
-------------------------------------
Paragraph 3 Base Rent: Months 1-36 $10,570,00/month
----------------
Months 37-60 $11,503.00/month
----------------
See Addendum
-------------
</TABLE>
Paragraph 27 "Base Year" for Operating Cost: 1995
----
"Fiscal Year" for Operating Costs: January 1 - December 31
Paragraph 27c "Tenants Share" of Operating Costs: 2.4%
----
Paragraph 32 Security Deposit: $0.00
-----
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to set forth Basic Lease
Information shall mean the respective information set forth above and shall be
construed to incorporate all of the terms provided under the particular Lease
paragraph pertaining to such information. If there is any conflict between any
Basic Lease information and the Lease, the Lease shall control
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
Spiecker Properties Baugh Industrial Contractors, Inc.,
A California limited partnership a Washington corporation
By: Spiecker Properties L.P.,
a California limited partnership
Its: General Partner
By: Spiecker Properties, Inc.
a Maryland corporation
Its: General Partner
/s/ Donald S. Jefferson /s/
- ------------------------------ --------------------------------------
By: Donald S. Jefferson By:
Its: Senior Vice President Its: Baugh Industrial Contractors, Inc.
President
Date: Date: 6/5/95
-------------------------- ---------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.13
Agreement of Lease
------------------
This Agreement ("Lease"), dated as of the 1st day of February, 1998 is by and
between SIXTH & VIRGINIA PROPERTIES, a Washington General Partnership,
hereinafter called "Owner," and Medlynx, LLC a Washington Corporation,
hereinafter called "Tenant."
1 NONSTANDARD PROVISIONS
The following constitute the nonstandard provisions of this Lease and are
referred to elsewhere herein.
a. Floor of The Westin Building on which Premises are located:
21/st/ Floor, Suite 2105
b. Agreed floor area of Premises:
Approximately two hundred seven (207) square feet on the 21/st/ floor
that includes an allowance for core and/or common areas used by
Tenant.
c. The term of this Lease (hereafter "Lease Term") shall be One ( 1 )
year and shall commence on the 1/st/ day of February, 1998 and end on
the 31st day of January, 1999.
d. Monthly Base Rent:
Seven Hundred Seventy Seven ($777) Dollars
e. Rent per day during any occupancy prior to commencement of Lease Term:
n/a
f. Reimbursement to Owner for Special Improvements:
Tenant, takes premises "as-is" and at Tenant's cost, Owner shall
install and supply all improvements to the Premises. All such
improvements shall be to building standard except as noted and shall
be completed in accordance with drawings prepared at Tenant's cost, by
Owner's staff end approved in advance by Owner and Tenant. Tenant
shall reimburse Owner for all work within 10 days of receipt of an
invoice.
g. Use permitted on Premises:
Telecommunications switching facility and general office use
h. Tenant's address for notices if other than Premises:
P.O. Box 50230
Bellevue, WA 98015
i. Tenant's billing address if other than Premises:
same as above
j. Parking:
During Lease Term, Owner shall provide Tenant with unreserved parking
spaces including an appropriate pro-rata share of "carpool" stall for
one (1) automobile in The Westin Building Garage. The space shall be
made available during periods of typical office use from 7:00 a.m. to
6:00 p.m. five days per week, Monday through Friday, and at other
times for the persons to whom such spaces am regularly rented who wish
to work in Building.
Tenant shall pay in advance the charge established by Owner for said
space, in addition to rent hereunder. If Tenant fails to timely pay
such charges, Owner may by written notice to Tenant elect either to
proceed as or provided in Article 14 or to cease to provide all or any
number of the
<PAGE>
be one hundred seventy dollars ($170) per month (including tax). From
time to time during this Lease, the charge for such space shall be
increased to the then-prevailing rate for similar service in the
immediate area.
Owner shall maintain the right to pass on to Tenant all applicable
parking taxes.
k. Relocation of Premises:
Owner shall have the right to relocate the Premises in Building on the
following terms and conditions:
1) The floor area of the new location shall be approximately the
same as the floor area of the original location;
2) Tenant will be reimbursed for all reasonable expenses incurred in
connection with the relocation, including but not limited to the
net cost of putting the new Premises in the same condition as the
original location, moving, signage, telephone & computer
equipment relocation and reasonable quantities of new stationery;
3) Owner shall give Tenant at least Ninety (90) days written notice
of relocation.
l. Security Deposit:
Concurrently with the execution of this Lease, Tenant shall deliver to
Owner a sum equal to One Thousand Fifty Four Dollars ($1,554) this as
security for the performance by Tenant of every covenant and condition
of this Lease. Upon payment of deposit, Tenant shall request and Owner
shall deliver to Tenant a written receipt therefor. Deposit may be
commingled with other funds of Owner and shall bear no interest. If
Tenant shall default with respect to any covenant or condition of this
Lease, including but not limited to the payment of rent, Owner may
apply the whole or any part of deposit to the payment of any sum in
default or any other sum which Owner may be required to spend by
reason of Tenant's default. Should Tenant comply with all of the
covenants and conditions of this Lease, deposit shall be rammed to
Tenant (or, at the option of Owner, to the last assignee of Tenant's
interest in this Lease) at the expiration of the term hereof. Tenant
shall not move into Premises until said deposit has been paid to
Owner.
m. Signage:
Owner will provide signage, according to building standards, to Tenant
with Tenant's business name at Three (3) separate locations:
1) Main Lobby Directory - Sixth Avenue
2) Third Floor Lobby Directory- Skybridge entrance from Garage
3) Elevator Lobby Directory on Tenant's floor
n. Holding Over:
If Tenant shall continue its occupancy of the Premises after the
expiration of the Lease Term, the occupancy shall not be deemed to
extend or renew the term of this Lease, and such occupancy shall
constitute a tenancy from month to month, subject to all of the terms
of this Lease, except the term, and except that the Rent for each
month of continued occupancy shall be double the Rent for the last
full month of the Lease Term. Tenant shall also be liable for Owner's
incidental and consequential damages sustained by virtue of Tenant's
holding over.
o. Square Footage Adjustment:
Owner and Tenant agree that reasonable attempts have been made to
determine the correct square footage used in this Lease. Owner grants
Tenant the option to remeasure and challenge the new premises square
footage calculation at Tenant's expense, If Tenant's square footage
calculation differs from the number used in this Lease, Owner will
remeasure at Owner's expense to determine which calculation is
correct. Owner and Tenant agree that any challenge of the square
footage calculation must be carried out within one month of the
commencement date. After that time, Owner and Tenant agree to mutually
waive any and all rights, claims, or liabilities against each other as
it relates to the
<PAGE>
p. Meat-Me Boom Access
Tenant shall have the right to share usage of the 19th floor Meet-Me
Room and associated wiring system. Owner shall supervise the
maintenance of the room by tenant-users and shall use all reasonable
means to ensure this facility is always available to Tenant. Tenant
agrees to abide by the regulations set jointly by Owners and tenant-
users or, should its practices conflict with those regulations, to
vacate immediately upon written request. As in Article 7, Owner shall
not be liable for damages nor shall the rental herein be abated for
failure to furnish or interruption in service in this facility.
For Meet-Me Room usage, Tenant shall pay a one-time usage fee of Five
Hundred Dollars ($500.00) no later than Thirty (30) days following
Commencement Date, For each DSX panel or DS3 module placed in the
room, Tenant shall pay a one-time fee of Three hundred sixty eight
dollars ($368.00) per DSX and/or one hundred eighty four dollars
($184.00) per DS3 module and a recurring monthly charge of $50.00 per
Panel installed within the room.
q. Cabling Right of Way
Owner gives to Tenant the right of way to install cable from the
Premises to the "Meet Me Room" on the 19th floor. Such installation is
at Tenant's expense and subject to limitations and exclusions
presented within Lease. Such installation must be coordinated with and
approved by The Westin Building Engineer. Cabling to areas of the
building other than the Meet-Me Room shall be governed by the same
terms and conditions set forth above but shall additionally be subject
to monthly recurring charges as established by Owner for all other
cable run by users throughout the building.
r. HVAC (Heating, Ventilating, and Air Conditioning)
Owner grants Tenant right to install at Tenant's sole cost, its own
HVAC equipment in Premises. This equipment shall be considered
Tenant's trade fixture. It shall be connected to the new building
cooling tower loop in a manner approved by the Building Engineer. As
in Article 7, Owner shall not be liable for damages nor shall the
rental herein be abated for failure to furnish or interruption in
service of this cooling tower and loop facility.
Tenant shall pay Owner within ten (10) days of completion of the
connection a one-time sum equal to Five hundred dollars ($500,00) per
ton of connected load. In addition, Tenant shall pay upon invoice a
quarterly fee which shall be its prorate, per too share of the costs
charged to all participants of the cooling tower. This quarterly
charge will include chemical treatment, electrical usage and water
consumption.
t. Class "A " Entry
Tenant acknowledges Owners requirement for the premises to have an
entry that is compatible with the Class "A" image of the building.
Tenant shall cooperate with Owner in developing an entry plan that
meets Owner's need for appearance and Tenant's need for privacy and
control.
2 EXHIBITS
The following Drawings and Special Provisions are attached hereto as
exhibits and made a part of this Lease:
Exhibit A - Floor plan of the Westin Building, herein called
"Building."
Exhibit B - Site plan showing relation and location of Building and
Westin Building Garage.
Exhibit C - Details of Premises Approved by Owner and Tenant.
3 PREMISES
Owner hereby leases to Tenant, and Tenant hereby leases of Owner, upon the
terms and conditions herein set forth, those certain Premises, described in
Article 1(a) and (b) and shown outlined in red on the standard floor plan
attached hereto marked "Exhibit A" and made a part hereof in that certain
<PAGE>
Building, known as the Westin Building situated in the City of Seattle,
County of King, State of Washington, at Sixth Avenue and Virginia Street,
and located on the following real property:
Lots 11 and 12 (less portion for street), Block 15 of Addition to town
of Seattle, as laid off by Heirs of Sarah A. Bell, deceased (commonly
known as Heirs of Sarah A. Bell's Addition to the City of Seattle), as
per plat recorded in Volume I of plats, page 103, records of King
County, Washington.
The areas so leased are hereinafter called "Premises."
4 RENT
Tenant covenants and agrees to pay Owner the monthly rent which is set
forth in Article 1(d) to be adjusted as provided elsewhere in this Lease,
in United States currency in advance on or before the first day of each
calendar month during said term, at the office of Owner in Building or at
such other place as Owner may from time to time designate in writing. It is
agreed that since collection of any amount past due imposes an
administrative cost on Owner, in addition to all other sums that may be
charged by Owner hereunder, Tenant shall pay to Owner a sum equal to Five
Cents ($0.05) for every Dollar not paid when due.
5 USE
Premises may be used only for the purpose set forth in Article 1(g) and for
no other purpose or purposes without the written consent of Owner. No use
shall be made of Premises, nor act done in or about Premises, which is
unlawful, or which may increase the existing ram of insurance upon
Building. Tenant shall not commit or allow to be committed any waste upon
Premises, or any public or private nuisance or other act or thing which
disturbs the quiet enjoyment of any other tenant in Building, nor shall
Tenant, without the written consent of Owner, use any apparatus, machinery
or device in or about Premises that shall cause any substantial noise or
vibration. If any of Tenant's office machines and equipment should disturb
the quiet enjoyment of any other tenant in Building, then Tenant shall
provide adequate insulation or take such other action as may be necessary
to eliminate the disturbance. Tenant shall observe such reasonable rules
and regulations as may be adopted by Owner for the safety, care and
cleanliness of Premises or Building and the preservation of good order
therein.
6 POSSESSION
In the event of Owner's inability to deliver possession of Premises ready
for occupancy at the commencement of the Lease Term, Owner shall not be
liable for any damage caused thereby, except as otherwise expressly stated
herein, nor shall this Lease become void or voidable, nor shall the Lease
Term be extended, but in such event, no rental shall be payable by Tenant
to Owner for any portion of the Lease Term prior to actual delivery to
Tenant of possession of Premises ready for occupancy by Tenant unless
Tenant shall have failed to meat its obligations under Article 23 or unless
the term of this Lease does not commence on or before March 15, 1998,
without fault on the part of Tenant in which event Tenant's sole remedy
shall be to cancel the Lease by giving thirty (30) days written notice of
its said election to Owner. If Tenant, with Owner's permission enters into
possession of Premises prior to commencement of the Lease Term, all of the
terms and conditions of this Lease shall apply during such prior period,
except that rental shall be the amount set forth in article 1(e) for each
calendar day during such prior period.
7 SERVICES PROVIDED BY OWNER
Owner shall, at its sole cost and expense, maintain Premises end the public
and common areas of Building, such as lobbies, stairs, landscaping,
corridors and restrooms, together with the Westin Building Garage, in
reasonably good order and condition except for damage occasioned by the act
of Tenant.
Owner, at Tenant's sole cost, shall furnish Premises from 7:00 a.m. to 6:00
p.m. Monday through Friday (exclusive of holidays), hereinafter called
"Standard Work Weak," with electricity for lighting and the operating of
office machines, heat and air conditioning as may be reasonably required
for the occupation of Premises.
Owner, at its sole cost shall provide elevator service, lighting
replacement, toilet room supplies, window washing with reasonable
frequency, and daily janitorial service on the basis of a Standard Work
Week during the times and in the manner that such janitorial services are
customarily furnished
<PAGE>
reserved be abated, for failure to furnish or delay in furnishing any of
the foregoing services, when such failure or delay is caused by accident or
conditions beyond the control of Owner, or by labor disturbances or labor
disputes of any character, or by inability to secure fuel, supplies,
machinery, equipment or labor after reasonable efforts to do so, or by the
making of improvements or necessary repairs to Premises or Building, nor
shall the temporary failure to furnish any of such services be construed as
an eviction of Tenant or relieve Tenant from the duty of observing and
performing any of the provisions of this Lease.
Tenant acknowledges that the 24-hour nature of its business exceeds the
Standard Work Week described above. Owner may at its option and at Tenant's
cost install a meter in the electrical system supplying Tenant, measure
usage and bill Tenant monthly at the same rate, including demand charges,
billed by Seattle City Light plus a monthly billing fee of $10.00.
Additionally, Tenant shall pay for all other expanses incurred by Owner as
a result of Tenant using Premises in excess of Standard Work Week.
8 REPAIRS AND ALTERATIONS
Tenant agrees by taking possession of the Premises that Premises are then
in a tenantable and good condition, that Tenant will take good care of
Premises, and the same will not be altered or in any way changed without
the written consent of Owner. Tenant hereby waives any right to make
repairs at Owner's expense. Tenant shall not make changes to locks on doors
or add, disturb, or in any way change any plumbing or wiring without first
obtaining written consent of Owner. All damages or injury done to Premises
by Tenant, or by any persons who may be in or upon Premises with the
consent of Tenant, shall be paid for by Tenant and Tenant shall pay for all
damages to Building caused by Tenant's misuse of Premises or the
appurtenances thereto. All other repairs to Premises necessary to maintain
Premises in a tenantable and good condition shall be done by or under the
direction of Owner and at Owner's expense except as otherwise specifically
provided herein. Tenant shall pay for the replacement of Special
Improvements as provided in Article 23 and the replacement of doors or
windows of Premises which are cracked or broken by Tenant, its employees,
agents, or invitees, and Tenant shall not put any curtains, draperies or
other hangings on or beside the windows in Premises without first obtaining
Owner's consent Owner agrees that it will repaint the interior of Premises
at least once every five years with a color mutually agreed upon between
Tenant and Owner. Owner may make any alterations or improvements which
Owner may deem necessary for the preservation, safety or improvement of
Premises or Building. All alterations, additions and improvements, except
trade fixtures installed by Tenant and which are removable without damage
to Building, shall become the property of Owner. Tenant shall, at the
termination of this Lease by the expiration of time or otherwise, surrender
and deliver up Premises to Owner in as good condition as when received by
Tenant from Owner, reasonable use and wear and damage by fire or other
casualty excepted.
Should Owner be required to make changes or additions to Building or Westin
Building Garage at any time during the term of this Lease as a result of
any law, rule, code or regulation which becomes effective after the
Commencement Date, then Tenant shall pay on demand by Owner, as additional
rent, a monthly charge equal to the area of Premises as stated in Article
1(b) divided by 350,000 times 1 and 1/3 percent of the cost of the change
or addition. Such additional rent shall commence upon substantial
completion of each such change or addition and shall continue to the end of
the term of this Lease.
9 ENTRY AND INSPECTION
Tenant will permit Owner and its agents to enter into and upon Premises at
all reasonable times for the purpose of inspecting the same or for the
purpose of cleaning, repairing, altering or improving Premises or Building
and when reasonably necessary may close entrances, doors, corridors,
elevators or other facilities without liability to Tenant by reason of such
closure and without such action by Owner being construed as an eviction of
Tenant or relieving the Tenant from the duty of observing and performing
any of the provisions of this Lease., Owner shall have the right to enter
Premises for the purpose of showing Premises to prospective tenants for a
period of 180 days prior to the expiration of the Lease Term.
10 DAMAGE OR DESTRUCTION
If Premises or Building are damaged by fire, wind, or other such casualty,
the damage shall be repaired by and at the expense of Owner, provided such
repairs (to restore Premises to usable condition) can be made within sixty
(60) days after the occurrence of such damage without the payment of
overtime or other premiums, and until such repairs are completed, the rent
shall be abated in proportion to the part
<PAGE>
of Premises which is unusable by Tenant in the conduct of its business (but
there shall be no abatement of rent by reason of any portion of Premises
being unusable for a period equal to one day or less).
If such repairs cannot be made within sixty (60) days, Owner may, at its
option, make them within a reasonable time, and in such event this Lease
shall continue in effect and the rent shall be abated in the manner
provided above. Owner's election to make repairs must be evidenced by
written notice to Tenant within thirty (30) days after the occurrence of
the damage.
If Owner does not elect to make such repairs that cannot be made within
sixty (60) days, then either party may, by written notice to the other,
terminate this Lease. A total destruction of Building shall automatically
terminate this Lease.
11 ADVERTISING
Tenant shall not inscribe any inscription, post, place, or in any manner
display any sign, notice, picture, placard or poster, or any advertising
matter whatsoever, anywhere in or about Premises or Building at places
visible (either directly or indirectly as an outline or shadow on a glass
pane) from any where outside Premises without first obtaining Owner's
written consent thereto.
12 INDEMNITY, LOSS AND WAIVER OF SUBROGATION
Tenant shall defend and indemnify Owner and save it harmless from and
against any and all liability, damages, costs, or expenses, including
attorneys' fees, arising from any ant, omission or negligence of Tenant or
the officers, contractors, licensees, agents, servants, employees, guests,
invitees, or visitors of Tenant in or about Building, or arising from any
accident, injury, or damage, howsoever and by whomsoever caused, to any
person or property, occurring in or about Premises, provided that the
foregoing provision shall not be construed to make Tenant responsible for
loss, damage, liability, or expense resulting from injuries to third
parties caused by the negligence of Owner or of any officer, contractor,
licensee, agent, servant, or employee of Owner. Owner shall not be
responsible for providing security and Tenant hereby releases Owner from
any claim for damage or loss of property that may arise as a result of
vandalism or theft in Building or Westin Building Garage. Owner and Tenant
each release the other from responsibility for, and waive their entire
claim of recovery for (i) any loss or damage to the real or personal
property of either located anywhere in Building and Westin Building Garage,
arising out of or incident to the occurrence of any of the perils which may
be covered by a fire and lightning insurance policy, with extended coverage
endorsement in common use in the Seattle locality or (ii) loss resulting
from business interruption at Premises or loss of rental income from
Building,, arising out of or incident to the occurrence of any of the
perils that may be covered by a business interruption insurance policy and
by the loss of rental income insurance policy in common use in the Seattle
locality. To the extent that such risks under (i) and (ii) are in fact
coveted by insurance, each party shall cause its insurance carriers to
consent to such waiver and to waive all rights of subrogation against the
other party.
13 LIENS AND INSOLVENCY
Tenant shall keep Premises and Building free from any liens or encumbrances
arising out of any work performed by Tenant, materials furnished by Tenant,
or obligations incurred by Tenant. Owner may terminate this Lease by giving
Tenant notice of its election to do so, if: (i) Tenant files a voluntary
petition in bankruptcy, or for reorganization under the bankruptcy laws, or
is adjudged a bankrupt by a court of competent jurisdiction, (ii) if Tenant
makes an assignment for the benefit of creditors, or if a receiver is
appointed for Tenant's business, or (iii) any other action is taken by or
against Tenant under any State or Federal insolvency or bankruptcy act. No
interest in this Lease or estate hereby created in favor of Tenant shall
pass by operation of law under any such bankruptcy or insolvency act to any
person whomsoever without the prior express written consent of Owner. Any
purported transfer in violation of this Article shall constitute a default
by Tenant.
14 DEFAULT AND RE-ENTRY
Except for a default under the preceding paragraph for which immediate
right of termination is given to Owner, if Tenant falls to pay any
installment of rent when due (plus interest on past due amounts at the
maximum legal rate from the date due) after 3 days written notice, or to
perform any other covenant under this Lease within thirty (30) days after
written notice from Owner stating the nature of the default, Owner may re-
enter and take possession of Premises using all reasonable force to do so;
provided, however, that if the nature of such default other than for non-
payment of rent is such that the same cannot reasonably be cured within
such thirty-day period, Tenant shall not be deemed to be in default if
Tenant shall within such period commence such cure and thereafter
diligently prosecute the
<PAGE>
same to completion. Notwithstanding such retaking of possession by Owner,
Tenant's liability for the rent provided herein shall not be extinguished
for the balance of the term of this Lease. Upon such re-entry, Owner may
elect either (i) to terminate this Lease, in which event Tenant shall
immediately pay to Owner a sum equal to that by which the then cash value
of the total rent reserved under this Lease for the balance of the Lease
Term exceeds the reasonable rental value of the Premises for the balance of
the Lease Term plus costs incident to releasing the Premises including, but
not limited to remodeling expenses, attorney's fees and real estate
commissions; or (ii) without terminating this Lease, to relet all or any
part of the Premises as the agent of and for the account of Tenant upon
such terms and conditions as Owner may deem advisable, in which event the
rents received on such reletting shall be applied first to the expenses of
reletting and collection, including necessary renovation and alteration of
Premises, reasonable attorney's fees and real estate commissions paid, and
thereafter to payment of all sums due to or to become due Owner hereunder,
and if a sufficient sum shall not be thus realized to pay such sums and
other charges, Tenant shall pay Owner any deficiency monthly, and Owner may
bring an action therefor as such monthly deficiency shall arise.
In the event of any such retaking of possession of Premises by Owner as
herein provided, Tenant shall remove all personal property located thereon
and, upon failure to do so upon demand of Owner, Owner may, in addition to
any other remedies allowed by law, remove and store the same in any such
place selected by Owner, including but not limited to a public warehouse,
at the expense and risk of Tenant. If Tenant shall fail to pay any sums due
hereunder or the cost of storing any such property after it has been stored
for a period of thirty (30) days or more, Owner may sell any or all of such
property at public or private sale and shall apply the proceeds of such
sale first, to the cost of such sale; second, to the payment of the charges
for storage, if any; and third, to the payment of any other sums of money
which may be due from Tenant to Owner under the terms of this Lease, and
the balance, if any, to Tenant.
Tenant hereby waives all claims for damages that may be caused by Owner's
lawfully re-entering and taking possession of Premises or lawfully removing
and storing or selling the property of Tenant as herein provided, and will
save Owner harmless from loss, costs, or damages occasioned thereby, and
such lawful re-entry shall not be considered or construed to be a forcible
entry.
15 SURRENDER OF POSSESSION
Upon expiration of the term of this Lease, whether by lapse of time or
otherwise, Tenant shall promptly and peacefully surrender Premises to
Owner.
16 COSTS AND ATTORNEYS' FEES
If Tenant or Owner shall bring any action for any relief against the other,
declaratory or otherwise, arising out of this Lease, including any suit by
Owner for the recovery of rent or possession of Premises, the losing party
shall pay the successful party a reasonable sum for attorneys' fees in such
suit, and such attorneys' fees shall be deemed to have accrued on the
commencement of such action.
17 NON-WAIVER
Waiver by Owner of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant, or
condition, or of any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Owner shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant, or condition of this Lease, other
than the failure of Tenant to pay the particular rental so accepted
regardless of Owner's knowledge of such preceding breach at the time of
acceptance of such rent.
18 ASSIGNMENT AND SUBLETTING
Tenant shall not assign this Lease or sublet Premises or any part thereof
without first obtaining Owner's written consent, which shall not be
unreasonably withheld. No such assignment or subletting shall relieve
Tenant of Tenant's liability under the Lease, except, if at the time of
such assignment or subletting, Tenant establishes to the reasonable
satisfaction of Owner that such assignee or sublessee is of satisfactory
financial responsibility at least equal to that of Tenant at the time
Tenant executed the Lease. Consent to any such assignment or subletting
shall not operate as a waiver of the necessity for a consent to any
subsequent assignment, and the terms of such consent shall be binding upon
any person holding by, under or through Tenant. In no event shall a
sublessee of Tenant sublet or assign any interest in this Lease.
<PAGE>
In the event or an assignment or subletting that requires Owner's time
and/or expense, Tenant shall reasonably compensate Owner for such expenses.
If Tenant is a corporation, then any transfer of this Lease by merger,
consolidation or liquidation or any change in the ownership of, or power to
vote, the majority of its outstanding voting stock shall constitute an
assignment for the purposes of this article.
19 SUCCESSORS
All of the covenants, agreements, terms and conditions contained in this
Lease shall apply to and be binding upon Owner and Tenant and their
respective heirs, executors, administrators, successors and assigns.
20 TAX ON RENTAL
If any governmental authority or unit under any present or future law
effective at any time during the term of this Lease shall in any manner
levy a tax on rentals payable under this Lease or on rentals accruing from
use of Premises under this Lease, or a tax in any form against Owner
because of or measured by income derived from the leasing or rental of
Premises, the amount of the next succeeding month's rent following payment
of such tax by Owner shall be increased by an amount equal to such tax paid
by Owner, and for Tenant's default in paying the rent thus revised, Owner
shall have the same remedies as upon failure to pay rent. Tenant shall not
be liable to pay any amount because of income tax of a general nature
applicable to Owner's various interests or sources of income. In the event
that it shall not be lawful for Tenant to pay such tax, the rental payable
to Owner under this Lease shall be revised to net Owner the same net rental
after imposition of any such tax as would have been payable to Owner prior
to the imposition of any such tax.
21 PRIORITY
This Lease shall automatically be subordinate to any mortgage or deed of
trust heretofore or hereafter placed upon Building, to any and all advances
made or to be made thereunder, to the interest on the obligations secured
thereby, and to all renewals, replacements and extensions thereof;
provided, however, that in the event of foreclosure of any such mortgage or
deed of trust or exercise of the power of sale thereunder, Tenant shall
attorn to the purchaser of Building at such foreclosure or sale and
recognize such purchaser as Owner under this Lease if so requested by such
purchaser. If any mortgagee or beneficiary elects to have this Lease
superior to its mortgage or deed of trust and gives notice of its election
to Tenant, then this Lease shall thereupon become superior to the lien of
such mortgage or deed of trust, whether this Lease is dated or recorded
before or after the mortgage or deed of trust. Within fifteen days of
presentation, Tenant shall execute, acknowledge, and deliver to Owner (i)
any subordination or nondisturbance agreement or other instrument that
Owner may require to carry out the provisions of this article, and (ii) any
estoppel certificate requested by Owner from time to time in the standard
form of any such mortgagee or beneficiary certifying in writing, if such be
true, that Tenant shall be in occupancy, that this Lease is unmodified and
in full force and effect (or if there have been modifications, that the
same is in full force and effect as modified and stating the modifications)
and the dates to which the rent and other charges shall have been paid, and
that there shall be no rental offsets or claims.
22 CONDEMNATION
If the whole of Premises, or if such portion of either Premises or the
facilities in Building as may be required for the reasonable use of
Premises, shall be taken by virtue of any condemnation or notice of
condemnation or eminent domain proceeding, or by purchase in lieu thereof,
or for public or quasipublic use, directly or indirectly, this Lease shall
automatically terminate as of the date of such condemnation, or purchase in
lieu of condemnation, or as of the date possession is taken by the
condemning authority, whichever is earlier. Current rent shall be
apportioned as of the date of such termination. In case of a taking of a
part of Premises or a portion of the facilities in Building not required
for the reasonable use of Premises, then this Lease shall continue in full
force and effect and the rental shall be equitably reduced based on the
proportion by which the rentable area of Premises is reduced, such rent
reduction to be effective on the date of such partial taking. No award of
any partial or entire taking shall be apportioned, and Tenant hereby
assigns to Owner any award which may be made in such taking or condemnation
together with any and all rights of Tenant now or hereafter arising in or
to the same or any part thereof, provided, however, that nothing herein
shall be deemed to give Owner any interest in, or to require Tenant to
assign to Owner, any award made to Tenant for the taking of personal
property or fixtures belonging to Tenant, for the interruption of or
damages to
<PAGE>
23 SPECIAL IMPROVEMENTS
The term "Special Improvements" as used in this Lease refers to all
improvements to Premises, whether provided at the expense of Owner or
Tenant, other than acoustical ceilings, lighting fixtures, air conditioning
grilles, air ducts and temperature controls, draperies, corridor and
demising partitions, and concrete floor ready for pad and carpet. Tenant
shall reimburse Owner for Owner's necessary expense of repairing or
replacing all Special Improvements to maintain Special Improvements in
first-class condition. Before occupancy of Premises, Tenant shall pay Owner
that certain sum set forth in Article 1(f) as payment for certain of
Special Improvements made to Premises. In addition, Tenant shall pay Owner
for installation of all Special improvements if they have been installed by
Owner pursuant to Tenant's request. Where Special Improvements are to be
installed by Owner, Tenant shall give Owner written notice of its final
color selections and all other details of its office layout in sufficient
time to permit Owner's completion of all work by the commencement date
hereunder using its normal crews on a regular time basis, and such notice
shall in any event be given not later than fifteen working days before such
commencement date.
24 REAL PROPERTY TAXES
Owner shall pay all real property taxes and assessments that may be levied
against Building and the underlying land. If the amount of such real
property taxes and assessments shall, in any calendar year during the Lease
Term, exceed the amount of real property taxes and assessments payable for
the calendar year 1997, then on the tax payment dates in 1998 and on these
dates of each succeeding year, Tenant shall reimburse Owner for Tenant's
proportionate share of such increase based upon the ratio which area of
Premises, as set forth in Article 1(b), bears to 350,000 square feet. Owner
shell submit to Tenant. if so requested by Tenant, a copy of the real
property tax statement for the year in which payment is requested.
The foregoing charges constitute additional rent that shall be deemed to
have accrued uniformly during the calendar year in which payment is due.
The final payment under the provision of this Article shall be prorated
based on reasonable projections of the increase through the termination of
this Lease and shall be due thirty days before such termination.
25 ANNUAL RENT ADJUSTMENT
To partially compensate for the effect of inflation, a portion of the
rental rate (viz. $ 7.50 per square foot per year) shall be adjusted
annually to reflect reductions, if any, in the purchasing power of the
dollar. Three separate generic elements of cost (namely: labor, materials
and energy) shall be deemed to be representative of all operational costs.
Indices for measuring changes in the dollar value for each of these cost
elements shall be: janitorial hourly labor rate, Consumer Price Index, and
the average cost per kilowatt-hour of electricity (including without
limitation all demand charges), respectively. Changes in each of these
shall adjust rent as provided below:
Generic Element's Cost
Element of Cost Index Share
--------------- ----- -----
1. Labor Janitorial rate $3.00
2. Material C.P.I. $3.00
3. Energy Average k Wh cost $1.50
The base index for each of these indices shall be established from data for
the month of September of the year preceding the year in which this Lease
commences. Indices for each succeeding year shall be calculated annually
using September experience data, and the ratio that these annual indices
bear to their respective base index shall be reduced by 1.00 then
multiplied by the individual element's cost share as specified in Items 1,
2 and 3 above, and by the area of Premises as set forth in Article l(b).
Each January 1, following the calendar year in which the Lease becomes
effective, the Monthly Rent in Article 1(d) shall be increased by one-
twelfth (1/12) of the sum of the amounts so determined. No changes in the
rent as specified above shall take place during the calendar year in which
the Lease Term commences.
The janitorial hourly labor rate shall be that as established by the
Building Services Employees International Union Local No. 6 for journeymen
including all applicable taxes and fringe benefits payable by employers.
The labor rate to be used as a base index for this Lease shall be $12.81.
The Consumer Price Index to be used shall be the Revised Consumer Price
Index for Urban Wage Earners and Clerical Workers, U.S. City Average,
All-Items Series (1982-1984 = 100), as published by
<PAGE>
the U.S. Department of Labor, Bureau of Statistics. If this index is
revised or changed (as, for example, by taking the average index for
different years as the base figure of 100), the base index shall be
adjusted accordingly. In the event such index is discontinued, the index
promulgated by the Department of Labor most closely approximating the above
referenced index shall be used as the base index. The Consumer Price Index
to be used as the base index for this Lease shall be 158.3.
The cost per kilowatt-hour of electricity consumed in the Westin Building
(including seasonal factors and any tax or surcharge that may be imposed),
shall be determined by dividing the total amount billed to Account No.
171001453015 for the supply of electricity consumed primarily during the
month of September by the consumption shown in the billing column entitled
"Consumption kwh/kvarh." The cost to be used as a base index for this Lease
shall be $.0401 per kilowatt-hour.
26 NOTICES
All notices under this Lease shall be in writing and delivered in person or
sent by registered or certified mail to Owner at its offices in Building
and to Tenant at Premises, or to such other place as may be set forth in
Article 1(h) or hereafter designated by either party in writing.
27 NAME OF BUILDING
Owner reserves the right in its sole discretion to change the name of
Building from that specified in Article 3.
28 CONSTRUCTION
The titles to articles of this Lease are not a part of this Lease and shall
have no effect upon the construction or interpretation of any part thereof.
This Lease shall be construed and governed by the law of the State of
Washington.
29 TIME OF ESSENCE
Time is of the essence of this Lease.
30 FORCE MAJEUR
In the event either Owner or Tenant shall be delayed or hindered in or
prevented from the performance of any act required hereunder by reason of
strikes, lockouts, labor troubles, inability to procure materials, failure
of power, restrictive governmental laws or regulations, riots,
insurrection, war or any reason era like nature, not the fault of the party
delayed in performing work or doing acts required under the terms of this
Lease, then performance of' such act shall be excused for the period of
such delay, provided that the provisions hereof shall not operate to excuse
Tenant from prompt payment of' rent or any other payments required by
Tenant hereunder.
IN WITNESS WHEREOF, Owner and Tenant have signed this Lease on the dates noted
below.
OWNER: TENANT:
- ----- ------
SIXTH & VIRGINIA PROPERTIES, MEDLYNX, LLC
A Washington General Partnership A Washington Corporation
By Clise properties Inc., a Partner
By /s/ By /s/ Kelly Jorgenson
---------------------------- -------------------------------
Its President Its President
--------------------------- ------------------------------
Date 2-26-98 Date 2/10/98
-------------------------- -----------------------------
<PAGE>
CLISE COMPANY, a Partner
By Retail Realty, Inc.,
By /s/
----------------------------
Its President
---------------------------
Date 2-26-98
--------------------------
GUARANTEE
For and in consideration of execution of this Lease, Kelly Jorgenson guarantees
the performance of all obligations of Medlynx, LLC, as said obligations exist
under all terms and conditions of this Lease and any modifications thereto.
/s/ Kelly Jorgenson
--------------------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that A.M. Clise is the
person who appeared before me and said person acknowledged that he signed this
instrument, on oath stated that he was authorized to execute the instrument and
acknowledged it as the President of CLISE PROPERTIES, INC., a partner of SIXTH &
VIRGINIA PROPERTIES, a Washington general partnership, to be the free and
voluntary act of such party for the uses and purposes mentioned in the
instrument.
Dated: 2/26/98
---------------
[SEAL] /s/ Jennifer A. Richards
----------------------------------------
Print Name: Jennifer A. Richards
-----------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Issaquah
----------------
My commission expires: 2/7/99
------------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that A.M. Clise is the
person who appeared before me and said person acknowledged that he signed this
instrument, on oath stated that he was authorized to execute the instrument and
acknowledged it as the President of RETAIL REALTY, INC., a partner of CLISE
COMPANY, a partnership, for and on behalf of CLISE COMPANY, which in turn is a
partner of SIXTH & VIRGINIA PROPERTIES, a Washington general partnership, to be
the free and voluntary act of such party for the uses and purposes mentioned in
the instrument.
Dated: 2/26/98
---------------
[SEAL] /s/ Jennifer A. Richards
----------------------------------------
Print Name: Jennifer A. Richards
-----------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Issaquah
----------------
My commission expires: 2/7/99
------------------
<PAGE>
EXHIBIT 10.14
--------------------------
Lease Modification #1
--------------------------
This Agreement made the 26th day of March, 1999, is by and
----- ------
between SIXTH & VIRGINIA PROPERTIES, a Washington General
Partnership, hereinafter called "Owner," and Pointshare
----------
Corporation formerly known as HealthKnowledge Corporation, a
---------------------------------------------------------
Delaware Corporation, hereinafter called "Tenant."
Owner and Tenant have executed a Lease dated the 1st day of
---
September, 1997 and Assignment of Lease and Acceptance dated
------------------------------------------------------------
the 27th of July, 1998. Said Lease and Assignment of Lease
----------------------
and Acceptance from I-Broadcast to HealthKnowledge
Corporation is for approximately 252 square feet on the 20th
--- ----
floor, Suite 2010 and approximately 1,577 square feet on the
-----------------------------------------------------
20th floor, Suite 2002 of The Westin Building, hereinafter
-----------------------
referred to as "Building," situated in the City of Seattle,
County of King, State of Washington, located at 2001 Sixth
Avenue and located on the following real property:
Lots 11 and 12 (less portion for street), Block 15 of
Addition to town of Seattle, as laid off by Heirs of
Sarah A. Bell, deceased, (commonly known as Heirs of
Sarah A. Bell's Addition to the City of Seattle) as per
plat recorded in Volume 1 of plats, page 103, records of
King County, Washington.
Now, therefore, for valuable consideration Owner and Tenant
as parties hereto agree that the Lease will be modified,
effective the 1st day of March, 1999, as Follows:
--- -----
Article 1 (a) shall be modified to read in its entirety as
follows:
a. Floors of The Westin Building on which Premises are
located: Combining Adjacent Suite 2002 with Suite 2010
Article l (b) shall be modified to read in its entirety as
follows:
b. Agreed floor area of Premises: Effective March 1,
1999, the agreed floor area of Premises shall be a
total of One Thousand Eight Hundred Twenty Nine
(1,829) rsf consisting of Suite 2002; One Thousand
Five Hundred Seventy Seven (l,577} square feet and
suite 2010, of approximately Two Hundred Fifty Two
(252) square feet as shown on exhibit "A" attached
hereto which includes an allowance for core and/or
common areas used by Tenant.
Article l (c) shall be modified to read in its entirety as
follows:
c. The term of this lease (hereinafter Lease Term ) shall
be extended through February 29, 2004.
Article 1 (d) shall be modified to read in its entirety as
follows:
d. Monthly Base Rent;
Monthly base rent shall be increased from the current
combined Base Rent of Three Thousand Eight Hundred
Sixty Three and 00/100 ($3,863.00) Dollars as follows:
March 1, 1999 - September 30, 1999 $4,573.00
October 1, 1999 - February 28, 2002 $5,182.00
March 1, 1002 - February 29, 2004 $5,487.00
Article 1 (j)shall be modified to read in its entirety as
follows:
j. Parking:
During the Lease Term, Owner shall provide Tenant with
three (3) unreserved parking spaces, including an
---------
appro-
<PAGE>
priate pro-rata share of "carpool" stalls, for
automobiles in The Westin Building Garage. Parking
spaces shall be provided from 7:00 a.m. to 6:00 p.m.
Monday through Friday (the Normal Parking Hours), and
as otherwise available outside of Normal Parking Hours.
Tenant acknowledges that parking spaces may not always
be available outside of Normal Parking Hours.
Tenant shall pay in advance the monthly charge
established by Owner for said parking spaces, on the
same date that monthly rent is due hereunder. If Tenant
fails to pay such charges when due, Owner may (i)
immediately cease to provide the parking spaces for
which Tenant has failed to pay, or (ii) continue to
provide the parking spaces and require that Tenant pay
the monthly parking charge, with interest at 12% per
annum, from the date due. Tenant may discontinue future
use and payment for any parking space upon written
notice to Owner. Tenant shall not be entitled to any
rebate for discontinued use of any parking space prior
to the end of the month. Upon initial occupancy of
Garage, the charge for each parking space shall be One
Hundred Seventy Dollars ($ 170.00 ) per month
(including tax). From time to time during this Lease,
the charge for parking spaces may be increased to the
then-prevailing rate for similar parking services in
the immediate area.
Owner shall maintain the right to pass on to Tenant all
applicable parking taxes. Parking taxes shall not
include real estate taxes for the Garage or any federal
income tax.
Article 1 (l) Security Deposit shall be modified to read in
its entirety as follows:
l. Security Deposit
Owner is holding Twelve Thousand Four Hundred Twenty
Eight and 00/100 Dollars ($12,428.00) as security for
the performance by Tenant of every covenant and
condition to be performed by Tenant under this Lease.
Upon payment of the said deposit, Owner shall deliver
to Tenant a written receipt therefor. The deposit may
be commingled with other funds of Owner, and Tenant
shall not be entitled to interest thereon. If Tenant
shall default with respect to any covenant or
condition of this Lease, including but not limited to
the payment of Base Monthly Rent, additional rent or
parking charges, and such default is not cured after
ten (10) days written notice as provided in Article
14, Owner may apply, but shall not be required the
whole or any part of the deposit to the payment of any
sum in default, and any other reasonable amounts which
Owner may be required to spend by reason of Tenant's
default. In the event Owner so applies all or any part
of the deposit, Tenant shall replenish the amount so
applied within ten (10) days of Owner's written
demand. Should Tenant comply with all of the covenants
and conditions of this Lease, the deposit shall be
returned to Tenant (or, at the option of Owner, to the
last assignee of Tenant's interest in this Lease) at
the expiration of the Lease Term. If the Owner assigns
its interest in this Lease, Owner shall not be
relieved of its obligations to Tenant hereunder until
the security deposit is transferred to Owner's
assignee.
Article l (p) shall be modified to read in its entirety as
follows:
p. Copper Meet-Me Room Access
Tenant shall have the privilege to use in common with
other Building tenants the 19th floor Meet-Me Room
(the "Meet-Me Room") and associated wiring systems.
Owner shall supervise the maintenance of the room by
tenant users and shall use reasonable means to ensure
this facility is available to Tenant. Tenant agrees to
abide
<PAGE>
by all written regulations for use of the Meet-Me Room
established jointly by Owner and tenant-users and
provided to Tenant, including, but not limited to the
"Survival Manual for Communications Companies" in the
Westin Building, the present version of which has been
provided to Tenant. If Tenant violates any such
regulation and fails to cure the same immediately upon
Owner's demand (or within any reasonable cure period
established by Owner in its sole discretion) Owner may
withdraw Tenant's privilege to use the Meet-Me Room.
Tenant understands and agrees that Meet-Me Room access
is a privilege and not a right, and that Owner's right
to exclude Tenant from Meet-Me Room access as stated
herein is absolute and not subject to RCW 59.12 et.
seq.
Owner shall not be liable for damages, nor shall the
rental herein reserved be abated, for Owner's failure
to provide Meet-Me Room access, functions and services,
when such failure or delay is caused by an event of
"Force Majeur" (as defined in Article 30), or by the
making of necessary repairs to the Premises or Building
(provided that Owner has used reasonable efforts not to
interfere with or interrupt the conduct of Tenant's
business at the Premises), nor shall the temporary
failure to furnish any of such services due to such
events be construed as an eviction of Tenant or relieve
Tenant from the duty of observing and performing any of
the provisions of this Lease.
For Copper Meet-Me Room usage, as of April 15, 1998,
------ ---------------------
Tenant has paid for the one-time usage fee of Five
--------------------------------------------------
Hundred and 00/100 Dollars ($500.00).
------------------------------------
For each DSX panel or DS3 module placed in the room,
Tenant shall pay a one-time fee of Three hundred sixty
eight and 00/100 dollars ($368.00) per DSX and/or one
hundred eighty four and 00/100 dollars ($184.00) per
DS3 module and a recurring monthly charge of Seventy
Five and 00/100 Dollars ($75.00) per Panel installed
within the room.
Article 1(r)shall be modified to read in its entirety as
follows:
r. HVAC (Heating, Ventilating, and Air Conditioning):
Owner grants Tenant the right to install, at Tenant's
sole cost, its own HVAC equipment in Premises. This
equipment shall he considered Tenant's trade fixture.
Tenant's HVAC equipment shall be connected in a manner
approved by the Building Engineer, which approval shall
not be unreasonably withheld, conditioned or delayed.
Owner represents and warrants to Tenant that at all
times during the Lease Term, Owner shall have available
for Tenant's heating and ventilation needs at the
Premises not more than Three (3) tons of HVAC cooling
--------
capacity. Owner agrees to allow Tenant to an
----------------------------------
additional Three (3) tons of HVAC cooling capacity
--------------------------------------------------
after December 31, 1999 subject to availability.
-----------------------------------------------
Owner shall not be liable for damages, nor shall the
rental herein reserved be abated, for Owner's failure
to furnish or delay in furnishing HVAC cooling, when
such failure or delay is caused by an event of Force
Majeur or by the making of necessary repairs to the
Premises or Building (provided that Owner has used
reasonable efforts not to interfere with or interrupt
the conduct of Tenant's business at the Premises), nor
shall the temporary failure to furnish any of such
services due to such events be construed as eviction of
Tenant or relieve Tenant from the duty of observing and
performing any of the provisions of this Lease.
<PAGE>
Tenant shall pay to Owner within thirty (30) days of
commencement of Lease a sum equal to Seven Hundred
Fifty & 00/100 ($750.00) per ton of committed capacity
(see above). In addition, Tenant shall pay within ten
(10) days of invoice a quarterly fee for Tenant's pro
rata, per ton share of the costs charged to all users
of the cooling tower for Owner's costs and expenses of
operating and maintaining the cooling tower, including,
but not limited to, chemical treatment, electrical
usage and water consumption
Article l(s)shall be modified to read in its entirety as
follows:
s. Essential Power:
Tenant shall have the right to the following additional
amounts of "Essential Power" (defined below):
(i) amperes of 480 volt Essential Power ("Minimum
Capacity") which shall be made available by Owner to
Tenant pursuant to the following schedule:
--------------------------------------------------
MINIMUM AMT. OF
PHASE DATE ESSENTIAL POWER
---- AVAILABLE TO TENANT
--------------------------------------------------
4th Quarter, 1999 10 Amps of 480V
--------------------------------------------------
January 1, 2000 15 Amps of 480V
--------------------------------------------------
At all times during the Term of this Lease, Owner shall
maintain the Essential Power system to ensure that the
then-current minimum level of Essential Power is
delivered by Owner to Tenant through The Westin
Building electrical system.
Owner shall not be liable for damages, nor shall the
rental herein reserved be abated, for Owner's failure
to furnish or delay in furnishing Essential Power, when
such failure or delay is caused by an event of Force
Majeur or by the making of necessary repairs to the
Premises or Building (provided that Owner has used
reasonable efforts not to interfere with or interrupt
the conduct of Tenant's business at the Premises), nor
shall the temporary failure to furnish any of such
services due to such events be construed as an eviction
of Tenant or relieve Tenant from the duty of observing
and performing any of the provisions of this Lease.
Tenant shall pay to Owner a connection charge of Seven
Hundred Fifty and 00/100 Dollars ($750.00) per ampere
of minimum Essential Power based on the schedule above
within 10 days of date shown: Tenant shall pay all
costs associated with wiring the Essential Power system
from the riser to Tenant's Premises, as well as its pro
rata share of any annual maintenance costs. As of this
----------
date, Tenant has Fifteen (15) amps of 480V of Essential
-------------------------------------------------------
Power.
------
NEW
Liability Insurance
Tenant at its sole cost and expense shall obtain and
maintain in full force and effect during the Lease term
commercial general liability insurance insuring against
any and all claims for injury to or death of persons
and loss of or damage to property occurring in, on or
about the Premises in form and amounts satisfactory to
Owner, but in any case with a single combined liability
limit of not less than $1,000,000. All such insurance
shall be written by companies satisfactory to Owner,
shall name Sixth & Virginia Properties as additional
insured parties, and shall contain a provision
requiring thirty days' written notice to Owner and to
Owner's mortgagees
<PAGE>
(if any) before cancellation or change in coverage,
scope or amount of insurance. Prior to taking
possession of the Premises, Tenant shall furnish Owner
with the certificate of such policy, and renewal
certificates shall be furnished to Owner prior to the
expiration of any expiring policy.
EXCEPT to the extent herein revised, amended or modified, all terms,
conditions and provisions of said Lease are hereby affirmed and
ratified in all respects.
OWNER: TENANT:
------ ------
SIXTH & VIRGINIA PROPERTIES, POINTSHARE CORPORATION
A Washington General Partnership A Delaware Corporation
By Clise Properties, Inc,, a Partner
/s/ /s/
By__________________________________ By__________________________
VP Finance
Its_________________________________ Its_________________________
4/27/99
Date________________________________ Date________________________
State of Washington
County of King
I certify that I know or have satisfactory evidence that A.M, Clise
----------
is the person who appeared before me and said person acknowledged
that he signed this instrument, on oath stated that he was
authorized to execute the instrument and acknowledged it as the
President of CLISE PROPERTIES INC., a partner of SIXTH & VIRGINIA
---------
PROPERTIES, a Washington general partnership, to be the free and
voluntary act of such party for the uses and purposes mentioned in
the instrument.
<TABLE>
<S> <C>
Dated_______________________________
_______________________________________________
(Name legibly printed or stamped)
Jennifer A. Richards
---------------------
Notary Public in and for the State of Washington,
residing at Issaquah
My appointment expires: February 7, 2003
</TABLE>
<PAGE>
EXHIBIT 10.15
[LOGO OF IMPERIAL BANK]
STARTER KIT LOAN AND SECURITY AGREEMENT
Borrower: HealthKnowledge Corporation Address: 1300 114/th/ Avenue SE Suite 100
--------------------------------
Bellevue, WA 98004
--------------------------------
Date: 9/22/97
-------------
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made and entered into on the
above date between IMPERIAL BANK ("Bank"), whose address is 226 Airport Parkway,
San Jose, California 95110 and with a loan production office located at 777
108/th/ Avenue N.E., Suite 1670, Bellevue, Washington 98004, and the party(ies)
named above (jointly and severally, "Borrower"), whose chief executive office is
located at the above address ("Borrower's Address").
1. Loans. Bank will make loans to Borrower (the "Loans") in amounts determined
by Bank in its reasonable business judgment up to the amount (the "Credit
Limit") shown on the Schedule to this Agreement (the "Schedule"), provided no
Event of Default and no event which, with notice or passage of time or both,
would constitute an Event of Default is occurring or has occurred. All Loans and
other monetary Obligations will bear interest at the rate shown on the
Schedule. Interest will be payable monthly, on the date shown on the monthly
billing from Bank. Bank may, in its discretion, charge Borrower's deposit
accounts maintained with Bank for any amounts coming due under this Agreement.
2. Security interest. As security for all present and future indebtedness,
guarantees, liabilities, and other obligations, of Borrower to Bank
(collectively, the "Obligations"), Borrower hereby grants Bank a continuing
security interest in all of Borrower's right title and interest in and to any
property now or hereafter described in an security agreement executed by
Borrower to Bank as well as the following types of property, whether now owned
or hereafter acquired, and wherever located (collectively, the "Collateral"):
All "accounts" "general intangibles," "chattel paper," "documents," "letters of
credit," "instruments," "deposit accounts," "inventory," "farm products,"
"fixtures" and "equipment," as such terms are defined in Division 9 of the
Washington Uniform Commercial Code in effect on the date hereof, and all
products, proceeds and insurance proceeds of the foregoing.
3. Representations And Agreements of Borrower. Borrower represents to Bank as
follows, and Borrower agrees that the following representations will continue to
be true, and that Borrower will comply with all of the following agreements
throughout the term of this Agreement:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and will
continue to be, duly authorized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby have been duly and validly authorized, and do not violate any law or any
provision of and are not grounds for acceleration under, any agreement or
instrument which is binding upon Borrower.
3.2 Name: Places of Business. The name of Borrower set forth in this Agreement
is its correct name. Borrower shall give Bank 15 days' prior written notice
before changing its name. The address set forth in the heading to this Agreement
is Borrower's chief executive office. In addition, Borrower has places of
business and Collateral is located only at the locations set forth on the
Schedule. Borrower will give Bank at least 15 days prior written notice before
changing its chief executive office or locating the Collateral at any other
location.
3.3 Collateral. Bank has and will at all times continue to have a first-
priority perfected security interest in all of the Collateral other than
specific equipment identified in existing filed or to be filed Financing
Statements. Borrower will immediately advise Bank in writing of any material
loss or damage to the Collateral.
3.4 Financial Condition and Statements. All financial statements now or in the
future delivered to Bank have been, and will be prepared in conformity with
generally accepted accounting principles. Since the last date covered by any
such statement, there has been no material adverse change in the financial
condition or business of Borrower. Borrower will provide Bank: (i) within 30
days after the end of each month, a monthly financial statement prepared by
Borrower, and such other information as Bank shall reasonably request; (ii)
within 120 days following the end of Borrower's fiscal year, complete annual
financial statements, certified by independent certified public accountants
acceptable to Bank and accompanied by the unqualified report thereon by said
independent certified public, accountants; and (iii) other financial information
reasonably requested by Bank from time to time.
3.5 Taxes: Compliance with Law. Borrower has filed, and will file, when due,
all tax returns and reports required by applicable law, and Borrower has paid,
and will pay, when due, all taxes, assessments, deposits and contributions now
or in
<PAGE>
the future owed by Borrower. Borrower has complied, and will comply, in all
material, respects, with all applicable laws, rules and regulations.
3.6 Insurance. Borrower will at all times adequately insure all of the tangible
personal property Collateral and carry such other business insurance as is
customary in Borrower's industry.
3.7 Access to Collateral and Books and Records. At reasonable times, on one
business day's notice, Bank, or its agents, shall have the right to inspect the
Collateral, and the right to audit and copy Borrower's books and records.
3.8 Banking Relationship and Operating Accounts. Borrower shall maintain its
primary operating deposit accounts with Bank. Borrower shall at all times
maintain its primary banking relationship with Bank.
3.9 Additional Agreements. Borrower shall not, without Bank's prior written
consent, do any of the following: (i) enter into any transaction outside the
ordinary course of business except for the sale of capital stock to venture
investors, provided that Borrower promptly delivery written notification to Bank
of any such stock sale; (ii) sell or transfer any Collateral, except in the
ordinary course of business; (iii) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower; (iv) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock other than the repurchase of up to five percent (5%) of Borrower's then
issued stock in any fiscal year from Borrower's employees or directors pursuant
to written agreements with Borrower; or (v) sell, transfer or grant a security
interest any of its rights, title or interest in intellectual property,
including, without limitation, any patents, copyrights or trademarks.
4. Term. This Agreement shall continue in effect until the maturity date set
forth on the Schedule (the "Maturity Date"). This Agreement may be terminated,
without penalty, prior to the Maturity Date as follows: (i) by Borrower,
effective three business days after written notice of termination is given to
Bank; or (ii) by Bank at any time after the occurrence of an Event of Default,
without notice, effective immediately. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay all Obligations in full,
whether or not such Obligations are otherwise then due and payable. No
termination shall in any way affect or impair any security interest or other
right or remedy of Bank, nor shall any such termination relieve Borrower of any
obligation to Bank, until all of the Obligations have been paid and performed in
full.
5. Events of Default and Remedies. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement: (a) Any
representation, statement, report or certificate given to Bank by Borrower or
any of its officers, employees or agents, now or in the future, is untrue or
misleading in a material respect; or (b) Borrower fails to pay when due any Loan
or any interest thereon or any other monetary Obligation; or (e) the total
Obligations outstanding at any time exceed the Credit Limit; or (d) Borrower
fails to perform any other non-monetary Obligation, which failure is not cured
within 5 business days after the date due; or (e) Dissolution, termination of
existence, insolvency or business failure of Borrower or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by or against Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (f) a material
adverse change in the business, operations, or financial or other condition of
Borrower. If an Event of Default occurs, Bank, shall have the right to
accelerate and declare all of the Obligations to be immediately due and payable,
increase the interest rate by an additional five percent per annum, and exercise
all rights and remedies recorded by applicable law. If any interest payment,
principal payment or principal balance payment due from Borrower is delinquent
ten or more days, Borrower agrees to pay Bank a late charge in the amount of 5%
of the payment so due and unpaid, in addition to the payment; but nothing in
this provision is to be construed as any obligation an the part of Bank to
accept payment of any payment past due or less than the total unpaid principal
balance after maturity. All payments shall be applied first to any late charges
owing, then to interest and the remainder, if any, to principal.
6. General. If any provision of this Agreement is held to be unenforceable,
the remainder of this Agreement shall still continue in full force and effect.
This Agreement and any other written agreements, documents and instruments
executed in connection herewith are the complete agreement between Borrower and
Bank and supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in this
Agreement. There are no oral understandings, representations or agreements
between the parties which are not in this Agreement or in other written
agreements signed by the parties in connection this Agreement. The failure of
Bank at any time to require Borrower to comply strictly with any of the
provisions of this Agreement shall not waive Bank's right later to demand and
receive strict compliance. Any waiver of a default shall not waive any other
default. None of the provisions of this Agreement may be waived except by a
specific written waiver signed by an officer of Bank and delivered to Borrower.
The provisions of this Agreement may not be amended, except in a writing signed
by Borrower and Bank. Borrower shall reimburse Bank for all reasonable
attorney's fees and all other reasonable costs incurred by Bank, in connection
with this Agreement (whether or not lawsuit is filed) including any post
petition bankruptcy activities. If Bank or Borrower files any lawsuit against
the other predicated on a breach of this Agreement, the prevailing party shall
be entitled to recover its reasonable costs and attorney's fees from the non-
prevailing party. Borrower may not assign any rights under this Agreement
without Bank's prior written consent. This Agreement shall be governed by the
laws of the State of California to the jurisdiction of whose courts Borrower
hereby agrees to submit.
7. Mutual Waiver of Jury Trial. BORROWER AND BANK EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT
<PAGE>
OR ANY CONDUCT, ACT OR OMISSION OF BANK OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR AFFILIATES.
8. Reference Proceedings. a. Other than (i) non-judicial foreclosure and all
matters in connection therewith regarding security interest in property; or (ii)
the appointment of a receiver, or the exercise of other provisional remedies
(any and all of which may be initiated pursuant to applicable law), each
controversy, dispute or claim ("Claim") between the parties arising out of or
relating to this Agreement, which is not settled in writing within ten days
after the "Claim Date" (defined as the date on which a party gives written
notice to all other parties that a controversy, dispute or claim exists), will
be settled by a reference proceeding in Los Angeles, California in accordance
with the provisions of Section 638 et seq. of the California Code of Civil
-- ---
Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any Claim, including whether such Claim
is subject to the reference proceeding and the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court of Los Angeles (the "Court"). The referee shall be
a retired Judge selected by mutual agreement of the parties, and if they cannot
so agree within thirty days after the Claim Date, the referee shall be selected
by the Presiding Judge of the Court. The referee shall be appointed to sit as a
temporary judge, as authorized by law. The referee shall (a) be requested to set
the matter for hearing within sixty (60) days after the Claim Date and (b) try
any and all issues of law or fact and report a statement of decision upon them,
if possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgment shall entered
pursuant to CCP 644 in the Court. All discovery permitted by this Agreement
shall be completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and, request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties.
b. The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of California. The
rules of evidence applicable to proceedings at law in the State of California
will be applicable to the reference proceeding. The referee shall be empowered
to enter equitable as well as legal relief, to provide all temporary and/or
provisional remedies and to enter equitable orders that will be binding upon the
parties. The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or
appealable judgment entered by the referee. The parties expressly reserve the
right to findings of fact, conclusions of law, a written statement of decision,
and the right to move for new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
Borrower:
HEALTHKNOWLEDGE CORPORATION
By: /s/ T. Kilgallon
-------------------------------------
President or Vice President
By: /s/ Christopher Dishman
-------------------------------------
(Assistant) Secretary or Chief
Financial Officer
Bank:
IMPERIAL BANK
By: /s/
-------------------------------------
Title: Senior Vice President
<PAGE>
[LOGO OF IMPERIAL BANK]
Master schedule to Starter Kit Loan and Security Agreement
Borrower: HealthKnowledge Corporation
Date: 9/22/97
----------------------
This Schedule is incorporated into and an integral part of the Starter Kit
Loan and Security Agreement between Imperial Bank ("Bank") and the above-named
Borrower of even date.
Credit Limit (Aggregate)
(Section 1): $750,000 (includes, without limitation, Equipment
Advances and the Merchant Services and Business
Bancard Reserve, if any)
Interest Rate (Section 1): The rate equal to Bank's Prime Rate in effect from
time to time, plus 1.50% per year. Interest shall
be calculated on the basis of a 360 day year for
the actual number of days elapsed. The Prime Rate
shall be the rate announced from time to time by
Bank as its "Prime Rate;" as a base rate upon
which other rates charged by Bank are based, and
it is not necessarily the best rate available at
Bank. The interest rate applicable to the
Obligations shall change on each date there is a
change in the Prime Rate.
Maturity Date (Section 4): March 31, 1999.
Other Locations and Addresses
(Section 3.2): __________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
Other Agreements: 1. Loan Fee. Borrower shall concurrently pay
Bank a non-refundable Loan Fee in the amount of
$3,750.00.
2. _____________________________________________
__________________________________________________
__________________________________________________
Borrower: Bank:
HEALTHKNOWLEDGE CORPORATION IMPERIAL BANK
By: /s/ T. Kilgallon By: /s/
--------------------------------- -----------------------------
President or Vice President
Title: Senior Vice President
By: /s/ Christopher Dishman
---------------------------------
(Assistant) Secretary or Chief
Financial Officer
<PAGE>
[LOGO OF IMPERIAL BANK]
Schedule to
Starter Kit Loan and Security Agreement (Equipment Advances)
Borrower: HealthKnowledge Corporation
Date: 9/22/97
-------------------------------
This Schedule is an integral part of the Loan and Security Agreement
between Imperial Bank ("Bank") and the above-named Borrower of even date.
Credit Limit (Equipment)
(Section 1): $750,000 (such amount to be funded under the aggregate
Credit Limit). Equipment Advances will be made only on
prior to March 31, 1998 (the "Last Advance Data") and
only for the purpose of purchasing equipment reasonably
acceptable to Bank. Borrower must provide invoices for
the equipment to Bank on or before the Last Advance
Data.
Interest Rate
(Section 1): The rate equal to Bank's Prime Rate in effect from time
to time, plus 1.50% per annum. Interest shall be
calculated on the basis of a 360 day year for the
actual number of days elapsed. The Prime Rate shall be
the rate announced from time to time by Bank as its
"Prime Rate;" as a base rate upon which other rates
charged by Bank are based, and it is not necessarily
the best rate available at Bank. The interest rate
applicable to the Obligations shall change on each date
there is a change in the Prime Rate.
Maturity Date
(Section 4): After the Last Advance Date, the unpaid principal
balance of the Equipment Advances shall be repaid in
thirty-six (36) equal monthly installments of
principal, plus interest, commencing on April, 30 1998
and continuing on the same day of each month thereafter
until the entire unpaid principal balance of the
Equipment Advances and all accrued unpaid interest have
been paid (subject to Bank's right to accelerate the
Equipment Advances on an Event of Default).
Borrower: Bank:
HEALTHKNOWLEDGE CORPORATION IMPERIAL BANK
By: /s/ T. Kilgallon By: /s/
----------------------------- ----------------------------------
President or Vice President
Title: Senior Vice President
By: /s/ Christopher Dishman
-----------------------------
(Assistant) Secretary or Chief
Financial Officer
<PAGE>
EXHIBIT 10.16
- --------------------------------------------------------------------------------
POINTSHARE CORPORATION
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS AND CONSTRUCTION............................. 1
1.1 Definitions......................................... 1
1.2 Accounting Terms.................................... 8
2. LOAN AND TERMS OF PAYMENT................................ 8
2.1 Credit Extensions................................... 8
2.2 Overadvances........................................ 9
2.3 Interest Rates, Payments, and Calculations.......... 9
2.4 Crediting Payments.................................. 10
2.5 Fees................................................ 10
2.6 Term................................................ 10
3. CONDITIONS OF LOANS...................................... 10
3.1 Conditions Precedent to Initial Credit Extension.... 10
3.2 Conditions Precedent to all Credit Extensions....... 11
4. CREATION OF SECURITY INTEREST............................ 11
4.1 Grant of Security Interest.......................... 11
4.2 Delivery of Additional Documentation Required....... 11
4.3 Right to Inspect.................................... 11
5. REPRESENTATIONS AND WARRANTIES........................... 12
5.1 Due Organization and Qualification.................. 12
5.2 Due Authorization; No Conflict...................... 12
5.3 No Prior Encumbrances............................... 12
5.4 Bona Fide Eligible Accounts......................... 12
5.5 Merchantable Inventory.............................. 12
5.6 Name; Location of Chief Executive Office............ 12
5.7 Litigation.......................................... 12
5.8 No Material Adverse Change in Financial Statements.. 12
5.9 Solvency, Payment of Debts.......................... 12
5.10 Regulatory Compliance............................... 13
5.11 Environmental Condition............................. 13
5.12 Taxes............................................... 13
5.13 Subsidiaries........................................ 13
5.14 Government Consents................................. 13
5.15 Full Disclosure..................................... 13
6. AFFIRMATIVE COVENANTS.................................... 13
6.1 Good Standing....................................... 14
6.2 Government Compliance............................... 14
6.3 Financial Statements, Reports, Certificates......... 14
6.4 Inventory; Returns.................................. 14
6.5 Taxes............................................... 14
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.6 Insurance..................................... 15
6.7 Principal Depository.......................... 15
6.8 Adjusted Quick Ratio.......................... 15
6.9 Profitability................................. 15
6.10 Liquidity; Debt Service Coverage.............. 15
6.11 Registration of Intellectual Property Rights.. 16
6.11 Further Assurances............................ 16
7. NEGATIVE COVENANTS................................. 16
7.1 Dispositions.................................. 16
7.2 Change in Business............................ 17
7.3 Mergers or Acquisitions....................... 17
7.4 Indebtedness.................................. 17
7.5 Encumbrances.................................. 17
7.6 Distributions................................. 17
7.7 Investments................................... 17
7.8 Transitions with Affiliates................... 17
7.9 Subordinated Debt............................. 17
7.10 Inventory..................................... 17
7.11 Compliance.................................... 17
8. EVENTS OF DEFAULT.................................. 18
8.1 Payment Default............................... 18
8.2 Covenant Default.............................. 18
8.3 Material Adverse Change....................... 18
8.4 Attachment.................................... 18
8.5 Insolvency.................................... 18
8.6 Other Agreements.............................. 19
8.7 Subordinated Debt............................. 19
8.8 Judgments..................................... 19
8.9 Misrepresentations............................ 19
9. BANK'S RIGHTS AND REMEDIES......................... 19
9.1 Rights and Remedies........................... 19
9.2 Power of Attorney............................. 20
9.3 Accounts Collection........................... 20
9.4 Bank Expenses................................. 20
9.5 Bank's Liability for Collateral............... 21
9.6 Remedies Cumulative........................... 21
9.7 Demand; Protest............................... 21
10. NOTICES............................................ 21
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......... 22
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
12. GENERAL PROVISIONS.................................. 22
12.1 Successors and Assigns........................ 22
12.2 Indemnification............................... 22
12.3 Time of Essence............................... 23
12.4 Severability of Provisions.................... 23
12.5 Amendment in Writing, Integration............. 23
12.6 Counterparts.................................. 23
12.7 Survival...................................... 23
13. JUDICIAL REFERENCE.................................. 23
14. CONFIDENTIALITY..................................... 24
</TABLE>
iii
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of July 15, 1998, by
and between IMPERIAL BANK ("Bank") and POINTSHARE CORPORATION ("Borrower").
RECITALS
--------
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
----------------------------
1.1 Definitions. As used in this Agreement, the following terms
-----------
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to seventy-five percent
(75%) of Eligible Accounts, as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower.
1
<PAGE>
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California or Washington are authorized
or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
---------
hereto.
"Committed Revolving Line" means a credit extension of up to Two
Hundred Thousand Fifty Thousand Dollars ($250,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Term Advance, or any other
extension of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
2
<PAGE>
"Debt Service Coverage" means, as of any date of determination, a
ratio of (a) the sum of (i) earnings after tax annualized for the preceding
three (3) months plus interest and non-cash (i.e., depreciation and
----
amortization) expenses, annualized for the preceding three months to (b) the sum
of (i) current portion of long term debt and capitalized leases plus (ii)
----
interest expense, annualized for the preceding three months.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4; provided, that standards of
--------
eligibility may be fixed and revised from time to time by Bank as a consequence
of any Collateral audits done pursuant to Section 6.3 in Bank's reasonable
judgment and upon notification thereof to Borrower in accordance with the
provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall
not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, twenty-five percent
(25%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an officer,
employee, or agent of Borrower,
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower,
(f) Accounts with respect to which the account debtor does not have
its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the United
States or any department, agency, or instrumentality of the United States;
(h) Accounts with respect to which Borrower is liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of any amounts owing to the account debtor against
amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligation to Borrower exceed twenty,
five percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines
to be doubtful.
3
<PAGE>
"Eligible Foreign Accounts" means Accounts with respect to which the
account debtor does not have its principal place of business in the United
States and that (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, acceptable to Bank or
(ii) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing created, acquired or held;
(c) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
4
<PAGE>
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products intended for sale
or lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
5
<PAGE>
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness secured by a lien described in clause (c) of
the defined term "Permitted Liens," provided such Indebtedness does not exceed
the lesser of the cost or fair market value of the equipment financed with such
Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(f) Indebtedness (other than (a) through (e)) at any time
outstanding in an amount not exceeding $100,000.
"Permitted Investment" means;
(a) Investments existing on the Closing Date disclosed in the
Schedule;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of
deposit maturing no more than one (1) year from the date of investment therein
issued by Bank, (iv) Bank's money market accounts and (v) Investments made in
connection with transactions permitted under Section 7.3; and
(c) Loans to employees to purchase Borrower's capital stock.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
--------
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that
--------
6
<PAGE>
any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof shall
be determined, the consolidated cash, cash-equivalents, accounts receivable and
investments, with maturities not to exceed 90 days, of Borrower determined in
accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Maturity Date" means July 14, 1999.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount thereof
shall be determined, the sum of the capital stock and additional paid-in capital
plus retained earnings (or minus accumulated deficit) of Borrower and its
Subsidiaries minus intangible assets, plus Subordinated Debt, on a consolidated
basis determined in accordance with GAAP.
"Term Maturity Date" means July 14, 2002.
"Total Liabilities" means at any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
7
<PAGE>
1.2. Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT.
-------------------------
2.1 Credit Extensions.
-----------------
Borrower promises to pay to the order of Bank, in lawful money of
the United States of America, the aggregate unpaid principal amount of all
Credit Extensions made by Bank to Borrower hereunder. Borrower shall also pay
interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof.
2.1.1 Revolving Advances.
------------------
(a) Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of (i) the Committed Revolving Line or (ii) the Borrowing
Base. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1.1 may be repaid and reborrowed at any time prior to
the Revolving Maturity Date, at which time all Advances under this Section 2.1.1
shall be immediately due and payable. Borrower may prepay any Advances without
penalty or premium.
(b) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific
time, on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the form
of Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
---------
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1.1 to Borrower's deposit account.
2.1.2 Term Advances.
-------------
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through July 14, 1999, Bank agrees
to make advances (each a "Term Advance" and, collectively, the "Term Advances")
to Borrower in an aggregate outstanding amount not to exceed $1,500,000. The
initial Term Advance shall be in an amount up to $500,000 and shall be used to
repay in full the obligations that Borrower owes Bank under the Starter Kit Loan
and Security Agreement dated September 22, 1997. In addition, Borrower may
request up to $500,000 of Term Advances on a non-formula basis for general
corporate purposes. Borrower may also requests up to $500,000 of Term Advances
to finance the purchase or acquisition of Equipment. Each Term Advance financing
Equipment shall not exceed one hundred percent (100%) of the invoice amount of
Equipment approved by Bank from time to time, excluding taxes, shipping,
warranty charges, freight discounts and installation expense.
8
<PAGE>
(b) Interest shall accrue from the date of each Term Advance at the
rate specified in Section 2.3(a), and shall be payable monthly on the first day
of each month through July 14, 1999. Any Term Advances that are outstanding on
July 14, 1999 shall be payable in thirty-six (36) equal monthly installments of
principal, plus all accrued interest, beginning on August 1, 1999, and
continuing on the same day of each month thereafter through July 14, 2002, at
which time all amounts due under this Section 2.1.2 and any other amounts due
under this Agreement shall be immediately due and payable. Borrower may prepay
any Term Advances without penalty or premium.
(c) When Borrower desires to obtain a Term Advance, Borrower shall
notify Bank (which notice shall be irrevocable) by facsimile transmission to be
received no later than 3:00 p.m. Pacific time one (1) Business Day before the
day on which the Term Advance is to be made. Such notice shall be substantially
in the form of Exhibit B. The notice shall be signed by a Responsible Officer or
----------
its designee and, as to any Term Advance financing Equipment, shall include a
copy of the invoice for such Equipment.
2.2 Overadvances. If any Advances hereunder exceed the lesser of the
------------
Borrowing Base or the Committed Revolving Line, Borrower, upon written notice
from Bank, shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rates.
--------------
(i) Advances. Except as set forth in Section 2.3(b), the
--------
Advances shall bear interest, on the outstanding daily balance thereof, at a
rate equal to One Percent (1.0%) above the Prime Rate.
(ii) Term Advances. Except as set forth in Section 2.3(b), the
-------------
Term Advances shall bear interest, on the outstanding daily balance thereof, at
a rate equal to One and One Half Percent (1.5%) above the Prime Rate.
(b) Late Fee; Default Rate. If any payment is not made within ten
----------------------
(10) days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount
or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
an Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
--------
first calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Committed Revolving
Line, in which case those amounts shall thereafter accrue interest at the rate
then applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder. Bank shall deliver to Borrower
statements of account in the ordinary course of business reflecting charges made
hereunder.
9
<PAGE>
(d) Computation. In the event the Prime Rate is changed from time to
-----------
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of the day the Prime Rate is changed, by an amount equal
to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
------------------
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon Pacific time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.
2.5 Fees. Borrower shall pay to Bank the following:
----
(a) Facility Fee. On the Closing Date, a Facility Fee equal to
------------
$5,000, which shall be nonrefundable;
(b) Bank Expenses. On the Closing Date, all Bank Expenses incurred
-------------
through the Closing Date, including reasonable attorneys' fees and expenses and,
after the Closing Date, all Bank Expenses, including reasonable attorneys' fees
and expenses, as and when they become due.
2.6 Term. This Assignment shall become effective on the Closing Date
----
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Term Maturity Date. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS.
-------------------
3.1 Conditions Precedent to Initial Credit Extension. The obligation
------------------------------------------------
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) a financing statement (Form UCC-1);
(d) an intellectual property security agreement;
10
<PAGE>
(e) an audit of the Collateral, the results of which shall be
satisfactory to Bank; and
(f) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
---------------------------------------------
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension
(provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date). The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST.
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank
--------------------------
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule and for Permitted Liens, such security interest constitutes a valid,
first priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in Collateral acquired
after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall
---------------------------------------------
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees,
----------------
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
11
<PAGE>
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
----------------------------------
is a corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where failure to so qualify would not have a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title
---------------------
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The services giving rise to such Eligible Accounts have
been performed and the account debtor has an unconditional obligation to pay
Borrower for such services. Borrower has not received notice of actual or
imminent Insolvency Proceeding of any account debtor that is included in any
Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
----------------------
of good and marketable quality, free from all material defects, except for
Inventory for which adequate reserves have been made.
5.6 Name; Location of Chief Executive Office. Except for
----------------------------------------
"Healthknowledge Corporation" and as disclosed in the Schedule, Borrower has not
done business under any name other than that specified on the signature page
hereof. The chief executive office of Borrower is located at the address
indicated in Section 10 hereof.
5.7 Litigation. Except as forth in the Schedule, there are no
----------
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral.
5.8 No Material Averse Change in Financial Statements. All
-------------------------------------------------
consolidated financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency, Payment of Debts. Borrower is solvent and able to pay
--------------------------
its debts (including trade debts) as they mature.
12
<PAGE>
5.10 Regulatory Compliance. Borrower and each Subsidiary have met
---------------------
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. Except as disclosed in the Schedule,
-----------------------
none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a hazardous
waste or hazardous substance disposal site, or a candidate for closure pursuant
to any environmental protection statute; to the best of Borrower's knowledge, no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and to the best of Borrower's knowledge, neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be
-----
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
------------
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained
-------------------
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which could have a Material Adverse Effect.
5.15 Full Disclosure. No representation, warranty or other
---------------
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS.
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
13
<PAGE>
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could have a Material Adverse Effect. Borrower shall maintain, and shall cause
each of its Subsidiaries to maintain in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each calendar month, a Borrower prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, in a form and certified by a Responsible Officer; (b) as
soon as available, but in any event within ninety (90) days after the end of
Borrower's fiscal year (beginning with the year ended December 31, 1998),
audited consolidated Financial statements of Borrower prepared in accordance
with GAAP, consistently applied; (c) promptly upon receipt of notice thereof, a
report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of Fifty Thousand Dollars ($50,000) or more; and (d) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time generally prepared by Borrower in the
ordinary course of business.
Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
---------
accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts and appraise Collateral at Borrower's expense, provided that such
audits will be conducted no more often than every twelve (12) months unless an
Event of Default has occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
------------------
and marketable condition, free from all material defects except for Inventory
for which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement. Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Fifty Thousand Dollars
($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
-----
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable
14
<PAGE>
laws, including, but not limited to, those laws concerning F.I.C.A., F.U.T.A.,
state disability, and local, state, and federal income taxes, and will, upon
request, furnish Bank with proof satisfactory to Bank indicating that Borrower
or a Subsidiary has made such payments or deposits; provided that Borrower or a
Subsidiary need not make any payment if the amount or validity of such payment
is contested in good faith, by appropriate proceedings and is reserved against
(to the extent required by GAAP) by Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss damage by fire, theft, explosion, sprinklers, and all other hazards
and risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the locations where Borrower's business is
conducted on the date hereof. Borrower shall also maintain insurance relating to
Borrower's ownership and use of the Collateral in amounts and of a type that are
customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premium therefor. All proceeds
over $50,000 payable under any such policy shall, at the option of Bank, be
payable to Bank to be applied in account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal depository
--------------------
and operating accounts with Bank.
6.8 Adjusted Quick Ratio. Beginning as of November 30, 1998, Borrower
--------------------
shall maintain, as of the last day of each calendar month, a ratio of Quick
Assets to Current Liabilities, less deferred revenue and the current portion of
Subordinated Debt, of at least 1.50 to 1.00.
6.9 Profitability. Borrower shall not suffer a loss for the fiscal quarter
-------------
ended June 30, 1998 in excess of $1,600,000, a loss in excess of $1,300,000 for
the fiscal quarter ended September 30, 1998, or a loss in excess of $1,000,000
for the fiscal quarter ended December 31, 1998.
6.10 Liquidity; Debt Service Coverage. Beginning as of November 30, 1998,
--------------------------------
Borrower shall maintain a balance of unrestricted cash and cash equivalents plus
the Borrowing Base minus the outstanding Advances that is one and one half (1.5)
times such balance. Notwithstanding the foregoing, after Borrower has maintained
a Debt Service Coverage of at least 1.50 to 1.00 for six consecutive months,
Borrower thereafter shall maintain such Debt Service Coverage of at least 1.50
to 1.00 as of the last day of each month in lieu of the liquidity covenant set
forth in the first sentence of this section 6.10.
6.11 Equity Infusion. On or before November 30, 1998, Borrower shall
---------------
receive no less than Five Million Dollars ($5,000,000) in cash proceeds from
institutional venture capital investors acceptable to Bank from the sale of its
Series B capital stock.
15
<PAGE>
6.11 Registration of Intellectual Property Rights.
--------------------------------------------
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, those intellectual property rights listed on Exhibits A, B and C to
the Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement within thirty (30) days of the date of this
Agreement. Borrower shall register or cause to be registered with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, those additional intellectual property rights developed or acquired
by Borrower from time to time in connection with any product prior to the sale
or licensing of such product to any third party, including without limitation
major revisions or additions to the intellectual property rights listed on such
Exhibits A, B and C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any material Trademarks, Patents or Copyrights to
be abandoned, forfeited or dedicated to the public without the written consent
of Bank, which shall not be unreasonably withheld.
(d) Bank may audit Borrower's Intellectual Property Collateral
to confirm compliance with this Section, provided such audit may not occur more
often than once per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section.
6.12 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
------------------
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Credit
Extensions, Borrower will not do any of the following without Bank's prior
written consent, which Bank may grant or withhold in its sole discretion:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of surplus, worn-out or obsolete Equipment.
16
<PAGE>
7.2 Change in Business. Engage in any business, or permit any of its
------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
-----------------------
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person in any
transaction involving consideration of more than $100,000; provided, however,
that Borrower or any Subsidiary may merge, consolidate or reorganize with or
into another entity as long as Borrower or such Subsidiary is the surviving
corporation and an Event of Default does not exist before or after giving effect
to such transaction.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
------------
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
-------------
or payment on account of or in redemption, retirement or purchase of any capital
stock, except that Borrower may repurchase the stock of former employees,
officers, directors or consultants pursuant to stock repurchase agreements as
long as an Event of Default does not exist or would not exist after giving
effect to such repurchase.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
----------------------------
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory; provided, however, that Borrower may deposit software
code in escrow for customers in the ordinary course of business. Except for
Inventory sold in the ordinary course of business and except for such other
locations as Bank may approve in writing, Borrower shall keep the Inventory only
at the location set forth in Section 10 hereof and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or be controlled by
----------
an "investment company," within the meaning of the Investment Company Act of
1940, or become
17
<PAGE>
principally engaged in, or undertake as one of its important activities, the
business of extending credit for the purpose of purchasing or carrying margin
stock, or use the proceeds of any Credit Extension for such purpose. Fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT.
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
---------------
Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future written
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within thirty (30) days after Borrower receives written notice
thereof or any officer of Borrower becomes aware thereof; provided, however,
that if the default cannot by its nature be cured within the thirty (30) day
period or cannot after diligent attempts by Borrower be cured within such thirty
(30) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed forty-five (45) days) to attempt to cure such default, and
within such reasonable time period the failure to have cured such default shall
not be deemed an Event of Default (provided that no Credit Extensions will be
required to be made during such cure period);
8.3 Material Adverse Change. If there occurs a Material Adverse
-----------------------
Effect;
8.4 Attachment. If any material portion of the Collateral is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of the
Collateral, or if a notice of lien, levy, or assessment is filed of record with
respect to any of the Collateral by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
18
<PAGE>
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank or otherwise consented to in
writing by Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
---------
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or
8.9 Misrepresentations. If any material misrepresentation or
------------------
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time
owing to or for the credit or the account of Borrower held by Bank;
19
<PAGE>
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
-----------------
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to Borrower's policies of insurance; and
(f) settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; provided Bank may exercise such power of attorney to sign the name
of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and immediately deliver such payments
to Bank in their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under the Revolving Facility as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.6 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses,
20
<PAGE>
shall be immediately due and payable, and shall bear interest at the then
applicable rate hereinabove provided, and shall be secured by the Collateral.
Any payments made by Bank shall not constitute an agreement by Bank to make
similar payments in the future or a waiver by Bank of any Event of Default under
this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES.
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: Pointshare Corporation
1300 114th Ave. SE, Suite 100
Bellevue, WA 98004
Attn: Chris Dishman
FAX: (425) 635-0301
with a copy to: Sonya Erickson
Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
FAX: (425) 739-8750
21
<PAGE>
If to Bank: Imperial Bank
226 Airport Parkway
San Jose, CA 95110-1024
Attn: Corporate Banking Center
FAX: (408) 451-8523
with a copy to: Imperial Bank
777 108th Avenue NE, Suite 1670
Bellevue, WA 98004
Attn: J. P. Michael
FAX: (425) 454-6224
Any notice received by Borrower shall be effective notwithstanding the lack
of receipt by Borrower's counsel. The parties hereto may change the address at
which they are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER.
------------------------------------------
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the nonexclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO a JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS.
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
-------- -------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
22
<PAGE>
12.3 Time of Essence. Time is of the essence for the performance of
---------------
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
13. JUDICIAL REFERENCE.
------------------
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Agreement, which controversy, dispute or claim is not settled
in writing within thirty (30) days after the "Claim Date" (defined as the date
----------
on which a party subject to this Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 et seq. of the California Code of Civil Procedure, or their successor
------
section ("CCP"), which shall constitute the exclusive remedy for the settlement
---
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Santa Clara County if none (the "Court"). The referee shall be a
-----
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of the Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP (S)170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the date of selection of the referee and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant CCP
(S)644 in any court in the State of California having jurisdiction. Any party
may apply for a reference proceeding at
23
<PAGE>
any time after thirty (30) days following notice to any other party of the
nature of the controversy, dispute or claim, by filing a petition for a hearing
and/or trial, All discovery permitted by this Agreement shall be completed no
later than fifteen (15) days before the first hearing date established by the
referee. The referee may extend such period in the event of a party's refusal to
provide requested discovery or unavailability of a witness due to absence or
illness. No party shall be entitled to "priority" in conducting discovery.
Dispositions may be taken by either party upon seven (7) days written notice,
and request for production or inspection of documents which cannot be resolved
by the parties shall be submitted to the referee as provided herein. The
Superior Court is empowered to issue temporary and/or provisions remedies, as
appropriate.
(b) Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a difficult
judgment, which new trial, if granted, is also to be a reference proceeding
under this provisions.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S)1280 through (S)1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
14. CONFIDENTIALLY.
--------------
In handling any confidential information Bank shall exercise the same
degree of care that it exercises with respect to its own proprietary information
of the same types to maintain the confidentiality of any non-public information
thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the Subsidiaries or Affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Advances or
Term Advances, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order,
24
<PAGE>
(iv) as may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, as evidenced by Bank's
records in existence at the time of such disclosure, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information and
provided such disclosure is not otherwise in violation of Borrower's rights.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
POINTSHARE CORPORATION
By: /s/ T. Kilgallon
--------------------------------
Title: CEO
-----------------------------
IMPERIAL BANK:
By: /s/ J.P. Michael
--------------------------------
Title: AVP
-----------------------------
25
<PAGE>
EXHIBIT A
---------
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created, written, produced or
acquired, including, but not limited to:
(i) all accounts receivable, accounts, chattel paper, contract
rights (including, without limitation, royalty agreements, license agreements
and distribution agreements), documents, instruments, money, deposit accounts
and general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all investment property, including securities and securities
entitlements;
(ii) all software, computer source codes and other computer programs
(collectively, the "Software Products"), and all common law and statutory
copyrights and copyright registrations, applications for registration, now
existing or hereafter arising, United States of America and foreign, obtained or
to be obtained on or in connection with the Software Products, or any parts
thereof or any underlying or component elements of the Software Products
together with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of Bank (herein referred to as
"Bank" or "Secured Party") to sue in its own name and/or the name of the Debtor
for past, present and future infringements of copyright;
(iii) all goods, including, without limitation, equipment and
inventory (including, without limitation, all export inventory);
(iv) all guarantees and other security therefor;
(v) all trademarks, service marks, trade names and service names and
the goodwill associated therewith;
(vi) (a) all patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (b)
licenses pertaining to any patent whether Debtor is licensor or licensee, (c)
all income, royalties, damages, payments, accounts, and accounts receivable now
or hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past, present or future
infringements thereof, (d) the right (but not the obligation) to sue for past,
present and future infringements thereof, (e) all rights corresponding thereto
throughout the world in all jurisdictions in which such patents have been issued
or applied for, and (f) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as the
"Patents"); and
(vii) all products and proceeds, including, without limitation,
insurance proceeds, of any of the foregoing.
26
<PAGE>
EXHIBIT 10.17
FIRST AMENDMENT
AND WAIVER
TO
LOAN AND SECURITY AGREEMENT
This First Amendment and Waiver to Loan and Security Agreement (the
"Amendment") is entered into as January 5, 1999 by and between IMPERIAL BANK
("Bank") and POINTSHARE CORPORATION ("Borrower").
RECITALS
--------
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of July 15; 1998, as amended (the "Agreement"). The parties desire to
amend the Agreement in accordance with the terms of this Amendment and waive
compliance with certain provisions thereof.
NOW, THEREFORE, the parties agree as follows:
1. Waivers
A. Bank waives Borrower's obligations to comply with Section 6.8 for the
calendar month ending December 31, 1998. Bank does not waive such obligations
for any other dates or any other failure by Borrower to perform its obligations
under the Loan Documents. This waiver is not a continuing waiver with respect to
any failure to perform any obligation after the date of this Amendment and the
Bank hereby reserves all rights and remedies it may have upon such occurrence.
B. Bank waives Borrower's obligations to comply with Section 6.10 for the
calendar month ending December 31, 1998. Bank does not waive such obligations
for any other dates or any other failure by Borrower to perform its obligations
under the Loan Documents. This waiver is not a continuing waiver with respect to
any failure to perform any obligation after the date of this Amendment and the
Bank hereby reserves all rights and remedies it may have upon such occurrence.
2. Amendments.
A. A new Section 5.16 is added to the Agreement as follows:
"5.16 Year 2000 Problem. Borrower and its subsidiaries have the areas
-----------------
within their operations and business which could be adversely affected
by, and have developed or are developing a program to address on a timely
basis, the Year 2000 Problem and have made related appropriate inquiry of
material suppliers and vendors, and based on such review and program, the
Year 2000 Problem will not have a Material Adverse Effect upon its
financial condition, operations or business as new conducted. "Year 2000
Problem" means the possibility that any computer applications or
equipment used by Borrower may be unable to recognize and properly
perform date-sensitive functions involving certain dates prior to and any
dates on or after December 31, 1999."
B. Section 6.9 is amended in full to read in as follows:
"6.9 Borrower shall not suffer a loss for the fiscal quarter ended
December 31, 1998 In excess of $1,600,000."
C. Section 6.11 is amended to read in full as follows:
"6.11 Equity Infusion. Borrower shall receive not less than $5,000,000
in cash proceeds from institutional venture capital investors acceptable to
Bank from the sale of its Series B capital stock on or before January 22,
1999."
<PAGE>
D. The second Section numbered 6.11, which is entitled Registration of
Intellectual Property Rights in the Agreement is renumbered to 6.12
and the current Section 6.12 which is entitled Further Assurances is
renumbered to 6.13.
E. A new Section 6.14 is added to the Agreement as follows:
"6.14 Year 2000 Compliance. Borrower shall perform all acts
--------------------
reasonably necessary to ensure that (a) Borrower and any business in which
Borrower holds a substantial interest, and (b) all customers, suppliers and
vendors that are material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all Borrower's systems
and adopting a detailed plan, with itemized budget, for the remediation,
monitoring and testing of such systems. As used in this paragraph, "Year
2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to
the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000. Borrower shell, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with the terms of
this paragraph as Bank may from time to require."
3. Unless otherwise defined, all capitalized terms in this Amendment
shall be defined in the Agreement. Except as amended, the Agreement remains in
full force and effect.
4. Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.
5. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
6. As a condition to the effectiveness of this Amendment, Borrower shall
pay Bank a fee of $250.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.
POINTSHARE CORPORATION
By: /s/ Christopher Dishman
-------------------------------
Title: VP Finance
----------------------------
IMPERIAL BANK
By: /s/ J.P. Michael
-------------------------------
Title: Assistant Vice President
----------------------------
<PAGE>
EXHIBIT 10.18
SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
---------------------------
This Second Amendment to Loan and Security Agreement is entered into as of
July 28, 1999 (the "Amendment"), by and between IMPERIAL BANK ("Bank") and
POINTSHARE CORPORATION ("Borrower").
RECITALS
--------
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of July 15, 1998, as amended including without limitation by that
certain First Amendment and Waiver to Loan and Security Agreement (the
"Agreement"). The parties desire to amend the Agreement in accordance with the
terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Certain defined terms in Section 1.1 of the Agreement are hereby added
or amended to read as follows:
"Credit Extension" means each Advance, Term Advance, Facility B Term
Advance, Equipment Advance, and any other extension of credit by Bank for
the benefit of Borrower hereunder.
"Equipment Line" means a credit extension of up to One Million Dollars
($1,000,000).
"Equipment Maturity Date" means the date that is forty-eight months
after the Equity Event.
"Equity Event" means the receipt by Borrower of cash proceeds from the
sale or issuance of its equity securities or from Subordinated Debt, on
term and from investors satisfactory to Bank in its sole discretion, in an
amount of not less than Ten Million Dollars ($10,000,000) on or before
October 31, 1999.
"Facility B Term Line" means a credit extension of up to Three Hundred
Fifty Thousand Dollars ($350,000).
"Facility B Term Maturity Date" means February 28, 2002.
"Revolving Maturity Date" means July 14, 2000.
2. The words "and any other amounts due under this Agreement" are hereby
deleted from Section 2.1.2(b).
3. New Sections 2.1.3 and 2.1.4 are hereby added to the Agreement to read
as follows:
2.1.3 Facility B Term Loan.
--------------------
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through August 28, 1999, Bank
agrees to make advances (each a "Facility B Term Advance" and,
collectively, the "Facility B Term Advances") to Borrower in an aggregate
outstanding amount not to exceed the Facility B Term Line.
(b) Interest shall accrue from the date of each Facility B Term
Advance at the rate specified in Section 2.3(a), and shall be payable on
August 28, 1999. Any Facility B Term Advances that are outstanding on
August 28, 1999 shall be payable in thirty (30) equal monthly installments
of principal, plus all accrued interest, beginning on September 28, 1999,
and continuing on the twenty-eighth (28th) day of each month thereafter
through the Facility B Term Maturity Date, at which time all amounts due
under this Section 2.1.3 shall be immediately due and payable. Facility B
Term Advances, once repaid, may not be reborrowed. Borrower may prepay any
Facility B Term Advances without penalty or premium.
1
<PAGE>
(c) When Borrower desires to obtain a Facility B Term Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Facility B Term Advance is to be
made. Such notice shall be substantially in the form of Exhibit B. The
notice shall be signed by a Responsible Officer or its designee.
2.1.4 Equipment Advances.
------------------
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date of the Equity Event through the date
which is twelve months after the Equity Event (the "Second Equipment
Availability Date"), Bank agrees to make advances (each an "Equipment
Advance" and, collectively, the "Equipment Advances") to Borrower in an
aggregate outstanding amount not to exceed the Equipment Line. Each
Equipment Advance shall not exceed one hundred percent (100%) of the
invoice amount of equipment and software approved by Bank from time to
time, excluding taxes, shipping, warranty charges, freight discounts and
installation expense. Borrower shall have purchased such equipment or
software within 90 days of the date of the corresponding Equipment Advance,
provided that on or within a week of the Closing Date, Bank agrees to make
a one-time initial Equipment Advance to finance equipment and software
which Borrower purchased no more than 180 days before the Closing Date.
(b) Interest shall accrue from the date of each Equipment Advance
at the rate specified in Section 2.3(a), and shall be payable monthly on
the twenty-eighth (28th) day of each month through the Second Equipment
Availability Date. Any Equipment Advances that are outstanding on the date
that is six months after the Equity Event (the "First Equipment
Availability Date") shall be payable in thirty-six (36) equal monthly
installments of principal, plus all accrued interest, beginning on the
twenty-eighth day of the month following the First Equipment Availability
Date, and continuing on the same day of each month thereafter through the
date which is forty-two (42) months after the Equity Event. Any Equipment
Advances that are outstanding on the Second Equipment Availability Date
which were not outstanding on the First Equipment Availability Date shall
be payable in thirty-six (36) equal monthly installments of principal, plus
all accrued interest, beginning, on the twenty-eighth day of the month
following the Second Equipment Availability Date, and continuing on the
same day of each month thereafter through the Equipment Maturity Date, at
which time all amounts due under this Section 2.1.4 and any other amounts
due under this Agreement shall be immediately due and payable. Equipment
Advances, once repaid, may not be reborrowed. Borrower may prepay any
Equipment Advances without penalty or premium.
(c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of Exhibit B. The notice
shall be signed by a Responsible Officer or its designee and include a copy
of the invoice for any Equipment to be financed.
4. Section 2.3(a)(i) is hereby amended in its entirety to read as follows:
(i) Advances. Except as set forth in Section 2.3(b), the
--------
Advances shall bear interest, on the outstanding daily balance thereof, at
a rate equal to one and one half percent (1.50%) above the Prime Rate.
Notwithstanding the foregoing, after the Equity Event, except as set forth
in Section 2.3(b), the Advances shall bear interest, on the outstanding
daily balance thereof, at a rate equal to three quarters percent (0.75%)
above the prime Rate.
5. Two new Sections 2.3(a)(iii) and 2.3(a)(iv) are hereby added to the
Agreement to read as follows:
(iii) Facility B Term Advances. Except as set forth in Section
------------------------
2.3(b), the Facility B Term Advances shall bear interest, on the
outstanding daily balance thereof, at a rate equal to one and one half
percent (1.50%) above the Prime Rate.
2
<PAGE>
(iv) Equipment Advances. Except as set forth in Section 2.3(b),
------------------
the Equipment Advances shall bear interest, on the outstanding daily
balance thereof, at a rate equal to three quarters percent (0.75%) above
the Prime Rate.
6. The first sentence of Section 6.10 is hereby amended in its entirety to
read as follows: "As of the last day of each month, Borrower shall maintain a
balance of unrestricted cash and cash equivalents plus the Borrowing Base minus
the outstanding Advances that is one and one half (1.5) times the sum of the
outstanding Obligations under Sections 2.1.2, 2.1.3, and 2.1.4 of this
Agreement.
7. Section 6.11 is hereby amended in its entirety to read as follows:
6.11 Equity Event. The Equity Event shall occur on or before October
------------
31, 1999.
8. A new Section 6.15 is hereby added to the Agreement:
6.15 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each calendar month after the Equity Event, a Tangible Net Worth of not
less than Three Million Five Hundred Thousand Dollars ($3,500,000).
9. Section 9.2 is hereby amended and replaced in its entirety to read as
follows:
9.2 Power of Attorney. Effective only upon the occurrence and during
-----------------
the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification
of Accounts or notify account debtors of Bank's security interest in the
Accounts; (b) endorse Borrower's name on any checks or other forms of
payment or security that may come into Bank's possession; (c) sign
Borrower's name on any invoice or bill of lading relating to any Account,
drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to account debtors; (d) dispose of
any Collateral; (e) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; (f) settle and adjust
disputes and claims respecting the accounts directly with account debtors,
for amounts and upon terms which Bank determines to be reasonable; (g) to
modify, in its sole discretion, any intellectual property security
agreement entered into between Borrower and Bank without first obtaining
Borrower's approval of or signature to such modification by amending
Exhibits A, B, and C, thereof, as appropriate, to include reference to any
right, title or interest in any Copyrights, Patents or Trademarks acquired
by Borrower after the execution hereof or to delete any reference to any
right, title or interest in any Copyrights, Patents or Trademarks in which
Borrower no longer has or claims to have any right, title or interest; (h)
to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral
without the signature of Borrower where permitted by law; and (i) to
transfer the Intellectual Property Collateral into the name of Bank or a
third party to the extent permitted under the California Uniform Commercial
Code; provided Bank may exercise such power of attorney to sign the name of
Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as
Borrower's attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
10. The Compliance Certificate to be delivered after the date of this
Amendment shall be in substantially the form of Exhibit C hereto.
---------
11. Unless otherwise defined, all capitalized terms in this Amendment
shall be as defined in the Agreement. Except as amended, the Agreement remains
in full force and effect.
12. Borrower represents and warrants that the representations and
warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.
3
<PAGE>
13. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
14. As a condition to the effectiveness of this Amendment, Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a) this Amendment, duly executed by Borrower;
(b) a non-refundable loan fee of Six Thousand Eight Hundred Dollars
($6,800), plus all Bank Expenses incurred through the date of this Amendment;
(c) a non-refundable documentation fee of Six Hundred Fifty Dollars
($650);
(d) Corporate Resolutions to Borrow;
(e) an agreement to provide insurance;
(f) a warrant to purchase stock; and
(g) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
POINTSHARE CORPORATION
By: /s/ Christopher Dishman
--------------------------
Title: VP Finance, Secretary
--------------------------
IMPERIAL BANK
By: /s/ J.P. Michael
--------------------------
Title: Vice President
--------------------------
4
<PAGE>
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., Pacific Time
TO: EMERGING GROWTH INDUSTRIES DATE:
---------------------
FAX#: (425) 454-6224 TIME:
---------------------
- --------------------------------------------------------------------------------
FROM: Pointshare Corporation
------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY: Christopher P. Dishman
----------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: /s/ Christopher P. Dishman
--------------------------------------------------------
PHONE NUMBER: 425-468-0303
----------------------------------------------------------------
FROM ACCOUNT # 736000019 TO ACCOUNT # 36001178
-------------- -----------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $ 350,000.00
------------------------------------
PRINCIPAL PAYMENT (ONLY) $
------------------------------------
INTEREST PAYMENT (ONLY) $
------------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
------------------------------------
OTHER INSTRUCTIONS:
----------------------------------------------------------
- -----------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respect of the date of the
telephone request for and Advance confirmed by this Payment / Advance Form;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
- -----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- ---------------------------------- ---------------------------------
Authorized Requester Phone #
- ---------------------------------- ---------------------------------
Authorized Requester Phone #
---------------------------------------------------------------
Authorized Signature (Bank)
- --------------------------------------------------------------------------------
5
<PAGE>
IMPERIAL BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Revolver)
Name(s): POINTSHARE CORPORATION Date: July 28, 1999
$250,000 credited to deposit account No. 36001178 when Advances are
requested or by wire transfer or cashiers check
$ amounts paid to Bank for
Amounts paid to others on your behalf:
$ to Imperial Bank for Loan Fee
$ to Imperial Bank for Document Fee
$ to Imperial Bank for accounts receivable audit (estimate)
$ to Bank counsel fees and expenses
$ to
$ to
$250,000 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
/s/ Christopher P. Dishman /s/
----------------------------- -----------------------------
Signature Signature
<PAGE>
IMPERIAL BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Facility B Term Loan)
Name(s): POINTSHARE CORPORATION Date: July 28, 1999
$350,000 credited to deposit account No. 36001178 when Advances are
requested
$ amounts paid to Bank for
Amounts paid to others on your behalf:
$ to Imperial Bank for Loan Fee
$ to Imperial Bank for Document Fee
$ to Imperial Bank for accounts receivable audit (estimate)
$ to Bank counsel fees and expenses
$ to
$ to
$350,000 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
/s/ Christopher P. Dishman /s/
----------------------------- -----------------------------
Signature Signature
<PAGE>
IMPERIAL BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Equipment Loan)
Name(s): POINTSHARE CORPORATION Date: July 28, 1999
$1,000,000 credited to deposit account No. 36001178 when Advances are
requested
$ amounts paid to Bank for
Amounts paid to others on your behalf:
$ to Imperial Bank for Loan Fee
$ to Imperial Bank for Document Fee
$ to
$ to
$1,000,000 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
/s/ Christopher P. Dishman /s/
----------------------------- -----------------------------
Signature Signature
<PAGE>
EXHIBIT 10.19
SENIOR LOAN AND SECURITY AGREEMENT NO. 6269
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 6269 (this "Security Agreement") is
dated as of July 30, 1999 between POINTSHARE CORPORATION, a Delaware corporation
("Borrower") and PHOENIX LEASING INCORPORATED, a California corporation
("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings the
Commitment amount as defined in Section 3(a)(ii) below, and Lender desires to
loan, subject to the terms and conditions herein set forth, such amount to
Borrower (each, a "Loan" and collectively, the "Loans"). Such borrowing shall
be evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles and
also certain custom use equipment, installation and delivery costs, purchase
tax, toolings, software and other items generally considered fungible or
expendable ("Soft Costs") whether now owned by Borrower or hereafter acquired,
and all substitutions and replacements of and additions, improvements,
accessions and accumulations to said equipment, machinery and fixtures and other
items, together with all rents, issues, income, profits and proceeds therefrom
(collectively, "Equipment") which Equipment is described on the Note attached
hereto or any subsequently-executed Note entered into by Lender and Borrower and
which incorporates this Security Agreement by reference (such financed Equipment
being referred to as, the "Collateral").
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The Term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Term and monthly payment amount payable with respect to each item of
Collateral shall be as set forth in and as stated in the respective Note(s).
The team of each Note hereto are subject to all conditions and provisions of
this Security Agreement as it may at any time be amended. Each Note shall
constitute a separate and independent Loan and contractual obligation of
Borrower and shall incorporate the terms and conditions of this Security
Agreement and any additional provisions contained in such Note. In the event of
a conflict between the terms and conditions of this Security Agreement and any
provisions of such Note, the provisions of such Note shall prevail with respect
to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be
canceled or terminated except as expressly provided herein. Borrower agrees
that its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such monthly payment amounts and other sums, are absolute and unconditional
and are not subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment due or alleged to be due to, or by reason of, any past, present or
future claims which Borrower may have against Lender, any assignee, the
manufacturer or seller of the Collateral, or against any person for any reason
whatsoever.
1
<PAGE>
SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
-------------
conditions of this Security Agreement Lender hereby agrees to make one or more
senior secured Loans to Borrower, subject to the following conditions: (i) each
Loan shall be evidenced by a Note; (ii) the total principal amount of the Loam
shall not exceed $2,000,000 in the aggregate (the "Commitment") provided that no
more than 25% of the amount of the utilized Commitment may be used to finance
Soft Costs; (iii) the amount of each Loan shall be at least $25,000 except for a
final Loan which may be less than $25,000; (iv) Lender shall not be obligated to
make any Loan after June 30, 2000; (v) at the time of each Loan, no Event of
Default or event which with the giving of notice or passage of time, or both,
could become an Event of Default shall have occurred, as reasonably determined
by Lender, and certified by Borrower; (vi) at the time of each Loan, Borrower
has reimbursed Leader for all UCC filing and search costs, inspection and
labeling costs, and appraisal fees, if any; (vii) for each Loan, Borrower shall
present to Lender a list of proposed Collateral for approval by Lender in its
sole discrimination; (viii) for each Loan, Borrower shall have provided Lender
with cash of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance reasonably acceptable Lender); (ix)
Borrower is performing substantially in accordance with its business plan
referred to as "Pointshare 4 Year Plan Balance Sheet, Statement of Operations
and Statement of Cash Flows" labeled 5 Year Plan 12-Series C Bal Sht_Bdgt,
IncStmt_Bdgt end CFStmt Bdgt (the "Business Plan") (all quarterly figures will
be prorated to monthly), as may be amended from time to time in form and
substance acceptable to Lender; (x) there shall be no material adverse change in
Borrower's condition. Financial or otherwise, that would materially impair the
ability of Borrower to meet its payment and other obligations under this Loan (a
"Material Adverse Effect") as reasonably determined by Lender, and Borrower so
certifies, from (yy) the date of the rest recent financial statements delivered
by Borrower to Lender to (zz) the date of the proposed Loan; (xi) Borrower shall
use the proceeds of all Loans hereunder to purchase or reimburse the purchase of
Collateral; (xii) all Collateral has been marked and labeled by Lender or
Lender's agent; and (xiii) Lender has received in form and substance acceptable
to Lender: (a) Borrower's interim financial statements signed by a financial
officer of Borrower, (b) prior to any feedings during November 1999,
verification that Borrower's cash position is at least $700,000; and (c)
complete copies of the Borrower's audit reports for its most recent fiscal year,
which shall include at least Borrower's balance sheet as of the close of such
year, and Borrower's statement of income and retained earnings and of changes in
financial position for such year, prepared on a consolidated basis and certified
by independent public accountants. Such certificate shall not be qualified or
limited because of restricted or limited examination by such accountant of any
material portion of the company's records. Such reports shall be prepared in
accordance with generally accepted accounting principles and practices
consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note. Each Note shall
---------
bear interest and be payable at the times and in the manner provided therein.
Following payment of the Indebtedness related to each Note, Lender shall return
such Note, marked "cancelled," to Borrower. Borrower has the ability to prepay
all, but not fewer than all, outstanding Notes in whole but not in part. The
prepayment amount shall be the sum of (i) and (ii) below, discounting the
amounts in (ii) at a rate of 6% per annum compounded monthly on the basis of a
360 day year: (i) all remounts which may be then due or accrued to the payment
date for all outstanding Notes; (ii) as of such payment date, an amount equal
to: (A) all remaining monthly payments due under all outstanding Notes, and (B)
12 additional monthly payments for all outstanding Notes, the amounts of which
will be calculated in accordance with Election No. 2 in Section 30. The
prepayment conditions are as follows: (a) Borrower must provide Lender with at
least five (5) days' advance written notice of its intention to prepay; and (b)
the prepayment date must fall on a regular monthly payment date.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral described on the Note attached hereto and
any subsequently executed Note entered into
2
<PAGE>
by Lender and Borrower and which incorporates this Security Agreement by
reference: (b) This Security Agreement secures (i) the payment of the principal
of and interest on the Notes and all other sums due thereunder and under this
Security Agreement (the "Indebtedness") and (ii) the performance by Borrower of
all of its other covenants now or hereafter existing under the Notes and this
Security Agreement (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified would not have a Material Adverse Effect; (b) it has full
authority to execute and deliver this Security Agreement and the Notes and
perform the terms hereof and thereof, and this Security Agreement and the Notes
have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) to the
best of its knowledge there is no action or proceeding pending or threatened
against Borrower before any court or administrative agency which might have a
Material Adverse Effect on the business, financial condition or operations of
Borrower; (f) at the time any Loan is made hereunder, Borrower owns and will
keep all of the Collateral free and clear of all liens, claims and encumbrances,
and, except for this Security Agreement, there is no deed of trust, mortgage
security agreement or other third party interest against any of the Collateral
other than Permitted Liens (as defined below); (g) at the time any Loan is made
hereunder, Borrower has good and marketable title to the Collateral; (h) at the
time any Loan is made hereunder, all Collateral has been received, installed and
is ready for use and is satisfactory in all respects for the purposes of this
Security Agreement; (i) the Collateral is, and will remain at all times under
applicable law, removable personal property, which is free and clear of any lien
or encumbrance except in favor of Lender other than Permitted Liens (as defined
below), notwithstanding the manner in which the Collateral may be attached to
any real property; (j) all credit and financial information submitted to Lender
herewith or at any other time is and will at the time given be true and correct
in all material respects; and (k) the security interest granted to Lender
hereunder is a first priority security interest, and (l) on or before January 1,
2000, Borrower's computer system shall be Year 2000 performance compliant and
will thus be able to accurately process date data from, into and between the
twentieth and twenty-first centuries including leap year calculations.
"Permitted Liens" shall mean and include: (i) liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith; and (ii) liens of carriers,
warehousemen, mechanics, materialmen, vendors, landlords and other liens arising
by operation of law incurred in the ordinary course of business.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be located
at the address (the "Collateral Location") shown on Exhibit A to each Note and
shall not be moved without Lender's prior written consent which location shall
in all events be within the United States. All of the records regarding the
Collateral shall be located at 1300 - 114th Avenue SE, Suite 100, Bellevue, WA
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98004, or such other location of which Borrower has given notice to Lender in
accordance with this Security Agreement. Lender shall have the right to Inspect
Collateral, including records relating thereto, and Borrower's books and records
at any time (upon reasonable notification) during regular business hours, such
books and records to be maintained in accordance, with generally accepted
accounting principles. Borrower shall be responsible for all labor, material and
freight charges incurred in connection with any removal or relocation of
Collateral which is requested b Borrower and consented to by Lender, as well as
for any charges due to the installation or moving of the Collateral. Payments
under the Notes and under this Security Agreement shall continue during my
period in which the Collateral is in transit during a relocation. During
Borrower's regular business hours and upon at least two days' notice to
Borrower, Lender or its agent shall mark and label Collateral, which labels (to
be provided by Lender) shall state that such Collateral is subject to a security
interest of Lender, and Borrower shall keep such labels on the Collateral as so
labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Upon reasonable notice
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Borrower will permit Lender to inspect each item of Collateral and its
maintenance records during Borrower's regular business hours. Borrower will at
its sole expense comply with all applicable laws, rules, regulations,
requirements and orders with respect to the use, maintenance, repair, condition,
storage and operation of each item of Collateral. Any addition or improvement
that is so required or cannot be so removed will immediately become Collateral
of Lender. (b) Service and Repair. Borrower will at its sole expense maintain
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and service and repair any damage to each item of Collateral in a manner
consistent with prudent industry practice and Borrower's own practice so that
such item of Collateral is at all times (i) in the same condition as when
delivered to Borrower, except for ordinary wear and tear, and (ii) in good
operating order for the function intended by its manufacturer's warranties and
recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Unless Lender's gross negligence
or willful misconduct causes the loss, Borrower hereby indemnifies and holds
harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence bring hereinafter called a
"Casualty Occurrence." Notwithstanding any Casualty Occurrence the Loan to which
such casualtied item of Collateral is subject shall continue in full force and
effect without any abatement in the monthly payment due. Borrower shall, at its
election, (a) no later than sixty(60) days after such Casualty Occurrence repair
the Collateral returning it to good operating condition, (b) no later than sixty
(60) days after such Casualty Occurrence replace the Collateral with Collateral
acceptable to Lender in its reasonable discretion, in good condition and repair
taking all steps required by Lender to perfect Lender's first priority security
interest therein, which replacement Collateral shall be subject to the terms of
this Security Agreement, or (c) on the next regular monthly payment date which
falls after such sixty (60) days, or if there is no such payment date, thirty
(30) days after such Casualty Occurrence pay to Lender an amount equal to the
Balance Due (as defined below) for each lost or damaged item of Collateral. The
Balance Due for each such item is the sum of: (i) all amounts for each item
which may be then due or accrued the payment date plus (ii) as of such payment
date, an amount equal to the product of the fraction specified below times the
sum of all remaining payments under the respective Note, including the amount of
any mandatory or optional payment required or permitted to be paid by Borrower
to Lender at the maturity of the Note discounting to present value the amounts
in (ii) at a rate of 6% per annum compounded monthly on the basis of a 360 day
year ("Discount Rate"). The numerator of the fraction shall be the collateral
value (as set forth on the applicable Note) of the item and the denominator
shall be the aggregate collateral value of all items under the Note. Upon the
making of such payments, Lender shall release such item of Collateral from its
lien hereunder.
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SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral
insured against all risks of physical loss for at least the replacement value of
the Collateral and in no event for less than the amount payable following a
Casualty Occurrence (as provided in Section 9). Such insurance shall provide for
a loss payable endorsement to Lender and/or any assignee of Lender. If there is
no Event of Default, any insurance proceeds received by Lender shall be released
by Lender for application to the costs incurred by Borrower to repair the
Collateral. Borrower shall maintain commercial general liability insurance,
including products liability and completed operations coverage, with respect to
loss or damage for personal injury, death or property damage in an amount not
less than $2,000,000 in the aggregate, naming Lender and/or Lender's assignee as
additional insured. Such insurance shall contain insurer's agreement to give
thirty (30) days' advance written notice to Lender before cancellation or
material change of any policy of insurance. Borrower will provide Lender and any
assignee of Lender with a certificate of insurance from the insurer evidencing
Lender's or such assignee's interest in the policy of insurance. Such insurance
shall cover any Casualty Occurrence to any unit of Collateral. Notwithstanding
anything in Section 9 or this Section 10 to the contrary, this Security
Agreement and Borrower's obligations hereunder shall remain in full force and
effect with respect to any unit of Collateral which is not subject to a Casualty
Occurrence. If Borrower fails to provide or maintain insurance as required
herein, Lender shall have the right, but shall not be obligated, to obtain such
insurance. In that event, Borrower shall pay to Lender the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect Lender's security interest in the Collateral as a first and prior
perfected security interest; (d) furnish Lender with its annual audited
financial statements within ninety (90) days following the end of Borrower's
fiscal year, unaudited quarterly financial statements within forty-five (45)
days after the end of each fiscal quarter, and within thirty (30) days of the
end of each mouth a financial statement for that month prepared by Borrower, and
including an income statement and balance sheet all of which shall be certified
by an officer of Borrower as true and correct and shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and such other information as Lender may reasonably request; and (e) promptly
(but in no event more than ten (10) days after the occurrence of such event),
notify Lender of any change in Borrower's condition during the commitment period
which constitutes a Material Adverse Effect, and of the occurrence of any Event
of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon
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Lender's request, will, at Borrower's expense, resist and defend such action,
suit or proceeding or cause the same to be resisted and defended by counsel
designated and approved by lender. Borrower's obligations under this Section 12
shall survive the payment in full of all the Indebtedness and the performance of
all Obligations with respect to acts or events occurring or alleged to have
occurred prior to the payment in full of all the Indebtedness and the
performance of all Obligations.
SECTION 13. TAXES. Borrower shall not be liable to Lender for any loss of
Lender's anticipated tax benefits. Borrower agrees to reimburse Lender (or pay
directly if instructed by Lender) and any assignee of Lender for, and to
indemnify and hold Lender and any assignee harmless from, all fees (including,
but not limited to, license, documentation, recording and registration and all
sales, use, gross receipts, personal property, occupational, value added or
other taxes, levies, imposts, duties, assessments, charges, or withholdings of
any nature whatsoever, together with any penalties, fines, additions to tax, or
interest thereon (the foregoing collectively "Impositions"), except same as may
be attributable to Lender's income, arising at any time prior to or during the
term of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lenders shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDERS PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY.
LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY
INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN
PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. If
Borrower is given notice of such assignment it agrees to acknowledge receipt
thereof in writing and Borrower shall execute such additional documentation as
Lender's assignee and/or secured party shall reasonably require at Lender's
expense. Each such assignee and/or secured party shall have all of the rights,
but (except as provided in this Section 15) none of the obligations, of Lender
under this Security Agreement unless such assignee or secured party expressly
agrees to assume such obligations in writing. Borrower shall not assert against
any assignee and/or secured party any defense, counterclaim or offset that
Borrower may have against Lender. Notwithstanding any such assignment, and
providing no Event of Default has occurred and is continuing, Lender, or its
assignees, secured parties, or their agents or assigns, shall not interfere with
Borrower's right to quietly enjoy use of Collateral subject to the term and
conditions of this Security Agreement. Subject to the foregoing, the Notes and
this Security Agreement shall inure to the benefit of, and are binding upon, the
successors and assignee; of the parties hereto. Borrower
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acknowledges that any such assignment by Lender will not change Borrower's
duties or obligations under this Security Agreement and the Notes or increase
any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
-----------------
conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes, excluding the Warrant shall prove to have
been incorrect in any material respect when made or given; (iv) Borrower's
failure to comply with or perform any material term, covenant or condition of
this Security Agreement or any Note, or comply with Section 16 of the Warrant,
or under any lease or mortgage of real property covering the location of the
Collateral if such failure to comply or perform is not cured by Borrower within
thirty (30) days after Borrower knows of the noncompliance or nonperformance or
notice from Lender or such longer period that Borrower is diligently attempting
to effect such cure; (v) seizure of any of the Collateral under legal process;
(vi) the filing by or against Borrower or any guarantor under any guaranty
executed in connection with this Security Agreement ("Guarantor") of a petition
for reorganization or liquidation under the Bankruptcy Code or any amendment
thereto or under any other insolvency law providing for the relief of debtors;
(vii) the voluntary or involuntary making of an assignment of a substantial
portion of its assets by Borrower or by any Guarantor for the benefit of its
creditors, the appointment of a receiver or trustee for Borrower or any
Guarantor or for any of Borrower's or Guarantor's assets the institution by or
against Borrower or any Guarantor of any formal or informal proceeding for
dissolution, liquidation, settlement of claims against or winding up of the
affairs of Borrower or any Guarantor provided that in the case of all such
involuntary proceedings, same are not dismissed within sixty (60) days after
commencement; (viii) the making by Borrower or by any Guarantor of a transfer of
all or a material portion of Borrowers or Guarantor's assets or inventory not in
the ordinary course of business; or (ix) any default or breach by any Guarantor
of any of the terms of its guaranty to Lender in connection with this Security
Agreement.
(b) Remedies. If any Event of Default has occurred, Lender may in its sole
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discretion exercise one or more of the following remedies with respect to any or
all of the Collateral: (i) declare due any or all of the aggregate sum of all
remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all reasonable damages and expenses incurred by Lender by reason of an
Event of Default; (iii) except as provided by law, without court order or prior
demand, enter upon the premises where the Collateral is located and take
immediate possession of and remove it without liability of Lender to Borrower or
any other person or entity; (iv) terminate this Security Agreement and sell the
Collateral at public or private sale or otherwise dispose of, hold, use or lease
any or all of the Collateral in a commercially reasonable manner; or (v)
exercise any other right or remedy available to it under applicable law. If
Lender has declared due any or all of the Remaining Payments, Borrower will pay
immediately to Lender, without duplication, (A) the Remaining Payments
discounted to present value at the Discount Rate, (B) all amounts which may be
then due or accrued, and (C) all other amounts due under this Security Agreement
and under the Notes (Lender's Return, as referred to below, means the mounts
described in clause (A), (B) and (C) above). The net proceeds of any sale or
lease of such Collateral will be credited against Lender's Return. The net
proceeds of a sale of the Collateral pursuant to this Section 16(b) is defined
as the sales price of the Collateral loss reasonable selling expenses,
including, without limitation, reasonable costs of remarketing the Collateral
and all reasonable
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refurbishing costs and commissions paid with respect to such remarketing. The
net proceeds of a lease of the Collateral pursuant to this Section 16(b) is
defined as the amount equal to the monthly payments due under such lease
(discounted to present value at the Discount Rate) plus the residual value of
the Collateral at the end of the basic term of such lease, as reasonably
determined by Lender, and discounted at the Discount Rate.
At Lender's request, Borrower shall assemble the Collateral and make it
available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
(c) Application of Proceeds. The proceeds of any sale of all or any part
-----------------------
of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
First to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
reasonable refurbishing costs, reasonable costs of remarketing and commissions
related to remarketing, all Remedy Expenses, all expenses, liabilities and
advances incurred or made pursuant to this Security Agreement or any Note by
Lender in connection with foreclosure, suit, sale or enforcement of this
Security Agreement or the Notes, and taxes, assessments or liens superior to
Lender's security interest granted by this Security Agreement;
Second, to the payment, of all other amounts not described in
item Third below due under this Security Agreement and all Notes;
Third, to pay Lender an amount equal to Lender's Return, to the
extent not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to whomever
may lawfully be entitled to receive it.
(d) Effect of Delay; Waiver; Foreclosure on Collateral. No delay or
--------------------------------------------------
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any
other or additional security, collateral or guaranty for the payment or
discharge of the Indebtedness and performance of the Obligations shall in no way
operate to prejudice, waive or affect the security interest created by this
Security Agreement or any rights, powers or remedies exercised hereunder or
thereunder. Lender shall not require first to foreclose on the Collateral prior
to bringing an action against Borrower for sums owed to Lender under this
Security Agreement or under any Note.
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SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 8% of any
payment owed Lender by Borrower which is not paid when due (taking into account
applicable grace periods), for every month such payment is not paid when due. If
such amounts have not been received by Lender at Lenders place of business or by
Lender's designated agent by the date such amounts are due under this Security
Agreement or the Notes, Lender shall bill Borrower for such charges. Borrower
acknowledges that invoices for amounts due hereunder or under the Notes are sent
by Lender for Borrower's convenience only. Borrower's non-receipt of an invoice
will not relieve Borrower of its obligation to make payments hereunder or under
the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints Lender (and each of
Lender's officers, employees, or agents designated by Lender) with full power of
substitution by Lender, as Borrower's attorney, with power to execute and
deliver on Borrower's behalf, financing statements and other documents necessary
to perfect and/or give notice of Lender's security intent in any of the
Collateral. Notwithstanding the above, Borrower will, upon Lender's request,
execute all financing statements pursuant to the Uniform Commercial Code and all
such other documents reasonably requested by Lender to perfect Lender's security
interests hereunder. Borrower authorizes Lender to file financing statements
signed only by Lender (where such authorization is permitted by law) at all
places where Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Neither Lender nor Borrower makes any
representation whatsoever, express or implied, concerning the legal character of
the transaction evidenced hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs
and expenses including reasonable attorney's fees, litigation expends and the
fees of collection agencies, incurred by Lender (a) in enforcing any of the
terms, conditions or provisions hereof and related to the exercise of its
remedies ("Remedy Expenses"), and (b) in connection with any bankruptcy or post-
judgement proceeding, whether or not suit is filed and, in each and every
action, suit or proceeding, including any and all appeals and petitions
therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral without Lender's prior written consent which shall not be
given for changes that will adversely affect the reliability and utility of the
Collateral or which cannot be removed without damage to the Collateral, or
which in any way decrease the value of the Collateral for purposes of resale or
lease.
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All attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lender.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicate. To the
extent if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security Interest in the Security Agreement may be created in
any documents other than the "Original" (b) There shall be only one original of
each Note and it shall be marked "Original," and all other counterparts will be
duplicates. To the extent, if any, that any Notes to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in any
Note(s) may be created in any documents other than the "Original."
SECTION 25. STOCK WARRANT. Borrower agrees that it will issue to Lender upon
execution of this Security Agreement a Warrant in the form of the Warrant
Agreement attached hereto as Exhibit B. Borrower and Lender agree that the value
of the Warrant hereunder is ten dollars ($10.00).
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee
("Fee") of $20,000. The Fee shall be applied by Lender first to reimburse
Lender for all out-of-pocket UCC and other search costs, inspections and
labeling costs and appraisal fees, if any, incurred by Lender, and then
proportionally to the first monthly payment for each Note hereunder in the
proportion that the Collateral value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such
monthly payments shall be non-refundable except if Lender defaults in its
obligation to fund Loans pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be to Lender 2401 Kerner Boulevard, San
Rafael, California 94901, Attention: Asset Management and to Borrower at 1300-
114/th/ Avenue SE, Suite 100, Bellevue, WA 98004, Attention: Christopher P.
Dishman, Vice President, or at such other address as the parties; may notify one
another of in writing from time to time.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such
corporate resolutions, financial statements and other documents as Lender shall
reasonably request from time to time. (b) Borrower represents that the
Collateral hereunder is used solely for business purposes. (c) Time is of the
essence with respect to this Security Agreement (d) Borrower acknowledges that
Borrower has read this Security Agreement and the Notes, understands them and
agrees to be bound by their terms and further agrees that this Security
Agreement and the Notes constitute the entire agreement between Lender and
Borrower, with respect to the subject matter hereof and supersede all previous
agreements, promises, or representations. (e) This Security Agreement and the
Notes may not be changed, altered or modified except by an instrument signed by
an officer or authorized representative of Lender and Borrower. (iv) Any
failure of Lender or Borrower to require strict performance by Borrower or
Lender, as the case may be, or any waiver by Lender or Borrower of any provision
herein or in a Note shall not be construed as a consent or waiver of any other
breach of the same or any other provision by Lender or Borrower, as the case may
be. (g) If any provision of this Security Agreement or any Note is held invalid,
such invalidity shall not affect any other provisions hereof or thereof. (h) The
obligations of Borrower to pay the Indebtedness and perform the Obligations
shall survive the expiration or earlier termination of this Security Agreement
and each Note until all Obligations of Borrower to Lender have been met and all
liabilities of Borrower to Lender and any assignee have been paid in full.
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(i) Borrower will notify Lender at least 30 days before changing its name,
principal place of business or chief executive office. (j) Borrower will, at its
expense, promptly execute and deliver to Lender such documents and assurances
(including financing statements) and take such further action as Lender may
reasonably request in order to carry out the intent of this Security Agreement
and Lender's rights and remedies.
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
each Note shall be deemed to have been made under and shall be governed by the
laws of the State of California in all respects, including maters of
construction, validity and performance. At Lender's sole discretion, option and
election, jurisdiction and venue for my legal action between the panics arising
out of or relating to this Security Agreement or any Note shall be in the
Superior Court of Marin County, California, or, in cases where federal diversity
jurisdiction is available, in the United States District Court for the Northern
District of California located in San Francisco, California. BORROWER AND
LENDER, TO THE EXTENT EACH MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL
BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY
NOTE, ANY SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION
HEREWITH.
SECTION 30. END OF LOAN POSITION. (a) General. Borrower shall be required to
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choose a final payment or Note extension election ("End of Loan Position") at
the expiation of the first Note's term. Borrower shall provide written notice,
of its election to Lender at least 60 days prior to the end of the term of the
first Note. That choice shall be an election of Borrower's End of Loan Position
election for all but not less than all, of the Collateral under all Notes under
the Security Agreement.
In the event Borrower does not provide 60 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No. 2.
(b) End of Loan Position Elections. As its End of Loan Position, Borrower
------------------------------
shall be required to:
Election No. 1: Make a final payment equal to 10.85% of the Note's original
- --------------
principal amount.
Election No. 2: Extend the Note's term for an additional 12 months ("Extended
- --------------
Term") for a monthly rate of 1.67% of the Note's original principal amount.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED POINTSHARE CORPORATION
By: /s/ E GILLEN By: /s/ Christopher P. Dishman
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Name: E GILLEN Name: Christopher P. Dishman
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Title: AVP Title: VP Finance, Secretary
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HEADQUARTERS LOCATION:
1300 - 114th Avenue SE, Suite 100
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EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of July 18, 1997 by and between TIMOTHY
J. KILGALLON (the "Employee") and HEALTHKNOWLEDGE CORPORATION, a Delaware
corporation (the "Company").
1. Term of Employment.
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(a) Effective Date. This Agreement shall be effective from July 18,
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1997 (the "Effective Date").
(b) Term. The Company agrees to continue the Employee's Employment,
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and the Employee agrees to remain in Employment with the Company, from the
Effective Date until the earlier of;
(i) July 18, 2001; or
(ii) The date when the Employee's Employment terminates pursuant
to Subsections 1 (d), (e), (f) or (g) below.
(c) Renewal. In the event that neither the Company nor Employee give
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notice to the other party of an intention to terminate this Agreement at least
30 days prior to the date set forth in clause (i) of Subsection 1(b) hereof,
this Agreement shall be automatically renewed for a one-year term. This
Agreement shall thereafter be automatically renewed for successive one-year
terms in the absence of 30-day notice by either party to the contrary.
(d) Early Termination. Subject to Section 8, the Company may terminate
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the Employee's Employment without Cause by giving the Employee 30 days' advance
notice in writing. The Employee may terminate his Employment without Good Reason
by giving the Company 30 days' advance notice in writing. The Employee's
Employment shall terminate automatically in the event of his death. Any waiver
of notice shall be valid only if it is made in writing and expressly refers to
the applicable notice requirement of this Section 1.
(e) Cause. The Company may terminate the Employee's Employment at any
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time upon reasonable notice for Cause. For all purposes under this Agreement,
"Cause" shall mean (i) a knowing failure by the Employee to comply with the
material policies of the Company, (ii) gross negligence of Employee which
results in a materially adverse impact to the Company, (iii) a breach of a
fiduciary duty to the Company, (iv) conviction of, or a plea of "guilty"
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or "no contest" to, a felony or (v) demonstrable and repeated (x) failure to
follow the directions of the Company's Board of Directors (the "Board") or (y)
failure to perform his obligations, duties or responsibilities hereunder, other
than a failure resulting from the Employee's complete or partial incapacity due
to physical or mental illness or impairment.
(f) Good Reason. Employee may terminate his Employment at any time
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upon reasonable notice for Good Reason. For all purposes under this Agreement,
"Good Reason" shall mean (i) a substantial reduction in Employee's position or
authority at the Company, (ii) a more than 25 percent reduction in Base
Compensation or benefits, (iii) a failure to pay compensation payable hereunder
or (iv) the filing by the Company of bankruptcy proceedings.
(g) Disability. The Company may terminate the Employee's active
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Employment due to Disability by giving the Employee 30 days' advance notice in
writing. For all purposes under this Agreement, "Disability" shall mean that the
Employee, at the time notice is given, has performed substantially none of his
duties under this Agreement for a period of not less than three consecutive
months as the result of his incapacity due to physical or mental illness. In the
event that the Employee resumes the performance of substantially all of his
duties hereunder before the termination of his active Employment under this
Subsection 1(g) becomes effective, the notice of termination shall automatically
be deemed to have been revoked.
(h) Rights Upon Termination. Except as expressly provided in Section
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8, upon the termination of the Employee's Employment pursuant to this Section 1,
the Employee shall only be entitled to the compensation, benefits and
reimbursements described in Sections 3, 4, 5 and 6 for the period preceding the
effective date of the termination. The payments under this Agreement shall fully
discharge all responsibilities of the Company to the Employee.
2. Duties and Scope of Employment.
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(a) Position. The Company agrees to employ the Employee as its
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President and Chief Executive Officer for the term of his Employment under this
Agreement ("Employment"). The Company agrees to use its best efforts to cause
the Employee to be nominated for election as a member of the Company's Board
throughout the term of his Employment.
(b) Obligations. During the term of his Employment, the Employee shall
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devote his full business efforts and time to the Company and its subsidiaries
(if any). He shall not render services to any other person or entity without the
express prior approval of the Board. Such approval shall not be withheld
unreasonably, provided that service on the boards of directors of other
corporations
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will be approved only if (i) such other corporations are not engaged in
activities that are competitive, or potentially competitive, with the Company,
(ii) such other corporations are of a quality and stature commensurate, in the
sole judgment of the Board, with the Employee's position under this Agreement
and with the Company's objectives and (iii) the Employee will not be serving on
the boards of directors of more than three corporations (other than the
Company).
3. Compensation.
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(a) Salary. During the term of his Employment, the Company agrees to
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pay the Employee as compensation for his services a base salary at the annual
rate of $144,000 or at such higher rate as the Company may determine from time
to time. Such salary shall be payable in accordance with the Company's standard
payroll procedures. (The annual compensation specified in this Section 3,
together with any increases in such compensation that the Company may grant from
time to time, is referred to in this Agreement as "Base Compensation.")
Employee's Base Compensation is retroactive to June 1, 1997.
(b) Incentive Plan. Employee shall be eligible to receive, at the
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discretion of the Board, grants of stock options under incentive plans adopted
by the Board and approved by the Company's stockholders.
(c) Bonus. Employee shall be eligible to receive an annual bonus of up
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to 60 percent of Base Compensation, such amount to be determined by the Board
and subject to the achievement of objectives to be determined by the Board no
later than 30 days prior to the commencement of each new year of Employment.
(d) Closing Bonus. Employee hereby acknowledges receipt of a $50,000
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bonus paid by the Company following the closing of the sale of the Company's
Series A Preferred Stock to cover prior legal, travel and other expenses.
(e) Cost of Living Adjustment. The Company shall pay to Employee
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$1,500 per month to offset the difference in cost of living from Atlanta to
Seattle. Such payments will terminate on the first anniversary of the Effective
Date.
(f) Loan Forgiveness. Pursuant to the terms of the Stock Agreement (as
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defined in Section 7 below) and in connection with the purchase of Common Stock,
the Company has loaned to Employee $59,250.00. One-fourth of the principal
amount of such loan shall be forgiven on each of the first four anniversaries of
the Effective Date provided that Employee achieves certain annual objectives as
determined by the Board of Directors and set forth in a written notice to
Employee no later than (i) December 31, 1997, in the case of the first one-year
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period and (ii) 30 days prior to the commencement of each subsequent one-year
period. In the event Employee's Employment terminates after less than four
consecutive years of service with the Company, the unpaid balance of such loan
shall be due and payable in accordance with the terms of the promissory note
dated July 18, 1997 attached hereto and incorporated herein by reference. In the
event of a Change of Control with respect to the Company (as defined in Section
7(b) below), any unpaid balance of such loan shall be forgiven as of the date of
the closing of the transaction that results in a Change of Control. Employee
acknowledges that the forgiveness of such loan may result in taxable
compensation to Employee and may be subject to applicable withholding taxes.
4. Employee Benefits.
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(a) Benefit Plans. During the term of his Employment, Employee shall
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be eligible to participate in the employee benefit plans maintained by the
Company, subject in each case to the generally applicable terms and conditions
of the plan in question and to the determinations of any person or committee
administering such plan.
(b) Disability Insurance. The Company will provide to Employee
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additional disability insurance coverage such that 75 percent of Base
Compensation is covered.
(c) Vacation. Employee will be entitled to four weeks of vacation for
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each full year of Employment. The maximum vacation Employee can accrue in any
year is four weeks. If Employee has not used his four weeks of vacation by the
end of the Employment year, he will not lose any accrued vacation, but vacation
will cease to accrue until accrued vacation is below the four week cap.
5. Business Expenses.
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During the term of his Employment, the Employee shall be authorized to
incur necessary and reasonable travel, entertainment and other business expenses
in connection with his duties hereunder. The Company shall reimburse the
Employee for such expenses upon presentation of an itemized account and
appropriate supporting documentation, all in accordance with the Company's
generally applicable policies.
6. Relocation Expenses.
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The Company will reimburse the reasonable moving expenses, not to exceed in
the aggregate $75,000, of Employee's relocation of his household from Atlanta to
Seattle, including real estate closing costs and commission on sale of his home
in Atlanta and the moving of household goods, family and automobile. If
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Employee's Employment is terminated for Cause or Employee resigns without Good
Reason prior to the first anniversary of the Effective Date, Employee will repay
50 percent of the relocation expenses paid by the Company.
7. Stock Vesting.
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(a) Acceleration. Employee and the Company are parties to that certain
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Common Stock Purchase Agreement dated as of July 17, 1997 (the "Stock
Agreement"), which provides for a right of repurchase in favor of the Company
with respect to 750,000 shares of the Company's Common Stock purchased by
Employee thereunder, which right of repurchase lapses ratably on a monthly basis
over a four-year period, subject to a one-year cliff. The Company agrees that,
in the event that the Company is subject to a Change in Control, such right of
repurchase shall lapse as to all then remaining unvested shares.
(b) Definition of Change in Control. For all purposes under this
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Agreement, "Change in Control" shall mean a consolidation, merger or other
reorganization of the Company with or into another corporation or other entity
or person in which the Company shall not be the continuing or surviving entity
of such merger, consolidation or reorganization, or the sale of all or
substantially all of the Company's properties and assets to any other person, or
any transaction or series of related transactions by this corporation in which
an excess of 50% of this corporation's voting power is transferred, unless the
Company's stockholders of record immediately prior to such merger,
consolidation, reorganization, sale or transaction are holders of more than 50%
of the voting equity securities of the surviving corporation.
8. Involuntary or Constructive Termination.
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(a) Salary and Benefit Continuation. Subject to Subsection 8(b)
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below, the Company shall continue (i) to pay the Employee's Base Compensation
(at the annual rate then in effect), (ii) to provide the benefits described in
Subsections 4(a) and 4(b) and (iii) to vest Employee's shares of Common Stock
under the Stock Agreement for 12 months following a termination of Employment,
if:
(i) At any time during the term of this Agreement, the Company
terminates the Employee's Employment without his consent for any reason
other than Cause or Disability; or
(ii) During the term of this Agreement, the Employee voluntarily
resigns his Employment for Good Reason.
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The payments under this Subsection 8(a) shall cease in the event of the
Employee's death.
(b) Mitigation. The payments under Subsection 8(a) above shall be
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reduced on a dollar-for-dollar basis by any other compensation earned by the
Employee for personal services performed as an employee or independent
contractor during the 12-month period following the termination of his
Employment, including (without limitation) deferred compensation. The Employee
shall apply his best efforts to seek and obtain other employment or consulting
engagements, whether on a full- or part-time basis, during such period in order
to mitigate the Company's obligations under Subsection 8(a) above. The Employee,
at reasonable intervals, shall report to the Company-with respect to such
efforts and any compensation earned during such period.
9. Successors.
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(a) Company's Successors. The Company shall use its best efforts to
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provide that any successor (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, will assume this Agreement and agree
expressly to perform this Agreement in the same manner and to the same extent as
the Company would be required to perform it in the absence of a succession. For
all purposes under this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets which executes and delivers
the assumption agreement described in this Subsection 9(a) or which becomes
bound by this Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights of the
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Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. Miscellaneous Provisions.
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(a) Notice. Notices and all other communications contemplated by this
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Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered mail, return receipt
requested and postage prepaid. In the case of the Employee, mailed notices shall
be addressed to him at the home address which he most recently communicated to
the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.
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(b) Waiver. No provision of this Agreement shall be modified, waived
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or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement; Modifications. No agreements, representations or
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understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement, the Stock Agreement or the
Confidentiality, Inventions and Noncompetition Agreement dated as of July 18,
1997 between the parties (the "Inventions Agreement") have been made or entered
into by either party with respect to the subject matter hereof. This Agreement,
the Stock Agreement and the Inventions Agreement contain the entire
understanding of the parties with respect to the subject matter hereof. A
modification of this Agreement shall be valid only if it is made in writing and
executed by both parties hereto.
(d) Withholding Taxes. All payments and imputed payments made under
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this Agreement shall be subject to reduction to reflect taxes or other charges
required to be withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the State of
Washington.
(f) Severability. The invalidity or unenforceability of any provision
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or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(g) Dispute Resolution Procedure.
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(i) The parties agree that any dispute arising out of or related
to the Employment relationship between them, including but not limited to
common law or statutory claims for discrimination, wrongful discharge,
breach of contract, breach of public policy, physical or mental harm or
distress, unpaid wages or any other dispute, shall be resolved by binding
arbitration, except where the law specifically forbids the use of
arbitration as a final and binding remedy.
(ii) The party claiming to be aggrieved shall furnish to the
other party a written statement of the grievance identifying any witnesses
or documents that support the grievance and the relief requested or
proposed.
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(iii) If the other party does not agree to furnish the relief
requested or proposed, or otherwise does not satisfy the demand of the
party claiming to be aggrieved, the parties shall submit the dispute to
nonbinding mediation before a mediator to be jointly selected by the
parties. The Company will pay the cost of the mediation.
(iv) If the mediation does not produce a resolution of the
dispute, the parties agree that the dispute shall be resolved by final and
binding arbitration in Seattle, Washington. The parties shall attempt to
agree to the identity of an arbitrator, and, if they are unable to do so,
the parties agree to assignment of an arbitrator from Judicial Arbitration
and Mediation Services (JAMS). The arbitrator shall have the authority to
determine whether the conduct complained of in section (g)(ii) violates the
rights of the complaining party and, if so, to grant any relief authorized
by law; provided, however, that the employee and the Company agree that for
violations of the employee's trade secret obligations, the Company reserves
the right to seek preliminary injunctive relief in court in order to
preserve the status quo or prevent irreparable injury before the matter can
be heard in arbitration. The arbitrator shall not have the authority to
modify, change or refuse to enforce the terms of this Agreement. In
addition, the arbitrator shall not have the authority to require the
Company to change any lawful policy or benefit plan. The hearing shall be
transcribed. The Company shall bear the costs of the arbitration if the
Employee prevails. If the Company prevails, the Employee will pay half the
cost of the arbitration or $500, whichever is less. Each party shall be
responsible for paying its own attorneys fees, unless the law provides
otherwise. Arbitration shall be the exclusive final remedy for any dispute
between the parties, and the parties agree that no dispute shall be
submitted to arbitration where the party claiming to be aggrieved has not
complied with the preliminary steps provided for in clauses (ii) and (iii)
above.
(v) Employee acknowledges that he has carefully read this
arbitration agreement and understands it, and is entering into the
agreement voluntarily after a reasonable period of time to consider it and
review it with personal legal counsel. Employee also acknowledges he may be
giving up the opportunity to bring claims before a court or jury, and does
so in order to gain the benefits of a speedy, impartial and cost-effective
resolution procedure.
(h) No Assignment. The rights of any person to payments or benefits
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under this Agreement shall not be made subject to option or assignment, either
by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Subsection 10(h) shall be void.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
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case of the Company by its duly authorized officer, as of the day and year first
above written.
/s/ Timothy J. Kilgallon
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Timothy J. Kilgallon
HEALTHKNOWLEDGE CORPORATION
By /s/ Dennis P. Schmuland
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Dennis P. Schmuland, M.D.
Chairman of the Board
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EXHIBIT 10.21
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to the Employment Agreement (the "Addendum") is entered into
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this 29th day of June, 1999 by and between Pointshare Corporation, a Delaware
corporation (the "Company"), and Timothy L Kilgallon ("Kilgallon").
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WHEREAS, the Company and Kilgallon are parties to that certain Employment
Agreement dated as of July 18, 1997 (the "Agreement").
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WHEREAS, the Company and Kilgallon hereby desire to supplement certain
provisions of the Agreement relating to compensation to Kilgallon.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. New Sections 3(g) and (h) shall be added to the Agreement reading as
follows:
(g) Additional Grant. Kilgallon will be granted a non-qualified option
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to purchase an additional 700,000 shares of the Company's Common Stock under,
and pursuant to the terms of, the Company's 1996 Amended and Restated Stock
- ----------------------------
Option Plan, including without limitation Section 11 thereof, at an exercise
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price equal to the fair market value (as determined by the Company's Board of
Directors) on the date of grant (currently estimated to be $0.125 per share)
(the "Additional Shares"). Such Additional Shares will vest and become
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exercisable as follows, provided Kilgallon continues to provide services to the
Company:
(i) 200,000 shares will vest over a four-year period as
follows: Twenty-five percent (25%) of the shares will vest on July 1,
2000 and one-thirty-sixth (1/36th) of the remaining seventy-five
percent (75%) of the shares will vest ratably at the end of each month
thereafter upon Kilgallon's completion of each month of service with
the Company.
(ii) 500,000 shares will vest as follows:
(A) 100,000 shares upon the earlier of (A) the closing
of a private equity financing with gross proceeds to
the Company of at least $20.0 million and (B) June 30,
2006;
(B) 200,000 shares upon the earlier of (A) the closing
of the Company's initial public offering of Common
Stock pursuant to a registration statement filed under
the Securities Act of 1933, as amended or upon a
"Change in Control" (as defined below) and (B) June 30,
2006; and
(C) 50,000 shares upon consummation of each agreement
with a corporate or strategic partner (as evidenced by
an equity investment or an agreement to collaborate
with respect to development, marketing or
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product offering) up to a maximum of 200,000 shares for
four such agreements; provided that in any event such
200,000 shares shall be deemed fully vested on June 30,
2006 if Kilgallon is still providing services to the
Company.
"Change of Control" shall mean any acquisition of the Company, whether by
merger (except for a merger effected solely for the purposes of changing the
domicile of the Company) or any other transaction or series of related
transactions in which the shareholders of the Company immediately prior thereto
own less than a majority of the voting stock of the Company (or its successor or
parent) immediately thereafter.
2. Except as provided herein, the Agreement shall remain in full force and
effect. If one or more provisions of this Amendment are held to be unenforceable
under applicable law, such provision shall be excluded from this Amendment and
the balance of this Amendment shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
3. Nothing in this Amendment, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Amendment, except as expressly provided herein.
4. This Amendment shall be governed by and construed under the laws of the
State of Washington.
5. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
first above written.
POINTSHARE CORPORATION:
By: /s/ Craig T. Davenport
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Name: Craig T. Davenport
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Its: Chairman
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Address: 1300 114th Avenue SE, Suite 100
Bellevue, WA 98004
KILGALLON:
/s/ Timothy J. Kilgallon
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Timothy J. Kilgallon
Address: 4356 E. Mercer Way
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Mercer Island, WA 98040
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EXHIBIT 10.22
ADDENDUM NO. 2 TO EMPLOYMENT AGREEMENT
This Addendum No. 2 to the Employment Agreement (the "Addendum") is entered
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into this 8th day of February 2000 by and between Pointshare Corporation, a
Delaware corporation (the "Company"), and Timothy J. Kilgallon ("Kilgallon").
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WHEREAS, the Company and Kilgallon are parties to that certain Employment
Agreement dated as of July 18, 1997 and Addendum to Employment Agreement dated
June 30, 1999 (the "Agreement").
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WHEREAS, the Company and Kilgallon hereby desire to supplement certain
provisions of the Agreement relating to compensation to Kilgallon.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. New Sections 3(g) and (h) shall be added to the Agreement reading as
follows:
(g) Additional Grant. Kilgallon will be granted a non-qualified
----------------
option to purchase an additional 700,000 shares of the Company's Common Stock
under, and pursuant to the terms of, the Company's 1996 Amended and Restated
Stock Option Plan, including without limitation Section 11 thereof, at an
exercise price equal to the fair market value (as determined by the Company's
Board of Directors) on the date of grant (currently estimated to be $0.125 per
share) (the "Additional Shares"). Such Additional Shares will vest and become
-----------------
exercisable as follows, provided Kilgallon continues to provide services to the
Company:
(i) 200,000 shares will vest over a four-year period as
follows: Twenty-five percent (25%) of the shares will vest on July 1,
2000 and one-thirty-sixth (1/36th) of the remaining seventy-five
percent (75%) of the shares will vest ratably at the end of each month
thereafter upon Kilgallon's completion of each month of service with
the Company.
(ii) 500,000 shares will vest as follows:
(A) 100,000 shares upon the earlier of (A) the
closing of a private equity financing with gross
proceeds to the Company of at least $20.0 million and
(B) June 30, 2003;
(B) 200,000 shares upon the earlier of (A) the
closing of the Company's initial public offering of
Common Stock pursuant to a registration statement filed
under the Securities Act of 1933, as amended or upon a
"Change in Control" (as defined below) and (B) June 30,
2003; and
(C) 50,000 shares upon consummation of each agreement
with a corporate or strategic partner (as evidenced by
an equity investment or an agreement to
<PAGE>
collaborate with respect to development, marketing or
product offering) up to a maximum of 200,000 shares for
four such agreements; provided that in any event such
200,000 shares shall be deemed fully vested on June 30,
2003 if Kilgallon is still providing services to the
Company.
"Change of Control" shall mean any acquisition of the Company, whether by
merger (except for a merger effected solely for the purposes of changing the
domicile of the Company) or any other transaction or series of related
transactions in which the shareholders of the Company immediately prior thereto
own less than a majority of the voting stock of the Company (or its successor or
parent) immediately thereafter.
2. Except as provided herein, the Agreement shall remain in full force and
effect. If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of this Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3. Nothing in this Amendment, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Amendment, except as expressly provided herein.
4. This Amendment shall be governed by and construed under the laws of the
State of Washington.
5. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[Signature page follows]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
first above written.
POINTSHARE CORPORATION:
/s/
By:_______________________________
Name:_____________________________
Its:______________________________
Address: 1300 114th Avenue SE, Suite 100
Bellevue, WA 98004
KILGALLON:
/s/ Timothy J. Kilgallon
__________________________
Timothy J. Kilgallon
Address:__________________
__________________
__________________
<PAGE>
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into effective as of
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April 30, 1999, between Pointshare Corporation, a Delaware corporation
("Employer"), and R. Scott Wiley ("Employee").
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In consideration of the mutual covenants set forth in this Agreement, Employer,
and Employee agree as follows:
1. Employment. During the term of this Agreement, Employee agrees to
serve as Chief Operating Officer, and to perform such duties as may reasonably
be assigned to Employee by the President and Chief Executive Officer (the
"CEO"), or such other supervisor as may be assigned by the CEO. The CEO, or
---
such other supervisor will have the power to direct, control, and supervise (a)
the services that Employee is to perform under this Agreement, (b) the means and
manner by which Employee will perform such services, and (c) the time for
performing such services; provided, however, that no employment duties or
constraints of any kind will be imposed that would require Employee to violate
any law, statute, ordinance, rule or regulation now or hereafter in effect.
2. Term. The term of this Agreement will commence as of April 30, 1999,
and subject to earlier termination under the other express provisions of this
Agreement, will terminate on October 27, 2000.
3. Performance of Services. Employee will diligently and competently
devote substantially all of his business time, attention, and energies to the
performance of his duties under this Agreement and will exert his best efforts
to further the business of Employer, to preserve for the benefit of Employer the
goodwill of Employer's customers and those who have business relationships with
Employer, and to comply with all laws, statutes, ordinances, rules and
regulations known to him relating to the services provided by him under this
Agreement.
4. Compensation. Employer will pay to Employee base compensation at a
rate of One Hundred Fifty Seven Thousand Five Hundred Dollars ($157,500) per
year, payable in periodic installment in accordance with Employer's payroll
policies from time to time in effect for personnel at Employee's level.
Employer will be entitled to deduct from the amounts owed Employee under this
Agreement any amounts that Employer is required by applicable federal, state, or
local law to withhold from an account of employment, income, or other taxes.
5. Termination of Agreement Prior to End of Term.
5.1 Employer will have the right to terminate this Agreement for
"Cause," which for purposes of this Agreement will be defined as (a) repeated
refusal to carry out directions of the Board with regard to material matters
reasonably consistent with Employee's duties; (b) knowing violation of a state
or federal law involving the commission of a crime against Employer or a felony;
(c) misuse of alcohol or controlled substances, misrepresentation, deception,
fraud, or dishonesty materially injurious to Employer; and (d) any act or
omission in willful disregard of the interests of Employer that substantially
impairs Employer's goodwill,
<PAGE>
business, or reputation and that, if susceptible of being cured, is not cured by
Employee within thirty (30) days following receipt from Employer of a demand to
do so. A failure by Employee, because of illness or other incapacity, to render
the services contemplated by this Agreement will not constitute cause.
5.2 Employer will have the right to terminate this Agreement if
Employee fails, because of illness or other incapacity, to render the services
contemplated by this Agreement for a period of one hundred twenty (120)
consecutive days or any series of shorter periods aggregating one hundred fifty
(150) days in any consecutive period of twelve (12) months ("Disability").
----------
5.3 Employee's employment pursuant to this Agreement is "at-will," and
-------
Employer will have the right to terminate this Agreement at any time, without
"Cause" for any reason or for no reason, with or without notice.
------
5.4 This Agreement will automatically terminate upon the death of the
Employee.
6. Effect of Termination. Upon termination by Employer of Employee's
employment during the term of this Agreement other than for Cause, Disability or
death, Employee will be entitled to continue to receive his Base Salary and
benefits applicable generally to full-time employees of Employer for six (6)
months following such termination. In addition, upon termination by Employer of
Employee's employment during the term of this Agreement other than for Cause,
Disability or death, any unvested stock options or shares of restricted stock
held by Employee as of the date of Employee's termination of employment shall
continue to vest for a period of twelve (12) months following such termination
date according to the vesting schedule set forth in any agreement between
Employee and the Employer governing the issuance to Employee of such securities.
7. Confidentiality, Inventions, and Noncompetition. Employee agrees to
the provisions in the Confidentiality, Inventions, and Noncompetition Agreement
executed October 27, 1997, a copy of which is attached hereto as Attachment A.
8. Miscellaneous.
8.1 This agreement will be binding upon and inure to the benefit of
Employer, its successors and assigns. This Agreement will be binding upon
Employee and his heirs, personal and legal representatives, and guardians, and
will inure to the benefit of Employee. Neither this Agreement nor any part
hereof or interest herein will be assignable by Employee.
8.2 The terms and provisions of this Agreement may only be modified or
supplemented by a written instrument duly executed by each party hereto.
8.3 This Agreement will be governed by and enforced and construed in
accordance with the laws of the State of Washington.
-2-
<PAGE>
8.4 If either party prevails in any action to enforce its rights under
this Agreement, it will recover from the other party its reasonable attorneys'
fees and costs, including any fees and costs incurred upon appeal.
8.5 This Agreement sets forth the entire, integrated understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior or contemporaneous agreements or understandings, written or
oral, between Employer and Employee.
8.6 If any provision of this Agreement, on its face or as applied to
any person or circumstance, is or becomes unenforceable to any extent and is not
reformed pursuant to this Agreement, the remainder of this Agreement and the
application of the provision to any other person, circumstance or extent, will
not be affected, and this Agreement will continue in force.
8.7 Each of the parties hereto will have the right to waive compliance
in a particular circumstance with a covenant set forth in this Agreement, but no
such waiver will operate as a waiver of compliance with such covenant in any
other circumstance or as a waiver of compliance with any other covenant set
forth in this Agreement. In any event, no such waiver will be deemed effective
unless it is in writing and signed by the party so waiving.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
effective as of the day and year first set forth above.
"Employer" Pointshare Corporation
/s/ Timothy J. Kilgallon
By ______________________________
Timothy J. Kilgallon
President and CEO
/s/ R. Scott Wiley
"Employee" _________________________________
R. Scott Wiley
-3-
<PAGE>
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of July 18, 1997 by and between DENNIS P.
SCHMULAND, M.D. (the "Employee") and HEALTHKNOWLEDGE CORPORATION, a Delaware
corporation (the "Company").
1. Term of Employment.
-------------------
(a) Effective Date. This Agreement shall be effective from July 18,
--------------
1997 (the "Effective Date").
(b) Term. The Company agrees to continue the Employee's Employment,
----
and the Employee agrees to remain in Employment with the Company, from the
Effective Date until the earlier of:
(i) July 18, 2001; or
(ii) The date when the Employee's Employment terminates pursuant to
Subsections 1 (d), (e), (f) or (g) below.
(c) Renewal. In the event that neither the Company nor Employee give
-------
notice to the other party of an intention to terminate this Agreement at least
30 days prior to the date set forth in clause (i) of Subsection 1(b) hereof,
this Agreement shall be automatically renewed for a one-year term. This
Agreement shall thereafter be automatically renewed far successive one-year
terms in the absence of 30-day notice by either party to the contrary.
(d) Early Termination. Subject to Section 8, the Company may
-----------------
terminate the Employee's Employment without Cause by giving the Employee 30
days' advance notice in writing. The Employee may terminate his Employment
without Good Reason by giving the Company 30 days' advance notice in writing.
The Employee's Employment shall terminate automatically in the event of his
death. Any waiver of notice shall be valid only if it is made in writing and
expressly refers to the applicable notice requirement of this Section 1.
(e) Cause. The Company may terminate the Employee's Employment at
-----
any time upon reasonable notice for Cause. For all purposes under this
Agreement, "Cause" shall mean (i) a knowing failure by the Employee to comply
with the material policies of the Company, (ii) gross negligence of Employee
which results in a materially adverse impact to the Company, (iii) a breach of a
fiduciary duty to the Company, (iv) conviction of, or a plea of "guilty" or "no
contest" to, a felony or (v) demonstrable and repeated (x) failure to follow the
directions of the Company's Board of Directors (the
1
<PAGE>
"Board") or (y) failure to perform his obligations, duties or responsibilities
hereunder, other than a failure resulting from the Employee's complete or
partial incapacity due to physical or mental illness or impairment.
(f) Good Reason. Employee may terminate his Employment at any time
-----------
upon reasonable notice for Good Reason. For all purposes under this Agreement,
"Good Reason" shall mean (i) a substantial reduction in Employee's position or
authority at the Company, (ii) a more than 25 percent reduction in Base
Compensation or benefits, (iii) a failure to pay compensation payable hereunder
or (iv) the filing by the Company of bankruptcy proceedings.
(g) Disability. The Company may terminate the Employee's active
----------
Employment due to Disability by giving the Employee 30 days' advance notice in
writing. For all purposes under this Agreement, "Disability" shall mean that the
Employee, at the time notice is given, has performed substantially none of his
duties under this Agreement for a period of not less than three consecutive
months as the result of his incapacity due to physical or mental illness. In the
event that the Employee resumes the performance of substantially all of his
duties hereunder before the termination of his active Employment under this
Subsection 1(g) becomes effective, the notice of termination shall automatically
be deemed to have been revoked.
(h) Rights Upon Termination. Except as expressly provided in Section
-----------------------
8, upon the termination of the Employee's Employment pursuant to this Section 1,
the Employee shall only be entitled to the compensation, benefits and
reimbursements described in Sections 3, 4, 5 and 6 for the period preceding the
effective date of the termination. The payments under this Agreement shall fully
discharge all responsibilities of the Company to the Employee.
2. Duties and Scope of Employment.
------------------------------
(a) Position. The Company agrees to employ the Employee as its
--------
Chairman of the Board and Chief Medical Officer for the term of his Employment
under this Agreement ("Employment"). The Company agrees to use its best efforts
to cause the Employee to be nominated for election as a member of the Company's
Board throughout the term of his Employment.
(b) Obligations. During the term of his Employment, the Employee
-----------
shall devote his full business efforts and time to the Company and its
subsidiaries (if any). He shall not render services to any other person or
entity without the express prior approval of the Board. Such approval shall not
be withheld unreasonably, provided that service on the boards of directors of
other corporations will be approved only if (i) such other corporations are not
engaged in activities that are competitive, or potentially competitive, with the
Company, (ii) such other corporations are of a quality and stature commensurate,
in the sole judgment of the Board, with the
2
<PAGE>
Employee's position under this Agreement and with the Company's objectives and
(iii) the Employee will not be serving on the boards of directors of more than
three corporations (other than the Company).
3. Compensation.
-------------
(a) Salary. During the term of his Employment, the Company agrees to
------
pay the Employee as compensation for his services a base salary at the annual
rate of $156,000 or at such higher rate as the Company may determine from time
to time. Such salary shall be payable in accordance with the Company's standard
payroll procedures. (The annual compensation specified in this Section 3,
together with any increases in such compensation that the Company may grant from
time to time, is referred to in this Agreement as "Base Compensation.")
(b) Incentive Plan. Employee shall be eligible to receive, at the
--------------
discretion of the Board, grants of stock options under incentive plans adopted
by the Board and approved by the Company's stockholders.
(c) Bonus. Employee shall be eligible to receive an annual bonus of
-----
up to 60 percent of Base Compensation, such amount to be determined by the Board
and subject to the achievement of objectives to be determined by the Board no
later than 30 days prior to the commencement of each new Employment year.
(d) Closing Bonus. Employee hereby acknowledges receipt of a $75,000
-------------
bonus paid by the Company following the closing of the sale of the Company's
Series A Preferred Stock.
4. Employee Benefits.
-----------------
(a) Benefit Plans. During the term of his Employment, Employee shall
-------------
be eligible to participate in the Employee benefit plans maintained by the
Company, subject in each case to the generally applicable terms and conditions
of the plan in question and to the determinations of any person or committee
administering such plan.
(b) Disability Insurance. The Company will provide to Employee
--------------------
additional disability insurance coverage such that 75 percent of Base
Compensation is covered.
(c) Vacation. Employee will earn four weeks of vacation for each
--------
full year of Employment. The maximum vacation Employee can accrue in any year is
four weeks. If Employee has not used his four weeks of vacation by the end of
the Employment year, he will not lose any accrued vacation, but vacation will
cease to accrue until any accrued vacation is reduced.
3
<PAGE>
5. Business Expenses.
-----------------
During the term of his Employment, the Employee shall be authorized to
incur necessary and reasonable travel, entertainment and other business expenses
in connection with his duties hereunder. The Company shall reimburse the
Employee for such expenses upon presentation of an itemized account and
appropriate supporting documentation, all in accordance with the Company's
generally applicable policies. Employee shall also be entitled to reimbursement
of professional and educational expenses as approved by the Board.
6. Automobile Allowance. The Company shall pay to Employee $500 per
--------------------
month as an automobile allowance. Such payments will terminate on the first
anniversary of the Effective Date.
7. Stock Vesting.
-------------
(a) Acceleration. Employee and the Company are parties to that
------------
certain Stock Restriction Agreement dated as of July 17, 1997 (the "Stock
Restriction Agreement"), which provides for a right of repurchase in favor of
the Company with respect to certain shares of the Company's Subordinated
Convertible Preferred Stock owned by Employee, which right of repurchase lapses
ratably on a monthly basis over a four-year period. The Company agrees that, in
the event that (A) the Employee's Employment terminates because of death or
total and permanent Disability or (B) the Company is subject to a Change in
Control, such right of repurchase shall lapse as to all then remaining unvested
shares.
(b) Definition of Change in Control. For all purposes under this
-------------------------------
Agreement, "Change in Control" shall mean a consolidation, merger or other
reorganization of the Company with or into another corporation or other entity
or person in which the Company shall not be the continuing or surviving entity
of such merger, consolidation or reorganization, or the sale of all or
substantially all of the Company's properties and assets to any other person, or
any transaction or series of related transactions by this corporation in which
an excess of 50 percent of this corporation's voting power is transferred,
unless the Company's stockholders of record immediately prior to such merger,
consolidation, reorganization, sale or transaction are holders of more than 50
percent of the voting equity securities of the surviving corporation.
8. Involuntary or Constructive Termination.
---------------------------------------
(a) Salary Continuation. Subject to Subsection 8(b) below, the
-------------------
Company shall continue (i) to pay the Employee's Base Compensation (at the
annual rate then in effect) and (ii) to provide the benefits described in
Subsections 4(a) and 4(b) for 12 months following a termination of Employment
or, if such termination is prior to the first anniversary of the Effective Date,
for 24 months following such
4
<PAGE>
termination, if:
(i) At any time during the term of this Agreement, the Company
terminates the Employee's Employment without his consent for any reason
other than Cause or Disability; or
(ii) During the term of this Agreement, the Employee voluntarily
resigns his Employment for Good Reason.
The payments under this Subsection 8(a) shall cease in the event of the
Employee's death.
(b) Mitigation. The payments under Subsection 8(a) above shall be
----------
reduced on a dollar-for-dollar basis by any other compensation earned by the
Employee for personal services performed as an employee or independent
contractor during the 12-month period or 24-month period, as the case may be,
following the termination of his Employment, including (without limitation)
deferred compensation. The Employee shall apply his best efforts to seek and
obtain other employment or consulting engagements, whether on a full- or part-
time basis, during such period in order to mitigate the Company's obligations
under Subsection 8(a) above. The Employee, at reasonable intervals, shall report
to the Company with respect to such efforts and any compensation earned during
such period.
9. Successors.
----------
(a) Company's Successors. The Company shall use its best efforts to
--------------------
provide that any successor (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, will assume this Agreement and agree
expressly to perform this Agreement in the same manner and to the same extent as
the Company would be required to perform it in the absence of a succession. For
all purposes under this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets which executes and delivers
the assumption agreement described in this Subsection 9(a) or which becomes
bound by this Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights of the
---------------------
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
5
<PAGE>
10. Miscellaneous Provisions.
------------------------
(a) Notice. Notices and all other communications contemplated by
------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered mail, return receipt
requested and postage prepaid. In the case of the Employee, mailed notices shall
be addressed to him at the home address which he most recently communicated to
the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.
(b) Waiver. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement; Modifications. No agreements, representations
------------------------------
or understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement, the Stock Restriction Agreement
or the Confidentiality, Inventions and Noncompetition Agreement dated as of
November 1, 1996 between Employee and the Company's predecessor in interest,
HealthKnowledge Corporation, a Washington corporation (the "Inventions
Agreement") have been made or entered into by either party with respect to the
subject matter hereof. This Agreement, the Stock Restriction Agreement and the
Inventions Agreement contain the entire understanding of the parties with
respect to the subject matter hereof. A modification of this Agreement shall be
valid only if it is made in writing and executed by both parties hereto.
(d) Withholding Taxes. All payments and imputed payments made under
-----------------
this Agreement shall be subject to reduction to reflect taxes or other charges
required to be withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
Washington.
(f) Severability. The invalidity or unenforceability of any
------------
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
6
<PAGE>
(g) Dispute Resolution Procedure.
----------------------------
(i) The parties agree that any dispute arising out of or
related to the Employment relationship between them, including but not limited
to common law or statutory claims for discrimination, wrongful discharge, breach
of contract, breach of public policy, physical or mental harm or distress,
unpaid wages or any other dispute, shall be resolved by binding arbitration,
except where the law specifically forbids the use of arbitration as a final and
binding remedy.
(ii) The party claiming to be aggrieved shall furnish to the
other party a written statement of the grievance identifying any witnesses or
documents that support the grievance and the relief requested or proposed.
(iii) If the other party does not agree to furnish the relief
requested or proposed, or otherwise does not satisfy the demand of the party
claiming to be aggrieved, the parties shall submit the dispute to nonbinding
mediation before a mediator to be jointly selected by the parties. The Company
will pay the cost of the mediation.
(iv) If the mediation does not produce a resolution of the
dispute, the parties agree that the dispute shall be resolved by final and
binding arbitration in Seattle, Washington. The parties shall attempt to agree
to the identity of an arbitrator, and, if they are unable to do so, the parties
agree to assignment of an arbitrator from Judicial Arbitration and Mediation
Services (JAMS). The arbitrator shall have the authority to determine whether
the conduct complained of in section (g)(ii) violates the rights of the
complaining party and, if so, to grant any relief authorized by law; provided,
however, that the employee and the Company agree that for violations of the
employee's trade secret obligations, the Company reserves the right to seek
preliminary injunctive relief in court in order to preserve the status quo or
prevent irreparable injury before the matter can be heard in arbitration. The
arbitrator shall not have the authority to modify, change or refuse to enforce
the terms of this Agreement. In addition, the arbitrator shall not have the
authority to require the Company to change any lawful policy or benefit plan.
The hearing shall be transcribed. The Company shall bear the costs of the
arbitration if the Employee prevails. If the Company prevails, the Employee will
pay half the cost of the arbitration or $500, whichever is less. Each party
shall be responsible for paying its own attorneys fees, unless the law provides
otherwise. Arbitration shall be the exclusive final remedy for any dispute
between the parties, and the parties agree that no dispute shall be submitted to
arbitration where the party claiming to be aggrieved has not complied with the
preliminary steps provided for in clauses (ii) and (iii) above.
(v) Employee acknowledges that he has carefully read this
arbitration agreement and understands it, and is entering into the agreement
voluntarily after a reasonable period of time to consider it and review it with
personal legal counsel. Employee also acknowledges he may be giving up the
opportunity to
7
<PAGE>
bring claims before a court or jury, and does so in order to gain the benefits
of a speedy, impartial and cost-effective resolution procedure.
(h) No Assignment. The rights of any person to payments or benefits
-------------
under this Agreement shall not be made subject to option or assignment, either
by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Subsection 10(h) shall be void.
(i) Attorney's Fees. Within 30 days of the execution hereof, the
---------------
Company agrees to reimburse the reasonable legal fees and expenses incurred by
Employee, not to exceed $2,500, in connection with the negotiation of this
Agreement and related transactions.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
------------------
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
/s/ Dennis Schmuland
-----------------------------
Dennis P. Schmuland, M.D.
HEALTHKNOWLEDGE CORPORATION
By /s/ T. Kilgallon
--------------------------
Timothy J. Kilgallon
President and Chief
Executive Officer
8
<PAGE>
EXHIBIT 10.25
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT (the "Agreement") is entered into effective as of
---------
September 14, 1999, between Pointshare Corporation, a Delaware corporation
formerly known as Healthknowledge Corporation (the "Company"), and Dennis
-------
Schmuland, M.D. ("Schmuland").
---------
Recitals
A. The Company and Schmuland entered into an Employment Agreement dated as of
July 18, 1997 (the "Employment Agreement").
--------------------
B. The Company and Schmuland entered into a Stock Restriction Agreement dated
as of July 17, 1997 (the "Restriction Agreement").
---------------------
C. The Company and Schmuland desire to amend certain provisions of the
Employment Agreement and the Restriction Agreement.
Agreement
In consideration of the mutual covenants set forth in this Agreement, the
Company and Schmuland agree as follows:
1. Employment Position. Section 2(a) of the Employment Agreement is
amended in its entirety as follows:
"(a) Position. The Company agrees to employ the Employee as its Vice
--------
President and Chief Medical Officer for the term of his Employment under this
Agreement ("Employment")."
2. Departure from Board of Directors. The Company and Schmuland each
agree that Schmuland no longer being a member of the Board of Directors of the
Company shall not constitute (i) a "Good Reason" under section 1(f) of the
Employment Agreement or (ii) Involuntary or Constructive Termination under
Section 1(a) of the Restriction Agreement.
3. Repurchase Option. The Company and Schmuland each agree that the
Company's Repurchase Option shall terminate and be of no further force and
effect with respect to all shares of the Option Stock (as defined in the
Restriction Agreement). The Company will cause the Escrow Agent (as defined in
the Restriction Agreement) to release all shares of the Option Stock still held
in escrow as soon as practicable after execution of this Agreement.
The parties have executed and delivered this Agreement effective as of the
day and year first set forth above.
Pointshare Corporation Dennis Schmuland, M.D.
By: /s/ Timothy J. Kilgallon /s/ Dennis Schmuland, M.D.
------------------------ --------------------------
Timothy J. Kilgallon
President and CEO
<PAGE>
EXHIBIT 10.26
ADVISORY SERVICES AGREEMENT
This AGREEMENT ("Agreement") is made this 5/th/ day of April, 1999, between
---------
Craig T. Davenport ("Advisor"), CEO & Managing Partner of The D.W. Group, and
-------
Pointshare Corporation ("Company"), a Washington corporation with corporate
-------
office located at 1300 - 114th Avenue S.E., Suite 100, Bellevue, Washington
98004.
WITNESS:
WHEREAS, the Company desires to retain Advisor as an independent contractor
to provide services for the Company on a nonexclusive basis; and
WHEREAS, Advisor is willing to render such services to the Company on the
terms and conditions set forth in this Agreement.
THEREFORE, it is agreed as follows:
Section 1. Duties and Term. The Company hereby engages Advisor, effective
as of the date hereof, as an advisor to provide services to the Company. The
goal of this agreement is to have Advisor work closely with the Company's
management team and its Board of Directors. Advisor and Timothy J. Kilgallon,
President & Chief Executive Officer of the Company, have had substantive
discussions about the Company and its immediate needs. Based on the
conversations, the parties have agreed that Advisor will provide services in the
following principle areas:
(i) Assistance and advice in the development, implementation
and ongoing refinement of: marketing plans; customer implementation; customer
service and support strategies; sales programs and activities; company
management and organization development.
(ii) Be a mentor and coach to the C.E.O. and President, along
with key senior managers, particularly Scott Wiley.
(iii) Become a trusted advisor and confidant to senior
management.
(iv) Become a member of the Board of Directors and operate as a
"Lead Director" on Company operations and execution of effectiveness.
(v) Apply concentrated effort to assure the Company's
achievement of its Second Quarter 1999 Vital 5 Objectives.
Advisor and the Company have projected that to provide services to meet the
responsibilities identified above, Mr. Davenport will have to commit to, at
minimum an average of eight (8) day(s) per month for the first ninety (90) days
of this Agreement. The time commitment by Advisor will begin April 5, 1999 and
continue until July 2, 1999, but may be increased or decreased upon the mutual
acceptance of both parties. Any increase or decrease in the time requirement of
Advisor may change the terms of compensation contained in "Section 2.
<PAGE>
Compensation." Mr. Davenport and Mrs. White have agreed that essentially Mr.
Davenport will have to be available on an "as needed basis" and therefore
readily available to assist the Company.
Section 2. Compensation.
2.1 Fee Rate. Recognizing the early stage nature of the Company, its
--------
limited financial resources and Advisor's interest to secure equity ownership,
Advisory will reduce his normal and customary fees of two thousand five hundred
dollars ($2,500) per day to five hundred dollars ($500) per day and receive a
stock or stock option grant(s) to offset this reduction and to provide an
incentive for Mr. Davenport to make significant contributions to the Company's
performance. Advisor will provide a monthly statement to the President and
C.B.O. detailing activities and services provided beginning with the month of
April, 1999. In satisfaction of the cash portion of the fee, the Company will
pay Advisor the sum of $4333.33 on or prior to the last day of each of the
months of April, May and June, 1999; provided Advisor continues to provide
services to the Company.
2.2 Stock Option Grant. Advisor will be granted a non-qualified
------------------
option to purchase 50,000 shares of the Company's Common Stock, at an exercise
price equal to the fair market value (as determined by the Company's Board of
Directors) on the date of grant (currently estimated to be $0.125 per share).
This option will vest and become exercisable as follows: 16,666.66 shares will
vest on the last day of April, May, and June 1999 until fully vested; provided
Advisor continues to provide services to the Company.
2.3 Directors' Stock Option Grant. As a Director of the Company, Mr.
-----------------------------
Davenport will be granted a non-qualified option to purchase 25,000 shares of
the Company's Common Stock pursuant to the Company's 1998 Directors Stock Option
Plan. The options will be exercisable at an exercise price equal to the fair
market value (as determined by the Company's Board of Directors) on the date of
grant (currently estimated to be $0.125 per share). This option will vest and
become exercisable in accordance with the terms set forth in the Company's 1998
Directors Stock Option Plan.
2.4 Expenses. The Company shall reimburse Advisor for the cost of
--------
expenses incurred in connection with the performance of his obligations as an
Advisor within thirty (30) days of delivery of expense receipts. As a condition
to receipt of reimbursement, Advisor shall be required to submit to the Company
reasonable evidence that the amount involved was expended and related to
services provided under this Agreement. Any individual expense in excess of five
hundred dollars ($500) shall require the prior approval of the President and
C.E.O. of the Company.
Section 3. Investment in Future Equity Offerings. Subject to the
discretion of the Board of Directors and other legal or contractual
restrictions, Advisor may be provided the opportunity, to invest in the
Company's future equity offerings on the same terms as other investors in such
offerings.
Section 4. Consulting or Other Services for Competitors. Advisor
represents and warrants that Advisor will not, during the term of this
Agreement, perform stay consulting or other services for any company, person or
entity whose business or proposed business in any way
-2-
<PAGE>
involves products or services which could reasonably be determined to be
competitive with the products or services or proposed products or services of
the Company. If, however, Advisor decides to do so, Advisor agrees to notify the
Company in writing in advance (specifying the identity of the entity or the
person) and provide information sufficient to allow the Company to determine if
such consulting would conflict with projects or products of the Company. If the
Company determines that such business is in competition with that conducted by
the Company, this Agreement shall terminate immediately.
Section 5. Confidential Information. Advisor understands his
responsibility to treat as confidential certain information concerning the
Company. In connection with the performance of his obligations for the Company,
Advisor agrees that he will hold information designated as confidential in
confidence and not disclose any such information to any third party except as
reasonably required to perform his obligations or as authorized by the Company.
Upon termination of this Agreement, Advisor shall return all confidential and
proprietary information in his possession to the Company at Company's request.
Furthermore, Advisor will abide by the terms and conditions as set forth in the
Company's "Proprietary Information and Inventions Agreement" executed by Advisor
concurrently with this Agreement.
Section 6. Independent Contractor. Advisor shall be an independent
contractor, not an employee of the Company and shall have the sole control and
discretion in the manner of performing the services described in this Agreement.
Advisor will be responsible and liable for, any and all income taxes relating to
the compensation he is paid. It is further understood and agreed, Advisor is not
eligible to participate in any employee benefit plans or employee programs
sponsored or financed by the Company.
Section 7. Termination. This Agreement will terminate twelve (12) months
following the effective date on this Agreement. Notwithstanding any other
provision of this agreement, either party hereto may terminate this Agreement at
any time upon giving twenty (20) days written notice to the other party.
Termination shall have not effect upon the rights and obligations of the parties
arising out of transaction occurring prior to the effecting date of such
termination.
Section 8. Survival. The obligations set forth in Sections 2, 4, 5, 6, 7,
8, 9, 10, 11 and 12 shall survive any termination of this Agreement.
Section 9. Non-Assignability. Neither this Agreement nor the rights and
obligations hereunder are assignable by Advisor either voluntarily or by
operation of law.
Section 10. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Washington.
Section 11. Indemnification. Company hereby agrees to hold harmless and
indemnify Advisor to the full extent authorized or permitted by law.
-3-
<PAGE>
Section 12. Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to this subject matter.
COMPANY:
/s/ T. Kilgallon
-------------------------------
Timothy J. Kilgallon
President & C.E.O.
Pointshare Corporation
ADVISOR:
/s/ Craig T. Davenport
- --------------------------------
Craig T. Davenport
C.E.O. & Managing Partner
The D.W. Group
-4-
<PAGE>
EXHIBIT 10.27
AMENDMENT TO ADVISORY SERVICES AGREEMENT
This Amendment to Advisory Services Agreement (the "Amendment") is entered
---------
into this 29th day of June, 1999 by and between Pointshare Corporation, a
Delaware corporation (the "Company"), and Craig T. Davenport ("Advisor").
------- -------
WHEREAS, the Company and Advisor are parties to that certain Advisory
Services Agreement dated as of April 5, 1999 (the "Agreement").
---------
WHEREAS, the Company and Advisor hereby desire to amend certain provisions
of the Agreement relating to compensation to Advisor.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Sections 2.1 and 2.2 of the Agreement shall be amended and restated in
their entirety as follows:
2.1 Fee Rate. Recognizing the early stage nature of the Company,
--------
its limited financial resources and Advisor's interest to secure equity
ownership, Advisor will reduce his normal and customary fees of Two Thousand
Five Hundred Dollars ($2,500) per day to Five Hundred Dollars ($500) per day and
receive a stock or stock option grant(s) to offset this reduction and to provide
an incentive for Advisor to make significant contributions to the Company's
performance. Advisor will provide a monthly statement to the President and
Chief Executive Officer detailing activities and services provided beginning
with the month of April, 1999. In satisfaction of the cash portion of the fee,
the Company will pay Advisor the sum of Five Thousand Dollars ($5,000) on or
prior to the last day of each month during the term of this Agreement commencing
with the month of July 1999; provided Advisor continues to provide services to
the Company.
2.2 Stock Option Grants.
-------------------
2.2.1. Original Grant. Advisor was granted a non-qualified
--------------
option to purchase 50,000 shares of the Company's Common Stock under, and
pursuant to the terms of, the Company's 1996 Amended and Restated Stock
Option Plan, including without limitation Section 11 thereof, at an
exercise price equal to the fair market value on the date of grant. The
shares subject to this option vested and became exercisable as follows:
16,666.66 shares vested on the last day of each of the months of April, May
and June, 1999.
2.2.2. Additional Grant. Advisor will be granted a non-
----------------
qualified option to purchase an additional 125,000 shares of the Company's
Common Stock, at an exercise price equal to the fair market value (as
determined by the Company's Board of Directors) on the date of grant
(currently estimated to be $0.125 per share) (the "Additional Shares").
-----------------
Such Additional Shares will vest and become exercisable as follows,
provided Advisor continues to provide services to the Company:
<PAGE>
(A) 50,000 shares will vest over a four-year period as
follows: Twenty-five percent (25%) of the shares will vest on July 1,
2000 and one-thirty-sixth (1/36th) of the remaining seventy-five
percent (75%) of the shares will vest ratably at the end of each month
thereafter upon Advisor's completion of each month of service with the
Company.
(B) 75,000 shares will vest as follows:
(i) 25,000 shares upon the earlier of (A) the closing
of a private equity financing with gross proceeds to
the Company of at least $20.0 million and (B) June 30,
2006;
(ii) 25,000 shares upon the earlier of (A) the closing
of the Company's initial public offering of Common Stock
pursuant to a registration statement filed under the
Securities Act of 1933, as amended or upon a "Change in
Control" (as defined below) and (B) June 30, 2006; and
(iii) 25,000 shares upon consummation of four (4)
agreements with corporate or strategic partners (each
corporate or strategic agreement to be evidenced by an
equity investment or an agreement to collaborate with
respect to development, marketing or product offering);
provided that in any event such 25,000 shares shall be
deemed fully vested on June 30, 2006 if Advisor is still
providing services to the Company.
"Change of Control" shall mean any acquisition of the Company, whether by
merger (except for a merger effected solely for the purposes of changing the
domicile of the Company) or any other transaction or series of related
transactions in which the shareholders of the Company immediately prior thereto
own less than a majority of the voting stock of the Company (or its successor or
parent) immediately thereafter.
2. Except as provided herein, the Agreement shall remain in full force and
effect. If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of this Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3. Nothing in this Amendment, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Amendment, except as expressly provided herein.
4. This Amendment shall be governed by and construed under the laws of the
State of Washington.
- 2 -
<PAGE>
5. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[Signature page follows]
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
POINTSHARE CORPORATION:
By: /s/ Timothy J. Kilgallon
-------------------------------------
Timothy J. Kilgallon
President and Chief Executive Officer
Address: 1300 114th Avenue SE, Suite 100
Bellevue, WA 98004
ADVISOR:
/s/ Craig T. Davenport
______________________________________
Craig T. Davenport
Address:
------------------------------
------------------------------
------------------------------
[Signature Page to Advisory Services Agreement]
<PAGE>
EXHIBIT 10.28
AMENDED AND RESTATED SERVICES AGREEMENT
This AMENDED AND RESTATED SERVICES AGREEMENT ("Agreement") is made this
---------
16th day of February, 2000, by and between Pointshare Corporation, a Delaware
corporation (the "Company"), and Craig T. Davenport ("Chairman").
------- --------
WITNESS:
WHEREAS, the Company and Chairman are parties to that certain Services
Agreement dated as of April 5, 1999 and Addendum to Advisory Services Agreement
dated June 30, 1999 (the "Agreement") ; and
---------
WHEREAS, the Company and Chairman hereby desire to amend and restate the
Agreement in its entirety as set forth herein.
THEREFORE, it is agreed as follows:
Section 1. Duties. Employee shall serve as Chairman of the Company's
Board of Directors and shall provide consulting services to the Company. This
Agreement may be terminated by either party, with or without cause, on thirty
(30) days' written notice to the other party;
Section 2. Compensation.
2.1 Chairman Compensation. The Company will pay Chairman, the sum of
---------------------
Five Thousand Dollars ($5,000) on or prior to the last day of each month during
the term of this Agreement; provided Chairman continues to provide services to
the Company.
2.2 Stock Option Grants.
-------------------
2.2.1. Original Grant. Chairman was granted a non-qualified
--------------
option to purchase 50,000 shares of the Company's Common Stock under the
Company's 1996 Amended and Restated Stock Option Plan (the "1996 Plan"), at
---------
an exercise price equal to the fair market value on the date of grant The
shares subject to this option vested and became exercisable as follows:
16,666.66 shares vested on the last day of each of the months of April, May
and June, 1999.
2.2.2. Additional Grant. Chairman was granted a non-qualified
----------------
option to purchase an additional 125,000 shares of the Company's Common
Stock under the 1996 Plan, at an exercise price equal to $0.125 which was
the fair market value on the date of grant (the "Additional Shares"). Such
-----------------
Additional Shares vest and become exercisable as follows, provided Chairman
continues to provide services to the Company:
(A) 50,000 shares vest over a four-year period as
follows: Twenty-five percent (25%) of the shares vest on July 1, 2000
and one-thirty-sixth (1/36th) of the remaining seventy-five percent
(75%) of the shares vest ratably at
<PAGE>
the end of each month thereafter upon Chairman's completion of each
month of service with the Company.
(B) 75,000 shares vest as follows:
(i) 25,000 shares upon the earlier of (A) the
closing of a private equity financing with gross
proceeds to the Company of at least $20.0 million
and (B) June 30, 2003;
(ii) 25,000 shares upon the earlier of (A) the
closing of the Company's initial public offering of
Common Stock pursuant to a registration statement
filed under the Securities Act of 1933, as amended
and (B) June 30, 2003; and
(iii) 25,000 shares upon consummation of four (4)
agreements with corporate or strategic partners
(each corporate or strategic agreement to be
evidenced by an equity investment or an agreement
to collaborate with respect to development,
marketing or product offering); provided that in
any event such 25,000 shares shall be deemed fully
vested on June 30, 2003 if Chairman is still
providing services to the Company.
2.3 Directors' Stock Option Grant. The option grants set forth in
-----------------------------
this Agreement are in consideration of Chairman's consulting services to the
Company and are in addition to the option grants automatically granted under the
Company's 1998 Directors Stock Option Plan in consideration of Chairman's
service as a director of the Company.
2.4 Expenses. The Company shall reimburse Chairman for the cost of
--------
expenses incurred in connection with the performance of his obligations under
this Agreement within thirty (30) days of delivery of expense receipts. As a
condition to receipt of reimbursement, Chairman shall be required to submit to
the Company reasonable evidence that the amount involved was expended and
related to services provided under this Agreement. Any individual expense in
excess of five hundred dollars ($500) shall require the prior approval of the
President and C.E.O. of the Company.
Section 3. Consulting or Other Services for Competitors. Chairman
represents and warrants that Chairman will not, during the term of this
Agreement, perform any consulting or other services for any company, person or
entity whose business or proposed business in any way involves products or
services which could reasonably be determined to be competitive with the
products or services or proposed products or services of the Company. If,
however, Chairman decides to do so, Chairman agrees to notify the Company in
writing in advance (specifying the identity of the entity or the person) and
provide information sufficient to allow the Company to determine if such
consulting would conflict with projects or products of the Company. If the
-2-
<PAGE>
Company determines that such business is in competition with that conducted by
the Company, this Agreement shall terminate immediately.
Section 4. Investment in Future Equity Financings. Subject to the
approval of the Board of Directors and other legal or contractual restrictions,
Chairman may be offered the opportunity to invest in the Company's future equity
financings on the same terms and conditions as the other investors in such
financings.
Section 5. Confidential Information. Chairman understands his
responsibility to treat as confidential certain information concerning the
Company. In connection with the performance of his obligations for the Company,
Chairman agrees that he will hold information designated as confidential in
confidence and not disclose any such information to any third party except as
reasonably required to perform his obligations or as authorized by the Company.
Upon termination of this Agreement, Chairman shall return all confidential and
proprietary information in his possession to the Company at Company's request.
Furthermore, Chairman will abide by the terms and conditions as set forth in the
Company's "Proprietary Information and Inventions Agreement" executed by
Chairman concurrently with this Agreement.
Section 6. Independent Contractor. Chairman shall be an independent
contractor, not an employee of the Company and shall have the sole control and
discretion in the manner of performing the services described in this Agreement.
Chairman will be responsible and liable for, any and all income taxes relating
to the compensation he is paid. It is further understood and agreed, Chairman
is not eligible to participate in any employee benefit plans or employee
programs sponsored or financed by the Company.
Section 7. Termination. This Agreement will terminate twelve (12) months
following the effective date on this Agreement. Notwithstanding any other
provision of this agreement, either party hereto may terminate this Agreement at
any time upon giving thirty (30) days written notice to the other party.
Termination shall have not effect upon the rights and obligations of the parties
arising out of transaction occurring prior to the effecting date of such
termination.
Section 8. Survival. The obligations set forth in Sections 3, 5, 6, 7, 8,
9, 10, 11 and 12 shall survive any termination of this Agreement.
Section 9. Non-Assignability. Neither this Agreement nor the rights and
obligations hereunder are assignable by Chairman either voluntarily or by
operation of law.
Section 10. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Washington.
Section 11. Indemnification. Company hereby agrees to hold harmless and
indemnify Chairman to the full extent authorized or permitted by law.
-3-
<PAGE>
Section 12. Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to this subject matter.
COMPANY:
/s/ Timothy J. Kilgallon
------------------------------
Timothy J. Kilgallon
President & C.E.O.
Pointshare Corporation
CHAIRMAN:
/s/ Craig T. Davenport
- ---------------------------
Craig T. Davenport
-4-
<PAGE>
EXHIBIT 10.29
PROMISSORY NOTE
---------------
$170,000.00 Bellevue, Washington
January 14, 2000
For value received, the undersigned promises to pay Pointshare Corporation,
a Delaware corporation (the "Company"), at its principal office the principal
sum of $170,000.00 with interest from the date hereof at a rate of 6.21% per
annum, compounded annually, on the unpaid balance of such principal sum. Such
principal and interest shall be due and payable according to the schedule
provided below.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company (the "Shares") and is subject to the terms of a
Pledge and Security Agreement between the undersigned and the Company of even
date herewith.
If prior to payment in full of this Note either (i) the undersigned's
employment or consulting relationship with the Company is terminated, or (ii)
the undersigned transfers, sells or disposes of any of the Shares, this Note
shall be immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT INTEREST
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
/s/ Tim Kilgallon
----------------------------------------
Payment Schedule:
- ----------------
Note payments are due one year after the full vesting on each option grant. The
payment schedule is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
# Vesting Full Due Date Amount Due Interest Total Due
Commencement Vesting
- --------------------------------------------------------------------------------
1 6/29/99 6/28/03 6/28/04 $ 87,500.00 $26,675.24 $114,175.24
- --------------------------------------------------------------------------------
2 12/14/99 12/13/03 12/13/04 $ 82,500.00 $28,443.16 $110,943.16
- --------------------------------------------------------------------------------
Totals $170,000.00 $55,118.40 $225,118.40
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.30
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into this
---------
14th day of January, 2000, by and between Pointshare Corporation, a Delaware
corporation (the "Company") and Tim Kilgallon ("Purchaser").
------- ---------
RECITALS
--------
In connection with Purchaser's exercise of an option to purchase certain
shares of the Company's Common Stock (the "Shares") pursuant to Option
------
Agreements dated June 29, 1999 and December 14, 1999 between Purchaser and the
Company, Purchaser is delivering a promissory note of even date herewith (the
"Note") in full or partial payment of the exercise price for the Shares. The
- -----
Company requires that the Note be secured by a pledge of the Shares or the terms
set forth below,
AGREEMENT
---------
In consideration of the Company's acceptance of the Note as full or
partial payment of the exercise price of the Shares, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The Note shall become payable in full upon:
(a) the voluntary or involuntary termination or cessation of
employment of Purchaser with the Company, for any reason, with or without cause
(including death or disability); or
(b) the transfer or sale of all or any portion of the Shares.
2. Purchaser shall deliver to the Secretary of the Company, or his or
her designee (hereinafter referred to as the "Pledge Holder"), all certificates
-------------
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Purchaser and
------------
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension
or modification of the Note, Purchaser hereby grants to the Company a security
interest in and pledges with and delivers to the Company Purchaser's Shares
(sometimes referred to herein as the "Collateral").
----------
4. In the event that Purchaser prepays all or a portion of the Note, in
accordance with the provisions thereof, Purchaser intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual
<PAGE>
interest thereon, shall continue to be so held by the Pledge Holder, to serve as
independent collateral for the outstanding portion of the Note for the purpose
of commencing the holding period set forth in Rule 144(d) promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
--------------
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
Fair Market Value of the Shares reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness
under the Note, the Company may elect then, or at any time thereafter, to
exercise all rights available to a secured party under the Washington Uniform
Commercial Code including the right to sell the Collateral at a private or
public sale or repurchase the Shares as provided above. The proceeds of any sale
shall be applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company,
(b) To the extent necessary, proceeds shall be used to satisfy
any remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all mounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement; provided, however,
-------- -------
that Pledge Holder shall nevertheless retain the Shares as escrow agent if at
the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
[Signature Page Follows]
-2-
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
POINTSHARE CORPORATION
By: /s/ Kirk A. Collamer
--------------------
Name: Kirk A. Collamer
--------------------
(print)
Title: EXEC. V.P. + CFO
-----------------
Address:1300 - 114th Avenue SE, Suite 100
Bellevue, WA 98004
TIMOTHY J. KILGALLON:
/s/ Timothy J. Kilgallon
------------------------
Timothy J. Kilgallon
Address:--------------------
--------------------
<PAGE>
Attachment A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Pointshare Corporation (the
---------
"Company") dated January 14, 2000 (the "Agreement"), Purchaser hereby sells,
------- ---------
assigns and transfers unto the Company one million shares (1,000,000) shares of
the Common Stock of the Company, standing in Purchaser's name on the books of
the Company and represented by Certificate No. , and hereby irrevocably
appoints to transfer said stock on the books of the Company with full
power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT.
Dated:
Signature:
/s/ Timothy J. Kilgallon
------------------------
Timothy J. Kilgallon
/s/ Irene Kilgallon
-------------------
Spouse of Optionee (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to perfect the security interest of the Company
pursuant to the Agreement
<PAGE>
Exhibit 10.31
SECURED PROMISSORY NOTE
-----------------------
$100,000.00 Bellevue, Washington
December 2, 1999
FOR VALUE RECEIVED, Kelly R. Jorgensen ("Borrower") promises to pay to
--------
Pointshare Corporation, a Delaware corporation (the "Company"), the principal
-------
sum of One Hundred Thousand Dollars ($100,000.00), together with interest on the
unpaid principal hereof from the date hereof at the rate of 6.0% per annum,
compounded annually.
All principal and accrued interest (if any) shall be due and payable in
full on the earliest of (a) November 30, 2001, (b) in the event of any default
under the Loan Agreement (as defined below) or (c) the date of any sale,
conveyance, assignment, alienation or any other form of transfer of the Stock
(as defined below). Payments of principal and interest shall be made in lawful
money of the United States of America and shall be credited first to the accrued
interest, with the remainder applied to principal.
Borrower may at any time prepay all or any portion of the principal or
interest owing hereunder.
This Note is subject to the terms of a Secured Loan Agreement, dated as of
December 2, 1999 by and between the Company and Borrower (the "Loan Agreement")
--------------
and is subject to all the provisions thereof, and is secured by a pledge of
Common Stock of the Company under the terms of a Security Agreement dated
December 2, 1999 (the "Security Agreement") and is subject to all the
------------------
provisions thereof.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by
Borrower.
The holder of this Note shall have full recourse against Borrower, and
shall not be required to proceed against the collateral securing this Note in
the event of default.
/s/ Kelly R. Jorgensen
----------------------
Kelly R. Jorgensen
<PAGE>
EXHIBIT 10.32
SECURITY AGREEMENT
------------------
This Security Agreement is made as of December 2, 1999 by and between
Pointshare Corporation, a Delaware corporation ("Pledgee"), and Kelly R.
-------
Jorgensen ("Pledgor") an employee of Pointshare Corporation.
-------
RECITALS
--------
Pledgee has loaned to Pledgor, and Pledgor has borrowed from Pledgee, an
aggregate of $100,000.00, which loan is or shall be evidenced by a promissory
note (the "Note") and is to be secured by up to an aggregate of 522,000 shares
----
of Pledgee's Common Stock in Pointshare Corporation (as adjusted for subsequent
stock splits, reverse stock splits and recapitalization) held or hereafter
acquired by Pledgee (the "Shares").
------
AGREEMENT
---------
In consideration of the foregoing, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement agree as follows:
1. Creation and Description of Security Interest; Transferability; Escrow.
----------------------------------------------------------------------
(a) In consideration of the loan to Pledgor, Pledgor, pursuant to
the laws of the State of Washington, hereby pledges the Shares (sometimes
referred to in this Agreement as the "Collateral") represented by the
----------
certificate delivered herewith, duly endorsed in blank or with executed stock
powers, to the Secretary of Pledgee (the "Pledgeholder"), who shall hold said
------------
certificate subject to the terms and conditions of this Security Agreement.
(b) The pledged stock (together with an executed blank stock
assignment for use in transferring all or a portion of the Shares to Pledgee if,
as and when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the Secured
Loan Agreement.
(c) Except as required to enable Pledgee to exercise its rights as a
secured party, none of the Shares pledged under this Section 1 may be sold,
transferred, pledged, hypothecated or otherwise disposed of by Pledgor.
(d) To ensure the ability of Pledgee to exercise its rights as a
secured party hereunder, Pledgor shall, upon execution of this Agreement,
deliver and deposit with the Secretary of Pledgee, or such other person
designated by Pledgee, the share certificate representing the Shares, together
with a stock power, duly endorsed in blank, in the form attached hereto as
Exhibit B-1. The Shares and stock power(s) shall be held by Pledgee in escrow,
- -----------
until such time as the Note shall have been paid in full. As a further
inducement to Pledgee to loan to
<PAGE>
Pledgor the funds represented by the Note, the spouse of Pledgor, if any, shall
execute and deliver to Pledgee a Consent of Spouse in the form attached hereto
as Exhibit B-2.
-----------
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
---------------------------------------
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
-----------------------
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
(b) Encumbrances. All Shares now or hereafter pledged under this
------------
Agreement are and shall be free of all other encumbrances, defenses and liens,
and Pledgor will not further encumber the Shares without the prior written
consent of Pledgee.
3. Voting Rights. During the term of this pledge and so long as all
-------------
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
-----------------
stock dividend, reclassification, readjustment or other changes declared or made
in the capital structure of Pledgee, all new, substituted and additional shares
or other securities issued by reason of any such change shall be delivered to
and held by the Pledgeholder under the terms of this Security Agreement in the
same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgee held by Pledgor as a result thereof.
5. Warrants and Rights. In the event that, during the term of this
-------------------
pledge, subscription warrants or other rights or options shall be issued in
connection with the pledged Shares, such rights, warrants and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
-------
this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants contained in this
Security Agreement for a period of 10 days after written notice thereof from
Pledgee.
-2-
<PAGE>
7. Remedies in the Event of Default. In the case of an event of default,
--------------------------------
as set forth above, Pledgee shall have the right to accelerate payment of the
Note upon notice to Pledgor, and shall thereafter be entitled to pursue any or
all of its remedies under applicable law, including, without limitation, (a)
offsetting from Pledgor's salary, bonuses, vacation pay or other amounts due to
Pledgor from the Pledgee, any amount due and payable by Pledgor under the Note,
and/or (b) proceeding against the Collateral in accordance with the laws of the
State of Washington.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The pledge of Shares shall continue until the payment of all
----
indebtedness secured hereby, at which time the remaining pledged stock shall be
promptly delivered to Pledgor.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
----------
proceeding is instituted by or against Pledgor, or if a receiver is appointed
for the property of Pledgor, or if Pledgor makes an assignment for the benefit
of creditors, the entire amount unpaid on the Note shall become immediately due
and payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence,
----------------------
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
12. Miscellaneous.
-------------
(a) Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(b) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS) or confirmed facsimile, or forty-eight (48) hours after being
deposited in the U.S. mail as certified or registered mail with postage prepaid,
if such notice is addressed to the party to be notified at such party's address
or facsimile number as set forth below, or as subsequently modified by written
notice.
-3-
<PAGE>
(d) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(e) Advice of Legal Counsel. Each party acknowledges and represents
-----------------------
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its behalf
has read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
[Signature Page Follows]
-4-
<PAGE>
The parties hereto have executed this Security Agreement as of the day and
year first above written.
KELLY R. JORGENSEN
/s/ Kelly R. Jorgensen
---------------------------------------
(Signature)
Address: 2029 160th Pl. SE
----------------------------
Mill Creek, WA 98012
----------------------------
----------------------------
POINTSHARE CORPORATION
By: /s/ T. Kilgallon
------------------------------------
Title: CEO
---------------------------------
Address: 1300 114th Avenue SE, Suite 100
Bellevue, WA 98004
-5-
<PAGE>
EXHIBIT B-1
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED I hereby sell, assign and transfer unto Pointshare
Corporation, a Delaware corporation, (the "Company") Five Hundred Twenty-Two
Thousand (522,000) shares of the Company's Common Stock standing in my name on
the books of said corporation and represented by Certificate No. C-8 herewith
and do hereby irrevocably constitute and appoint Christopher P. Dishman,
Secretary of the Company to transfer said stock on the books of the Company with
full power of substitution in the premises.
Dated: December 2,1999
Signature:
/s/ Kelly R. Jorgensen
-------------------
Kelly R. Jorgensen
This Assignment Separate from Certificate was executed in conjunction with the
terms of a Security Agreement between the above assignor and the Company dated
December 2, 1999.
<PAGE>
EXHIBIT B-2
-----------
CONSENT OF SPOUSE
-----------------
I, Stacy Jorgensen, spouse of Kelly R. Jorgensen, have read and
---------------
approved the foregoing Secured Loan Agreement and the exhibits thereto (the
"Agreement"). In consideration of granting of the right to my spouse to borrow
- ----------
funds as set forth in the Agreement, I hereby appoint my spouse as my attorney-
in-fact in respect to the exercise of any rights under the Agreement and agree
to be bound by the provisions of the Agreement insofar as I may have any rights
under such Agreement or in any shares of Pointshare Corporation serving as
collateral pursuant thereto under the community property laws of the State of
Washington or similar laws relating to marital property in effect in the state
of our residence as of the date of the signing of the Agreement.
Dated: 12-2-99
--------------------
/s/ Stacy Jorgensen
-------------------------
(Signature)
Stacy Jorgensen
-------------------------
(Print Name)
-7-
<PAGE>
EXHIBIT 10.33
PROMISSORY NOTE
---------------
$82,500.00 Bellevue, Washington
January 14, 2000
For value received, the undersigned promises to pay Pointshare Corporation,
a Delaware corporation (the "Company"), at its principal office the principal
-------
sum of $82,500.00 with interest from the date hereof at a rate of 6.21% per
annum, compounded annually, on the unpaid balance of such principal sum. Such
principal and interest shall be due and payable according to the schedule
provided below.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company (the "Shares") and is subject to the terms of a
------
Pledge and Security Agreement between the undersigned and the Company of even
date herewith.
If prior to payment in full of this Note either (i) the undersigned's
employment or consulting relationship with the Company is terminated, or (ii)
the undersigned transfers, sells or disposes of any of the Shares, this Note
shall be immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT INTEREST
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
/s/ Kirk Collamer
---------------------------
Kirk Collamer
Payment Schedule:
- -----------------
Note payments are due one year after the full vesting on each option grant. The
payment schedule is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
# Vesting Full Due Date Amount Due Interest Total Due
Commencement Vesting
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 12/1/99 11/30/03 11/30/04 $82,500.00 $28,443.16 $110,943.16
- -------------------------------------------------------------------------------------------------------------
Totals $82,500.00 $28,443.16 $110,943.16
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.34
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into this
---------
14th day of January, 2000, by and between Pointshare Corporation, a Delaware
corporation (the "Company") and Kirk Collamer ("Purchaser").
------- ---------
RECITALS
--------
In connection with Purchaser's exercise of an option to purchase certain
shares of the Company's Common Stock (the "Shares") pursuant to an Option
------
Agreement dated October 26, 1999 between Purchaser and the Company, Purchaser is
delivering a promissory note of even date herewith (the "Note") in full or
----
partial payment of the exercise price for the Shares. The Company requires that
the Note be secured by a pledge of the Shares or the terms set forth below.
AGREEMENT
---------
In consideration of the Company's acceptance of the Note as full or partial
payment of the exercise price of the Shares, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. The Note shall become payable in full upon:
(a) the voluntary or involuntary termination or cessation of
employment of Purchaser with the Company, for any reason, with or without cause
(including death or disability); or
(b) the transfer or sale of all or any portion of the Shares.
2. Purchaser shall deliver to the Secretary of the Company, or his or her
designee (hereinafter referred to as the "Pledge Holder"), all certificates
-------------
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Purchaser and
------------
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension or
modification of the Note, Purchaser hereby grants to the Company a security
interest in and pledges with and delivers to the Company Purchaser's Shares
(sometimes referred to herein as the "Collateral").
----------
4. In the event that Purchaser prepays all or a portion of the Note, in
accordance with the provisions thereof, Purchaser intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual
<PAGE>
interest thereon, shall continue to be so held by the Pledge Holder, to serve as
independent collateral for the outstanding portion of the Note for the purpose
of commencing the holding period set forth in Rule 144(d) promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
--------------
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
Fair Market Value of the Shares reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the Washington Uniform Commercial Code
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement; provided, however,
-------- -------
that Pledge Holder shall nevertheless retain the Shares as escrow agent if at
the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
[Signature Page Follows]
-2-
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
POINTSHARE CORPORATION
By: /s/ T. Kilgallon
--------------------
Name: Timothy J. Kilgallon
--------------------
(print)
Title: CEO
--------------------
Address: 1300 - 114th Avenue SE, Suite 100
Bellevue, WA 98004
KIRK COLLAMER:
/s/ Kirk Collamer
--------------------
Kirk Collamer
Address: 17118 SE 43rd St
------------------
Issaquah, WA 98027
------------------
<PAGE>
Attachment A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Pointshare Corporation (the
---------
"Company") dated January 14, 2000 (the "Agreement"), Purchaser hereby sells,
------- ---------
assigns and transfers unto the Company Three Hundred Thousand (300,000) shares
of the Common Stock of the Company, standing in Purchaser's name on the books of
the Company and represented by Certificate No. , and hereby irrevocably
--------
appoints to transfer said stock on the books of the Company
--------------------
with full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE
USED AS AUTHORIZED BY THE AGREEMENT.
Dated: 1/30/00
-------
KIRK COLLAMER:
/s/ Kirk Collamer
---------------------------------------
Kirk Collamer
/s/ Melody L. Collamer
---------------------------------------
Spouse of Kirk Collamer (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to perfect the security interest of the Company
pursuant to the Agreement.
