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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
ACUBID.COM, INC.
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(Name of Small Business Issuer in its charter)
Delaware 33-0529299
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1947 Camino Vida Roble, Suite 102, Carlsbad, California 92008
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(Address of principal executive offices) Zip Code
Issuer's telephone number (760) 804- 0023
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, par value $0.001
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ACUBID.COM, INC.
FORM 10-SB
Table of Contents
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Item No.
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PART I.
1. Description of Business.................................................... 1
2. Management's Discussion and Analysis or Plan of Operation.................. 26
3. Description of Property ................................................... 28
4. Security Ownership of Certain Beneficial Owners and Management ............ 29
5. Directors and Executive Officers, Promoters and Control Persons............ 31
6. Executive Compensation..................................................... 33
7. Certain Relationships and Related Transactions............................. 46
8. Description of Securities.................................................. 46
PART II.
1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters................................ 48
2. Legal Proceedings.......................................................... 50
3. Changes in and Disagreements with Accountants.............................. 50
4. Recent Sales of Unregistered Securities.................................... 51
5. Indemnification of Directors and Officers.................................. 55
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PART F/S: Financial Statements.........................................................
PART III.
1. Index and Description of Exhibits............................................
SIGNATURES..................................................................................
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EXCEPT FOR THE DESCRIPTION OF HISTORICAL FACTS CONTAINED HEREIN, THIS
FORM 10-SB REGISTRATION STATEMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES AS DETAILED HEREIN AND ELSEWHERE FROM TIME
TO TIME IN OTHER DOCUMENTS PUBLICLY DISSEMINATED BY THE COMPANY. FORWARD LOOKING
STATEMENTS CONTAINED IN THIS DOCUMENT ARE MADE PURSUANT TO THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT BELIEFS AND ASSUMPTIONS ABOUT THE
REGISTRANT AND THE INDUSTRY IN WHICH THE REGISTRANT COMPETES IN, AND ON
INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT. FORWARD -LOOKING STATEMENTS
INCLUDE, BUT ARE NOT LIMITED TO, THE INFORMATION CONCERNING POSSIBLE OR ASSUMED
FUTURE RESULTS OF OPERATIONS OF THE REGISTRANT SET FORTH UNDER THE HEADINGS
"MANAGEMENT'S DISCUSSION AND ANALYSIS" , "PLAN OF OPERATION", AND "BUSINESS."
FORWARD-LOOKING STATEMENTS ALSO INCLUDE STATEMENTS IN WHICH WORDS SUCH AS
"EXPECT," "ANTICIPATE," "INTEND," "PLAN," "BELIEVE," "ESTIMATE," "CONSIDER," OR
SIMILAR EXPRESSIONS ARE USED.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The Company was incorporated under the Company Act of British Columbia
on August 26, 1983, as Sheen Minerals, Inc. On August 27, 1991, the Company
changed its name to International AcuVision Systems, Inc. and in September,
1993, the Company was domesticated under Section 388 of the General Corporation
Law of the State of Delaware. From the date of its incorporation until February
20, 1987, the Company engaged in the business of exploration for mineral
deposits, with a view to their extraction and sale if commercially feasible.
Subsequent to February 20, 1987, pursuant to a vote of the majority of the
issued and outstanding shares, the name of the Company was changed and the
Company adopted a new business direction in the field of vision training.
During the period August, 1991 through August 31, 1998, the Company
marketed its vision training products in the Optometric, Sports Vision,
Occupational Therapy and Visual Rehabilitation fields. During the quarter ending
November 30, 1997, the Company sold vision training equipment worldwide and
raised $125,000 U.S.
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through the sale of a self-liquidating debenture. The $125,000 proceeds was to
be used to increase inventory and institute a telemarketing program. Shortly
after raising the funds to increase inventory, the Company learned that
Electronic Manufacturing Source, the turn-key manufacturer of the Company's
AcuVision 1000, 2000, and Visual Test Administrator had become insolvent and the
Company had to find another manufacturer.
During the next two quarters, the Company continued to make sales of the
vision training products from existing inventory and search for a new cost
effective way to manufacture the product. By fiscal year end, August 31, 1998,
the Company concluded that future sales and business in the vision training
marketed was too limited and that the costs of marketing and production too
great. As a result, management determined that the Company should restructure.
On March 15, 1999, at the Annual General Meeting of Shareholders, in
anticipation of a change in business direction, the following resolutions were
adopted:
- - The Company's authorized common shares was consolidated from 20,000,000
common shares, par value $.001, into 10,000,000 common shares par value, such
that every two old common shares were consolidated into one new common share.
- - The Board of Directors was authorized if it deemed appropriate, to later
increase the number of common shares which the Company is authorized to issue
50,000,000 common shares, par value $.001.
- - The name of the Company was changed to AcuBid.com, Inc.
- - A class of 10,000,000 Preferred shares was created.
Subsequent to Annual General Meeting, the Board of Directors authorized
a change in the name of the Company of AcuBid.com, Inc, an increase in the
authorized shares to 50,000,000, the creation of a class of 10,000,000 Preferred
Shares and a change in business direction, as described herein. In addition, to
the new business direction described herein, the Company will continue to fill
unsolicited orders for vision training products.
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Business of the Company
AcuBid.com is a new web-based auction house featuring business-to-
consumer and consumer-to-consumer auctions. The AcuBid.com auction is fully
automated and available 7 days a week, 24 hours a day. AcuBid.com will target
serious collectors who are knowledgeable about products and already use online
auctions to buy and sell product. Key categories for AcuBid.com include sports
memorabilia, movie and entertainment memorabilia, stamps, antiques, and other
collectibles.
AcuBid.com's competition includes many well-known brand names, including
eBay, Yahoo, and Amazon. In order to be competitive, AcuBid.com management will
implement a focused strategy to encourage trial and usage by:
- Emphasizing key categories including sports memorabilia, antiques,
stamps, and other collectibles;
- Developing a business model that combines both consumer-to-consumer
and business-to-consumer components;
- Featuring high profile retired athletes and other celebrities as
spokesmen;
- Retain the services of experts in various fields to assist in
inventory acquisition and appraisal;
- Establishing a $25 minimum bid for all auctions to encourage listing
better products and discourage the swap meet style of auctions found on
competitive sites;
- Make third party escrow service available to users; and,
- Provide an intuitive and easy to use interface for visitors.
THE ACUBID.COM BUSINESS MODEL
The AcuBid.com business model includes both consumer-to-consumer and
business-to-consumer auctions. The consumer-to-consumer auctions are similar to
the auctions found on eBay, Yahoo, Amazon, and many other online auction houses.
AcuBid.com will provide the venue for buyers to bid on items listed by
individual sellers. The company will collect a fee for each item listed and a
sales commission on each
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purchase.
In the business-to-consumer model, AcuBid.com will also be an active
seller on the auction site. These business-to-consumer auctions provide an
important point of differentiation for the company:
- AcuBid.com has control over inventory quality and is able to offer
buyers an unconditional 30-day money back guarantee when the company is the
seller;
- High standards for inventory control will encourage other sellers to
bring better merchandise to AcuBid.com;
- Selling Company owned inventory will provide additional profit centers
for AcuBid.com
CORPORATE GOALS AND OBJECTIVES
- Acquire interesting products in various categories for sale on
AcuBid.com.
- Generate site traffic by:
- Encouraging high volume sellers to list on AcuBid.com
- Encourage buyers to come to the site by ensuring that there is
sufficient value in products listed on the site
- Implement strategic alliances with other Web sites
- Create brand awareness for AcuBid.com through advertising, promotions,
"guerilla marketing" tactics, and other strategies to raise the company profile.
- Provide the most complete, easy to use, attractive, and desirable
online auction site for buyers and sellers.
- Develop a loyal base of AcuBid.com customers.
- Achieve profitability as quickly as possible to provide a rewarding
and positive return to our shareholders.
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THE ACUBID.COM AUCTION
The AcuBid.com auction is fully automated and available 7 days a week,
24 hours a day. Consumers are able to access AcuBid.com at any time to browse
current auctions, list new items for sale, bid on items, check account status,
or view other information available on the site.
Auction formats available on AcuBid.com include standard, reserve, and
Dutch auctions. Sellers choose auction parameters provided by the company
including duration, minimum bid, bid increment, and payment method. AcuBid.com
offers free image hosting to sellers on company servers. This feature provides
sellers with an opportunity to display products for sale at no additional cost.
Other online auctions offer image hosting either at a nominal charge, or the
image hosting is not done on the competitor's servers.
The AcuBid.com product line includes proprietary signed sports
memorabilia from company spokesmen including Yogi Berra, Johnny Bench, Joe
Morgan, Rollie Fingers, and Gale Sayers. These athletes have been working with
AcuBid.com to develop signed sports memorabilia products. The company will
evaluate selling signed memorabilia from other athletes on a case-by-case basis.
Certificates of authenticity from AcuBid.com are provided for items signed for
the company.
Another product offered by AcuBid.com is the Auction Ticker. This
program is designed to enhance the online auction experience by providing
real-time information on auctions on various sites in addition to AcuBid.com.
This lets a potential buyer monitor multiple auctions simultaneously.
A final product in development is an AcuBid.com mall. This shop will
sell products at a fixed price instead of at auction. The shop concept is
similar to the announcement made by Amazon, where individuals and store owners
will be able to set up an online store front on AcuBid.com. This new mall will
have a separate URL; it will be linked to the auction site.
PRODUCT ATTRIBUTES
The main product attribute of AcuBid.com is an easy to use auction
interface. AcuBid.com has intuitive site architecture. A comprehensive search
function will allow product, member, and other searches. AcuBid.com is designing
the web site to be compatible for the majority of Internet browsers in use.
Finally, AcuBid.com will provide safe and secure transactions for users.
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The company will be pro-active in developing an extensive assortment of
interesting and desirable memorabilia for sale on the site. AcuBid.com will be
an active buyer of inventory for the company auctions. The company has
established relationships with collectors and dealers who have been listing
product for sale on the site, and are committed to continue listing products on
AcuBid.com. This differs from the approach at other online auctions where the
auction operator does not get involved in inventory procurement. As a buyer of
merchandise for the site AcuBid.com has a level of control over the quality of
products up for auction not found on other sites. To reinforce the commitment to
quality, when AcuBid.com is the seller consumers will have a 30-day
unconditional money back guarantee on all products purchased from AcuBid.com.
It is not necessary to register as an AcuBid.com user to browse through
different auctions. However, to become a Buyer or Seller on AcuBid.com users are
required to register and accept the AcuBid.com Member Agreement. The Member
Agreement takes a few minutes to fill out, and upon completion users are able to
bid on products or list items for sale.
AcuBid.com requires users to provide personal information including
name, address, phone number, E-mail address, and credit card information. This
information is necessary for several reasons:
- To verify that buyers and sellers are not minors;
- To provide AcuBid.com with billing information when the user incurs
fees from AcuBid.com;
- To verify how the company can contact the registered user.
To protect the integrity of this information AcuBid.com has made it
clear in the privacy policy that this information will not be released to any
outside party. The AcuBid.com privacy policy has been submitted to BBBonline and
Trust-E.org for approval. These organizations provide third party assurance that
the privacy policy meets the highest standards of consumer protection.
ACUBID.COM POINTS OF DIFFERENTIATION
AcuBid.com is an independent online auction site. This provides an
opportunity to focus on the serious collectors who form the basis of the target
audience.
All bidding starts at a minimum of $25.00
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A simple pricing structure with no hidden cost: there is a fixed listing
fee of $2.00 per item and a fixed commission of 2% on successful sales.
PRICING
The recommended pricing strategy for AcuBid.com is based on simplicity
and appeal. This strategy provides the company with a key point of
differentiation. Many competing auction sites have a complicated pricing
structure that includes a tiered sales commission and listing fees based on
options chosen by the seller.
There are no hidden costs with the AcuBid.com pricing structure. Sellers
pay a $2.00 per item to list products for sale. There is an option to pay an
additional $1.50 for a bold headline in the product description field. Sellers
pay a 2% sales commission on successful sales. There is no fee to the buyer
beyond the purchase price and shipping.
ACUBID.COM MISSION STATEMENT
Our mission is to provide serious collectors - both buyers and sellers -
an unparalleled online auction experience by:
- Ensuring that there are interesting and unique products for auction;
- Providing great customer service;
- Building an easy to use, intuitive, and "glitch" free online
experience from the minute a consumer logs on through registration,
bidding, listing, etc.;
- Becoming the primary online auction house for serious collectors; and
- Always listening to our customers.
ACUBID.COM VISION STATEMENT
- AcuBid.com will deliver an online auction that is easier to use and
search than the "swap meet" style auctions found in many competitive
sites.
- AcuBid.com will provide users a satisfying online auction interface.
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- The company will actively source interesting and hard to find
inventory to sell via the AcuBid.com auction.
- Buyers can look at current auctions at any time; registered sellers
are able to list new items for sale and registered buyers are able to
bid at anytime in a fully automated real-time auction.
- Famous athletes and celebrities will help develop new memorabilia to
be sold on AcuBid.com and act as company spokesmen.
- Experts in various fields will provide information that is useful and
relevant to collectors.
- Become a profitable company; gain significant market share in the
online auction industry, become an industry leader in terms of
bringing together serious collectors
Members of the Advisory Board consist of:
Kurt Bevacqua - Chairman - Kurt Bevacqua is a former major leaguer who played
for the San Diego Padres, Cleveland Indians, Kansas City Royals, Pittsburgh
Pirates and Texas Rangers. He was named the Padres Most Valuable Player during
the 1984 World Series when he hit 2 home rums, including a game winner. Kurt was
known as a clutch pinch hitter, and he finished his career 9th on the All-time
Career Pinch Hit list. Kurt is a regular player on the recently formed Celebrity
Players Golf Tour.
Yogi Berra - Yogi Berra is one of the most beloved players of all time. He is
known to many for his witty observations including "it ain't over til it's
over", "it is like deja vu all over again", and "You can observe a lot by
watching". During his playing career with the Yankees, Yogi was a 15 time
American League All Star. His Hall of Fame career including 2 MVP awards, and
several World Series records including most games by a catcher (63), hits (71)
and times on a winning team (10). Yogi went on to manage both the New York
Yankees and the New York Mets. Yogi is one of only a few managers to have won
pennants in both the American and National Leagues.
Joe Morgan - Mr. Morgan occupies a prominent position on the national stage in
sports as a professional athlete, broadcaster, author, journalist, businessman,
and philanthropist. Mr. Morgan is a familiar voice on weekly baseball broadcasts
for ESPN and the All Star Game, as well as the World Series and League
Championship Series for NBC sports. He has won an Emmy for sports broadcasting
and has been called the
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"best analyst in baseball" by the Wall Street Journal. Mr. Morgan has been on
nationally televised panels with President Clinton and other leaders and has
written extensively about baseball. Mr Morgan is the founder and head of the
"Joe Morgan Youth Foundation" which was founded in 1982 "to offer a strong and
dependable helping hand to prepare youth for a brighter tomorrow". Mr. Morgan
was inducted into the Baseball Hall of Fame in 1990, his first year of
eligibility.
Johnny Bench - Johnny Bench won 2 MVP awards with the Cincinnati Reds. Mr. Bench
played on 14 National League All Star teams, and 2 World Series Championship
Teams. He won 10 Gold Gloves with the Reds, and set an endurance record by
catching 100 or more games for 13 consecutive seasons. He has also been active
in broadcasting for the Cincinnati Reds Radio Network, CBS Radio, and others.
Mr. Bench is also an active golfer on the Celebrity Players Tour.
Rollie Fingers - Mr Fingers played in the major leagues for 17 years with
Oakland, San Diego, and Milwaukee and is recognized as the first true "closer"
in baseball. He as a 7 time all star, and the recipient of the Cy Young award
for best pitcher in the league in 1981. In 1981 Mr. Fingers was also voted the
Most Valuable Player of the league, a rare feat for a relief pitcher. Mr.
Fingers was voted relief pitcher of the 1970s, and thanks to the trademark
handlebar moustache, remains one of the most recognized figures in baseball. He
still holds the World Series record of 6 saves, was voted MVP of the 1974 World
Series, was "Fireman of the Year" four times and is considered by many to be the
greatest relief pitcher of all time. Mr. Fingers was inducted into the Baseball
Hall of Fame in 1992.
Neil J. Salkind Ph.D. - Professor Salkind received his Doctorate from the
University of Maryland in Human Development in 1973 and has been a professor of
Educational Psychology and Research in the School of Education at the University
of Kansas since 1983. Professor Salkind, in addition to numerous academic
publications, has written extensively in the computer and Internet field,
specifically on eBay's online auction. AcuBid.com will be reviewing the site
with Prof. Neil Salkind. His particular expertise and knowledge of the online
auction industry will provide good counsel for AcuBid.com.
THE ACUBID.COM WEB SITE
On August 2, 1999, the Company's auction web site, AcuBid.com began
conducting auctions in both the Person-to-Person format and in the Company-to-
Person format, with Company owned and consigned inventory. As of October 7,
1999, the Company offered 1200 items in 18 categories which included Sports
Memorabilia, Stamps, Numismatics, Fine Art, Antiques, Militaria, Jewelry,
Gaming, Comic Books, Fine Wines, Books & Magazines, Tickets, Entertainment,
Ceramics/Glass, Porcelain,
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Vintage Electronics and Toys. As of October 7, 1999, the Company completed 800
auctions with 1200 open auctions.
Both Buyers and Sellers are required to register as AcuBid.com users as
well as accept the AcuBid.com Member Agreement. The AcuBid.com auction service
is a fully automated, topically arranged easy to use online service that is
available on a 24 hour a day, seven day a week basis, with the exception of 3
hours of regularly scheduled monthly site maintenance. Within minutes of
completing the simple online registration form, a seller can list items for sale
on the service and buyers can submit bids for items quickly and easily. Buyers
can search items listed by category or specific item. During the course of the
auction, bidders are notified by e-mail of the status of their bids on a daily
basis and are notified immediately if they are outbid. Sellers and successful
bidders are automatically notified when an auction is completed. The Company
offers users support via e-mail and support bulletin boards staffed on a 24 hour
a day, seven day a week basis. There is no cost associated with viewing, bidding
and purchasing items. Shipping and handling fees will be charged on Company
sales. The Company also recommends the use of I-Escrow, Inc. and their site
iescrow.com to provide buyer and seller escrow services.
AcuBid.com has designed an Auction Ticker and is offering the beta
release as a free download. The Auction Ticker is a software program designed to
provide update information on auction items that the user has indicated an
interest in. Currently, the Auction Ticker supports monitoring auctions on
AcuBid.com, eBay.com, Amazon.com, and Yahoo.com. Thus a user can simultaneously
monitor other auctions while conducting other web related activities.
BUYING AND SELLING ON ACUBID.COM
Registration - Although any visitor to the Company's site can browse
through and view the items listed for auction, in order to bid for an item or to
list an item for sale, buyers and sellers must first register with AcuBid.com.
Users register by completing a short online form and can immediately bid for an
item or list an item for sale. The online registration form requires users to
accept the Company's Member Agreement, provide e-mail address, a fixed address,
and credit card information to be later used for the payment of AcuBid.com's
services.
Selling on AcuBid.com - A seller registered with AcuBid.com can list a
product for auction by completing a short online form. The seller selects a
minimum price for opening bids, at or above the Company's minimum bid of $25.00,
and chooses how long the auction will last. Additionally, the seller may set a
reserve price for an item, which is the minimum price at which the seller is
wiling to sell the item, usually
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higher than the minimum price set for opening bids. The reserve price is not
disclosed to bidders. A seller can elect to sell items in individual auctions,
or, if the seller has multiple items, can elect to hold a "Dutch Auction." For
example, an individual wishing to sell 10 identical items could hold 10
individual auctions or hold a Dutch Auction in which all winning bidders pay the
same price which is set by the lowest successful bidder.
Sellers of items on AcuBid.com are charged posting fees and commissions.
There is a general $2.00 posting fee to list an item. For an additional $1.50
the title of the item will be displayed in bold faced type and for an additional
$10.00 fee, the listed item will be cycled through the "Spotlighted Items" of
the item's subcategory. Spotlight auction listings are accessible from a related
subcategory page and are in rotation with other Spotlight listings. For an
additional $75.00 fee, the item will be cycled through the "Premier Items"
section of the main page and the item's subcategory. Premier auction listings
are accessible from AcuBid.com's front page and the main category page and are
in rotation with other Premier auction listings. A commission of 2% will be
charged on the final selling price of all successful transactions. Sellers
listing items are given 500k of disk space and may purchase additional space:
2.5 MB for $2.50 per month and 5.0 MB for $5.00 per month for the purpose of
displaying photographs. A seller can also include a description of the product
with links to the seller's Web site. Invoices for posting fees, additional
posting fees, and commissions are sent via email to sellers on a monthly basis.
Sellers have a credit card account on file with the Company and that account is
charged shortly after the invoice is sent.
Buying on AcuBid.com - Buyers enter AcuBid.com through its home page,
which contains a listing of product categories, information on Online Chats with
Hall of Famers, and a spotlight of Premier items. Bidders can search for
specific items by browsing through a list of auctions within a category or
subcategory and then "click through" to a detailed description for a particular
item. Bidders can also search specific categories or the entire database of
auction listings using keywords to describe the type of products in which they
are interested. Users can also search for a particular seller or bidder by name
in order to review his or her auction and feedback history. Once a registered
bidder has found an item of interest, the bidder enters the maximum amount he or
she is willing to pay at that time. AcuBid.com utilizes a proven technology
called Proxy Bidding. Proxy Bidding allows a bidder to enter a confidential
maximum bid on an item without need to continually monitor the auction. The
bidder in effect appoints AcuBid.com as its agent to place bids on their behalf.
There is no additional cost to the bidder to use this service. In this capacity,
the Company will only use as much of the maximum bid amount as is necessary to
be the highest current bidder, bearing in mind the bidding increments
established by the seller. During the bidding process, buyers
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wanting additional information about a listed item can access the seller's
e-mail address and contact the seller for additional information. Once each bid
is made, a confirmation is sent to the bidder via email, an outbid notice is
sent the next highest bidder and the item's auction status is automatically
updated. During the course of the auction, bidders are notified of the status of
their bids via email on a daily basis and are notified immediately after they
are outbid. Bidders are not charged for making bids or purchases.
Completed Person-to-Person Transactions - At the end of an auction
period, if a bid meets the minimum price and, if one is set, the reserve price,
the Company automatically notifies the buyer and seller by e-mail. At no point
during the process does the Company take possession of either the item being
sold or the buyer's payment. Rather, the buyer and seller must independently
arrange for the shipment of and payment for the item, with the buyer typically
paying for shipping. A seller can view the buyer's feedback rating and then
determine the manner of payment, such as personal check, cashier's check or
credit card, and also whether to ship the item before or after payment is
received. Under the terms of the AcuBid.com Member Agreement, if a seller
received one or more bids equal to or above the stated minimum or in a reserve
auction, the reserve price, the seller is obligated to complete a transaction
although the Company has no power to force the seller or bidder to complete the
transaction other than to suspend them from using the Company's service. In the
event that buyer and seller are unable to complete the transaction, the Company
credits the seller the commission.
Completed Company to Person Transactions - At the end of an auction
period, if a bid meets the minimum price and, if one is set, the reserve price,
the Company automatically notifies the buyer by e-mail, giving the buyer a
choice of completing the transaction by check or credit card and giving the
buyer a choice of shipping methods. Under the terms of the AcuBid.com Member
Agreement, if the Company received one or more bids that meets the stated
minimum or in a reserve auction, the reserve price, the Company is obligated to
complete a transaction. Buyers have a credit card account on file with the
Company and if the Buyer fails to respond the Company email that account is
charged and the Company selects the method of shipping. All Company to Person
transactions come with a 30 day money back guarantee and the merchandise can be
returned for any reason. The Company ships the merchandise by Airborne Express,
Federal Express or United States Postal Service. For all items with a value in
excess of $100.00, the Company ships by United States Postal Service due to the
ability to easily insure the item against loss, theft, or damage. For items
valued under $100 and 5 pounds or less, the delivery charge is $7.50 and $9.75
for shipping weight between 5 and 10 pounds.
Feedback and Ratings - Every registered AcuBid.com user is issued a
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trading profile, on which users who have conducted business or interacted with
the person may submit compliments or criticism. The information is recorded in a
feedback profile that includes a feedback rating for the person and indicates
comments from other users who have interacted with that person in the past.
Users may review a person's feedback profile to check on the person's reputation
on the site before deciding to bid on an item listed by that person or in
determining how to complete payment for and delivery of an item.
The terms of the Company's Member Agreement prohibit actions that would
undermine the integrity of the feedback process, such as a person's leaving
positive feedback about himself or herself through other accounts or leaving
negative feedback for others through other accounts. The feedback process has
features designed to detect and prevent some forms of abuse. Users who receive a
sufficiently negative net feedback rating will have their registrations
suspended and will be unable to bid on or list items for sale. It is generally
believed that such a feedback process is useful in overcoming initial user
hesitancy when trading over the Web since it reduces the anonymity and
uncertainty of dealing with an unknown trading partner.
User Services - The Company offers a variety of support features that
are designed to build AcuBid.com user affinity and loyalty. The Company
facilitates e-mail communications between buyers and sellers and offers chat
rooms to its users. The Company also offers on-line chats with Hall of Famers
such as Yogi Berra, Johnny Bench and Gayle Sayers. The Company also has an
announcement section that covers new features, and will be implementing an
"items wanted" section where users can post notices seeking specific items.
Customers can also receive a report of their recent activity on AcuBid.com,
including bidding activity, selling activity, account balances, favorite
categories and feedback.
Customer Support - The Company provides customer support services
through both email and telephone support. Customers requiring support must email
the Company with their questions and the customer support staff will respond
either by email or telephone depending on the nature of the customer question.
Most email for customer support are handled within 24 hours. As the Company
grows, it plans to institute a 24 hour telephonic customer support service for
both technical and nontechnical issues.
In addition, the Company provides guidelines for trading, helps provide
information to resolve user disputes and responds to reports of misuses of the
AcuBid.com service. The customer service staff will investigate user complaints
of possible misuse of the service and takes appropriate action, including
issuing warnings to users or suspending users from bidding on or listing items
for sale. The types of complaints that would be investigated include various
forms of bid manipulation,
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malicious posting of negative feedback and posting illegal items for sale. The
customer service staff will also provide information to assist users with
disputes over the quality of the goods sold or other fraudulent activity.
Inventory Control - The Company has instituted an inventory control
system for acquisition and maintenance of items acquired on behalf of the
Company. All items purchased by the Company must be accompanied by a Purchase
Order that has been approved by a senior executive of the Company. Once the
Purchase Order has been approved, funds to pay for the purchase will be
requisitioned from the bookkeeper and delivered to the seller of the items. Once
the item or items have been received by the Company, the shipping documents are
cross-checked with the Purchase Order. If the documentation matches, the items
are taken into the locked Inventory Control room and processed. The items are
first checked for damage and then photographed with a digital camera, both for
inventory control and for posting for sale on the site. The item is then
processed for safe storage in the Inventory Control Room along with a
certificate of authenticity. Each item has an Inventory Control sheet requiring
the following information: a. Item name; b. Detailed description of the item; c.
Storage location of the item; d. Identity of person placing the item in
inventory; e. Approximate value of the item; f. Purchase price of the item; g.
Item Number; h. Starting Price; i. Reserve price; j. Postings; k. Final Sale
price; l. Identity of the buyer/winner of the auction; m. Approval by senior
officer to close out item.
The Company maintains an Inventory Control Facility that is secured with
an alarm system that includes motion and shock sensors. The facility is locked
at all times. Certain prime expensive items are held in several bank vaults
located in San Diego County, California. Once logged into inventory, in either
the Inventory Control Room or the bank vault, the items can only be removed upon
successful completion of the auction of the item.
Fulfillment - Shipping and handling of Company owned inventory is
handled by the staff. Shipping is either through the United States Postal
Service, Airborne Express, or Federal Express. (See, Completed Company to Person
Transactions.) Package preparation is handled by the staff and inventory control
procedures are strictly observed.
Marketing Initiatives since Inception
Company spokesmen
AcuBid.com has entered into agreements with the following retired
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athletes to act as Company spokesmen:
- Yogi Berra
- Johnny Bench
- Joe Morgan
- Rollie Finger
- Gale Sayers
- Kurt Bevacqua
These athletes will sign memorabilia for sale on AcuBid.com, participate
in live online chat rooms, serve on the AcuBid.com Board of Advisors, and appear
in company advertising. In addition, Professor Neil Salkind will also act as a
spokesman for the Company.
Online Chat Rooms
The first live chat rooms were conducted with Yogi Berra on Friday,
September 24, 1999, Johnny Bench on Saturday, September 25, 1999, and Gale
Sayers on Sunday, September 26, 1999. The Company spokesmen listed above have
all agreed to participate for 2 hours every month in online chats.
Advertising Agency
AcuBid.com has retained an advertising agency and several independent
consultants to provide marketing and public relations assistance. The agency and
consultants will be responsible for helping to develop the creative strategy and
content for AcuBid.com, and buy the media time (radio, TV, online, print, etc.)
for company advertising.
Advertising to Date
To date AcuBid.com has run online "banner ads" on Yahoo.com, Excite.com,
Infoseek.com, and Lycos.com. The company will start running print ads in Linn's
Stamp News in mid-October. The company is developing a comprehensive advertising
plan to begin early in the first quarter of 2000. This plan will include print,
radio, online, and possibly some select TV advertising.
"Guerilla Marketing"
The company has received free publicity vis a vis radio interviews
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<PAGE> 19
conducted with Michael Schaffer (CEO) and Rick Schwartz (VP Marketing). Mr.
Schaffer and Mr. Schwartz have appeared on business-oriented radio programs in
San Diego, Chicago, Washington, D.C., and New York City. A local TV affiliate in
San Diego has also done a live broadcast from the AcuBid.com offices.
Inventory Acquisition
The initial marketing strategy has been focused on large collectors and
dealers. This strategy of working with dealers results in large blocks of
merchandise being listed on the site, as opposed to trying to market to
individual consumers. It is very expensive to market to individuals who may only
list a few products at a time. The company is working with dealers capable of
listing several hundred items in a 2-3 month period. Eventually the marketing
emphasis will shift to individuals, but only when the number of items listed for
auction has increased.
Promotions
The 2% sales commission normally charged to winning bids was waived for
the first 60 days of operation.
Marketing Plan
A comprehensive marketing plan covering fiscal year 2000 is in the
initial stages of development. This plan will cover:
- Market assessment: customer analysis, competitor analysis
- AcuBid.com brand overview: AcuBid.com brand position
statement, brand identity (what does AcuBid.com stand for, what does it mean,
points of differentiation vs. competitors, relevance, etc.)
- Marketing objectives for AcuBid.com: # registered users, site
traffic metrics, # items listed, market share, other quantifiable marketing
objectives
- Tactics to be used to promote AcuBid.com
- Financial objectives for AcuBid.com
- Technical requirements for marketing plan
- Personnel requirements for marketing plan
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<PAGE> 20
The primary marketing objective through the end of this year is to
develop and increase the number of items up for auction on AcuBid.com. In
December/January the marketing emphasis will shift to more consumer driven
activities designed to get people onto the site.
Operations and Technology
The AcuBid.com Internet auction site consists of multiple INTEL Pentium
based workstations utilizing Microsoft Windows NT Enterprise Edition, Microsoft
SQL Server, Microsoft Internet Information Server, and Microsoft Site Server
technologies. Long-term growth of the site is accommodated through the use of
the following scalability, fault tolerant, and security strategies.
Scalability is the ability of a site to expand as its client base
expands. Scalability of the site is accomplished using a "division of labor"
strategy as well as "clustering" technology. Servers are divided into four
types: web servers, personalization/mail servers, database servers, and image
servers, dividing the workload into four groups. The database servers can be
further specialized by partitioning the data that each database server would
manage. The image servers are further divided by assigning members to specific
image servers. "Clustering" refers to the use of multiple servers that divide
client requests among the servers assigned to a cluster. Multiple data-less web
and personalization/mail servers are clustered to provide scalability for these
servers.
Fault tolerance is the ability for the site to easily recover from
hardware failures. Fault tolerance within the site is accomplished though
hardware mirroring of all data stores (image and database servers) and the use
of fail-over database servers. Fault tolerance of the web and
personalization/mail servers is accomplished by the same "clustering" technology
used for scalability. Disaster recovery is provided through the use of
incremental backups of the database and image data stores.
Security is the ability for the site to protect its servers and data
from unwarranted access. Security within the site is accomplished through a
variety of technologies, including fire walls, IP restrictions, encryption, and
password authentication.
Competitive Business Conditions
Industry Background: Growth of the Internet and Online Commerce
The Internet has emerged as a global medium enabling millions of people
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worldwide to share information, rapidly and easily communicate and
electronically conduct business. International Data Corporation ("IDC")
estimates that the number of Internet users will grow from approximately 60
million worldwide in 1997 to approximately 320 million worldwide by the end of
2002. This large and rapid growth is expected to be propelled by the large and
growing number of Personal Computers ("PCs") installed in homes and offices, the
decreasing cost of PCs, easier, faster and cheaper access to the Internet,
improvements in network infrastructure, the proliferation of Internet content
and the increasing familiarity and acceptance of the Internet by businesses and
consumers. The Internet has a number of distinct characteristics that
differentiate it from traditional media: users communicate and access
information without geographic or tangible limitations; users access dynamic and
interactive content on a real-time basis; and, users communicate and interact
instantaneously with a single individual or with groups of individuals. As a
result of these distinct characteristics, Interned usage is expected to continue
to expand rapidly.
The growing adoption of the World Wide Web represents an enormous
opportunity for businesses to conduct commerce over the Internet. IDC estimates
that commerce over the Internet will increase from approximately $32 billion
worldwide in 1998 to approximately $130 billion worldwide in 2000.
THE INTERNET TRADING MARKET
While companies initially focused on facilitating and conducting
transactions between businesses over the Internet, a number of companies more
recently have focused on facilitating a wide variety of business-to-consumer
transactions. These companies typically use the Internet to offer standard
products and services that can be easily described with graphics and text and do
not necessarily require physical presence for purchase, such as books, compact
discs, videocassettes, automobiles, home loans, airline tickets and online stock
trading. The Internet gives these companies the opportunity to develop
relationships with customers from a central location without having to make the
significant investments required in traditional retail such as building local
retail presences, managing a worldwide distribution infrastructure or developing
the printing and mailing infrastructure associated with traditional direct
marketing activities.
Prior to the advent of E-Commerce, the exchange of goods between
individuals, that is person-to-person trading, has been conducted through
trading forums such as classified advertisements, collectibles shows, garage
sales and flea markets or through intermediaries, such as auction houses and
consignment shops. These are not necessarily efficient markets, making trading
difficult for buyers and sellers. Such modes of trading are fragmented and
regional in nature and make it more
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expensive for buyers and sellers to meet and exchange information and complete
transactions. Prior to the spread of E-Commerce, buyers in the person-to-person
trading market were limited to searching local classified advertising or
traveling to geographically dispersed venues to find items of interest. These
traditional markets have high transaction costs due to mark-ups and commissions.
eBay, in its market analysis estimated this market to be $50 billion dollars in
1997.
eBay was one of the earliest pioneers to change the person-to-person
trading market by introducing its auction trading format. Since then other
companies have followed suit, either modeling themselves after eBay or
specializing in the auction of limited categories of items, such as computers,
fitness/sports, and sports collectibles. Additionally, with the rise in
popularity of the E-Commerce, some on-line auction houses limit their market to
business to business auctions and to person to business auctions.
While the auction market is dominated by eBay, it is growing and many
participants believe that it is a market so large that it can sustain many
Internet auction houses. When asked in May, 1999 about Amazon.com's move into
on-line auction's, its President, Jeffrey P. Bezos stated, "[i] believe this is
a large market, and there is room for two players to have critical mass. So it's
not that somebody has to lose for us to win.... I think this is one of the most
misunderstood things about E-commerce. There aren't going to be a few winners.
There are going to be tens of thousands of winners. This is a big, huge,
complicated space. And it's going to be as complex, with as much variety and as
many winners, as the physical world. Further evidence of the auction market's
breadth is the September 17, 1999 announcement that a network of Internet sites,
including Microsoft Corporation and Lycos, Inc. are forming an online auction
alternative to eBay, Inc. which will be launched on September 20, 1999.
Fairmarket, Inc. creator of the auction network, indicated that it will function
like a virtual warehouse to which nearly 100 sites will link their own auctions,
in contrast to eBay's single marketplace.
/////
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THE COMPETITION
The following table offers a comparison of the Company's business model
with those of the Company's most likely competitors:
FULL LINE AUCTION SITES
<TABLE>
<CAPTION>
Auction
Company AcuBid.com eBay Amazon uTrade Yahoo Universe BoxLot
- ---------------- -------------- --------------- ------------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Business Business to Person to Person to Person to Person to Person to Person to
Model(1) Person and Person Person and Person Person Person Person
Person to Business to
Person Person
Primary Focus(2) General General General General General General General
Minimum Bid(3) $25.00 $0.01 $1.00 $1.00 $1.00 $1.00 $1.00
Image Hosting Free hosting Not on Not on Not on Not on Not on Not on
on Company company company company company company company
servers up to servers servers servers servers servers servers
500k
Chat (4) Yes Yes No No Yes Yes No
House as Yes No No No No No No
Seller(5)
Listing Fee $2.00 per item $0.25-2.00 per $0.25-2.00 Free Free $0.25 Free
item per item
Sales Commission 2.0% selling 5% to $25.00; 5% to $25.00; No sales No sales 2.5% 5% to $50.00;
price 2.5% to $1.25+2.5% to commission commission 2.5% $50.00+
$1,000; 1.25% $1000;
$1000+ $25.63+1.25%
$1,000+
</TABLE>
Footnotes to Table:
1. Description of auction mode and includes main conduits of activity.
2. Primary focus of auction (as of date of filing) based upon number of active
auctions, or products, or both.
3. Minimum bids are set by the auction house and thereafter chosen by the
seller within house guidelines.
4. Chat rooms provided by auction house which allow users to comment upon
Sellers, other Buyers, products and a wide range of topics.
5. Is the auction house also a seller, manufacturer or otherwise representing
itself.
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<PAGE> 24
Since the inception of its auction business in March, 1999, the Company
has believed that the Internet "shopping portal" of the future will be a hybrid
site: offering both Company owned inventory with full fulfillment capabilities
and service, as well as simply providing the process to facilitate the venue to
match buyers and sellers and charging a small commission to do so. This wisdom
was borne out by the recent trends of the majors, eBay and Amazon.com to both
cross over to the hybrid model: Amazon.com has moved into person-to-person
auctions and eBay recent business move to explore fixed price and storefront
sales.
The Company seeks to distinguish itself in the Internet auction market
from the competition by marketing Company owned collectibles directly to the
public and seeking and offering only high end collectibles that can justify the
Company's minimum bid of $25 in both the person-to-person auction format and the
Company to person auction format. The Company believes that Company to Person
transactions will give the Company the competitive edge because the Company will
be able to acquire the collectible items significantly below the actual market
value through contacts generated for the Company by its Advisory Board. The
Company also believes that the active participation of the Advisory board in
Chat rooms will distinguish the Company from the high volume low end auction
sites. Additionally, the Company believes that it can be competitive in Company
to Person transactions due to the buying power associated with the Company's
current financial position. The Company seeks to distinguish itself from other
Internet auction sits by limiting its site to high end collectibles and by
offering an unconditional money back guarantee for Company owned inventory.
Intellectual Property - The Company regards the protection of its
copyrights, service marks, trademarks, trade dress and trade secrets as critical
to its future success and relies on a combination of copyright, trademark,
service mark and trade secret laws and contractual restrictions to establish and
protect its proprietary rights in products and services. The Company has entered
into confidentiality and invention assignment agreements with its employees and
contractors, and nondisclosure agreements with its suppliers and strategic
partners in order to limit access to and disclosure of its proprietary
information. There can be no assurance that these contractual arrangements or
the other steps taken by the Company to protects its intellectual property will
prove sufficient to prevent misappropriation of the Company's technology or to
deter independent third party development of similar technologies. The Company
pursues the registration of its trademarks and service marks in the United
States and internationally. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which the
Company's services are made available online.
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<PAGE> 25
The Company also relies on certain technologies that it licenses from
third parties, such as Microsoft, Compaq, and Symantec, the suppliers of key
database technology, the operating system and specific hardware components for
the Company's business. There can be no assurance that these third party
technology licenses will continue to be available to the Company on commercially
reasonable terms. The loss of such technology could require the Company to
obtain substitute technology of lower quality or performance standards or a
greater const, which could materially adversely affect the Company's business,
results of operations and financial condition.
To date, the company has not been notified that its technologies
infringe the proprietary rights of third parties, but there can be no assurance
that third parties will not claim infringement by the Company with respect to
past, current, or future technologies. The Company expects that participants in
its markets will be increasingly subject to infringement claims as the number of
services and competitors in the company's industry segment grows. Any such
claim, whether meritorious or not, could be time consuming, result in costly
litigation, cause service upgrade delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licencing agreements might not
be available on terms acceptable to the Company or at all. As a result, any such
claim could have a material adverse effect upon the Company's business, results
of operations and financial conditions.
Privacy Policy - The Company believes that issues relating to privacy
and use of personal information relating to Internet users are becoming
increasingly important as the Internet and its commercial use grow. The Company
has adopted a detailed privacy policy that outlines how the Company uses
information concerning its users and the extent to which other registered users
may have access to this information. Users must acknowledge and agree to this
policy when registering for the AcuBid.com service. The Company does not sell or
rent any personally identifiable information about its users to any third party,
however, the Company does disclose information to sellers and winning bidders
that contains the seller's and winning bidder's name, email address and
telephone number. The Company also uses information about its users for internal
purposes only in order to improve marketing and promotional efforts, to analyze
site usage statistically, and to improve content, product offerings and site
layout.
Government Regulation - The Company is not currently subject to direct
federal, state or local regulation, and laws or regulations applicable to access
to or commerce on the Internet, other than regulations applicable to businesses
generally. However, due to the increasing popularity and use of the Internet and
other online services, it is possible that a number of laws and regulations may
be adopted with respect to the Internet or other online services covering issues
such as user privacy, freedom of expression, pricing, content and quality of
products and services, taxation,
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advertising, intellectual property rights and information security.
Although sections of the Communications Decency Act of 1996 (the "CDA")
that, among other things, proposed to impose criminal penalties on anyone
distributing "indecent" material to minors over the Internet, were held to be
unconstitutional by the U.S. Supreme Court, there can be no assurance that
similar laws will not be proposed and adopted. Certain members of Congress have
recently discussed proposing legislation that would regulate the distribution of
"indecent" material over the Internet in a manner that they believe would
withstand challenge on constitutional grounds. The nature of such similar
legislation and the manner in which it may be interpreted and enforced cannot be
fully determined and, therefore, legislation similar to the CDA could subject
the Company and/or its customers to potential liability, which in turn could
have an adverse effect on the Company's business, results of operations and
financial condition. The adoption of any such laws or regulations might also
decrease the rate of growth of Internet use, which in turn could decrease the
demand for the AcuBid.com service or increase the cost of doing business or in
some other manner have a material adverse effect on the Company's business,
results of operations and financial condition.
In addition, applicability to the Internet of existing laws governing
issues such as property ownership, copyrights and other intellectual property
issues, taxation, libel, obscenity and personal privacy is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the unique
issues of the Internet and related technologies.
In addition, numerous states, including the State of California in which
the Company's headquarters are located, have regulations regarding the manner in
which "auctions" may be conducted and the liability of "auctioneers" in
conducting such auctions. No legal determination has been made with respect to
the applicability of the California regulations to the Company's business to
date and little precedent exists in this area. The Company has complied with the
auctioneer bonding requirements of the State of California. There can be no
assurance, however, that a state will not attempt to impose other regulations
upon the Company in the future or that such imposition will not have a material
adverse effect on the Company's business, results of operations and financial
condition.
Several states have also proposed legislation that would limit the uses
of personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also recently
settled a proceeding with one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes,
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<PAGE> 27
could create uncertainty in the marketplace that could reduce demand for the
services of the Company or increase the cost of doing business as a result of
litigation costs or increased service delivery costs, or could in some other
manner have a material adverse effect on the Company's business, results of
operations and financial condition.
In addition, because the Company's services are accessible worldwide,
and the Company facilitates sales of goods to users worldwide, other
jurisdictions may claim that the Company is required to qualify to do business
as a foreign corporation in a particular state or foreign country. The Company
is qualified to do business in two states in the United States, and failure by
the Company to qualify as a foreign corporation in a jurisdiction where it may
be required to do so could subject the Company to taxes and penalties for the
failure to qualify and could result in the inability of the Company to enforce
contracts in such jurisdictions. Any such new legislation or regulation, or the
application of laws or regulations from jurisdictions whose laws do not
currently apply to the Company's business, could have a material adverse effect
on the Company's business, results of operations and financial condition.
The law relating to the liability of providers of online services for
activities of their users on the service is currently unsettled. While the
Company will not pre-screen the types of goods offered on AcuBid.com, the
Company is aware that certain goods, such as alcohol, tobacco, firearms, adult
material and other goods that may be subject to regulation by local, state or
federal authorities. There can be no assurance that the Company will be able to
prevent the unlawful exchange of goods on its service or that it will
successfully avoid civil or criminal liability for unlawful activities carried
out by users through the Company's service. The imposition upon the Company of
potential liability for unlawful activities of users of the AcuBid.com service
could require the Company to implement measures to reduce its exposure to such
liability, which may require, among other things, the Company to spend
substantial resources and/or to discontinue certain service offerings. Any costs
incurred as a result of such liability or asserted liability could have a
material adverse effect on the Company's business, results of operations and
financial condition.
In addition, the Company's success depends largely upon sellers reliably
delivering and accurately representing the listed goods and buyers paying the
agreed purchase price. The Company takes no responsibility for delivery of
payment or goods to any user of the AcuBid.com service in person-to-person
transactions. The Company anticipates that it will receive in the future,
communications from users who did not receive the purchase price or the goods
that were to have been exchanged. While the Company can suspend the accounts of
users who fail to fulfill their delivery obligations to other users, the
Company, beyond crediting sellers with the amount of their fees in certain
circumstances, does not have the ability to otherwise require users to make
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<PAGE> 28
payments or deliver goods and the Company does not and will not compensate users
who believe they have been defrauded by other users.
The Company may also from time to time receive complaints from buyers as
to the quality of the goods purchased. With respect to Company to Person
transactions, the Company has an unconditional 30 day return policy and believes
that such a policy will be adequate to protect the Company from most problems
associated with Company to Person transactions. With respect to Person-to-Person
transactions, although the Company will attempt to reduce its liability to
buyers for unfulfilled transactions or other claims related to the quality of
the purchased goods, the Company may in the future receive requests from users
requesting reimbursement or threatening legal action against the Company if no
reimbursement is made. Any resulting litigation could be costly for the Company,
divert management attention and could result in increased costs of doing
business, or otherwise have a material adverse effect on the Company's business,
results of operations and financial condition. Any negative publicity generated
as a result of fraudulent or deceptive conduct by users of AcuBid.com could
damage the Company's reputation and diminish the value of its name, which could
have a material adverse effect on the Company's business, results of operations
and financial condition.
Other than Company owned inventory, the Company will not pre-screen the
goods that are listed by users on AcuBid.com or the contents of their listings,
which may include text and images. The Company anticipates that it will receive
in the future, communications alleging that certain items sold through the
AcuBid.com service infringe third-party copyrights, trademarks or other
intellectual property rights. While the Company's user policy prohibits the sale
of goods which may infringe third-party intellectual property rights and the
Company is empowered to suspend the account of any user who infringes
third-party intellectual property rights, there can be no assurance that an
allegation of infringement will not result in litigation against the Company.
Any such litigation could be costly for the Company and could result in
increased costs of doing business, or could in some other manner have a material
adverse effect on the Company's business, results of operations and financial
condition.
Employees - As of September 30, 1999, the Company had 12 employees: 3
senior executives responsible for contracting, procurement and purchasing,
inventory oversight, and investor relations; 2 in customer/technical support; 5
in general office administration; a director of marketing; and, chief of
technology. The Company has never had a work stoppage, and no employees are
represented under collective bargaining agreements. The Company considers its
relations with its employees to be good. The Company believes that its future
success will depend in part on its continued ability to attract, integrate,
retain and motivate highly qualified technical and managerial personnel.
Competition for qualified personnel in the Company's industry
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<PAGE> 29
and geographic location is intense, and there can be no assurance that the
Company will be successful in attracting, integrating, retaining and motivating
a sufficient number of qualified personnel to conduct its business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
AcuBid.com Inc., online auction house, is a new business direction of
the Company. The business plan, conceived in February 1999, has the company
competing for a share of the very exciting on line auction business dominated
presently by EBAY, Amazon.com and Yahoo. On line auctions enable buyers and
sellers of specified items to come together on an informal and entertaining
manner and to conduct their business.
The Company has raised $5,025,471 since the change in business direction
in February 1999. The company has invested approximately $230,000 in equipment,
$238,000 in inventory and, as of August 31, 1999 has spent approximately
$432,000 on general administration and overhead. The Company has approximately
$4 Million in cash on deposit in short term money market funds at federally
insured financial institutions.
At current operating rates the company can easily satisfy its cash
pre-payments over the next 12 months and will have no need to raise additional
funds. However, the Company's long term capital requirements will depend upon
many factors, including, but not limited to, the rate of market acceptance of
the Company's service, the Company's ability to develop, maintain and expand its
user base, the level of resources required to expand the Company's marketing and
sales organization and other factors, some of which may be beyond the Company's
control. A slower than expected rate of acceptance of the Company's service or
lower than expected revenues generated from the service, extra-ordinary costs
associated with Company to Person transactions, would materially adversely
affect the Company's liquidity. The Company has no commitments for additional
financing, and there can be no assurances that any such additional financing
would be available in a timely manner, or, if available, would be on terms
acceptable to the Company.
The Company derives income from listing fees, commissions received from
the sale of items on it's site and from profits derived from purchases and sales
of items from it's own account. The company estimates that it will take at least
one operating year before enough items are listed in the various categories to
generate enough revenues to meet operating costs. While the Company believes
that it should
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<PAGE> 30
also profit from the purchase and sale of inventory items (items purchased for
the account of AcuBid.com, Inc.), there is however no way to project profits
from these transactions at this point. It is also possible that inventory
transactions may result in losses rather than gains due to acquisition costs,
inventory management costs, and fulfillment cost. However, it is managements
belief that the Company can be profitable selling only 10-15% of eBay's volume
of items, relying on higher item prices and internal inventory.
The company will incur no research and development costs over the next
12 months of operations. The company will require no significant additional
equipment to meet user demand at foreseeable levels of operation. At some point
additional servers and equipment will be required. At present levels of
operations, the management does not believe that the number of key employees
will change significantly within the next 12 months.
The Company commenced operation of its online auction house, AcuBid.com,
on August 2, 1999. Since that time the company has focused on establishing
commercial relationships with sellers of collectibles. Management believes that
once enough items are registered for sale, buyers will be attracted to the site.
When that occurs, levels of commissions and profits from Company owned inventory
will grow.
It is premature to estimate operating margins at this early stage of
operations. Although there are some industry figures available (eBay) since we
are involved in inventory purchases as well, it would be misleading to use
figures from other companies.
The Company's initial thrust has been in sports and stamps. This trend
will change and management believes that antiques may well ultimately dominate
the number of items for sale and the potential buyers, since there are more
antique items available for collection than any other.
The Company has not realized any significant operating revenue to date.
Since the Company has no historical operating revenues to gauge future operating
revenues upon, it is uncertain as to what level of revenue the Company may
achieve in the next year.
Year 2000 Issues Many current installed computer systems and software
products are coded to accept only two digit entries in the date code field and
cannot reliably distinguish dates beginning on January 1, 2000 from dated prior
to the year 2000. Many companies' software and computer systems may need to be
upgrade or replaced in order to correctly process dates beginning in 2000 and to
comply with the
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<PAGE> 31
"Year 2000" requirements. The Company has reviewed its internal programs and has
determined that there are no significant Year 2000 issues within the Company's
systems or services. However, the Company utilizes third-party equipment and
software that may not be Year 2000 compliant although the Company believes that
the third-party systems that are material to its business are Year 2000
compliant based on representations made by these suppliers. Failure of such
third-party equipment or software to process properly dates to the year 2000 and
thereafter could require the Company to incur unanticipated expenses to remedy
any problems, which could have a materially adverse effect on the Company's
business, results of operations and financial condition.
ITEM 3. DESCRIPTION OF PROPERTY
Effective June 1, 1999, the Company began leasing 3,081 square foot of
prime office space in the very desirable Pacific Ridge Complex in Carlsbad,
California. The Company obtained the space at $1.60 per square foot, $0.30-0.40
per square foot below market. The lease is for three years, with renewal and
expansion options. The Company believes that this space will provide adequate
working space and environment for the technical and administrative needs of the
Company and will provide the necessary high tech profile to meet with experts in
the field and other interested parties. The Company believes that this office
space will be adequate to meet its needs for the immediate future. Long-range
future growth can be accommodated by leasing additional space nearby.
On May 25, 1999, the Company entered into an agreement with Level 3
Communications to secure space and bandwidth for the housing of its main Web
site server operations in San Diego, California. server. Pursuant to its
agreement, the Company is required to pay Level 3 Communications $1800.00 per
month which will increase as the bandwidth increases with growth.
/////
/////
/////
/////
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<PAGE> 32
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30,1999 (except as
otherwise indicated by footnote), certain information with respect to the number
of shares of Common Stock of the Company beneficially owned by (i) each officer
and director of the Company; (ii) each person known to beneficially own more
than 5% of the Company's Common Stock; and, (iii) all executive officers and
directors as a group:
<TABLE>
<CAPTION>
Common Stock(1)
-------------------------------
Name or Group (2) Number of Shares % of Class
- ------------------------- ---------------- ----------
<S> <C> <C>
Directors: (3)
John Irvine 150,000 2.40%
Lawrence Schaffer 346,000(4)(9) 5.53%
Michael Schaffer 369,500(5)(9) 5.91%
Norman Schwartz 202,000(6) 3.23%
Waddy Stephenson 130,000(7) 2.08%
Officers:
John Irvine 150,000 2.40%
Lawrence Schaffer 346,000(4)(9) 5.53%
Michael Schaffer 369,500(5)(9) 5.91%
Norman Schwartz 202,000(6) 3.23%
Richard Schwartz 10,000(8) 0.16%
Waddy Stephenson 130,000(7) 2.08%
Officers and Directors
as a Group: 1,207,510 19.33%
5% Beneficial Owners:(9)
Michael Schaffer 369,500(5) 5.91%
Lawrence Schaffer 346,000 5.53%
</TABLE>
(1) Based on a total of 6,248,151 shares outstanding as of September 15, 1999
and includes Common Stock beneficially owned plus, where applicable, Common
Stock issuable upon exercise of outstanding stock options, warrants, and/or
convertible notes held only by the person or group indicated that are fully
exercisable or exercisable within 60 days after September 15, 1999.
(2) The persons named in the table have sole voting and investment power with
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<PAGE> 33
respect to all shares shown to be beneficially owned by the, subject to
community property laws, where applicable, and the information contained in
the footnotes to this table. Unless otherwise indicated, the business
address for persons listed in the table is 1947 Camino Vida Roble, Suite
102, Carlsbad, California 92008.
(3) This table does not include stock ownership of the Company's Advisory
Board, who do not exercise control and have no role in the management of
the Company. Common Stock owned by members of the Advisory Board
beneficially own, including Common Stock issuable upon exercise of
outstanding stock options, warrants, and/or convertible notes held that are
fully exercisable or exercisable within 60 days after September 15, 1999 is
as follows: Kurt Bevacqua - 200,000 shares (additionally, Mr. Bevacqua was
granted 50,000 shares of stock); Johnny Bench - 20,000; Yogi Berra -
30,000; Joe Morgan - 45,000 shares; Rollie Fingers - 35,000 shares; and,
Neil Salkind - 15,000 shares.
(4) Includes 100,000 shares of Common Stock issuable upon exercise of stock
options exercisable at $0.45 per share.
(5) Includes 59,000 shares of Common Stock held in escrow.
(6) Includes 100,000 shares of Common Stock issuable upon exercise of stock
options exercisable at $0.45 per share.
(7) Includes 100,000 shares of Common Stock issuable upon exercise of stock
options exercisable at $0.45 per share.
(8) The Company has entered into an agreement with Mr. Richard Schwartz
granting him 5000 shares of Common Stock on each of September 1, 1999,
December 1, 1999, and March 1, 2000. Additionally, the agreement provides
that Mr. Schwartz is to receive a qualified stock option to purchase 50,000
shares of Common Stock at an exercise price of $3.00 per share, expiring on
July 1, 2001. Although the Board of Directors has adopted an Incentive
Stock Option Plan, it has not been approved by the shareholders and the
option granted to Mr. Schwartz is contingent on that approval. Mr. Schwartz
stock ownership listed in the table reflects the 5000 shares of Common
Stock already received as well as the 5000 shares of Common Stock due on
December 1, 1999.
(9) In August, 1999, pursuant to a private placement offering, the Company
issued 3,950,000 share of Convertible Preferred Stock which is convertible
1 share of the preferred into 0.66 shares of Common Stock beginning on
February 2, 2000.
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<PAGE> 34
Assuming that all 3,950,000 was converted on that date and no additional
Common Stock was issued., there would be 8,678,851 shares of Common Stock
outstanding. In that event, Lawrence Schaffer and Michael Schaffer would no
longer be holders of 5% or more of the outstanding Common Stock; however,
there would be two purchasers of the preferred shares that would hold in
excess of 5% of the outstanding Common Stock. Andora Holdings Ltd., a
Bahamian corporation whose address is c/o Lennox Paton, Devonshire House,
Queen Street, Nassau, Bahamas, purchased 750,000 shares of the preferred
stock which would convert into 499,950 shares of Common Stock which would
constitute 5.76% of Common Stock outstanding, assuming all shares of the
preferred were converted. The Canadian Commercial Workers Industry Pension
Plan, whose address is 125 Queens Plate Drive, Suite 220, Etobicoke,
Ontario, Canada M9W6V1 purchase 1,250,000 shares of the preferred stock
which would convert into 832,500 shares of Common Stock which would
constitute 9.59% of Common Stock outstanding, assuming all shares of the
preferred were converted. For further information on the private placement
of these preferred shares, see Part II, Item 4, Recent Sales of
Unregistered Securities.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Company's Directors and Executive Officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Lawrence Schaffer 31 Director, and President
Michael Schaffer 57 Director, and Chief Executive Officer
Norman Schwartz 56 Director, Chief Financial Officer, and
Vice President of Finance
John Irvine 48 Director
Waddy Stephenson 39 Director and Vice President of
Technical Development
Richard Schwartz 36 Vice President of Marketing
</TABLE>
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<PAGE> 35
Biographies of Directors and Executive Officers and Key Employees.
MICHAEL A. SCHAFFER - 57, Chief Executive Officer. Mr. Schaffer received
a Bachelor of Arts degree from Hunter College in 1964 and a Juris Doctorate from
Brooklyn Law School in 1967 and was admitted to the practice of law in the State
of New York in 1967 and practiced law through 1974. From 1972 to 1974, Mr.
Schaffer owned an interest in a broker dealer with offices in New York, New York
and Los Angeles, California. From 1975, Mr. Schaffer has been a private
investor. Since 1970, Mr. Schaffer has had a high degree of involvement with
collectibles, such as rare stamps. Mr. Schaffer is one of the founders of
WebGalaxy, Inc., a non-reporting, publicly traded Internet service provider
based in Carlsbad, California.
LAWRENCE C. SCHAFFER - 31, President. Bachelor of Arts, University of
Arizona, 1991. Employed in the brokerage industry in New York as a stockbroker
for four years at Guntal & Company, Janney Montgomery Scott and Natwest Investor
Services. Mr. Schaffer also has experience in administration and marketing for
several small-cap public companies. Mr. Schaffer has served as President of the
Company when it was known as International AcuVision Systems, Inc. since 1994.
Mr. Schaffer is one of the founders of WebGalaxy, Inc., a non-reporting
publicly traded Internet service provider based in Carlsbad, California.
NORMAN A. SCHWARTZ - 56, Director, Chief Financial Officer, and Vice
President of Finance. Mr. Schwartz receive a Juris Doctorate degree from the
University of Arizona and a Master of Laws in Taxation from New York University
and was formerly a staff member in the Office of the Chief Counsel of the
Internal Revenue Service in Washington, D.C. Subsequently, Mr. Schwartz was
principal and Chief Executive Officer of Oxford Financial Corporation of
Phoenix, Arizona and was Chief Executive Officer and director of American Lube
Centers of Houston, Texas, one of the largest franchisees of Jiffy Lube
International. Mr. Schwartz is currently an officer and director of AmeriTrust,
an estate planning and financial planning firm.
JOHN S. IRVINE - 48 Director. BA & MBA, Western University, Toronto
Canada. John is President of both Affinity TeleSystems Inc. of Canada and U.S.A.
Affinity TeleSystems. Affinity is a marketing management company in the
telecommunications field with strong affiliation to the labor movement. Prior to
founding Affinity, Mr. Irvine was employed in senior management positions in the
Banking and Office products industries. Mr. Irvine is an officer and director of
WebGalaxy, Inc., a non-reporting publicly traded Internet service provider based
in Carlsbad, California.
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<PAGE> 36
WADDY STEPHENSON - 39, Director, Vice President of Technical
Development. Mr. Stephenson received a Bachelors Degree in Computer Science and
Mathematics from the University of North Florida in 1985. Mr Stephenson has
worked on client/server based application for the past fifteen years. Since
1986, Mr. Stephenson has worked on Internet based applications for both
commercial and Government agencies, including DirecTv, InfusionCom, and the
United States Marine Corps.
RICHARD SCHWARTZ - 36, Vice President, Marketing. Bachelor of Arts,
University of Southern California. MBA, University of Southern California.
Consumer Marketing experience includes Marketing Manager for both The Upper Deck
Company and Nestle USA. Mr. Schwartz also worked for Macy's California as a
Group Sales Manager and in other merchandising management roles.
Michael Schaffer and Lawrence Schaffer are father and son, respectively.
Norman Schwartz and Richard Schwartz do not share a familial relationship. All
directors hold office until the next annual meeting of the shareholders and
until their successors are elected. Officers serve at the discretion of the
Board of Directors and their salaries are subject to review and adjustment from
time to time by the Board.
At present, there are no committees of the Board. There are no
arrangements or understanding between any director and any other person pursuant
to which any person was elected or nominated as a director.
The Company's Bylaws provide that the size of the Board of Directors
shall be between 1 and 7 members with the exact number within that range
determined from time to time by resolution of the Board of Directors. There are
presently 5 authorized positions as members of the Board, none of which are
vacant. Norman Schwartz and Lawrence Schaffer were elected at the last annual
meeting of shareholders held in March, 1999. The remaining directors were
appointed to the Board to serve until the next annual meeting.
ITEM 6. EXECUTIVE COMPENSATION
The following Summary Compensation Table indicates the cash
compensation, as well as other compensation, paid or accrued, for the period
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<PAGE> 37
September 1, 1998 through August 31, 1999 to the Officers and Directors of the
Company. Other than as set forth herein, no executive officer's salary and bonus
exceeded $100,000 in the applicable period. The following information includes
the dollar value of base salaries bonus awards, the number of stock options
granted and certain other compensation, if any, whether paid or deferred.
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------------------
Annual Compensation Awards Payouts
----------------------------------- ------------------------- --------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Name Annual Restricted Under- All Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- ------------ ---- ------- ----- ------- ---------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael
Schaffer 1999 $25,000 -0- -0- 100,000 -0- -0- -0-
CEO
Director
Lawrence
Schaffer 1999 $25,000 -0- $5172(1) 50,000 100,000 -0- -0-
President
Director
Norman 1999 $34,000 -0- -0- 50,000 100,000 -0- -0-
Schwartz
CFO &
VP Finance
Director
Waddy 1999 $33,332 -0- -0- 30,000 100,000 -0- -0-
Stephenson
VP Technical
Director
Richard 1999 $13,500 -0- -0- 15,000 50,000 -0- -0-
Schwartz
VP Marketing
John 1999 -0- -0- -0- 100,000 100,000 -0- -0-
Irvine
Director
</TABLE>
(1) With the exception of the $5172 payable to Lawrence Schaffer for a car
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<PAGE> 38
allowance, no amounts are shown in the table with respect to any other
perquisites paid to any named officer because the aggregate amount of such
perquisites (e.g. auto allowance) did not exceed the lesser of (i) $50,000
or (ii) 10% of the total annual salary and bonus of any named officer.
STOCK OPTIONS
<TABLE>
<CAPTION>
Option/SAR Grants in the Period 9/1/98 through 8/31/99
- -------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Expiration
Name Granted (#) Fiscal Year(4) Price ($/Sh) Date
- ------------ ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Michael
Schaffer -0- N/A N/A N/A
Lawrence
Schaffer(1) 100,000 13.4% $0.45 3/15/01
Norman
Schwartz(1) 100,000 13.4% $0.45 3/15/01
Waddy
Stephenson(1) 100,000 13.4% $0.45 3/15/01
John
Irvine(2) 100,000 13.4% $0.45 3/15/01
Richard
Schwartz (3) 50.000 6.7% $3.00 7/01/01
</TABLE>
(1) Represents options to acquire 100,000 shares of stock at $0.45 per share
which is 100% vested.
(2) Mr. Irvine has exercised his option.
(3) Although the Board of Directors has adopted an Incentive Stock Option Plan,
it has not been approved by the shareholders and the option granted to Mr.
Schwartz is contingent on that approval.
(4) This calculation includes options issued to members of the Advisory Board.
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<PAGE> 39
The Board of Directors has approved an Incentive Equity Plan and a Stock
Option Plan for Non-Employee Directors, however, the Plans have not been
approved by the Shareholders. Currently, stock options and stock compensation
award may be granted to employees, officers and directors form time to time at
the discretion of the Board of Directors. See, "Stock Option and Compensation
Plans" below.
Aggregated Option/SAR Exercises in the Last Fiscal Year
and Fiscal Year End Option/SAR Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End(#) at FY-End($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized($) Unexercisable Unexercisable
- ------------- --------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Michael
Schaffer N/A N/A N/A N/A
Lawrence
Schaffer(1) -0- -0- 100,000/ $217,000/
Norman
Schwartz(1) -0- -0- 100,000/ $217,000/
Waddy
Stephenson(1) -0- -0- 100,000/ $217,000/
John
Irvine(2) 100,000 $217,000 N/A N/A
Richard
Schwartz(3) -0- -0- 0/50,000 0/0
</TABLE>
The value of unexercised in-the-money options is based upon a fair
market value of the stock on August 31, 1999 of $2 5/8, the closing price in the
OTC market on that date.
The Company currently does not have any compensation plans involving
long-term incentive or deferred pension or profit sharing plans for it executive
officers. The Board of Directors has approved an Incentive Equity Plan and a
Stock Option Plan for Non-Employee Directors, however, the Plans have not been
approved by the
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<PAGE> 40
Shareholders. Currently, stock options and stock compensation award may be
granted to employees, officers and directors form time to time at the discretion
of the Board of Directors. See, "Stock Option and Compensation Plans" below.
Employment Agreements
On April 26, 1999, the Company entered into a one year employment
agreement with Waddy Stephenson, the Company's Vice President of Technical
Development commencing on May 1, 1999. The Company will pay Mr. Stephenson
$8,333.33 per month or $100,000 for the year. Pursuant to the agreement, Mr.
Stephenson received 30,000 shares of Common Stock for services previously
rendered and an option to purchase 100,000 shares of the Company's common stock
at $0.45 per share. The Company anticipates that at the end of the one year
term, it will enter into a new employment agreement with Mr. Stephenson.
The Company has entered into a one year employment agreement with Mr.
Richard Schwartz, Vice President of Marketing, commencing on August 1, 1999. The
Company will pay Mr. Richard Schwartz $7,000.00 per month or $84,000 per year.
Pursuant to the agreement, Mr. Schwartz was granted 5000 shares of Common Stock
on each of September 1, 1999, December 1, 1999, and March 1, 2000. Additionally,
the agreement provides that Mr. Schwartz is to receive a qualified stock option
to purchase 50,000 shares of Common Stock at an exercise price of $3.00 per
share, expiring on July 1, 2001. There are no other terms affecting Mr. Schwartz
employment.
Compensation of Directors
Officers of the Company receive no additional compensation for their
services as directors. Directors of the Company currently receive no cash
compensation for their attendance at Board meetings except reimbursement for
travel expenses. Although no other compensation is currently contemplated for
directors of the Company, the Board reserves the right to change its policy as
to compensation of directors from time to time based upon the financial
condition of the Company, future performance and other relevant factors.
Stock Option Plans
Effective August, 1999, the Company adopted two stock option plans: the
1999 Incentive Equity Plan (the "Incentive Plan") and the 1999 Stock Option Plan
For Non-employee Directors (the "Directors Plan"). Options granted under these
plans are subject to approval of the stockholders at the next annual meeting. To
date no options have been granted under the Directors Plan.
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<PAGE> 41
The Incentive Equity Plan
The following general description of certain features of the Incentive
Plan is qualified in its entirety by reference to the Incentive Plan. The
purpose of the Incentive Plan is to enable the Company to attract officers and
other key employees and consultants and to provide them with appropriate
incentives and rewards for superior performance. The Incentive Plan affords the
Company the ability to respond to changes in the competitive and legal
environments by providing the Company with greater flexibility in key employee
and executive compensation. This plan is designed to be an omnibus plan allowing
the company to grant a wide range of compensatory awards including stock
options, stock appreciation rights, restricted stock, deferred stock and
performance shares or units. The Incentive Plan is intended to encourage stock
ownership by recipients by providing for or increasing their proprietary
interests in the Company, thereby encouraging them to remain in the Company's
employment. The Incentive Plan has been prepared to comply with all applicable
tax and securities laws, including Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and state and federal tax laws.
Subject to adjustment as provided in the Incentive Plan, the number of
shares of Common Stock that may be issued or transferred, plus the amount of
shares of Common Stock covered by outstanding awards granted under the Incentive
Plan, shall not in the aggregate exceed 1,500,000 shares. The number of
Performance Units granted under the Incentive Plan shall not in the aggregate
exceed 100,000. The number of shares of Common Stock granted under the Incentive
Plan to any individual in any calendar year shall not in the aggregate exceed
100,000.
Officers, including officers who are members of the Board of Directors,
and other key employees of and consultants to the Company may be selected by the
Committee (as defined below) to receive benefits under the Incentive Plan.
The Incentive Plan authorizes the granting of options to purchase shares
of Common Stock ("Option Rights"), stock appreciation rights ("Appreciation
Rights"), restricted shares ("Restricted Shares"), deferred shares ("Deferred
Shares"), performance shares ("Performance Shares") and performance units
("Performance Units").
Option Rights. The Committee may grant Option Rights that entitle the
optionee to purchase shares of Common Stock at a price less than, equal to or
greater than market value on the date of grant. The option price is payable at
the time of exercise (i) in cash or cash equivalent, (ii) by the transfer to the
Company of shares of Common Stock that are already owned by the optionee and
have a value at the time of exercise equal to the option price, (iii) with any
other legal consideration the Committee
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<PAGE> 42
may deem appropriate or (iv) by any combination of the foregoing methods of
payment. Any grant may provide for deferred payment of the option price from the
proceeds of sale through a broker on the date of exercise of some or all of the
shares of Common Stock to which the exercise relates. The Committee has the
authority to specify at any time that Restricted Shares or other shares of
Common Stock which are subject to risk of forfeiture or restrictions on transfer
will be accepted for part or all of the option price. In such event, the
Committee may provide that the shares of Common Stock received upon exercise of
the stock option will not be subject to the same risks of forfeiture or
restrictions on transfer which applied to the shares used as payment for the
option price. The Committee may also provide that additional Option Rights will
automatically be granted to an optionee upon the exercise of Option Rights.
Option Rights granted under the Incentive Plan may be Option Rights that
are intended to qualify as incentive stock options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986 ("Code") or Option Rights
that are not intended to so qualify. The Incentive Plan permits the granting of
incentive stock options or non-qualified stock options at the discretion of the
Committee. The exercise price for nonqualified stock options granted may not be
less than 85% of the fair market value per share of Common Stock on the date of
grant. The exercise price for ISOs may not be less than the fair market value
per share of Common Stock on the date of grant, and ISOs granted to persons
owning more than 10% of the Company's voting stock must have an exercise price
of not less than 110% of the fair market value per share of Common Stock on the
date of grant. All options granted must be exercised within ten years of grant,
except that ISOs granted to 10% or more stockholders must be exercised within
five years of grant. The aggregate market value (as determined as of the date of
grant) of the Common Stock for which any optionee may be awarded ISOs which are
first exercisable by such optionee during any calendar year may not exceed
$100,000. At or after the date of grant of any non-qualified Option Rights, the
Committee may provide for the payment of dividend equivalents to the optionee on
a current, deferred or contingent basis or may provide that dividend equivalents
be credited against the option price.
Each grant must specify the conditions, including as and to the extent
determined by the Committee, the period or periods of continuous employment or
continuous engagement of consulting services of the optionee by the Company or
any subsidiary, or the achievement of Management Objectives (as defined in the
Incentive Plan), that are necessary before the Option Rights will become
exercisable, and may provide for the earlier exercise of the Option Rights,
including, without limitation, in the event of a change in control of the
Company or other similar transaction or event. Successive grants may be made to
the same optionee regardless of whether Option Rights previously granted to him
or her remain unexercised.
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<PAGE> 43
Appreciation Rights. Appreciation Rights granted under the Incentive
Plan may be either free-standing or granted in tandem with Option Rights. An
Appreciation Right represents the right to receive from the Company the
difference ("Spread"), or a percentage thereof not in excess of 100 percent,
between the base price per share of Common Stock in the case of a free-standing
Appreciation Right, or the option price of the related Option Right in the case
of a tandem Appreciation Right, and the market value of the Common Stock on the
date of exercise of the Appreciation Right. Tandem Appreciation Rights may only
be exercised at a time when the related Option Right is exercisable and the
Spread is positive, and the exercise of a tandem Appreciation Right requires the
surrender of the related Option Right for cancellation.
A free-standing Appreciation Right must have a base price that is at
least equal to the fair market value of a share of Common Stock on the date of
grant, must specify the conditions, including as and to the extent determined by
the Committee, the period of continuous employment or continuous engagement of
consulting services, or the achievement of Management Objectives, that are
necessary before the Appreciation Right becomes exercisable (except that it may
provide for its earlier exercise, including, without limitation, in the event of
a change in control of the Company or other similar transaction or event) and
may not be exercised more than 10 years from the date of grant. Any grant of
Appreciation Rights may specify that the amount payable by the Company upon
exercise may be paid in cash, shares of Common Stock or a combination thereof,
and the Committee may either reserve or grant to the recipient the right to
elect among those alternatives. The Committee may provide with respect to any
grant of Appreciation Rights for the payment of dividend equivalents thereon in
cash or Common Stock on a current, deferred or contingent basis.
Restricted Shares. An award of Restricted Shares involves the immediate
transfer by the Company to a participant of ownership of a specific number of
shares of Common Stock in consideration of the performance of services or, as
and to the extent determined by the Committee, the achievement of Management
Objectives. The participant is entitled immediately to voting, dividend and
other ownership rights in the shares. The transfer may be made without
additional consideration from the participant or in consideration of a payment
by the participant that is less than the market value of the shares on the date
of grant, as the Committee may determine.
Restricted Shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined by
the Committee. An example would be a provision that the Restricted Shares would
be forfeited if the participant ceased to serve the Company as an officer or
other key employee during a specified period of years. In order to enforce these
forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in a manner and to the
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<PAGE> 44
extent prescribed by the Committee for the period during which the forfeiture
provisions are to continue. The Committee may provide for a shorter period
during which the forfeiture provisions are to apply, including, without
limitation, in the event of a change in control of the Company or other similar
transaction or event.
Deferred Shares. An award of Deferred Shares constitutes an agreement by
the Company to deliver shares of Common Stock to the participant in the future
in consideration of the performance of services, subject to the fulfillment of
such conditions during the Deferral Period (as defined in the Incentive Plan) as
the Committee may specify. During the Deferral Period, the participant has no
right to transfer any rights under the award and no right to vote the shares
covered by the award. On or after the date of any grant of Deferred Shares, the
Committee may authorize the payment of dividend equivalents thereon on a
current, deferred or contingent basis in either cash or additional shares of
Common Stock. Grants of Deferred Shares may be made without additional
consideration from the participant or for consideration in an amount that is
less than the market value of the shares on the date of grant. Deferred Shares
must be subject to a Deferral Period, as determined by the Committee on the date
of grant, except that the Committee may provide for a shorter Deferral Period,
including, without limitation, in the event of a change in control of the
Company or other similar transaction or event.
Performance Shares and Performance Units. A Performance Share is the
equivalent of one share of Common Stock, and a Performance Unit is the
equivalent of $1.00. A participant may be granted any number of Performance
Shares or Performance Units. The participant will be given one or more
Management Objectives to meet within a specified period ("Performance Period")
which may be subject to earlier termination, including, without limitation, in
the event of a change in control of the Company or other similar transaction or
event. A minimum level of acceptable achievement will also be established by the
Committee. If by the end of the Performance Period the participant has achieved
the specified Management Objectives, he or she will be deemed to have fully
earned the Performance Shares or Performance Units. If the participant has not
achieved the Management Objectives but has attained or exceeded the
predetermined minimum level of acceptable achievement, he or she will be deemed
to have partly earned the Performance Shares or Performance Units in accordance
with a predetermined formula. To the extent earned, the Performance Shares or
Performance Units will be paid to the participant at the time and in the manner
determined by the committee in cash, shares of Common Stock or any combination
thereof, and the Committee may either grant to the recipient or retain the right
to elect among these alternatives. At or after the date of grant of any
Performance Shares, the Committee may provide for the payment of dividend
equivalents to the optionee on a current, deferred or contingent basis.
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Management Objectives mean the achievement of performance objectives
established pursuant to the Incentive Plan. The Committee may adjust Management
Objectives and related minimum acceptable levels of achievement if events or
transactions have occurred after the date an award was granted that are
unrelated to the performance of the participant and result in distortion of the
Management Objectives or the related minimum levels. Management Objectives may
be described in terms of either Company-wide objectives or objectives that are
related to the performance of the individual participant or the division,
subsidiary, department or function within the Company or a subsidiary in which
the participant is employed or with respect to which the participant provides
consulting services.
No Option Right, or other "derivative security" within the meaning of
Rule 16b-3 under the Exchange Act, is transferable by a participant except by
will or the laws of descent and distribution. Option Rights and Appreciation
Rights may not be exercised during a participant's lifetime except by the
participant or, in the event of his or her incapacity, by his or her guardian or
legal representative acting in a fiduciary capacity on behalf of the participant
under state law and court supervision.
The maximum number of shares of Common Stock that may be issued or
transferred under the Incentive Plan, the number of shares covered by
outstanding awards and the option prices or base prices per share applicable
thereto, are subject to adjustment in the event of stock dividends, stock
splits, combinations of shares, recapitalization, mergers, consolidations,
spin-offs, reorganizations, liquidations, issuances of rights or warrants, and
similar transactions or events. In the event of any such transaction or event,
the Committee may in its discretion provide in substitution for any or all
outstanding awards under the Incentive Plan such alternative consideration as it
may in good faith determine to be equitable in the circumstances and may require
the surrender of all awards so replaced.
The Incentive Plan is to be administered by a committee ("Committee") of
the Board of Directors which shall consist of not less than two directors, each
of whom is a "disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act. In connection with its administration of the Incentive Plan, the
Committee is authorized to interpret the Incentive Plan and related agreements
and other documents. The Committee may make grants to participants under any or
a combination of all of the various categories of awards that are authorized
under the Incentive Plan. The Committee may with the concurrence of the affected
participant cancel any agreement evidencing an award granted under the Incentive
Plan. In the event of any such cancellation, the Committee may authorize the
granting of a new award under the Incentive Plan in such manner, at such price
and subject to such other terms, conditions and discretion as would have been
applicable under the Incentive Plan had the canceled award not been granted. The
Committee may also grant any award or
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combination of awards authorized under the Incentive Plan, including without
limitation an award that as granted prior to the adoption of the Incentive Plan,
and any such award or combination of awards so granted under the Incentive Plan
may or may not cover he same number of shares of Common Stock as had been
covered by the canceled award and will be subject to such other terms,
conditions and discretion as would have been permitted under the Incentive Plan
had the canceled award not been granted.
The Incentive Plan may be amended from time to time by the Committee,
but without further approval by the Stockholders of the Company no such
amendment (unless expressly allowed pursuant to the adjustment provisions
described above) may (i) increase the aggregate number of shares that may be
issued or transferred plus the amount of shares covered by outstanding awards,
or increase the aggregate number of Performance Units that may be granted
thereunder or (ii) otherwise cause Rule 16b-3 under the Exchange Act to cease to
be applicable to the Incentive Plan.
The Directors Plan
The following general description of certain features of the Directors
Plan is qualified in its entirety by reference to the Directors Plan. The
Directors Plan is intended to encourage outside Directors of the Company to own
shares of the Company's stock and thereby to align their interests more closely
with the interests of the other stockholders of the Company, to encourage the
highest level of outside Director performance by providing such Directors with a
direct interest in the Company's attainment of its financial goals, and to
provide financial incentives that will help attract and retain the most
qualified outside Directors.
The Directors Plan will be administered by a committee ("Committee") of
the Board of Directors, consisting of not less than two members of the Board.
Only members of the Board of Directors who are not employees of the Company
(each a "Director") will be eligible to participate in the Directors Plan. For
purposes of the Directors Plan, an "employee" is a person whose compensation
from the Company is subject to withholding under the Internal Revenue Code of
1986.
Subject to adjustment as described below, the number of shares issued or
transferred, plus the number of shares covered by outstanding options under the
Directors Plan shall not exceed 250,000 shares of Common Stock. Shares of Common
Stock covered by an option, which is canceled or terminated, will again be
available to be issued or to be the subject of a stock option granted under the
Directors Plan.
Each nonemployee Director of the Company, who is a Director on the
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effective date of the Directors Plan is granted an immediate option to purchase
3,000 shares of Common Stock, and will also receive automatic grants of
additional options to purchase 3,000 shares of Common Stock on the first day
after each succeeding annual meeting thereafter for so long as he or she
continues to serve as a Director. Individuals becoming Directors after the
effective date of the Directors Plan receive an immediate option to purchase
3,000 shares of Common Stock, and will also receive automatic grants of
additional options to purchase 3,000 shares of Common Stock on the first day
following the next annual stockholder's meeting thereafter, for so long as he or
she continues to serve as a Director, provided that he or she has served as a
Director for at least six months prior thereto.
The exercise price of the options granted is equal to the fair market
value per share of Common Stock on the date of grant. Options granted under the
Directors Plan shall become exercisable to the extent of 20% of the Common
Shares subject thereto on the Date of Grant and to the extent of an additional
20% of the Common Shares subject thereto after each of the first four
anniversaries of such date, for so long as the Optionee continues to serve as a
member of the Board. To the extent exercisable, each Nonqualified Option shall
be exercisable in whole or in part from time to time.
In the event a grantee ceases to be a Director of the Company, vested
options granted to nonemployee Directors must be exercised within three months
after the Director's termination (in the event that termination was due to other
than death or disability), or one year after termination (in the event that
termination was due to death or disability), or by the tenth anniversary of the
date of grant, whichever occurs first. All awards under the Directors Plan may
be only non-qualified stock options.
The purchase price of stock options granted under the Directors Plan may
be paid in cash, shares of Common Stock held by the optionee for at least six
months, or a combination thereof. Shares of Common Stock issued pursuant to the
Directors Plan may be authorized but unissued shares or treasury shares.
Fractional shares will not be issued in connection with the exercise of a stock
option, and cash in lieu thereof will be paid by the Company.
Upon a Change in Control, all Option Rights that would become
exercisable through the Company's next annual stockholders' meeting following a
Change in Control will become immediately exercisable in full. If any event or
series of events constituting a Change in Control is abandoned, the effect
thereof will be null and the exercisability of Option Rights will be governed by
the provisions of the Directors Plan described above. The Directors Plan defines
a Change in Control as the occurrence of any of the following events: (i)
execution by the Company of an agreement for the merger, consolidation or
reorganization into or with another
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corporation or other legal person, unless as a result of such transaction not
less than a majority of the combined voting power of the then-outstanding
securities of such corporation or person immediately after such transaction are
held in the aggregate by holders of securities entitled to vote generally in the
election of Directors of the Company ("Voting Securities") immediately prior to
such transaction; (ii) execution by the Company of an agreement for the sale or
other transfer of all or substantially all of its assets to another corporation
or legal person, unless as a result of such transaction not less than a majority
of the combined voting power of the then-outstanding securities of such
corporation or legal person immediately after such transaction is held in the
aggregate by the holders of Voting Securities of the Company immediately prior
to such transaction; (iii) a report is filed on Schedule 13D or Schedule 14D-1
disclosing that any person (other than a person who holds more than 10% of the
Common Stock on the date of consummation of the Offering) has or intends to
become the beneficial owner of a majority or more of the combined voting power
of the then-outstanding Voting Securities; (iv) during any period of two
consecutive years, individuals who at the beginning of any such period
constitute at least a majority thereof (each Director first elected or first
nominated for election by a vote of at least two-thirds of the Directors then in
office who were Directors of the Company at the beginning of any such period
being deemed to have been a Director of the Company at the beginning of such
period); or (v) the Company adopts a plan for the liquidation or dissolution of
the Company other than pursuant to a merger, consolidation or reorganization
which would not constitute a Change in Control, as described in clause (i)
above.
The Committee will make or provide for adjustments to the maximum number
of shares issuable pursuant to the Directors Plan, the number and kind of shares
of Common Stock or other securities that are covered by outstanding options, and
the option price applicable to outstanding options as the Committee will in good
faith determine to be equitably required to prevent dilution or expansion of the
rights of optionees which would otherwise result from any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, any merger, consolidation, spin-off, split-off,
spin-out, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of warrants or other rights to purchase
securities or any other corporate transaction or event having an effect similar
to any of the foregoing.
The Board may at any time amend or terminate the Directors Plan.
Notwithstanding the foregoing, (i) except for the adjustments described above,
without the approval of the stockholders of the Company, no such amendment will
increase the maximum number of shares covered by the Directors Plan, materially
modify the requirements as to eligibility for participation in the Directors
Plan, or otherwise cause the Director Plan or any grant, award or election made
pursuant thereto to cease to
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satisfy any applicable condition of Rule 16b-3 promulgated under the Exchange
Act, (ii) no such amendment will cause any Director to fail to qualify as a
"disinterested person" within the meaning of Rule 16b-3, (iii) provisions
relating to the amount and price of securities to be awarded ant the timing of
awards under the Director Plan will not be amended more than once every six
months, other than to comport with changes in the Code, the Employment
Retirement Income Security Act, or the rules promulgated thereunder and (iv) no
amendment or termination will adversely affect any outstanding award without the
consent of the Director holding such award.
No Option Rights may be granted under the Directors Plan more than ten
years after the date of approval of the Directors Plan by the Company's
stockholders.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No relationship or related transactions exist of the type required to be
reported under this Item 7.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, $.001 par value, of which 5,698,151 were outstanding on September
15, 1999. Holders of shares of Common Stock are entitled to one vote for each
share on all matter to be voted on by the stockholders. Holders of Common Stock
have no cumulative voting rights. Holders of shares of Common Stock are entitled
to share ratably in dividend, if any, as may be declared, from time to time by
the Board of Directors in its discretion, from funds legally available. In the
event of a liquidation, dissolution or winding up of the Company, the holders of
shares of Common Stock are entitled to share pro rata all assets remaining after
payment in full of all liabilities. Holders of Common Stock have no preemptive
rights to purchase the Company's common stock. There are no conversion rights or
redemption or sinking fund provisions with respect to the Common Stock. All of
the outstanding shares of common Stock are fully paid and non-assessable. The
Company has never paid cash dividends on its Common Stock.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of
10,000,000 shares of preferred stock, $0.001 par value. The Company's Board of
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Directors has authority, without action by the shareholders, to issue all or any
portion of the authorized but unissued preferred stock in one or more series and
to determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series.
The Company currently has outstanding 3,950,000 shares of Series A
Preferred Stock with a stated value of $1.00 per share. The Series A Preferred
Stock will pay interest at the rate of 6% per annum calculated on the $1.00 per
share stated value. The interest is payable on the first of each of August and
February commencing February 1, 2000. Holders of the Series A Preferred will not
be entitled to vote at meetings of shareholders.
Commencing on February 1, 2000, holders of the Series A Preferred Stock
can convert all or part of the preferred shares into Common Stock, as described
above in the following timetable and the following amounts:
<TABLE>
<CAPTION>
Time of Conversion Number of Common Shares to be Issued
- ------------------------------------------------------ --------------------------------------------
<S> <C>
During the Period February 2, 2000 up to and including 0.66 Common Shares for each Preferred Share
January 31, 2001
During the period February 1, 2001 up to and including 0.40 Common Shares for each Preferred Share
January 31, 2002
During the period February 1, 2002 up to and including 0.285 Common Shares for each Preferred Share
January 31, 2003
During the period February 1, 2003 up to and including 0.20 Common Shares for each Preferred Share
January 31, 2004
</TABLE>
After August 1, 2004, the Company has the right to redeem any or all of
the Series A Preferred shares by paying the holder of the Preferred $1.00 per
share together with any unpaid accrued interest. If such redemption is not for
all of the shares, then the redemption will be pro rata.
Pursuant to a formula, the conversion price of the Series A Preferred
shares will be adjusted in the event of a Common Share reorganization defined
as: i) a Common Stock dividend; ii) a distribution of Common Stock to holders of
Common Stock; iii) a stock split; or, iv) a reverse stock split. In the event of
such Common Stock reorganization, the Conversion Price for the Series A
Preferred will be proportionately adjusted by multiplying the Conversion Price
by the quotient of the number of shares outstanding before the Common Stock
reorganization divided by the number of Common Shares outstanding after the
Common Stock reorganization .
In the event that the Company files a Registration Statement with the
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Securities and Exchange Commission (the "Commission"), to register any of its
equity securities, the holders of the Series A Preferred Shares have "piggyback"
rights to register for resale any Common Stock. In such event, all Preferred
Share will be converted into Common Shares effective as of the date of the
registration statement. Such shares to be registered are subject to a pro rata
reduction or exclusion from the offering at the request of the managing
underwriter.
At the time of the conversion of the Preferred Shares into Common Stock,
the Series A Preferred shareholders will receive one common share purchase
warrant for each two Common Shares issued at the time of the conversion. On and
after February 1, 2000, each common share purchase warrant will entitle the
shareholder to purchase one Common Share (a "Warrant Share") at an exercise
price of $2.00 per Warrant Share from and including February 1, 2000, up to and
including July 31, 2004. The warrants expire at the close of business July 31,
2004.
The Preferred Shares can only be transferred to another holder with the
consent of the Company's Board of Directors.
PART II.
ITEM 1. Market Price of and Dividend on the Registrant's Common Equity and
Related Stockholder Matters.
The Company's Common Stock has been publicly traded in the
over-the-counter market and quoted on the Nasdaq electronic OTC Bulletin Board
since March, 1999 under the trading symbol, "EBID". Prior to that, the Company's
stock traded on the Vancouver Stock Exchange since February, 1985 and since
August 26, 1997, the Company's stock has traded in the over-the-counter market
and quoted on the OTC Bulletin Board under the symbol IACV The OTC Bulletin
Board is an electronic quotation service that displays real-time quotes, last
sale prices and volume information in certain and domestic foreign issuers whose
securities are traded in the over-the-counter market.
No dividends on the Company's Common stock have been declared or paid
since the Company's inception. The Company currently intends to retain earnings
to finance the growth and development of its business and does not anticipate
paying cash dividends on its Common Stock in the foreseeable future. As of
September 15, 1999 there were approximately 3203 holders of record of the
Company's Common Stock and 20 holders of the Company's Series A Convertible
Preferred Stock.
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Although a limited volume of trading occurred, to the best of the
Company's knowledge there was little active trading in the over-the-counter
market between September 1, 1998 and March, 1999. The following states the range
of high and low bid prices for the each quarter of the last two fiscal years:
<TABLE>
<CAPTION>
Calendar Quarter Ending(1) High Low
- -------------------------- ------- -------
<S> <C> <C>
November 30, 1997 $0.63 $0.50
February 28, 1998 $0.5625 $0.25
May 31, 1998 $0.25 $0.1875
August 31, 1998 $0.1875 $0.10
November 30, 1998 $0.10 $0.04
February 28, 1999 $0.20 $0.04
May 31, 1999 (2) $4.25 $0.20
August 31, 1999 $8.00 $2.50
</TABLE>
(5) The High/Low bid prices for each quarter of the last fiscal year was
obtained from Nasdaq Trading and Market Services. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
(6) At the Company's annual meeting on March 15, 1999, the Company's
authorized common shares was consolidated from 20,000,000 common shares
$.001 par value into 10,000,000 common shares $.001 par value, such that
every two old common shares were consolidated into one new common share.
The Board of Directors was authorized if it deemed appropriate, to later
increase the number of common shares which the Company is authorized to
issue 50,000,000 common shares $.001 par value. Subsequent to Annual
General Meeting, the Board of Directors authorized a change in the name
of the Company of AcuBid.com, Inc, an increase in the authorized shares
to 50,000,000, Accordingly, prices reflected above for the period
November 30, 1997 through February 28, 1999 have been adjusted to
reflect the effect of the 2 to 1 consolidation.
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4,
1999, issuers who do not make current filings pursuant to Sections 13 and 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") are ineligible for
listing on the Nasdaq Over-the-Counter Bulletin Board ("OTCBB"). Pursuant to the
Rule, issuers who are not current with such filings are subject to having the
quotation of their securities removed from the OTCBB pursuant to a phase in
schedule depending on each issuer's trading symbol as reported on January 4,
1999 and thereafter may quote its Common
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Stock on the National Quotation Bureau "Pink Sheets." As previously discussed,
the Company's phase in schedule, the Company is subject to having the quotation
of its securities removed from the OTCBB on December 15, 1999, until the Company
becomes compliant with the Rule. One month prior to having the quotation of
their securities removed from the OTCBB, non complying issuers will have their
trading symbol appended with an "E".
The Company is not currently in compliance with the Rule, and in the
past, has not made filings pursuant to Sections 13 and 15(d) of the Exchange
Act. The Company has filed this Registration Statement on Form 10SB in or to
become a reporting company and therefore comply with the Rule. However, the
Company will remain subject to having quotation of its securities removed from
the OTCBB on December 15, 1999 and trading of its securities thereafter on the
Pink Sheets, until such time as the Securities and Exchange Commission
(the "Commission") has reviewed the Company's Form 10SB and has stated that it
has no further comments. Should the Commission fail to clear all comments prior
to December 15, 1999, quotation of the Company's securities will be removed from
the OTCBB and thereafter traded on the Pink Sheets until such time as the
Registration Statement is cleared by the Commission. Once the Company has
complied with the Rule, it will once again become eligible for quotation on the
OTCBB and will seek to be reinstated on the OTCBB or other appropriate exchange.
ITEM 2. Legal Proceedings.
As of the date of this filing, there are no material legal proceedings
pending.
ITEM 3. Changes in and Disagreements with Accountants.
From September 2, 1997, until March, 1999, the Company's accountant's
were Elliot Tulk Pryce Anderson ("Elliot Tulk"), 750 W. Pender, Suite 1101
Vancouver, B.C. V6C2T8. During this period of time, the Company's stock was
traded on the Vancouver Stock Exchange and the Company was required to have its
financial statements audited in accordance with Canadian accounting principles.
The Company voluntarily delisted its stock on the Vancouver Stock Exchange on
March 15, 1999 and terminated the services of Elliot Tulk Pryce Anderson. This
action was approved by the Company's Board of Directors.
Elliot Tulk's report on the financial statements for each of the fiscal
years ending August 31, 1998 and August 31, 1997 did not contain an adverse
opinion or disclaimer of opinion, nor was it modified as to uncertainty, audit
scope, or accounting
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principles. There were no disagreements with Elliot Tulk on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.
The Company then retained Kelly & Company, 3931 MacArthur Boulevard,
Suite 205, Newport Beach, California 92660 to re-audit the Company's financial
statements for fiscal years ending August 31, 1998 and August 31, 1997 in
accordance with United States Generally Accepted Accounting Principles. The
Company subsequently terminated the services of Kelly & Company as their
auditors. This action was approved by the Company's Board of Directors.
Kelly & Company's report on the financial statements for each of the
fiscal years ending August 31, 1998 and August 31, 1997 did not contain an
adverse opinion or disclaimer of opinion, nor was it modified as to uncertainty,
audit scope, or accounting principles. There were no disagreements with Kelly &
Company on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
On October 7, 1999, the Company engaged the firm of Israeloff Trattner &
Company, 11 Sunrise Plaza, Valley Stream , New York 11580 as principal
accountants to audit the Company's financial statements. The Company did not
consult Israeloff Trattner & Company on any matter required to be reported in
this Item.
ITEM 4. Recent Sales of Unregistered Securities.
During the last three years, the Company has sold the following
securities without registering them under the Securities Act of 1933 (the
"Securities Act"):
In 1996, the Company sold 100,000 shares of its Common Stock at $0.60
per share with non-transferable warrants to purchase and additional 100,000
shares any time through January 15, 1997 at an exercise price of $0.70 Canadian
per share ($0.52 U.S. at the date of issuance). In January, 1997, prior to
expiration, the warrants to purchase 100,000 shares were exercised, and the
Company realized proceeds of $51,128.
During fiscal year 1997, options to purchase 113,750 shares of Common
Stock were exercised, from which the Company realized $79,810.
In April, 1997, the Company issued 20,000 shares of its Common Stock in
settlement of $30,660 owed to a vendor.
In April, 1997, the Company issued a total 24,790 shares of its Common
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Stock to an employee and two officers in satisfaction of unpaid salaries of
$37,000 owed to these individuals. The market value of the shares issued in
satisfaction exceed the amounts owed by $10,433.
In April, 1997, the Company sold 100,000 units in a private placement at
$1.66 Canadian per unit ($1.20 U.S. per unit at the date of issuance). Each unit
consisted of one share of the Company's common stock and one transferable common
stock purchase warrant. The warrants were exercisable immediately, and each
warrant entitled the holder to purchase one share of common stock at a price of
$1.66 Canadian per share ($1.20 U.S. per share at the date of issuance) through
February 14, 1998 and $ 1.92 Canadian per share ($1.20 U.S. per share at the
date of issuance ) thereafter through February 14, 1999. Total proceeds from
this offering was $120,177. As of August 31, 1998 all of these warrants were
outstanding and expired in February, 1999.
In fiscal year 1996, the Company granted options to purchase 212,500
shares of is Common Stock to officers, directors, and employees of the Company,
which expired in January and May, 1998. Exercise prices ranged from $0.70 the
$1.58 Canadian per share ($0.66 to $1.16 U.S. per share at the date of grant).
Options to purchase 98,750 shares of Common Stock expired in fiscal year 1998.
In fiscal year 1997, the Company granted options to purchase 235,000
shares of Common Stock to directors and officers of the Company, which expired
in June and July 1999. Exercise prices ranged from $0.70 to $3.70 Canadian per
share ($1.02 to $2.72 U.S. per share at the date of the grant). Options to
purchase 75,000 shares were canceled in fiscal year 1997, and options to
purchase 160,000 shares were canceled in fiscal year 1998.
In fiscal year 1998, the Company granted options to purchase 50,000
shares of the Company's Common Stock to an employee of the Company which were to
expire in September 1999. The exercise price was $1.60 Canadian per share ($1.44
U.S. per share at the date of the grant). All of these options were canceled in
fiscal year 1998.
In November, 1997, the Company issued debentures totaling $125,000 to
three individuals for $100,000 cash and the retirement of a $25,000 payable to
an officer. The debentures bear interest at 10% per annum, payable quarterly and
commenced on March 1, 1998. Principal payments began on February 15, 1998 at the
greater of 10% of the original principal amount per month or 50% of the gross
proceeds received from the sale of products during each month until paid. This
offering was deemed exempt under the Section 4(2) of Securities Act of 1933. The
debentures were issued with detachable, non-transferable warrants to purchase
additional shares of the
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Company's Common Stock at one share for each $1.00 Canadian of debenture
principal amount. The warrants to purchase 87,500 post split Common Shares were
exercisable anytime for $0.80 Canadian per share through November 30, 1998, and
$0.92 Canadian per share through November 30, 1999, at which time they expire.
At the date of the transaction, this represented warrants to purchase 87,500
post-split common shares at $0.56 U.S. and $0.66 U.S. per share through these
respective dates. Of the warrants outstanding in 1999, a warrant to purchase
52,500 shares of Common Stock at $0.66 U.S. was exercised in August, 1999 and
warrants to exercise the purchase of 35,000 shares are still outstanding. As of
August 31, 1998, the debentures were in default and were subsequently satisfied.
In March, 1999, the Company in settlement of certain debentures and a
note payable and related accrued interest in the amount of $78,980, to two of
the Company's officers and directors and another individual, issued 300,000
shares of the Company's Common Stock. This offering was deemed exempt under the
Section 4(2) of Securities Act.
In March, 1999, the Company issued 57,100 shares of its Common Stock to
employees and consultants, including the Company's previous attorneys and agreed
to issued the Company's current attorney 10,000 shares of Common Stock, in
exchange for services already rendered. This offering was deemed exempt under
the Section 4(2) of Securities Act.
In March, 1999, the Company issued 280,000 shares of its Common Stock to
its officers and directors. This offering was deemed exempt under the Section
4(2) of Securities Act.
In March, 1999, the Company issued 70,000 shares of its Common Stock to
members of the Advisory Board. This offering was deemed exempt under the Section
4(2) of Securities Act.
In March, 1999, the Company issued options to purchase 400,000 shares of
its Common Stock at $0.45 per share to officers and directors. This offering was
deemed exempt under the Section 4(2) of Securities Act. These options were
immediately exercisable.
In March, 1999, the Company issued options to purchase 225,000 shares of
its Common Stock at $0.45 per share to members of the Advisory Board. This
offering was deemed exempt under the Section 4(2) of Securities Act. These
options were immediately exercisable.
In March, 1999, the Company issued options to purchase 20,000 shares
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of its Common Stock at $0.45 per share to employees/consultants. This offering
was deemed exempt under the Section 4(2) of Securities Act. These options were
immediately exercisable.
In April, 1999, the Company issued 1000 shares of its Common Stock to an
employee/consultants, in exchange for services already rendered. This offering
was deemed exempt under the Section 4(2) of Securities Act.
In May, 1999, the Company issued options to purchase 25,000 shares of
its Common Stock at $1.75 per share to a member of the Advisory Board. This
offering was deemed exempt under the Section 4(2) of Securities Act. These
options were immediately exercisable.
In May, 1999, the Company issued options to purchase 15,000 shares of
its Common Stock at $2.50 per share to an employee/consultant. This offering was
deemed exempt under the Section 4(2) of Securities Act. These options were
immediately exercisable.
In July, 1999, the Company agreed to issue 10,000 shares of its Common
Stock to a consultants, in exchange for services already rendered. This offering
was deemed exempt under the Section 4(2) of Securities Act.
In July, 1999, the Company issued 30,000 shares of its Common Stock to a
member of the Advisory Board. This offering was deemed exempt under the Section
4(2) of Securities Act.
In August, 1999, the Company agreed to issued 20,000 shares of its
Common Stock to a member of the Advisory Board. This stock has not yet been
issued and will be deemed exempt under the Section 4(2) of Securities Act.
In August, 1999, the Company issued options to purchase 50,000 shares of
its Common Stock at $3.00 per share to an officer. This offering was deemed
exempt under the Section 4(2) of Securities Act. These options were immediately
exercisable.
In October, 1999, the Company issued options to purchase 10,000 shares
of its Common Stock at $2.00 per share to a member of the Advisory Board. This
offering was deemed exempt under the Section 4(2) of Securities Act. These
options were immediately exercisable.
In October, 1999, the Company agreed to issued 15,000 shares of its
Common Stock to two members of the Advisory Board. This stock has not yet been
issued and will be deemed exempt under the Section 4(2) of Securities Act.
-54-
<PAGE> 58
In March, 1999, the Company sold 111 units at $4500 per unit in a
Regulation D, Rule 504 private placement offering to 49 investors. Each unit
consisted of 10,000 shares of Common Stock at $0.45 per share and one Warrant to
purchase 10,000 shares of Common Stock at $0.45 per share. The warrants were
exercisable at any time and expired April 1, 2001. All warrants issued were
exercised. Accordingly the Company issued 2,220,000 of its Common Stock, and
received total proceeds of $999,000.
In July, 1999, the Company sold 395 units at $10,000 per unit. Each unit
consisted of 10,000 shares of 6% convertible preferred stock and warrants to
purchase shares of Common Stock. Dividends are payable semi-annually. Each
preferred share is convertible into .666 common shares in the first year, .4
shares in the second year, and .285 shares thereafter. No preferred share can be
converted until on or after February 1, 1999. At the time of the conversion of
the Preferred Shares into Common Stock, the Series A Preferred shareholders will
receive one common share purchase warrant for each two Common Shares issued at
the time of the conversion. On and after February 1, 2000, each common share
purchase warrant will entitle the shareholder to purchase one Common Share (a
"Warrant Share") at an exercise price of $2.00 per Warrant Share from and
including February 1, 2000, up to and including July 31, 2004. The warrants
expire at the close of business July 31, 2004. This offering was deemed exempt
pursuant to Rule 506 of Regulation D and was sold to 20 investors, all of which
were accredited. The Company raised $3,950,000 in this offering.
ITEM 5. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation authorizes the Company to
indemnify its officers and directors to the full extent permitted by Delaware
law and to enter into agreements for that purpose. The Company has agreed to
enter into indemnification agreements with its officers and directors which will
provide for indemnification for all liability, damages and costs or expenses
arising from or in connection with service for, employment by, or other
affiliation with the Company to the maximum extent permitted by law. Delaware
law permits indemnification if a director or officer acts in good faith in a
manner reasonable believed to be in, or not opposed to, the best interest of the
corporation. A director or officer must be indemnified as to any matter in which
he or she successfully defends himself or herself. Indemnification is prohibited
as to any matter in which the director or officer is adjudge liable to the
corporation. The Company may advance expenses for indemnification in any
proceeding subject to the condition that if, when and to the extent that a final
judicial determination is made to the effect that the officer or director is not
permitted to be so indemnified under applicable law, the Company will be
entitled to be reimbursed for all
-55-
<PAGE> 59
amounts previously advance for such expenses.
The Company does not currently have, but reserves the right to purchase
and maintain, directors and officers insurance insuring its directors and
officers against any liability arising out of their status as such, regardless
of whether the Company has the power to indemnify such persons against such
liability under applicable law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Section 102 (b)(7) of the Delaware General Corporation Law, as enacted
on July 1, 1986 and subsequently amended, states that a Delaware corporation's
certificate of incorporation may include provisions to the effect that directors
of the Company shall not be personally liable to the Company or its shareholders
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 Company or
its shareholders, (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, relating to prohibited dividends or
distributions or the repurchase or redemption of stock, or (iv) for any
transaction from which the director derives and improper personal benefit. The
Company's certificate of incorporation includes provisions of the type permitted
by Section 102(b)(7).
PART F/S:
-56-
<PAGE> 60
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
FINANCIAL STATEMENTS
(UNAUDITED)
AS OF JUNE 30, 1999 AND 1998 AND
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
<PAGE> 61
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
INDEX TO THE FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Accountants' Disclaimer Opinion ..............................................1
Financial Statements for AcuBid.Com Inc. (Unaudited):
Balance Sheet, June 30, 1999 and 1998 ...................................2
Statements of Operations
For the Ten Month Periods Ended June 30, 1999 and 1998 ...............3
Statements of Shareholders' Equity
For the Ten Month Periods Ended June 30, 1999 and 1998 ...............4
Statements of Cash Flows
For the Ten Month Periods Ended June 30, 1999 and 1998 ...............5
Notes to the Financial Statements (Unaudited) ................................7
</TABLE>
<PAGE> 62
Accountants' Disclaimer Report
To the Board of Directors of
AcuBid.Com, Inc.
The accompanying balance sheet of AcuBid.Com, Inc. (formerly International
AcuVision Systems, Inc.) (the "Company") as of June 30, 1999, and the related
statements of operations, shareholders' equity, and cash flows for the ten month
periods ended May 31, 1999 and 1998, were not audited by us and, accordingly, we
do not express an opinion on them.
/S/ Kelly & Company
- --------------------------
Kelly & Company
Newport Beach, California
August 6, 1999
<PAGE> 63
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
BALANCE SHEETS
(UNAUDITED)
JUNE 30, 1999
ASSETS
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
Current assets:
Cash $ 807,471
Accounts receivable, net of allowance
for doubtful accounts 25
Inventory 81,136
Prepaid expenses and deposits 6,444
-----------
Total current assets 895,076
Property and equipment, net of accumulated depreciation 80,296
-----------
TOTAL ASSETS $ 975,372
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,316
Accrued liabilities 41,378
Capital lease payable 5,733
Due to related parties 31,913
TOTAL CURRENT LIABILITIES 126,340
-----------
Commitments and contingencies
Shareholders' equity:
Common stock; par value of $0.001 per share;
50,000,000 shares authorized, 5,629,901 and
2,639,301 shares issued and outstanding at
periods ended June 30, 1998 and 1997 5,631
Additional paid-in capital 8,829,667
Accumulated deficit (7,986,266)
-----------
TOTAL SHAREHOLDERS' EQUITY 849,032
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 975,372
===========
</TABLE>
The accompanying footnotes are an integral part of the financial statements.
See accountants' disclaimer report.
2
<PAGE> 64
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF OPERATIONS
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net sales -- $ 158,135
Cost of sales $ 320 104,465
----------- -----------
Gross profit (320) 53,670
----------- -----------
Operating costs and expenses:
Selling, general and administrative 177,085 265,021
Depreciation 463 6,034
----------- -----------
Total operating costs and expenses 177,548 271,055
----------- -----------
Loss from operations (177,868) (217,385)
Other expenses (925,110) 749
----------- -----------
Loss before provision for income
taxes and extraordinary item (1,102,978) (218,134)
Provision for income taxes (800) (800)
Extraordinary gain on settlement of debt 72,745 --
----------- -----------
NET LOSS $(1,031,033) $ (218,934)
=========== ===========
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.28) $ (0.08)
=========== ===========
</TABLE>
The accompanying footnotes are an integral part of the financial statements.
See accountants' disclaimer report.
3
<PAGE> 65
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Common Common Paid-in Accumulated
Shares Stock Capital Deficit Total
--------- ------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, AUGUST 31, 1998 2,639,301 2,640 6,734,352 (6,955,233) (218,241)
Shares issued for services rendered 416,000 416 186,784 -- 187,200
Sale of stock in private placement offering 1,100,000 1,100 498,400 -- 499,500
Exercise of stock purchase warrants 1,052,500 1,053 526,481 -- 527,534
Exercise of stock options 100,000 100 44,900 -- 45,000
Shares issued in satisfaction of debt 322,100 322 149,050 -- 149,372
Options granted on common stock to employees
and directors for services -- -- 689,700 -- 689,700
Net loss -- -- -- (1,031,033) (1,031,033)
--------- ------- ---------- ----------- ---------
BALANCE, JUNE 30, 1999 5,629,901 $ 5,631 $8,829,667 $(7,986,266) $849,032
========= ======= ========== =========== =========
</TABLE>
The accompanying footnotes are an integral part of the financial statements.
See accountants' disclaimer report.
4
<PAGE> 66
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF CASH FLOWS
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,031,033) $ (218,934)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 463 6,035
Uncollectable accounts -- --
Amortization of debt discount 7,588 10,626
Shares issued for services 187,200 --
Value of stock options issued for services 689,700 --
Extraordinary gain on settlement of debt (72,745) --
Debt settlement expense 56,015 --
Decrease (increase) in assets:
Accounts receivable 11,540 1,943
Inventory (71,337) 65,547
Prepaid expenses and deposits (4,930) 6,459
Increase (decrease) in liabilities:
Accounts payable (33,137) 4,489
Accrued liabilities 10,157 (11,086)
Due to related parties 18,123 27,090
----------- -----------
CASH USED IN OPERATING ACTIVITIES (232,396) (107,831)
----------- -----------
Cash flows used in investing activities:
Purchase of property and equipment (42,035) --
----------- -----------
CASH USED IN INVESTING ACTIVITIES (42,035) --
----------- -----------
Cash flows provided by (used in) financing activities:
Proceeds from debentures to shareholders -- 100,000
Payment on debentures to shareholders -- (7,500)
Proceeds from exercise of warrants 527,531 --
Proceeds from exercise of options 45,000 --
Proceeds from issuance of stock - private placement 499,500 --
----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES 1,072,031 92,500
----------- -----------
NET INCREASE (DECREASE) IN CASH 797,600 (15,331)
CASH AT BEGINNING OF PERIOD 9,871 62,134
----------- -----------
CASH AT END OF PERIOD $ 807,471 $ 46,803
=========== ===========
</TABLE>
The accompanying footnotes are an integral part of the financial statements.
See accountants' disclaimer report.
5
<PAGE> 67
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF CASH FLOWS
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Cash paid during the period for:
Interest $ -- $ 1,250
Income taxes $ -- $ 1,330
Supplemental Schedule of Non-Cash Investing and Financing Activities
Assets purchased:
Assets $ 38,945 $
Liabilities incurred $(38,945) $
Common shares issued for settlement of debt:
Accounts payable $ 18,357 $ --
Debenture payable to officer $ 25,000 $ --
Debenture payable to shareholder $ 50,000 $ --
Common stock $ (322) $ --
Additional paid-in capital $(93,035) $ --
</TABLE>
The accompanying footnotes are an integral part of the financial statements.
See accountants' disclaimer report.
6
<PAGE> 68
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments, consisting of only normal
recurring adjustments, except as noted elsewhere in the notes to the
condensed financial statements, necessary to present fairly its financial
position as of June 30, 1999 and the results of its operations and cash
flows for the ten months ended June 30, 1999 and 1998. These statements are
condensed and therefore do not include all of the information and footnotes
required by generally accepted accounting principals for complete financial
statements. The statements should be read in conjunction with the
consolidated financial statements and footnotes included in the Company's
Annual Report for the year ended August 31, 1998. The results of operations
for the ten months ended June 30, 1999 are not necessarily indicative of
the results to be expected for the full year.
2. DESCRIPTION OF COMPANY'S BUSINESS
AcuBid.Com Inc. (the "Company") was formed in Canada in 1983. It was
subsequently incorporated under the laws of the State of Delaware on
September 15, 1993. The Company is in the business of developing, marketing
and selling vision training equipment. The Company owns a patent regarding
the above equipment and software and has expensed all costs in developing
the patent and prototypes. In March 1999, the Company changed its name from
International AcuVision Systems, Inc. to AcuBid.Com Inc. and expanded its
business objective to include the development of a premier website to
facilitate the buying and selling of high end collectibles. The Company
will maintain an inventory of rare and hard to find items, which it will
auction to the public over its website. In addition, the Company intends to
act as a broker to provide a venue for sellers and dealers to display their
collectibles to potential purchasers throughout the world via the
AcuBid.Com website.
3. DUE TO RELATED PARTIES
During the ten month period ended June 30, 1998, the Company rented office
space and utilized administrative services from an entity owned by two
officers of the Company. Total rent and administrative expense charged to
the Company was $1,300 for the ten month periods ended June 30, 1998. In
January 1999, the Company moved its offices. No rent or administrative
expenses were charged to the Company for the four months prior to
relocation.
See accountants' disclaimer report.
7
<PAGE> 69
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
4. DEBENTURES PAYABLE
In November 1997, the Company issued debentures totalling $125,000 to three
individuals for $100,000 in cash and the retirement of a $25,000 note
payable to an officer. The debentures bear interest at 10% per annum,
payable quarterly commencing on March 1, 1998. Principal payments began on
February 15, 1998 at the greater of 10% of the original principal amount
per month or 50% of the gross proceeds received from the sale of products
during each month until paid.
The debentures were issued with detachable, non-transferable warrants to
purchase additional shares of the Company's common stock at one share for
each $1.00 Canadian of the principal amount. The warrants were exercisable
anytime at $0.40 Canadian per share through November 30, 1998, and $0.46
Canadian per share through November 30, 1999, at which time they expire. At
the date of the transaction, this represented warrants to purchase 87,500
post-split common shares at $0.56 U.S. and $0.66 U.S. per share through
these respective dates. The proceeds from the issuance of the debentures
were allocated between the fair value of the debentures and the fair value
of the warrants, and a related discount of $26,250 was recognized. The
discount is amortized on an effective interest method over the life of the
debentures. The unamortized discount at June 30, 1998 was $10,624.
In March 1999, the Company retired two of the debentures and related
accrued interest totalling approximately $78,980 for the issuance of
200,000 shares of its common stock. The remaining debenture with a
principal balance of $67,500 was forgiven by the debenture holder and an
extraordinary gain of $72,745, consisting of principal plus accrued
interest, was recognized.
5. NOTE PAYABLE TO SHAREHOLDER
Note payable to a shareholder for $25,000, with an interest rate of 10% per
annum, was collateralized by all assets of the Company, with interest
payable semiannually, due July 25, 1998. In March 1999, the note payable
and related accrued interest totalling approximately $26,417, was retired
for the issuance of 100,000 shares of the Company's common stock.
Interest expense for the ten month periods ended June 30, 1999 and 1998 was
$13,043 and $12,953, respectively.
See accountants' disclaimer report.
8
<PAGE> 70
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
6. COMMITMENTS
Product License Agreement
In June 1996, the Company entered into a Product License Agreement with
Bausch & Lomb B.V., Corporation ("Bausch & Lomb"), which granted the
Company an exclusive license to manufacture and sell Eye Hand and Eye Foot
Reaction Measurement Software and Hardware. As consideration, the Company
is to pay Bausch & Lomb royalties based on a percentage of net sales
ranging from 8% for the first million dollars in sales to 5% of any sales
above three million dollars. The initial term of this agreement terminates
in May 2006 and is automatically extended in one-year increments. Royalty
expenses of $2,492 and $2,438 were recognized in fiscal years 1998 and
1997, respectively. There are no minimum product license fees due under
this agreement.
7. STOCK-BASED COMPENSATION
Stock Options
The Company granted options to purchase shares of its common stock as
indicated below. The options were fully vested on the dates of grant and
the exercise prices were equal to the market prices of the Company's stock
at the grant dates. The maximum term of each option was two years from the
date of grant and provided that upon termination of employment or service
as a director, the option would be immediately cancelled.
In March 1999, the Company granted options to purchase 645,000 shares of
the Company's common stock to employees and directors of the Company, which
expire in March 2001. The exercise price was $0.45 per share.
See accountants' disclaimer report.
9
<PAGE> 71
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
7. STOCK-BASED COMPENSATION, CONTINUED
Stock Options, Continued
The following summarizes information about stock options granted and
outstanding at June 30, 1999, and 1998, and changes during the ten month
periods then ended.
<TABLE>
<CAPTION>
For the Period Ended For the Period Ended
June 30, 1999 June 30, 1998
-------------------- ---------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at August 31, 1998 -- -- 258,750 $0.90
Granted 645,000 0.45 50,000 0.26
Exercised 100,000 0.45 -- --
Cancelled/expired -- -- (98,750) 0.76
------- ---- ------- -----
Outstanding at end of period 545,000 -- 210,000 $1.07
======= ==== ======= =====
</TABLE>
The weighted average assumptions used to calculate the fair values of the
stock options granted in 1999 and 1998 are:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Dividend yield 0% 0%
Risk free interest rate 4.74% 5.57%
Fair value 1.26 0.76
Expected contractual life 2 years 2 years
</TABLE>
SFAS No. 123, Accounting for Stock-Based Compensation, requires the use of
option valuation models to provide supplemental information regarding
options granted after 1994. Pro forma information regarding net income and
earnings per share shown below was determined as if the Company had
accounted for its employee stock options under the fair value method of
that statement.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting periods. The pro forma
effect on net loss for 1999 and 1998 may not be representative of the
actual results had the Company accounted for the stock options using the
fair value method.
See accountants' disclaimer report.
10
<PAGE> 72
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
7. STOCK-BASED COMPENSATION, CONTINUED
Stock Options, Continued
<TABLE>
<CAPTION>
1999 1998
------------ ---------
<S> <C> <C>
Net loss, as reported $(1,031,033) (218,134)
Pro forma net loss $ 1,153,232 (218,134)
Basic loss per share, as reported $ (0.28) (0.08)
Pro forma basic loss per share $ (0.31) (0.08)
</TABLE>
Warrants
In November 1997, the Company issued debentures with detachable,
non-transferrable warrants to purchase 87,500 shares of its common stock
(Note 4). These warrants were immediately exercisable on issuance and
expire in November 1999.
The following summarizes information about warrants granted and outstanding
at June 30, 1999 and 1998, and changes during the ten month periods then
ended.
<TABLE>
<CAPTION>
For the Period Ended For the Period Ended
June 30, 1999 June 30, 1998
---------------------- -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Warrants Price Warrants Price
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 187,500 $1.74 187,500 $1.74
Granted -- -- -- --
Exercised (52,500) 0.84 -- --
Cancelled/forfeited (100,000) 1.18 -- --
-------- -------- -------- --------
Outstanding at end of period 35,000 $0.56 187,500 $1.74
======== ======== ======== ========
</TABLE>
See accountants' disclaimer report.
11
<PAGE> 73
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
8. LOSS PER SHARE
The computations of net loss per common share for the ten month periods
ended June 30, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net loss available to common stockholders:
Loss before extraordinary gain $(1,103,778) $ (218,134)
Extraordinary gain 72,745 --
----------- -----------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $(1,031,033) $ (218,134)
=========== ===========
WEIGHTED-AVERAGE SHARES OUTSTANDING 3,652,262 2,639,301
=========== ===========
Basic and diluted loss per common share:
Loss before extraordinary gain $ (0.30) $ (0.08)
Extraordinary gain 0.02 --
----------- -----------
NET LOSS $ (0.28) $ (0.08)
=========== ===========
</TABLE>
The effect of the potentially dilutive securities listed below were not
included in the computation of diluted loss per share, because to do so
would have been antidilutive for the period presented.
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Shares of common stock issuable under:
Employee stock options 545,000 210,000
Common stock purchase warrants 35,000 100,000
</TABLE>
See accountants' disclaimer report.
12
<PAGE> 74
ACUBID.COM INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
FOR THE TEN MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
9. YEAR 2000 DISCLOSURE
The Company has conducted a comprehensive review of its computer operations
to identify the systems that could be adversely affected by the Year 2000
Issue and has developed and implemented a plan that it believes has
resolved the issue. The Year 2000 Issue is a result of computer programs
being written using two digits rather than four to define the applicable
year. Any of the Company's programs that have time-sensitive software might
have recognized a date using "00" as the year 1900 rather than the year
2000. This could have resulted in a major system failure or
miscalculations. The Company presently believes that, with modifications
already made to existing software and conversion to new software, the Year
2000 problem will not pose significant operations problems for the
Company's computer systems as so modified and converted.
10. SUBSEQUENT EVENT
In July 1999, the Company initiated a private placement to sell 400 units
at $10,000 per unit. Each unit consists of 10,000 shares of 6% convertible
preferred stock and warrants to purchase 5,000 shares of its common stock.
Dividends are payable semi-annually. Each preferred share is convertible
into .666 common shares in the first year, .4 shares in the second year,
and .285 shares thereafter. No preferred shares can utilize the conversion
feature until six months after the offering has been concluded. The
warrants to purchase common shares are exercisable at $2.00 per share in
the first year and $3.00 per share thereafter. The warrants expire five
years from the date of issue. In the event the Company files an initial
public offering of its shares, the preferred shares automatically convert
and along with the warrants, will have piggyback registration rights. The
Company has raised approximately $3.5 million from this offering.
See accountants' disclaimer report.
13
<PAGE> 75
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
FINANCIAL STATEMENTS
AS OF AUGUST 31, 1998 AND
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<PAGE> 76
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
INDEX TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<S> <C>
Report of Independent Auditors......................................................... 1
Financial Statements for AcuBid.Com Inc.
(formerly International AcuVision Systems, Inc.:
Balance Sheet, August 31, 1998................................................. 2
Statements of Operations
For the Years Ended August 31, 1998 and 1997................................ 3
Statements of Shareholders' Equity
For the Years Ended August 31, 1998 and 1997................................ 4
Statements of Cash Flows
For the Years Ended August 31, 1998 and 1997................................ 5
Notes to the Financial Statements.............................................. 7
</TABLE>
<PAGE> 77
[KELLY & COMPANY LETTERHEAD]
Report of Independent Auditors
To the Board of Directors and Stockholders
AcuBid.Com Inc. (formerly International AcuVision Systems, Inc.)
We have audited the accompanying balance sheet of AcuBid.Com Inc. (a Delaware
corporation)(formerly International AcuVision Systems, Inc.) as of August 31,
1998, and the related statements of operations, shareholders' equity, and cash
flows for the years ended August 31, 1998 and 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AcuBid.Com Inc. as of August
31, 1998, and the results of its operations and its cash flows for each of the
two years ended August 31, 1998 and 1997 in conformity with generally accepted
accounting principles.
/s/ KELLY & COMPANY
- -----------------------------------
Kelly & Company
Newport Beach, California
August 12, 1999
<PAGE> 78
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
BALANCE SHEET
AUGUST 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 9,870
Accounts receivable, net of allowance for
doubtful accounts of $4,650 11,565
Inventory 4,778
Prepaid expenses and deposits 1,514
-----------
Total current assets 27,727
Property and equipment, net of accumulated depreciation 4,799
-----------
TOTAL ASSETS $ 32,526
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 57,186
Accrued liabilities 44,877
Due to related parties 13,790
Debenture payable to officer 23,482
Debentures payable to shareholders 86,431
Note payable to shareholder 25,000
-----------
TOTAL CURRENT LIABILITIES 250,766
Commitments and contingencies
Shareholders' deficit:
Common stock; par value of $0.001 per share;
50,000,000 shares authorized, 2,639,301
shares issued and outstanding 2,640
Additional paid-in capital 6,734,353
Accumulated deficit (6,955,233)
-----------
TOTAL SHAREHOLDERS' DEFICIT (218,240)
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 32,526
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 79
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Sales $ 157,140 $ 176,201
Cost of sales 117,881 92,809
--------- ---------
Gross profit 39,259 83,392
--------- ---------
Operating costs and expenses:
Selling, general and administrative 273,157 253,876
Depreciation 6,960 3,895
--------- ---------
Total operating costs and expenses 280,117 257,771
--------- ---------
Loss from operations (240,858) (174,379)
Other expenses 31,641 629
--------- ---------
Loss before provision for income taxes and
extraordinary item (272,499) (175,008)
Provision for income taxes (800) (5,530)
Extraordinary gain on settlement of debt -- 51,051
--------- ---------
NET LOSS $(273,299) $(129,487)
========= =========
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.10) $ (0.05)
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 80
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, AUGUST 31, 1996 2,280,761 $ 2,281 $ 6,384,254 $(6,552,447) $ (165,912)
Exercise of stock purchase warrants 100,000 100 51,028 -- 51,128
Exercise of stock options 113,750 114 79,696 -- 79,810
Shares issued in satisfaction of debt 44,790 45 78,048 -- 78,093
Sale of stock in private placement offering 100,000 100 120,077 -- 120,177
Net loss -- -- -- (129,487) (129,487)
----------- ----------- ----------- ----------- -----------
BALANCE, AUGUST 31, 1997 2,639,301 2,640 6,713,103 (6,681,934) 33,809
Issuance of detachable stock purchase
warrants -- -- 21,250 -- 21,250
Net loss -- -- -- (273,299) (273,299)
----------- ----------- ----------- ----------- -----------
BALANCE, AUGUST 31, 1998 2,639,301 $ 2,640 $ 6,734,353 $(6,955,233) $ (218,240)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 81
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(273,299) $(129,487)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 6,960 3,895
Inventory obsolescence 16,241 --
Uncollectable accounts receivable 3,765 885
Amortization of debt discount 13,662 --
Shares issued for compensation -- 10,443
Extraordinary gain on settlement of debt -- (51,051)
Decrease (increase) in assets:
Accounts receivable 8,686 (12,916)
Inventory 59,016 (71,255)
Prepaid expenses and deposits 6,459 39,795
Increase (decrease) in liabilities:
Accounts payable (22,608) 10,564
Accrued liabilities 19,954 5,410
Due to related parties 16,400 (8,595)
--------- ---------
CASH USED IN OPERATING ACTIVITIES (144,764) (202,312)
--------- ---------
Cash flows used in investing activities:
Purchase of property and equipment -- (4,356)
--------- ---------
CASH USED IN INVESTING ACTIVITIES -- (4,356)
--------- ---------
Cash flows provided by (used in) financing activities:
Proceeds from notes payable from related parties 100,000 --
Payment on note payable from related party (7,500) --
Proceeds from exercise of warrants -- 51,128
Proceeds from exercise of options -- 79,811
Proceeds from issuance of stock - private placement -- 120,177
--------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES 92,500 251,116
--------- ---------
Net increase (decrease) in cash (52,264) 44,448
CASH AT BEGINNING OF PERIOD 62,134 17,686
--------- ---------
CASH AT END OF PERIOD $ 9,870 $ 62,134
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 82
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
Supplemental Disclosure of Cash Flow Information
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash paid during the year for:
Interest $ 12,253 $ 6,846
Income taxes $ 800 $ 5,530
Supplemental Schedule of Non-Cash Investing and Financing Activities
Common shares issued for settlement of debt:
Accounts payable -- $ 30,660
Salaries payable -- $ 37,000
Common stock -- $ (45)
Additional paid-in capital -- $(67,615)
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 83
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
1. DESCRIPTION OF COMPANY'S BUSINESS
AcuBid.Com Inc. (formerly International AcuVision Systems, Inc.) (the
"Company") was formed in Canada in 1983. It was subsequently
incorporated under the laws of the state of Delaware In September 1993.
The Company is in the business of developing, marketing and selling
vision training equipment. The Company owns a patent regarding the above
equipment and software and has expensed all costs in developing the
patent and prototypes. Subsequent to year-end the Company changed its
name from International AcuVision Systems, Inc. to AcuBid.Com Inc. and
expanded its business objective to include the development of a premier
website to facilitate the buying and selling of high-end collectibles.
The Company will maintain an inventory of rare and hard to find items,
which it will auction to the public over its website. In addition, the
Company intends to act as a broker to provide a venue for sellers and
dealers to display their collectibles to potential purchasers throughout
the world via the AcuBid.Com website.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenues are recognized when the Company's products are shipped.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid investments
with original maturities of three months or less. The Company has no
requirements for compensating balances. The Company did not have cash
balances that exceeded the federally insured limits at August 31, 1998.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade accounts
receivable. Exposure to losses on accounts receivable is principally
dependent on the individual customer's financial condition, as credit
sales are not collateralized. The Company monitors its exposure to
credit losses and writes off those accounts receivable that it deems to
be uncollectable. The Company had one customer, which accounted for 46%
of the Company's sales for the year ended August 31, 1998, totalling
$71,796. No single customer accounted for more than 10% of revenues for
the year ended August 31, 1997.
7
<PAGE> 84
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Inventory
The inventory is stated at the lower of cost or market. Inventory cost
is determined by using the first in, first out method. Substantially all
inventory consists of finished goods held for sale. The Company's
management monitors inventory for excess and obsolete items and makes
necessary valuation adjustments when required.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using
the straight-line method over the expected lives, which range from three
to five years. Expenditures for normal maintenance and repairs are
charged to operations. Renewals and betterments that materially extend
the life of the assets are capitalized.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for potential impairment
whenever circumstances indicate that the carrying amount of an asset is
not recoverable. The estimated undiscounted cash flows associated with
the assets are compared to the carrying amounts to determine if a
writedown to fair value is required. The Company has determined that
there was no such impairment present at August 31, 1998.
Income Taxes
The Company accounts for income taxes using the liability method. Under
this method deferred income tax liabilities and assets are computed
based on the tax liability or benefit in future years of the reversal of
temporary differences in the recognition of income or deduction of
expenses between financial and tax reporting. Deferred tax assets and/or
liabilities are classified as current and noncurrent based on the
classification of the related asset or liability for financial reporting
purposes, or based on the expected reversal date for deferred taxes that
are not related to an asset or liability. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Disclosure about Fair Value of Financial Instruments
The Company accounts for the value of financial instruments using the
fair value method.
8
<PAGE> 85
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Foreign Currency Translation
The majority of the Company's assets and operations are situated in the
state of California, and therefore the financial statements have been
prepared in U. S. dollars. Monetary assets and liabilities expressed in
Canadian currency are translated at the exchange rate at the end of the
year. All other assets and liabilities are translated at the rate
prevailing at the dates the assets were acquired or the liabilities were
incurred. Revenue and expenses are translated at the average exchange
rate for the year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, established accounting and disclosure
requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. SFAS No. 123 allows the use of
Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock
Issued to Employees, which is the intrinsic value method of accounting
as described below, for options granted to employees, provided the pro
forma disclosure requirements of SFAS No. 123 are adopted.
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in APB No. 25. Compensation cost for stock
options granted employees, if any, is measured as the excess of the
quoted market price of the Company's stock at the date of grant over the
amount an employee must pay to acquire the stock. Restricted stock is
recorded as compensation cost over the requisite vesting periods based
on the market value on the date of grant.
9
<PAGE> 86
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Common Shares and Per Share Amounts
In March 1999, The Company effected a one-for-two reverse stock split.
All common shares and per share amounts have been adjusted to give
effect to that stock split.
Loss per Common Share
The Company adopted the Financial Accounting Standards Board SFAS No.
128, Earnings Per Share. This pronouncement replaced the previously
reported primary and fully dilutive earnings per share with basic and
diluted earnings per share. Loss per common share has been calculated in
accordance with the requirements of this statement for the years ended
August 31, 1998 and 1997.
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding
for the year. Diluted earnings per share reflects the potential dilution
that could occur if diluted securities and other contracts to issue
common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the Company's
earnings. Diluted loss per share does not consider the potentially
dilutive securities on an "as if converted" basis, as the effect of
their inclusion would be anti-dilutive.
Advertising Costs
Advertising costs are charged to operations as they are incurred.
Advertising expense was $12,725 and $33,292 for the years ended
August 31, 1998 and 1997, respectively.
10
<PAGE> 87
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1998
--------
<S> <C>
Computer equipment $ 3,000
Furniture 2,215
Office equipment 18,907
--------
Total property and equipment 24,122
Less: accumulated depreciation (19,323)
--------
PROPERTY AND EQUIPMENT, NET $ 4,799
========
</TABLE>
Depreciation expense for the years ended August 31, 1998 and 1997 was
$6,960 and $3,895, respectively.
4. DUE TO RELATED PARTIES
The Company rents office space and utilizes administrative services from
an entity owned by two officers of the Company. In addition, the Company
received advances of $8,000 from the entity during fiscal year 1998.
Total related party rent and administrative expenses charged to the
Company was $8,400 and $5,010 for the fiscal years ended August 31, 1998
and 1997, respectively.
5. DEBENTURES PAYABLE
In November 1997, the Company issued debentures totaling $125,000 to
three individuals for $100,000 in cash and the retirement of a $25,000
note payable to an officer. The debentures bear interest at 10% per
annum, payable quarterly and commenced on March 1, 1998. Principal
payments began on February 15, 1998 at the greater of 10% of the
original principal amount per month or 50% of the gross proceeds
received from the sale of products during each month until paid.
11
<PAGE> 88
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
5. DEBENTURES PAYABLE, CONTINUED
The debentures were issued with detachable, non-transferable warrants to
purchase additional shares of the Company's common stock at one share
for each $1.00 Canadian of debenture principal amount. The warrants
were exercisable anytime at $0.40 Canadian per share through November
30, 1998, and $0.46 Canadian per share through November 30, 1999, at
which time they expire. At the date of the transaction, this represented
warrants to purchase 87,500 post-split common shares at $0.56 U.S. and
$0.66 U.S. per share through these respective dates. The proceeds from
the issuance of the debentures were allocated between the fair value of
the debentures and the fair value of the warrants, and a related
discount of $21,250 was recognized. The discount is amortized on an
effective interest method over the life of the debentures. The
unamortized discount at August 31, 1998 was $7,588. These debentures
were in default at August 31, 1998, and were satisfied subsequent to
year-end (Note 15).
<TABLE>
<CAPTION>
1998
--------
<S> <C>
Debentures payable to officer, net of
unamortized discount of $1,518 $ 23,482
Debentures payable to shareholders, net of
unamortized discount of $6,070 86,431
--------
TOTAL DEBENTURES $109,913
========
</TABLE>
6. NOTE PAYABLE TO SHAREHOLDER
<TABLE>
<CAPTION>
1998
--------
<S> <C>
Note payable to a shareholder, with an interest
rate of 10% per annum, collateralized by all
assets of the Company, with interest payable
semiannually, due July 25, 1998. This note was
in default at August 31, 1998, and was satisfied
subsequent to year-end (Note 15) $ 25,000
========
</TABLE>
Interest expense for the years ended August 31, 1998, and 1997 was
$25,915 and $6,846, respectively.
12
<PAGE> 89
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
7. DEFERRED INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
For the Years
Ended August 31,
--------------------
1998 1997
------ ------
<S> <C> <C>
Current income tax expense:
Federal -- --
State $ 800 $5,530
------ ------
800 5,530
Deferred income tax expense (benefit):
Federal -- --
State -- --
------ ------
TOTAL PROVISION FOR INCOME TAXES $ 800 $5,530
====== ======
</TABLE>
Significant components of the Company's deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
August 31,
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforward $ 306,464 $ 192,789
Allowance for doubtful accounts 1,992 379
Other 272 272
--------- ---------
TOTAL DEFERRED INCOME TAX ASSET 308,728 193,440
Valuation allowance (308,728) (193,440)
--------- ---------
NET DEFERRED INCOME TAX ASSET -- --
========= =========
</TABLE>
13
<PAGE> 90
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
7. DEFERRED INCOME TAXES, CONTINUED
Reconciliation of effective tax rate to the U.S. statutory rate is as
follows:
<TABLE>
<CAPTION>
For the Years
Ended August 31,
----------------------
1998 1997
------ ------
<S> <C> <C>
Tax expense at U.S. statutory rate (34.0)% (34.0)%
State tax provision 0.3 4.5
Change in valuation allowance 34.0 34.0
------ ------
EFFECTIVE INCOME TAX RATE 0.3% 4.5%
====== ======
</TABLE>
The Company also has federal and state net operating loss carryforwards
of $737,632 and $629,742, respectively. The federal and state net
operating loss carryforwards will begin to expire in the years 2009 and
1999, respectively. A significant portion of prior period net operating
losses were not related to United States tax jurisdiction as the Company
was a foreign corporation through 1993.
8. COMMITMENTS AND CONTINGENCIES
Product License Agreement
In June 1996, the Company entered into a Product License Agreement with
Bausch & Lomb B.V., Corporation ("Bausch & Lomb"), which granted the
Company an exclusive license to manufacture and sell Eye Hand and Eye
Foot Reaction Measurement Software and Hardware. As consideration, the
Company was to pay Bausch & Lomb royalties based on a percentage of net
sales ranging from 8% for the first million dollars in sales to 5% of
any sales above three million dollars. The initial term of this
agreement terminates in May 2006 and is automatically extended in
one-year increments. Royalty expenses of $2,492 and $2,438 related to
this agreement were recognized in fiscal years 1998 and 1997,
respectively. There are no minimum product license fees due under this
agreement.
9. EXTRAORDINARY GAIN ON SETTLEMENT OF DEBT
In fiscal year 1997, the Company settled certain liabilities with
vendors totaling $74,044 for cash payments of $22,394 and delivery of
Company-owned inventory with a cost of $599, and thereby recognized a
$51,051 extraordinary gain on settlement.
14
<PAGE> 91
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
10. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts of all financial instruments have been
determined by the Company using available market information and
appropriate valuation methodologies. Fair value is described as the
amount at which the instrument could be exchanged in a current
transaction between informed willing parties, other than in a forced
liquidation. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated
fair value amounts. The Company is not a party to any derivative
instruments. The Company does not have any off balance sheet financial
instruments.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
Cash and equivalents, accounts receivable, inventory, other current
assets, accounts payable, current portion of note payable, and certain
other current liability amounts are reported in the balance sheet at
approximate fair value due to the short term maturities of these
instruments.
11. COMMON STOCK TRANSACTIONS
Common Shares Issued for Warrants and Options Exercised
In connection with a private placement in fiscal year 1996, the Company
sold 100,000 shares of its common stock with non-transferable warrants
to purchase an additional 100,000 shares any time through January 15,
1997 at an exercise price of $0.70 Canadian per share ($0.52 U.S. at the
date of issuance). In January 1997, prior to expiration, the warrants to
purchase 100,000 shares were exercised, and the Company realized
proceeds of $51,128.
During fiscal year 1997, options to purchase of 113,750 shares of common
stock were exercised, from which the Company realized $79,810.
Common Shares issued for Settlement of Debt
In April 1997, the Company issued 20,000 shares of its common stock in
settlement of $30,660 owed to a vendor. The market value of the shares
issued approximated the amount of the liabilities at the settlement
date.
15
<PAGE> 92
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
11. COMMON STOCK TRANSACTIONS, CONTINUED
Common Shares issued for Settlement of Debt, Continued
In April 1997 the Company issued a total of 24,790 shares of its common
stock to an employee and two officers in satisfaction of unpaid salaries
of $37,000 owed to these individuals. The market value of the shares
issued in satisfaction exceeded the amounts owed by $10,433, which was
recognized by the Company as compensation expense at the settlement
date.
Private Placement Offering
In April 1997, the Company sold 100,000 units in a private placement at
$1.66 Canadian per unit ($1.20 U.S. per unit at the date of issuance).
Each unit consisted of one share of the Company's common stock and one
non-transferable common stock purchase warrant. The warrants were
exercisable immediately, and each warrant entitled the holder to
purchase one share of common stock at a price of $1.66 Canadian per
share ($1.20 U.S. per share at the date of issuance) through February
14, 1998 and $1.92 Canadian per share ($1.20 U.S. per share at the date
of issuance) thereafter through February 14, 1999. Total proceeds from
the offering were $120,177.
12. STOCK-BASED COMPENSATION
Stock Options
The Company granted options to purchase shares of its common stock as
indicated below. The options were fully vested on the dates of grant and
the exercise prices were equal to the market prices of the Company's
stock at the grant dates. The maximum term of each option was two years
from the date of grant and provided that upon termination of employment
or service as a director, the option would be immediately cancelled.
In fiscal year 1996, the Company granted options to purchase 212,500
shares of its common stock to officers, directors, and employees of the
Company, which expired in January and May 1998. Exercise prices ranged
from $0.70 to $1.58 Canadian per share ($0.66 to $1.16 U.S. per share at
the date of grant). Options to purchase 113,750 shares of its common
stock were exercised in fiscal year 1997 and options to purchase 98,750
shares of its common stock expired in fiscal year 1998.
16
<PAGE> 93
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
12. STOCK-BASED COMPENSATION, CONTINUED
Stock Options, Continued
In fiscal year 1997, the Company granted options to purchase 235,000
shares of the Company's common stock to directors and officers of the
Company, which expired in June and July 1999. Exercise prices ranged
from $0.70 to $3.70 Canadian per share ($1.02 to $2.72 U.S. per share at
the date of grant). Options to purchase 75,000 shares were cancelled in
fiscal year 1997, and options to purchase 160,000 shares were cancelled
in fiscal year 1998.
In fiscal year 1998, the Company granted options to purchase 50,000
shares of the Company's common stock to an employee of the Company,
which expire in September 1999. The exercise price was $1.60 Canadian
per share ($1.44 U.S. per share at the date of grant). All of these
options were cancelled in fiscal year 1998.
The following summarizes information about stock options granted and
outstanding at August 31, 1998, and 1997, and changes during the years
then ended.
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
August 31, 1998 August 31, 1997
---------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 258,750 $0.90 212,500 $0.60
Granted 50,000 0.26 235,000 1.36
Exercised -- -- (113,750) (0.32)
Cancelled/expired (308,750) (1.16) (75,000) (0.57)
-------- ----- -------- -----
Outstanding at end of year -- -- 258,750 $1.07
======== ===== ======== =====
</TABLE>
The weighted average assumptions used to calculate the fair values of
the stock options granted in 1998 and 1997 are:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Dividend yield 0% 0%
Risk free interest rate 5.57% 5.65%
Expected contractual life 2 years 2 years
</TABLE>
17
<PAGE> 94
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
12. STOCK-BASED COMPENSATION, CONTINUED
Stock Options, Continued
The weighted average fair value of the options granted during 1998 and
1997 was $0.76. The intrinsic value method was used as prescribed in APB
No. 25 under which no compensation cost for options is recognized for
options granted at or above fair market value of the Company's common
stock at the date of grant. Had compensation cost for fiscal years 1998
and 1997 been determined based on the fair value at the grant dates
consistent with SFAS No. 123, the Company's net loss and loss per share
would not have been effected as these were cancelled subsequent to
grant.
The fair value of each option granted was estimated at the date of grant
using the Black Scholes Options Pricing Method ("BSOPM"). The BSOPM was
developed for use in estimating the fair value of traded options. The
Company's employee stock options have characteristics significantly
different from those of traded options, such as vesting restrictions and
extremely limited transferability. In addition, the assumptions used in
options valuation models are highly subjective, particularly the
expected stock price volatility of the underlying stock. Because changes
in these subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not
provide a reliable single measure of the fair value of its employee
stock options.
Warrants
In fiscal year 1996, the Company, in connection with a private
placement, issued warrants to purchase 100,000 shares of its common
stock (Note 11). All of the warrants were exercised in January 1997, and
the Company realized proceeds of $51,128.
In fiscal year 1997, the Company, in connection with a private
placement, issued warrants to purchase 100,000 shares of its common
stock (Note 11). The warrants were immediately exercisable, and at
August 31, 1998, all of these warrants were outstanding. The warrants
expired in February 1999.
In November 1997, the Company issued debentures with detachable,
non-transferable warrants to purchase 87,500 shares of its common stock
(Note 5). These warrants were immediately exercisable on issuance and
expire in November 1999.
18
<PAGE> 95
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
12. STOCK-BASED COMPENSATION, CONTINUED
Warrants, Continued
The following summarizes information about warrants granted and
outstanding at August 31, 1998, and 1997, and changes during the years
then ended.
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
August 31, 1998 August 31, 1997
---------------------- -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Warrants Price Warrants Price
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 100,000 $1.18 100,000 $0.52
Granted 87,500 0.56 100,000 1.18
Exercised -- -- (100,000) (0.52)
Cancelled -- -- -- --
-------- ----- -------- -----
Outstanding at end of year 187,500 $1.74 100,000 $1.18
======== ===== ======== =====
</TABLE>
13. EARNINGS (LOSS) PER SHARE
The computations of net loss per common share for the years ended August
31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net loss available to common stockholders:
Loss before extraordinary gain $ (273,299) $ (180,538)
Extraordinary gain -- 51,051
----------- -----------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (273,299) $ (129,487)
=========== ===========
WEIGHTED-AVERAGE SHARES OUTSTANDING 2,639,301 2,447,599
=========== ===========
Basic and diluted loss per common share:
Loss before extraordinary gain $ (0.10) $ (0.07)
Extraordinary gain -- 0.02
----------- -----------
NET LOSS $ (0.10) $ (0.05)
=========== ===========
</TABLE>
19
<PAGE> 96
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
13. EARNINGS (LOSS) PER SHARE, CONTINUED
The effect of the potentially dilutive securities listed below were not
included in the computation of diluted loss per share, because to do so
would have been antidilutive for the period presented.
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Shares of common stock issuable under:
Employee stock options -- 258,750
Common stock purchase warrants 187,500 100,000
</TABLE>
14. YEAR 2000 DISCLOSURE (UNAUDITED)
The Company has conducted a comprehensive review of its computer
operations to identify the systems that could be adversely affected by
the Year 2000 Issue and has developed and implemented a plan that it
believes has resolved the issue. The Year 2000 Issue is a result of
computer programs being written using two digits rather than four to
define the applicable year. Any of the Company's programs that have
time-sensitive software might have recognized a date using "00" as the
year 1900 rather than the year 2000. This could have resulted in a major
system failure or miscalculations. The Company presently believes that,
with modifications already made to existing software and conversion to
new software, the Year 2000 problem will not pose significant operations
problems for the Company's computer systems as so modified and
converted.
15. SUBSEQUENT EVENTS
Common Shares Issued for Retirement of Debt
In March 1999, the Company retired certain debentures and a note
payable, and the related accrued interest totaling approximately $78,980
for the issuance of 300,000 shares of its common stock.
Debt Forgiveness
In March 1999, a debenture holder forgave the principal and accrued
interest owed him by the Company, which totaled approximately $72,774.
20
<PAGE> 97
ACUBID.COM, INC.
(FORMERLY INTERNATIONAL ACUVISION SYSTEMS, INC.)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
15. SUBSEQUENT EVENTS
Private Placement Offerings
In March 1999, the Company sold 111 units at $4,500 per unit in a
private placement offering. Each unit consisted of 10,000 shares of its
common stock and 1 warrant to purchase 10,000 shares of common stock at
$0.45 per share. The warrants were exercisable at any time, and all
warrants issued were exercised. Accordingly, the Company issued
2,220,000 shares of its common stock and received total proceeds of
$999,000.
In July 1999, the Company initiated a private placement to sell 400
units at $10,000 per unit. Each unit consists of 10,000 shares of 6%
convertible preferred stock and warrants to purchase 5,000 shares of its
common stock. Dividends are payable semi-annually. Each preferred share
is convertible into .666 common shares in the first year, .4 shares in
the second year, and .285 shares thereafter. No preferred shares can
utilize the conversion feature until six months after the offering has
been concluded. The warrants to purchase common shares are exercisable
at $2.00 per share in the first year and $3.00 per share thereafter. The
warrants expire five years from the date of issue. In the event the
Company files an initial public offering of its shares, the preferred
shares automatically convert and along with the warrants, will have
piggyback registration rights. The Company has raised approximately $3.5
million from this offering. The accompanying notes are an integral part
of the financial statements.
21
<PAGE> 98
PART III: INDEX TO EXHIBITS AND DESCRIPTION
The following exhibits are filed with this Report:
<TABLE>
<S> <C>
3.i.1 Certificate of Incorporation, Sheen, Minerals Inc., a Province of
British Columbia Corporation, dated August 26, 1983
3.i.2 Company Act Memorandum of Sheen Minerals Inc. establishing name and
capital of 10,000,000 common shares dated August 26, 1983
3.i.3 Special Resolution by Sheen Minerals Inc. changing name to S.M.M.
Enterprises Ltd. dated February 6, 1986
3.i.4 Certificate of Name change by Province of British Columbia from Sheen
Minerals Inc. to S.M.M. Enterprises Ltd. dated February 19, 1986
3.i.5 Certificate of Name change by Province of British Columbia from S.M.M.
Enterprises Ltd. to Acuvision Systems Inc. dated February 20, 1987
3.i.6 Special Resolution of Name change by Province of British Columbia -
Changing name from S.M.M. Enterprises Ltd. to Acuvision Systems Inc.
dated October 3, 1986
3.i.7 Certificate of Name change by Province of British Columbia from
Acuvision Systems Inc. to International Acuvision Systems Inc. dated
August 27, 1991
3.i.8 Company Act Special Resolution - Changing name to International
Acuvision. dated August 27, 1991 and increasing the authorized Common
Stock to 50,000,000
3.i.9 Certificate of Incorporation of International AcuVision Systems, Inc.,
dated March 15, 1993
3.i.10 Certificate of Amendment of Certificate of Incorporation State of
Delaware, changing name International Acuvision Systems, Inc. to
AcuBid.com, Inc., dated May 19, 1993
3.i.11 Certificate of Secretary of State of Delaware re AcuBid.com, Inc. as
duly incorporated, dated August 5, 1999
3.i.12 Certificate of Amendment of Certificate of Incorporation of AcuBid.com,
Inc. to Secretary of State of Delaware authorizing 50,000,000 common
shares and 10,000,00 of preferred shares, both with a par value of $.001
per share. Dated June 22, 1999.
3.i.13 Secretary of State of California Name Change Certificate of
Qualification by a foreign corporation International Acuvision systems,
Inc., a Delaware corporation, to a new name AcuBid.com, Inc. Executed
May 24, 1999
3.ii.1 (Bylaws) Articles of Sheen Minerals Inc., Province of British Columbia,
dated August 24, 1983
</TABLE>
<PAGE> 99
<TABLE>
<S> <C>
3.ii.2 Bylaws - Delaware Corp
4.1 Certificate of Designations, Series A Convertible Preferred Stock of
AcuBid.com, Inc., a Delaware Corporation
4.2 Warrant to Purchase Common Stock Expiring on April 1, 2001
4.3 Warrant to Purchase Shares of Common Stock of AcuBid.com, Inc.
Exercisable Six Months from the Date of Grant and Expiring Five Years
from the Date of the Grant
10.1 Advisor agreement between AcuBid.com Inc., and Kurt Bevacqua dated March
1, 1999
10.2 Advisor Agreement between AcuBid.com Inc., and Joe Morgan dated April 19,
1999
10.3 Advisor Agreement between AcuBid.com Inc., and Rollie Fingers dated May
6, 1999
10.4 Endorsement Agreement between AcuBid.com Inc., and Yogi Berra, dated
July 1999
10.5 Advisor Agreement between AcuBid.com Inc., and Johnny Bench dated August
16, 1999
10.6 Advisor Agreement between AcuBid.com Inc., and Neil Salkind dated
October 1, 1999
10.7 Employment agreement between AcuBid.com Inc., and Waddy Stephenson dated
April 26, 1999
10.8 Employment agreement between AcuBid.com Inc., and Richard Schwartz dated
July 29, 1999
10.9 Commercial Office Space Lease, dated May 4, 1999
10.10 Contract between AcuBid.com, Inc. and Level 3, for dedicated Internet
access, dated May 29, 1999
</TABLE>
<PAGE> 100
<TABLE>
<S> <C>
10.11 Stock option plan for non-employee directors
10.12 Incentive Equity Plan
10.13 Form of Preferred Stock and Warrant Purchase Agreement between
AcuBid.com and 20 accredited investors in Regulation D, Rule 506
offering in August, 1999
10.14 Proprietary Information Agreement between AcuBid.com and certain
employees
10.15 Proprietary Information Agreement between AcuBid.com and certain
employees
16 Letter on Change in Certifying Accountant.
27 Financial Data Schedule
</TABLE>
SIGNATURES:
/s/ AcuBid.com, Inc.
------------------------------------
Registrant
October 21, 1999 By: /s/ LAWRENCE SCHAFFER
---------------------------------
Lawrence Schaffer
President
<PAGE> 1
EXHIBIT 3.i.1
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
258183
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Consumer and Corporate Affairs
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE OF INCORPORATION
I HEREBY CERTIFY THAT
SHEEN MINERALS INC.
HAS THIS DAY BEEN INCORPORATED UNDER THE COMPANY ACT
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 26TH DAY OF AUGUST, 1983
[SEAL]
/s/ L. G. HUCK
L. G. HUCK
DEPUTY REGISTRAR OF COMPANIES
<PAGE> 1
EXHIBIT 3.i.2
ORIGINAL WAS COPY
FILED AND REGISTERED Certified true copies
AUG 26 1983
AUG 20 1983 for Diane Byrne
Registrar of Companies
M.A. Jorre de St. Jorre for the Province of British Columbia.
REGISTRAR OF COMPANIES
COMPANY ACT
MEMORANDUM
OF
SHEEN MINERALS INC.
I wish to be formed into a Company with limited liability under the Company Act
in pursuance of this Memorandum.
1. The name of the Company is "SHEEN MINERALS INC."
2. The authorized capital of the Company consists of 10,000,000 common shares
without par value.
3. I agree to take the number and kind of shares in the Company set opposite
my name.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FULL NAME, RESIDENT ADDRESS NUMBER, KIND AND CLASS OF
AND OCCUPATION OF SUBSCRIBER SHARES TAKEN BY SUBSCRIBER
- --------------------------------------------------------------------------------
<S> <C>
MICHAEL L. DuMOULIN ONE (1) SHARE WITHOUT
5375 Angus Drive PAR VALUE
Vancouver, British Columbia
V6M 3N3
Barrister and Solicitor
TOTAL SHARES TAKEN: ONE (1) SHARE WITHOUT
PAR VALUE
</TABLE>
DATED at Vancouver, B.C. this 24th day of August, 1983.
/s/ MICHAEL L. DUMOULIN
- ----------------------------------
MICHAEL L. DuMOULIN
<PAGE> 1
EXHIBIT 3.i.3
I HEREBY CERTIFY THAT THIS IS A COPY
OF A DOCUMENT FILED WITH THE REGISTRAR
OF COMPANIES ON
FEB 19 1986
/s/ ROBERTA LAUDER
DEPUTY REGISTRAR OF COMPANIES
FOR THE PROVINCE OF BRITISH COLUMBIA
Certificate of Incorporation No. 268183
[LOGO]
PROVINCE OF BRITISH COLUMBIA
-----
FORM 21
(Section 371)
-----
COMPANY ACT
-----
SPECIAL RESOLUTION
The following special resolution* was passed by the undermentioned
company on the date stated:
Name of company SHEEN MINERALS INC.
-----------------------------------------------------------------
Date resolution passed February 6th, 1986
----------------------------------------------------------
Resolution(+)
"RESOLVED, as Special Resolutions, that:
1. the name of the Company be changed from SHEEN MINERALS INC. to S.M.M.
ENTERPRISES LTD.
2. Item 1 of the Memorandum of the Company be changed to read:
"The name of the Company is S.M.M. ENTERPRISES LTD."
3. the Memorandum as altered by these resolutions be in the form attached
hereto and marked Schedule "A", so that the Memorandum as altered shall
at the time of filing comply with the Company Act."
Certified a true copy the 6th day of February, 1986.
(Signature) /s/ MICHAEL L. DUMOULIN
---------------------------------
Michael L. DuMoulin
Solicitor
---------------------------------
(Relationship to company)
- ------------
* See section 1(i) for definition of "special resolution".
+ Insert text of special resolution.
<PAGE> 2
SCHEDULE "A"
MEMORANDUM
(As altered by Special Resolutions dated
February 6, 1986.)
OF
S.M.M. ENTERPRISES LTD.
1. The name of the Company is S.M.M. ENTERPRISES LTD.
2. The authorized capital of the Company consists of TEN MILLION
(10,000,000) common shares without par value.
<PAGE> 1
EXHIBIT 3.i.4
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
268183
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Consumer and Corporate Affairs
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
SHEEN MINERALS INC.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
S.M.M. ENTERPRISES LTD.
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 19TH DAY OF FEBRUARY, 1986
[SEAL]
/s/ ROBERTA J. LOWDON
ROBERTA J. LOWDON
DEPUTY REGISTRAR OF COMPANIES
<PAGE> 1
EXHIBIT 3.i.5
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
268183
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Consumer and Corporate Affairs
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
S.M.M. ENTERPRISES LTD.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
ACUVISION SYSTEMS INC.
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 20TH DAY OF FEBRUARY, 1987
[SEAL]
/s/ ROBERTA J. LOWDON
ROBERTA J. LOWDON
DEPUTY REGISTRAR OF COMPANIES
<PAGE> 1
EXHIBIT 3.i.6
I HEREBY CERTIFY THAT THIS IS A COPY
OF A DOCUMENT FILED WITH THE
REGISTRAR OF COMPANIES ON
FEB 20, 1987, 19
/s/ ROBERTA J. LOWDEN
------------------------------------
DEPUTY REGISTRAR OF COMPANIES
FOR THE PROVINCE OF BRITISH COLUMBIA
[LOGO]
PROVINCE OF BRITISH COLUMBIA
--------
FORM 21
(Section 371)
--------
COMPANY ACT
--------
SPECIAL RESOLUTION
The following special resolution* was passed by the undermentioned company
on the date stated:
Name of company S.M.M. ENTERPRISES LTD.
---------------------------------------------------------------
Date resolution passed October 3, 1986
--------------------------------------------------------
Resolution (dagger)
"RESOLVED, as Special Resolutions, that:
1. the name of the Company be changed from S.M.M. ENTERPRISES LTD. to
ACUVISION SYSTEMS INC.
2. Item 1 of the Memorandum of the Company be changed to read:
The name of the Company is "ACUVISION SYSTEMS INC."
3. the Memorandum as altered by these resolutions be in the form attached
hereto and marked Schedule "A", so that the Memorandum as altered shall
at the time of filing comply with the Company Act."
[RECEIVED MAR 2, 1987] [RECEIVED MAR 2, 1987]
Certified a true copy the 6th day of October, 1986
(Signature) /s/ MICHAEL L. DUMOULIN
---------------------------------
Solicitor
--------------------------------------------
(Relationship to company)
- -------------
* See section 1(1) for definition of "special resolution".
(dagger) Insert text of special resolution.
<PAGE> 2
SCHEDULE "A"
MEMORANDUM
(As altered by Special Resolutions dated October 3, 1986.)
OF
ACUVISION SYSTEMS INC.
1. The name of the Company is "ACUVISION SYSTEMS INC."
2. The authorized capital of the Company consists of TEN MILLION
(10,000,000) common shares without par value.
<PAGE> 1
EXHIBIT 3.i.7
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
268183
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
ACUVISION SYSTEMS INC.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
INTERNATIONAL ACUVISION SYSTEMS INC.
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 27TH DAY OF AUGUST, 1991
[SEAL]
/s/ DAVID W. BOYD
DAVID W. BOYD
REGISTRAR OF COMPANIES
<PAGE> 1
EXHIBIT 3.i.8
I HEREBY CERTIFY THAT THIS IS A COPY
OF A DOCUMENT FILED WITH THE
REGISTRAR OF COMPANIES ON
AUG 27, 1991
/s/ [SIGNATURE ILLEGIBLE]
------------------------------------
ASSISTANT DEPUTY REGISTRAR OF COMPANIES
FOR THE PROVINCE OF BRITISH COLUMBIA
FORM 21
(Section 371)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Incorporation No. 268183
COMPANY ACT
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned
Company on the date stated:
NAME OF COMPANY: ACUVISION SYSTEMS INC.
DATE RESOLUTION PASSED: March 1, 1991
Resolution:
"UPON MOTION IT WAS RESOLVED as a Special Resolution that:
1. all of the Company's common shares without par value be consolidated from
10,000,000 common shares, of which 7,718,978 shares are issued, into
2,000,000 common shares without par value, of which approximately
1,543,795.6 shares will be issued, every five old common shares being
consolidated into one new common share, and altering the Company's
Memorandum accordingly.
2. the Company increase the number of common shares without par value which
the Company is authorized to issue from 2,000,000 common shares
(post-consolidation) to 50,000,000 common shares without par value, and
altering the Company's Memorandum accordingly.
3. the name of the Company be changed from AcuVision Systems Inc. to
International AcuVision Systems Inc., and altering the Company's
Memorandum accordingly.
4. after the above amendments have taken place, the Company's Memorandum be
altered so that the Memorandum, as altered, shall at the time of filing
comply with the Company Act.
THE MEMORANDUM AS ALTERED IS ATTACHED AS SCHEDULE "A".
CERTIFIED A TRUE COPY THE 10TH DAY OF JULY, 1991.
DuMoulin Black (Signature) /s/ GEORGE R. BRAZIER
Barristers & Solicitors ------------------------------
10th Floor - 595 Howe Street GEORGE R. BRAZIER
Vancouver, B.C.
V6C 2T5 Solicitor
------------------------------
(Relationship to Company)
<PAGE> 2
SCHEDULE A
Attached to the Resolutions of INTERNATIONAL ACUVISION SYSTEMS INC.
passed by the Members on the 1st day of March, 1991
MEMORANDUM
(ALTERED)
of
INTERNATIONAL ACUVISION SYSTEMS INC.
1. The name of the Company is "INTERNATIONAL ACUVISION SYSTEMS INC.".
2. The authorized capital of the Company consists of FIFTY MILLION
(50,000,000) common shares without par value.
<PAGE> 1
EXHIBIT 3.i.9
CERTIFICATE OF INCORPORATION
OF
International AcuVision Systems, Inc.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is International AcuVision Systems, Inc.
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 32
Loockerman Square, suite L-100, City of Dover 19901, County of Kent; and the
name of the registered agent of the corporation in the State of Delaware at such
address is The Prentice-Hall Corporation Systems, Inc.
THIRD: The nature of the business and the purposes to be conducted and
promoted by the corporation, which shall be in addition to the authority of the
corporation to conduct any lawful business, to promote any lawful purpose, and
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware, are as follows:
To purchase, receive, take by grant, gift, devise, bequest, or
otherwise, lease, or otherwise acquire, own, hold, improve, employ, use,
and otherwise deal in and with real or personal property, or any interest
therein, wherever situated, and to sell, convey, lease, exchange, transfer,
or otherwise dispose of, or mortgage or pledge, all or any of its property
and assets, or any interest therein, wherever situated.
To carry on a general mercantile, industrial, investing, and trading
business in all its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export,
license as licensor or licensee, lease as lessor or lessee, distribute,
job, enter into
-1-
<PAGE> 2
negotiate, execute, acquire, and assign contracts in respect of, acquire,
receive, grant, and assign licensing arrangements, options, franchises, and
other rights in respect of, and generally deal in and with, at wholesale and
retail, as principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor, and in
any other lawful capacity, goods, wares, merchandise, commodities, and
unimproved, improved, finished, processed, and other real, personal, and mixed
property of any and all kinds, together with the components, resultants, and
by-products thereof.
To engage generally in the real estate business as principal, agent,
broker, and in any lawful capacity, and generally to take, lease, purchase, or
otherwise acquire, and to own, use, hold, sell, convey, exchange, lease,
mortgage, work, clear, improve, develop, divide, and otherwise handle, manage,
operate, deal in, and dispose of real estate, real property, lands,
multiple-dwelling structures, houses, buildings, and other works, and any
interest or right therein; to take, lease, purchase, or otherwise acquire, and
to own, use, hold, sell, convey, exchange, hire, lease, pledge, mortgage, and
otherwise handle, and deal in and dispose of, as principal, agent, broker, and
in any lawful capacity, such personal property, chattels, chattels real,
rights, easements, privileges, choses in action, notes, bonds, mortgages, and
securities as may lawfully be acquired, held, or disposed of; and to acquire,
purchase, sell, assign, transfer, dispose of, and generally deal in and with as
principal agent, broker, and in any lawful capacity, mortgages and other
interests in real, personal, and mixed properties; to carry on a general
construction, contracting, building, and realty management business as
principal, agent, representative, contractor, subcontractor, and in any other
lawful capacity.
To apply for, register, obtain, purchase, lease, take licenses in respect
of or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn
to account, grant licenses and immunities in respect of, manufacture under and
to introduce, sell, assign, mortgage, pledge, or otherwise dispose of, and, in
any manner deal with and contract with reference to:
(a) inventions, devices, formulae, processes, and any improvements
and modifications thereof;
(b) letters patent, patent rights, patented processes, copyrights,
designs, and similar rights, trade-marks, trade names, trade symbols, and other
indications of origin and ownership granted by or recognized under the laws of
the United States of America, the District of Columbia, any state or
subdivision thereof, and any commonwealth, territory, possession, dependency,
-2-
<PAGE> 3
colony, agency or instrumentality of the United States of America and of any
foreign country, and all rights connected therewith or appertaining thereunto;
(c) franchises, licenses, grants, and concessions.
To guarantee, purchase, take, receive, subscribe for, and otherwise
acquire, own, hold, use, and otherwise employ, sell, lease, exchange, transfer,
and otherwise dispose of, mortgage, lend, pledge, and otherwise deal in and
with, securities (which term, for the purpose of this Article THIRD, includes,
without limitation of the generality thereof, any shares of stock bonds,
debentures, notes, mortgages, other obligations, and any certificates,
receipts, or other instruments representing rights to receive, purchase, or
subscribe for the same, or representing any other rights or interests therein
or in any property or assets) of any persons, domestic and foreign firms,
associations, and corporations, and of any government or agency or
instrumentality thereof; to make payment therefor in any lawful manner; and,
while owner of any such securities, to exercise any and all rights, powers, and
privileges in respect thereof, including the right to vote.
To make, enter into, perform, and carry out contracts of every kind and
description with any person, firm, association, corporation, or government or
agency or instrumentality thereof.
To acquire by purchase, exchange, or otherwise, all, or any part of, or any
interest in, the properties, assets, business, and good will of any one or more
persons, firms, associations, or corporations heretofore or hereafter engaged in
any business for which a corporation may now or hereafter be organized under the
laws of the State of Delaware; to pay for the same in cash, property, or its own
or other securities; to hold, operate, reorganize, liquidate, sell, or in any
manner dispose of the whole or any part thereof; and in connection therewith, to
assume or guarantee performance of any liabilities, obligations, or contracts of
such persons, firms, associations, or corporations, and to conduct the whole or
any part of any business thus acquired.
To lend money in furtherance of its corporate purposes and to invest and
reinvest its funds from time to time to such extent, to such persons, firms,
associations, corporations, governments or agencies or instrumentalities
thereof, and on such terms and on such security, if any, as the Board of
Directors of the corporation may determine.
To make contracts of guaranty and suretyship of all kinds and endorse or
guarantee the payment of principal, interest, or dividends upon, and to
-3-
<PAGE> 4
guarantee the performance of sinking fund or other obligations of, any
securities, and to guarantee in any way permitted by law the performance of any
of the contracts or other undertakings in which the corporation may otherwise
be or become interested, of any person, firm, association, corporation,
government or agency or instrumentality thereof, or of any other combination,
organization, or entity whatsoever.
To borrow money without limit as to amount and at such rates of interest
as it may determine; from time to time to issue and sell its own securities,
including its shares of stock, notes, bonds, debentures, and other obligations,
in such amounts, on such terms and conditions, for such purposes and for such
prices, now or hereafter permitted by the laws of the State of Delaware and by
this certificate of incorporation, as the Board of Directors of the corporation
may determine; and to secure any of its obligations by mortgage, pledge, or
other encumbrance of all or any of its property, franchises, and income.
To be a promoter or manager of other corporations of any type or kind;
and to participate with others in any corporation, partnership, limited
partnership, joint venture, or other association of any kind, or in any
transaction, undertaking, or arrangement which the corporation would have power
to conduct by itself, whether or not such participation involves sharing or
delegation of control with or to others.
To draw, make, accept, endorse, discount, execute, and issue promissory
notes, drafts, bills of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments and evidences of indebtedness whether
secured by mortgage or otherwise, as well as to secure the same by mortgage or
otherwise, so far as may be permitted by the laws of the State of Delaware.
To purchase, receive, take, reacquire, or otherwise acquire, own and
hold, sell, lend, exchange, reissue, transfer, or otherwise dispose of, pledge,
use, cancel, and otherwise deal in and with its own shares and its other
securities from time to time to such an extent and in such manner and upon such
terms as the Board of Directors of the corporation shall determine; provided
that the corporation shall not use its funds or property for the purchase of its
own shares of capital stock when its capital is impaired or when such use would
cause any impairment of its capital, except to the extent permitted by law.
-4-
<PAGE> 5
To organize, as an incorporator, or cause to be organized under the
laws of the State of Delaware, or of any other State of the United States
of America, or of the District of Columbia, or of any commonwealth,
territory, dependency, colony, possession agency, or instrumentality of
the United States of America, or of any foreign country, a corporation or
corporations for the purpose of conducting and promoting any business or
purpose for which corporations may be organized, and to dissolve, wind up,
liquidate, merge, or consolidated any such corporation or corporations or
to cause the same to be dissolved, wound up, liquidated, merged, or
consolidated.
To conduct its business, promote its purposes, and carry on its
operations in any and all of its branches and maintain offices both within
and without the State of Delaware, in any and all States of the United
States of America, in the District of Columbia, and in any all
commonwealths, territories, dependencies, colonies, possessions, agencies,
or instrumentalities of the United States of America and of foreign
governments.
To promote and exercise all or any part of the foregoing purposes and
powers in any and all parts of the world, and to conduct its business in
all or any of its branches as principal, agent, broker, factor,
contractor, and in any other lawful capacity, either alone or through or
in conjunction with any corporations, associations, partnerships, firms,
trustees, syndicates, individuals, organizations, and other entities in
any part of the world, and, in conducting its business and promoting any
of its purposes, to maintain offices, branches, and agencies in any part
of the world, to make and perform any contracts and to do any acts and
things, and to carry on any business, and to exercise any powers and
privileges suitable, convenient, or proper for the conduct, promotion, and
attainment of any of the business and purposes herein specified or which
at any time may be incidental thereto or may appear conducive to or
expedient for the accomplishment of any of such business and purposes and
which might be engaged in or carried on by a corporation incorporated or
organized under the General Corporation Law of the State of Delaware, and
to have and exercise all of the powers conferred by the laws of the State
of Delaware upon corporations incorporated or organized under the General
Corporation Law of the State of Delaware.
The foregoing provisions of this Article THIRD shall be construed both as
purposes and powers and each as an independent purpose and power. The foregoing
enumeration of specific purposes and powers shall not be held to limit or
restrict in any manner the purposes and powers of the corporation, and the
purposes and powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by reference to, or
inference from, the terms of any provision of this or any
-5-
<PAGE> 6
other Article of this certificate of incorporation; provided, that the
corporation shall not conduct any business, promote any purpose, or exercise
any power or privilege within or without the State of Delaware which, under the
laws thereof, the corporation may not lawfully conduct, promote, or exercise.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is twenty million (20,000,000). The par value of
each of such shares is $.001. All such shares are of one class and are shares of
Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
Peter M. Goldstein 2141 Palomar Airport Road
Carlsbad, California 92009
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
-6-
<PAGE> 7
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of directors
need be by written ballot.
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
corporation may be exercised by the Board of Directors of the corporation;
provided, however, that any provision for the classification of directors
of the corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by
the stockholders entitled to vote of the corporation unless provisions for
such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of Section 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of
paragraph (7) of subsection (b) of Section 102 of the General Corporation Law
of the State of Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same
-7-
<PAGE> 8
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on March 15, 1993.
/s/ PETER M. GOLDSTEIN
------------------------------
Incorporator
-8-
<PAGE> 1
EXHIBIT 3.i.10
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
INTERNATIONAL ACUVISION SYSTEMS, INC.
a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of International AcuVision
Systems, Inc. resolutions were duly adopted setting forth a proposed amendment
of the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended
by changing the Article thereof numbered "First" so that, as amended, said
Article shall be and read as follows: The Name of the corporation (hereinafter
called the "Corporation") is AcuBid.com Inc.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and
held upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be signed
by Lawrence Schaffer, an Authorized Officer, this 15th day of March, 1999.
By: /s/ Lawrence Schaffer
-------------------------------
Authorized Officer
Name: Lawrence Schaffer
------------------------------
Print or Type
Title: President
------------------------------
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 02:45 PM 03/15/1999
991099719 - 2351168
<PAGE> 1
EXHIBIT 3.i.11
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "ACUBID.COM INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO FAR AS
THE RECORDS OF THIS OFFICE SHOW, AS OF THE FIFTEENTH DAY OF MARCH, A.D. 1999.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
2351168 8300 AUTHENTICATION: 9628830
991099719 DATE: 03-15-99
<PAGE> 1
EXHIBIT 3.i.12
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ACUBID.COM INC.
AcuBid.Com Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of AcuBid.Com Inc.
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and, at an annual meeting of the stockholders of said corporation,
calling for a vote thereon. The resolutions setting forth the proposed
amendment are as follows:
RESOLVED, that as a Special Resolution, the Company increase its authorized
capital to 50,000,000 shares of common stock with a par value of $.001 per
share.
UPON MOTION IT WAS FURTHER RESOLVED as a special Resolution that the Company
increase its authorized capital by creating 10,000,000 preferred shares with a
par value of $.001 per share, and attaching thereto the special rights and
restrictions, and that the Certificate of Incorporation of this corporation be
amended by changing the FOURTH Article thereof so that, as amended said Article
shall be and read as follows:
The corporation is authorized to issue two classes of stock, designated,
respectively, "common shares" and "preferred shares." The number of
authorized common shares is 50,000,000; the number of authorized preferred
shares is 10,000,000. Each of the common shares and preferred shares shall
have a par value of $.001 per share.
A statement of the rights, preferences, privileges, and restrictions
granted to or imposed on the respective classes of shares or on their
holders is as follows:
The Board of Directors will fix the number of shares of each series of
preferred stock and will determine or alter the rights, preferences,
privileges, and restrictions granted to or imposed on any wholly unissued
series of the preferred stock. The Board may increase or decrease the
number of shares of any wholly unissued series of preferred stock
subsequent to the issuance of those shares.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, an
annual meeting of the stockholders of said corporation was duly called and held
on March 15, 1999, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
1
<PAGE> 2
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed
by Lawrence Schaffer, its President, this 22nd day of June, 1999.
/s/ Lawrence Schaffer
By President
---------------------
(Title)
2
<PAGE> 3
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "ACUBID.COM INC.", FILED IN THIS OFFICE ON THE TWENTY-SECOND DAY OF JUNE,
A.D. 1999, AT 4:30 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL] /s/ EDWARD J. FREEL
--------------------------------
Edward J. Freel, Secretary of
State
2351168 8100 AUTHENTICATION: 9823197
991253370 DATE: 06-23-99
<PAGE> 1
EXHIBIT 3.i.13
[LOGO]
SECRETARY OF STATE
NAME CHANGE
CERTIFICATE OF QUALIFICATION
1875889
I, BILL JONES, secretary of State of the State of California, hereby certify:
That on the 19TH DAY OF MAY, 1999, there was filed in this office an Amended
Statement and Designation by Foreign Corporation whereby the corporate name of
INTERNATIONAL ACUVISION SYSTEMS, INC., a corporation organized and existing
under the laws of DELAWARE, was changed to ACUBID.COM INC.. This corporation
Complied with the requirements of California law in effect on that date for the
purpose of qualifying to transact intrastate business in the State of California
and as of said date has been and is qualified and authorized to transact
intrastate business in the State of California, subject however, to any
licensing requirements otherwise imposed by the laws of this State.
IN WITNESS WHEREOF, I execute
this certificate and affix the
Great Seal of the State of
California this day of May 24,
1999.
/s/ BILL JONES
[SEAL] BILL JONES
Secretary of State
<PAGE> 2
1875887 FILED
AMENDED STATEMENT BY In the office of the Secretary of State
FOREIGN CORPORATION of the State of California
MAY 19 1999
/s/ Bill Jones
BILL JONES, Secretary of State
AcuBid.com Inc.
- --------------------------------------------------------------------------------
(Name of Corporation)
, a corporation organized and existing
- ------------------------------------
under the laws of Delaware , and which is presently qualified for the
-------------------
(State or Place of Incorporation)
transaction of intrastate business in the State of California, makes the
following statement:
That the name of the corporation has been changed to that hereinabove set forth
and that the name relinquished at the time of such change was
-----------------
International AcuVision Systems, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AcuBid.COM Inc.
-------------------------------
(Name of Corporation)
/s/ LAWRENCE A. SCHAFFER
-------------------------------
(Signature of Corporate Officer)
Lawrence A. Schaffer, President
-------------------------------
(Typed Name and Title of Officer Signing
Page 1 of 1
<PAGE> 1
EXHIBIT 3.ii.1
ARTICLES
OF
SHEEN MINERALS INC
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART ARTICLE PAGE
- ---- ------- ----
<S> <C> <C>
1 INTERPRETATION 1
2 SHARES AND SHARE CERTIFICATES 2 - 3
3 ISSUE OF SHARES 3 - 4
4 SHARE REGISTERS 4 - 5
5 TRANSFER AND TRANSMISSION OF SHARES 5 - 7
6 ALTERATION OF CAPITAL 7 - 8
7 PURCHASE AND REDEMPTION OF SHARES 8 - 9
8 BORROWING POWERS 9 - 10
9 GENERAL MEETINGS 10 - 12
10 PROCEEDINGS AT GENERAL MEETINGS 12 - 14
11 VOTES OF MEMBERS 14 - 18
12 DIRECTORS 18 - 19
13 ELECTION AND REMOVAL OF DIRECTORS 19 - 20
14 POWERS AND DUTIES OF DIRECTORS 21
15 DISCLOSURE OF INTEREST OF DIRECTORS 21 - 23
16 PROCEEDINGS OF DIRECTORS 23 - 25
17 EXECUTIVE AND OTHER COMMITTEES 25 - 26
18 OFFICERS 26 - 27
19 INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES 27 - 28
20 DIVIDENDS AND RESERVE 28 - 30
21 DOCUMENTS, RECORDS AND REPORTS 30 - 31
22 NOTICES 31 - 32
23 RECORD DATES 32
24 SEAL 32 - 33
</TABLE>
<PAGE> 2
[SEAL]
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
SHEEN MINERALS INC.
PART 1
INTERPRETATION
1.1. In these Articles, unless there is something in the subject or
context inconsistent therewith:
"Board" and "the Directors" or "the directors" mean the Directors or
sole Director of the Company for the time being.
"Company Act" means the Company Act of the Province of British Columbia
as from time to time enacted and all amendments thereto and includes the
regulations made pursuant thereto.
"seal" means the common seal of the Company. "month" means calendar
month. "registered owner" or "registered holder" when used with respect
to a share in the authorized capital of the Company means the person
registered in the register of members in respect of such share.
Expressions referring to writing shall be construed as including
references to printing, lithography, typewriting, photography and other modes of
representing or reproducing words in a visible form.
Words importing the singular include the plural and vice versa; and
words importing male persons include female persons and words importing persons
shall include corporations.
1.2. The meaning of any words or phrases defined in the Company Act
shall, if not inconsistent with the subject or context, bear the same meaning in
these Articles.
<PAGE> 3
- 2 -
1.3. The Rules of Construction contained in the Interpretation Act shall
apply, mutatis mutandis, to the interpretation of these Articles.
Part 2
SHARES AND SHARE CERTIFICATES
2.1. Every member is entitled, without charge, to one certificate
representing the share or shares of each class held by him; provided that, in
respect of a share or shares held jointly by several persons, the Company shall
not be bound to issue more than one certificate, and delivery of a certificate
for a share to one of several joint registered holders or to his duly authorized
agent shall be sufficient delivery to all; and provided further that the Company
shall not be bound to issue certificates representing redeemable shares, if such
shares are to be redeemed within one month of the date on which they were
allotted. Any share certificate may be sent through the mail by registered
prepaid mail to the member entitled thereto, and neither the Company nor any
transfer agent shall be liable for any loss occasioned to the member owing to
any such share certificate so sent being lost in the mail or stolen.
2.2. If a share certificate
(i) is worn out or defaced, the Directors shall, upon production to them
of the said certificate and upon such other terms, if any, as they may
think fit, order the said certificate to be cancelled and shall issue a
new certificate in lieu thereof;
(ii) is lost, stolen or destroyed, then, upon proof thereof to the
satisfaction of the Directors and upon such indemnity, if any, as the
Directors deem adequate being given, a new share certificate in lieu
thereof shall be issued to the person entitled to such lost, stolen or
destroyed certificate; or
(iii) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the Company
issue in his name two or more certificates each representing a specified
number of shares
<PAGE> 4
- 3 -
and in the aggregate representing the same number of shares as the
certificate so surrendered, the Company shall cancel the certificate so
surrendered and issue in lieu thereof certificates in accordance with
such request.
Such sum, not exceeding one dollar, as the Directors may from time to
time fix, shall be paid to the Company for each certificate to be issued under
this Article.
2.3. Every share certificate shall be signed manually by at least one
officer or Director of the Company, or by or on behalf of a registrar, branch
registrar, transfer agent or branch transfer agent of the Company and any
additional signatures may be printed or otherwise mechanically reproduced and,
in such event, a certificate so signed is as valid as if signed manually,
notwithstanding that any person whose signature is so printed or mechanically
reproduced shall have ceased to hold the office that he is stated on such
certificate to hold at the date of the issue of a share certificate.
2.4. Except as required by law, statute or these Articles, no person
shall be recognized by the Company as holding any share upon any trust, and the
Company shall not be bound by or compelled in any way to recognize (even when
having notice thereof) any equitable, contingent, future or partial interest in
any share or in any fractional part of a share or (except only as by law,
statute or these Articles provided or as ordered by a court of competent
jurisdiction) any other rights in respect of any share except an absolute right
to the entirety thereof in its registered holder.
PART 3
ISSUE OF SHARES
3.1. Subject to Article 3.2 and to any direction to the contrary
contained in a resolution passed at a general meeting authorizing any increase
or alteration of capital, the shares shall be under the control of the Directors
who may, subject to the rights of the holders of the shares of the Company for
the time being issued, issue, allot, sell or otherwise dispose of, and/or grant
options on or otherwise deal in, shares authorized but not outstanding at such
times, to such persons (including Directors), in such manner, upon such terms
and conditions, and at such price or for such consideration, as they, in their
absolute discretion, may determine.
<PAGE> 5
- 4 -
3.2. If the Company is, or becomes, a company which is not a reporting
company and the Directors are required by the Company Act before allotting any
shares to offer them pro rata to the members, the Directors shall, before
allotting any shares, comply with the applicable provisions of the Company Act.
3.3. Subject to the provisions of the Company Act, the Company, or the
Directors on behalf of the company, may pay a commission or allow a discount to
any person in consideration of his subscribing or agreeing to subscribe, whether
absolutely or conditionally, for any shares in the Company, or procuring or
agreeing to procure subscriptions, whether absolutely or conditionally, for any
such shares, provided that, if the Company is not a specially limited company,
the rate of the commission and discount shall not in the aggregate exceed 25 per
centum of the amount of the subscription price of such shares.
3.4. No share may be issued until it is fully paid and the Company shall
have received the full consideration therefor in cash, property or past services
actually performed for the Company. The value of property or services for the
purpose of this Article shall be the value determined by the Directors by
resolution to be, in all circumstances of the transaction, the fair market
value thereof.
PART 4
SHARE REGISTERS
4.1. The Company shall keep or cause to be kept a register of members, a
register of transfers and a register of allotments within British Columbia, all
as required by the Company Act, and may combine one or more of such registers.
If the Company's capital shall consist of more than one class of shares, a
separate register of members, register of transfers and register of allotments
may be kept in respect of each class of shares. The Directors on behalf of the
Company may appoint A trust company to keep the register of members, register of
transfers and register of allotments or, if there is more than one class of
shares, the Directors may appoint a trust company, which need not be-the same
trust company, to keep the register of members, the register of transfers and
the register of allotments for each class of share. The Directors on behalf of
the Company may also appoint one or more trust companies, including the trust
company which keeps the said registers of its shares or of a class thereof, as
transfer agent for its shares or such class thereof, as the case may be, and the
same or another trust company or companies
<PAGE> 6
- 5 -
as registrar for its shares or such class thereof, as the case may be. The
Directors may terminate the appointment of any such. trust company at any time
and may appoint another trust company in its place.
4.2. Unless prohibited by the Company Act, the Company may keep or cause
to be kept one or more branch registers of members at such place or places as
the Directors may from time to time determine.
4.3. The Company shall not at any time close its register of members.
PART 5
TRANSFER AND TRANSMISSION
OF SHARES
5.1. Subject to the provisions of the Memorandum and of these Articles
that may be applicable, any member may transfer any of his shares by instrument
in writing executed by or on behalf of such member and delivered to the Company
or its transfer agent. The instrument of transfer of any share of the Company
shall be in the form, if any, on the back of the Company's share certificates or
in such other form as the Directors may from time to time approve. Except to the
extent that the Company Act may otherwise provide, the transferor shall be
deemed to remain the holder of the shares until the name of the transferee is
entered in the register of members or a branch register of members in respect
thereof.
5.2. The signature of the registered owner of any shares, or of his duly
authorized attorney, upon an authorized instrument of transfer shall constitute
a complete and sufficient authority to the Company, its directors, officers and
agents to register, in the name of the transferee as named in the instrument of
transfer, the number of shares specified therein, or, if no number is specified,
all the shares of the registered owner represented by share certificates
deposited with the instrument of transfer. If no transferee is named in the
instrument of transfer, the instrument of transfer shall constitute a complete
and sufficient authority to the Company, its directors, officers and agents to
register, in the name of the person in whose behalf any certificate for the
shares to be transferred is deposited with the Company for the purpose of having
the transfer registered, the number of shares specified in the instrument of
transfer or, if no number is specified, all the snares represented by all share
certificates deposited with the instrument of transfer.
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5.3. Neither the Company nor any Director, officer or agent thereof
shall be bound to inquire into the title of the person named in the form of
transfer as transferee, or, if no person is named therein as transferee, of the
person on whose behalf the certificate is deposited with the Company for the
purpose of having the transfer registered or be liable to any claim by such
registered owner or by any intermediate owner or holder of the certificate or of
any of the shares represented thereby or any interest therein for registering
the transfer, and the transfer, when registered, shall confer upon the person in
whose name the shares have been registered a valid title to such shares.
5.4. Every instrument of transfer shall be executed by the transferor
and left at the registered office of the Company or at the office of its
transfer agent or registrar for registration together with the share certificate
for the shares to be transferred and such other evidence, if any, as the
Directors or the transfer agent or registrar may require to prove the title of
the transferor or his right to transfer the shares and the right to the
transferee to have the transfer registered. All instruments of transfer where
the transfer is registered shall be retained by the Company or its transfer
agent or registrar and any instrument of transfer, where the transfer is not
registered, shall be returned to the person depositing the same together with
the share certificate which accompanied the same when tendered for registration.
5.5. There shall be paid to the Company in respect of the registration
of any transfer such sum, if any, as the Directors may from time to time
determine.
5.6. in the case of the death of a member, the survivor or survivors
where the deceased was a joint registered holder, and the legal personal
representative of the deceased where he was the sole holder, shall be the only
persons recognized by the Company as having any title to his interest in the
shares. Before recognizing any legal personal representative the Directors may
require him to obtain a grant of probate or letters of administration in British
Columbia.
5.7. Upon the death or bankruptcy of a member, his personal
representative or trustee in bankruptcy, although not a member, shall have the
same rights, privileges and obligations that attach to the shares formerly held
by the deceased or bankrupt member if the documents required by the Company Act
shall have been deposited at the company's registered office.
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5.8. Any person becoming entitled to a share in consequence of the death
or bankruptcy of a member shall, upon such documents and evidence being produced
to the Company as the Company Act requires or who becomes entitled to a share as
a result of an order of a Court of competent jurisdiction or a statute has the
right either to be registered as a member in his representative capacity in
respect of such share, or, if he is a personal representative, instead of being
registered himself, to make such transfer of the share as the deceased or
bankrupt person could have made; but the Directors shall, as regards a transfer
by a personal representative or trustee in bankruptcy, have the same right, if
any, to decline or suspend registration of a transferee as they would have in
the case of a transfer of a share by the deceased or bankrupt person before the
death or bankruptcy.
PART 6
ALTERATION OF CAPITAL
6.1. The Company may by ordinary resolution filed with the Registrar
amend its Memorandum to increase the authorized capital of the Company by:
(i) creating shares with par value or shares without par value, or both;
(ii) increasing the number of shares with par value or shares without
par value, or both; or
(iii) increasing the par value of a class of shares with par value, if
no shares of that class are issued.
6.2. The Company may by special resolution alter its Memorandum to
subdivide, consolidate, change from shares with par value to shares without par
value, or from shares without par value to shares with par value, or change the
designation of all or any of its shares but only to such extent, in such manner
and with such consents of members holding a class of shares which is the subject
of or affected by such alteration, as the Company Act provides.
6.3. The Company may alter its Memorandum or these Articles:
(i) by special resolution, to create, define and attach special rights
or restrictions to any shares and
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(ii) by special resolution and by otherwise complying with any
applicable provision of its Memorandum or these Articles, to vary or
abrogate any special rights and restrictions attached to any shares
and in each case by filing a certified copy of such resolution with the
Registrar but no right or special right attached to any issued shares shall be
prejudiced or interfered with unless all members holding shares of each class
whose right or special right is so prejudiced or interfered with unless all
members holding shares of each class whose right or special right is so
prejudiced or interfered with consent thereto in writing, or unless a resolution
consenting thereto is passed at a separate class meeting of the holders of the
shares of each such class by a majority of three-fourths, or such greater
majority as may be specified by the special rights attached to the class of
shares, of the issued shares of such class.
6.4. Notwithstanding such consent in writing or such resolution, no such
alteration shall be valid as to any part of the issued shares of any class
unless the holders of the rest of the issued shares of such class either all
consent thereto in writing or consent thereto by a resolution passed by the
votes of members holding three-fourths of the rest of such shares.
6.5. If the Company is or becomes a reporting company, no resolution to
create, vary or abrogate any special right of conversion attaching to any class
of shares shall be submitted to any meeting of members unless, if so required
by the Company Act, the British Columbia Securities Commission shall have
consented to the resolution.
6.6. Unless these Articles otherwise provide, the provisions of these
Articles relating to general meetings shall apply, with the necessary changes
and so far as they are applicable to a class meeting of members holding a
particular class of shares but the quorum at a class-meeting shall be one person
holding or representing by proxy one-third of the shares affected.
PART 7
PURCHASE AND REDEMPTION
OF SHARES
7.1. Subject to the special rights and restrictions attached to any
class of shares, the Company may, by a resolution of the Directors and in
compliance with the Company Act, purchase any of its shares at the price and
upon the terms specified in such resolution or redeem any class of its shares in
accordance with the special rights and restrictions attaching thereto.
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No such purchase or redemption shall be made if the Company is insolvent at the
time of the proposed purchase or redemption or if the proposed purchase or
redemption would render the Company insolvent. Unless the shares are to be
purchased through a stock exchange or the Company is purchasing the shares from
dissenting members pursuant to the requirements of the Company Act, the Company
shall make its offer to purchase pro rata to every member who holds shares of
the class or kind, as the case may be, to be purchased.
7.2. If the Company proposes at its option to redeem some but not all of
the shares of any class, the Directors may, subject to the special rights and
restrictions attached to such class of shares, decide the manner in which the
shares to be redeemed shall be selected.
7.3. Subject to the provisions of the Company Act, any shares purchased
or redeemed by the Company may be sold or issued by it, but, while such shares
are held by the Company, it shall not exercise any vote in respect of these
shares and no dividend shall be paid thereon.
PART 8
BORROWING POWERS
8.1. The Directors may from time to time on behalf of the Company
(i) borrow money in such manner and amount, on such security, from such
sources and upon such terms and conditions as they think fit,
(ii) issue bonds, debentures, and other debt obligations either outright
or as security for any liability or obligation of the Company or any
other person, and
(iii) mortgage, charge, whether by way of specific or floating charge,
or give other security on the undertaking, or on the whole or any part
of the property and assets, of the Company (both present and future).
8.2. Any bonds, debentures or other debt obligations of the Company may
be issued at a discount, premium or otherwise, and with any special privileges
as to redemption, surrender, drawing, allotment of or conversion into or
exchange for shares
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or other securities, attending and voting at general meetings of the Company,
appointment of Directors or otherwise and may by their terms be assignable free
from any equities between the Company and the person to whom they were issued or
any subsequent holder thereof, all as the Directors may determine.
8.3. The Company shall keep or cause to be kept within the Province of
British Columbia in accordance with the Company Act a register of its debentures
and a register of debentureholders which registers may be combined, and, subject
to the provisions of the Company Act, may keep or cause to be kept one or more
branch registers of its debentureholders at such place or places as the
Directors may from time to time determine and the Directors may by resolution,
regulation or otherwise make such provisions as they think fit respecting the
keeping of such branch registers.
8.4. Every bond, debenture or other debt obligation of the Company shall
be signed manually by at least one Director or officer of the Company or by or
on behalf of a trustee, registrar, branch registrar, transfer agent or branch
transfer agent for the bond, debenture or other debt obligation appointed by the
Company or under any instrument under which the bond, debenture or other debt
obligation is issued and any additional signatures may be printed or otherwise
mechanically reproduced thereon and, in such event, a bond, debenture or other
debt obligation so signed is as valid as if signed manually notwithstanding that
any person whose signature is so printed or mechanically reproduced shall have
ceased to hold the office that he is stated on such bond, debenture or other
debt obligation to hold at the date of the issue thereof.
8.5. The Company shall keep or cause to be kept a register of its
indebtedness to every Director or officer of the Company or an associate of any
of them in accordance with the provisions of the Company Act.
PART 9
GENERAL MEETINGS
9.1. Subject to any extensions of time permitted pursuant to the Company
Act, the first annual general meeting of the Company shall be held within
fifteen months from the date of incorporation and thereafter an annual general
meeting shall be held once in every calendar year at such time (not being more
than thirteen months after the holding of the last preceding annual general
meeting) and place as may be determined by the Directors.
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9.2. If the Company is, or becomes, a company which is not a reporting
company and all the members entitled to attend and vote at an annual general
meeting consent in writing to all the business which is required or desired to
be transacted at the meeting, the meeting need not be held.
9.3. All general meetings other than annual general meetings are herein
referred to as and may be called extraordinary general meetings.
9.4. The Directors may, whenever they think fit, convene an
extraordinary general meeting. An extraordinary general meeting, if
requisitioned in accordance with the Company Act, shall be convened by the
Directors or, if not convened by the Directors, may be convened by the
requisitionists as provided in the Company Act.
9.5. If the Company is or becomes a reporting company, advance notice of
any general meeting at which Directors are to be elected shall be published in
the manner required by the Company Act.
9.6. A notice convening a general meeting specifying the place, the day,
and the hour of the meeting, and, in case of special business, the general
nature of that business, shall be given as provided in the Company Act and in
the manner hereinafter in these Articles mentioned, or in such other manner (if
any) as may be prescribed by ordinary resolution, whether previous notice
thereof has been given or not, to such persons as are entitled by law or under
these Articles to receive such notice from the Company. Accidental omission to
give notice of a meeting to, or the non-receipt of notice of a meeting, by any
member shall not invalidate the proceedings at that meeting.
9.7. All the members-of the Company entitled to attend and vote at a
general meeting may, by unanimous consent in writing given before, during or
after the meeting, or if they are present at the meeting by a unanimous vote,
waive or reduce the period of notice of such meeting and an entry in the minute
book of such waiver or reduction shall be sufficient evidence of the due
convening of the meeting.
9.8. Except as otherwise provided by the Company Act, where any special
business at a general meeting includes considering, approving, ratifying,
adopting or authorizing any document or the execution thereof or the giving of
effect thereto, the notice convening the meeting shall with respect to such
documents be sufficient if it states that a copy of the document or proposed
document is or will be available for
<PAGE> 13
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inspection by members at the registered office or records office of the Company
or at some other place in British Columbia designated in the notice during usual
business hours up to the date of such general meeting.
PART 10
PROCEEDINGS AT GENERAL MEETINGS
10.1. All business shall be deemed special business which is transacted
at
(i) an extraordinary general meeting other than the conduct of and
voting at, such meeting; and
(ii) an annual general meeting, with the exception of the conduct of,
and voting at, such meeting, the consideration of the financial
statement and of the respective reports of the Directors and Auditor,
fixing or changing the number of directors, approval of a motion to
elect two or more directors by a single resolution, the election of
Directors, the appointment of the Auditor, the fixing of the
remuneration of the Auditor and such other business as by these Articles
or the Company Act may be transacted at a general meeting without prior
notice thereof being given to the members or any business which is
brought under consideration by the report of the Directors.
10.2. No business, other than election of the chairman or the
adjournment of the meeting, shall be transacted at any general meeting unless a
quorum of members, entitled to attend and vote, is present at the commencement
of the meeting, but the quorum need not be present throughout the meeting.
10.3. Save as herein otherwise provided, a quorum shall be two persons
present. If there is only one member the quorum is one person present and being,
or representing by proxy, such member. The Directors, the Secretary or, in his
absence, an assistant Secretary, and the solicitor of the Company shall be
entitled to attend at any general meeting but no such person shall be counted in
the quorum or be entitled to vote at any general meeting unless he shall be a
member or proxyholder entitled to vote thereat.
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10.4. If within half an hour from the time appointed for a general
meeting a quorum is not present, the meeting, if convened upon the requisition
of members, shall be dissolved. In any other case it shall stand adjourned to
the same day in the next week, at the same time and place, and, if at the
adjourned meeting a quorum is not present within half an hour from the time
appointed for the meeting, the person or persons present and being, or
representing by proxy, a member or members entitled to attend and vote at the
meeting shall be a quorum.
10.5. The Chairman of the Board, if any, or in his absence the President
of the Company or in his absence a Vice President of the Company, if any, shall
be entitled to preside as chairman at every general meeting of the Company.
10.6. If at any general meeting neither the Chairman of the Board nor
President nor a Vice-President is present within fifteen minutes after the time
appointed for holding the meeting or is willing to act as chairman, the
Directors present shall choose some one of their number to be chairman or if all
the Directors present decline to take the chair or shall fail to so choose or if
no Director be present, the members present shall choose one of their number or
any other person to be Chairman.
10.7. The Chairman may and shall, if so directed by the meeting, adjourn
the meeting from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left unfinished at
the meeting from which the adjournment took place. When a meeting is adjourned
for thirty days or more, notice, but not "advance notice", of the adjourned
meeting shall be given as in the case of an original meeting. Save as aforesaid,
it shall not be necessary to give any notice of an adjourned meeting or of the
business to be transacted at an adjourned meeting.
10.8. No motion proposed at a general meeting need be seconded and the
chairman may propose or second a motion.
10.9. Subject to the provisions of the Company Act, at any general
meeting a resolution put to the vote of the meeting shall be decided on a show
of hands, unless (before or on the declaration of the result of the show of
hands) a poll is directed by the chairman or demanded by at least one member
entitled to vote who is present in person or by proxy. The Chairman shall
declare to the meeting the decision on every question in accordance with the
result of the show of hands or the poll, and such decision shall be entered in
the book of proceedings of the Company. A declaration by the chairman that a
resolution has been carried, or carried unanimously, or by a particular
majority, or lost or not carried by a particular majority and an entry
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to that effect in the book of the proceedings of the Company shall be conclusive
evidence of the fact, without proof of the number or proportion of the votes
recorded in favour of, or against, that resolution.
10.10. In the case of an equality of votes, whether on a show of hands
or on a poll, the chairman of the meeting at which the show of hands takes place
or at which the poll is demanded shall not be entitled to a second or casting
vote.
10.11. No poll may be demanded on the election of a chairman. A poll
demanded on a question of adjournment shall be taken forthwith. A poll demanded
on any other question shall be taken as soon as, in the opinion of the chairman,
is reasonably convenient, but in no event later than seven days after the
meeting and at such time and place and in such manner as the chairman of the
meeting directs. The result of the poll shall be deemed to be the resolution of
and passed at the meeting at which the poll was demanded. Any business other
than that upon which the poll has been demanded may be proceeded with pending
the taking of the poll. A demand for a poll may be withdrawn. In any dispute as
to the admission or rejection of a vote the decision of the chairman made in
good faith shall be final and conclusive.
10.12. Every ballot cast upon a poll and every proxy appointing a
proxyholder who casts a ballot upon a poll shall be retained by the Secretary
for such period and be subject to such inspection as the Company Act may
provide.
10.13. On a poll a person entitled to cast more than one vote need not,
if he votes, use all his votes or cast all the votes he uses in the same way.
10.14. Unless the Company Act, the Memorandum or these Articles
otherwise provide, any action to be taken by a resolution of the members may be
taken by an ordinary resolution.
PART 11
VOTES OF MEMBERS
11.1. Subject to any special voting rights or restrictions attached to
any class of shares and the restrictions on joint registered holders of shares,
on a show of hands every member who is present in person and entitled to vote
thereat
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shall have one vote and on a poll every member shall have one vote for each
share of which he is the registered holder and may exercise such vote either in
person or by proxyholder.
11.2. Any person who is not registered as a member but is entitled to
vote at any general meeting in respect of a share, may vote the share in the
same manner as if he were a member; but, unless the Directors have previously
admitted his right to vote at that meeting in respect of the share, he shall
satisfy the directors of his right to vote the share before the time for holding
the meeting, or adjourned meeting, as the case may be, at which he proposes to
vote.
11.3. Any corporation not being a subsidiary which is a member of the
Company may by resolution of its directors or other governing body authorize
such person as it thinks fit to act as its representative at any general meeting
or class meeting. The person so authorized shall be entitled to exercise in
respect of and at such meeting the same powers on behalf of the corporation
which he represents as that corporation could exercise if it were an individual
member of the Company personally present, including, without limitation, the
right, unless restricted by such resolution, to appoint a proxyholder to
represent such corporation, and shall be counted for the purpose of forming a
quorum if present at the meeting. Evidence of the appointment of any such
representative may be sent to the Company by written instrument, telegram, telex
or any method of transmitting legibly recorded messages. Notwithstanding the
foregoing, a corporation being a member may appoint a proxyholder.
11.4. In the case of joint registered holders of a share the vote of the
senior who exercises a vote, whether in person or by proxyholder, shall be
accepted to the exclusion of the votes of the other joint registered holders;
and for this purpose seniority shall be determined by the order in which the
names stand in the register of members. Several legal personal representatives
of a deceased member whose shares are registered in his sole name shall for the
purpose of this Article be deemed joint registered holders.
11.5. A member of unsound mind entitled to attend and vote, in respect
of whom an order has been made by any court having jurisdiction, may vote,
whether on a show of hands or on a poll, by his committee, curator bonis, or
other person in the nature of a committee or curator bonis appointed by that
court, and any such committee, curator bonis, or other person may appoint a
proxyholder.
11.6. A member holding more than one share in respect of which he is
entitled to vote shall be entitled to appoint one or more (but not more than
five) proxyholders to attend,
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act and vote for him on the same occasion. If such a member should appoint more
than one proxyholder for the same occasion he shall specify the number of shares
each proxyholder shall be entitled to vote. A member may also appoint one or
more alternate proxyholders to act in the place and stead of an absent
proxyholder.
11.7. A form of proxy shall be in writing under the hand of the
appointor or of his attorney duly authorized in writing, or, if the appointor is
a corporation, either under the seal of the corporation or under the hand of a
duly authorized officer or attorney. A proxyholder need not be a member of the
Company if
(i) the Company is at the time a reporting company, or
(ii) the member appointing the proxyholder is a corporation, or
(iii) the Company shall have at the time only one member, or
(iv) the persons present in person or by proxy and entitled to vote at
the meeting by resolution permit the proxyholder to attend and vote; for
the purpose of such resolution the proxyholder shall be counted in the
quorum but shall not be entitled to vote
and in all other cases a proxyholder must be a member.
11.8. A form of proxy and the power of attorney or other authority, if
any, under which it is signed or a notarially certified copy thereof shall be
deposited at the registered office of the Company or at such other place as is
specified for that purpose in the notice convening the meeting, not less than 48
hours (excluding Saturdays, Sundays and holidays) before the time for holding
the meeting in respect of which the person named in the instrument is appointed.
In addition to any other method of depositing proxies provided for in these
Articles, the Directors may from time to time by resolution make regulations
relating to the depositing of proxies at any place or places and fixing the time
or times for depositing the proxies not exceeding 48 hours (excluding Saturdays,
Sundays and holidays) preceding the meeting or adjourned meeting specified in
the notice calling a meeting of members and providing for particulars of such
proxies to be sent to the Company or any agent of the Company in writing or by
letter, telegram, telex or any method of transmitting legibly recorded messages
so as to arrive before
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the commencement of the meeting or adjourned meeting at the office of the
Company or of any agent of the Company appointed for the purpose of receiving
such particulars and providing that proxies so deposited may be acted upon as
though the proxies themselves were deposited as required by this Part and votes
given in accordance with such regulations shall be valid and shall be counted.
11.9. Unless the Company Act or any other statute or law which is
applicable to the Company or to any class of its shares requires any other form
of proxy, a proxy, whether for a specified meeting or otherwise, shall be in the
form following, but may also be in any other form that the Directors or the
chairman of the meeting shall approve:
(Name of Company)
The undersigned, being a member of the above named Company,
hereby appoints ___________________________________________________
or failing him ____________________________________________________
as proxyholder for the undersigned to attend, act and vote for and on
behalf of the undersigned at the general meeting of the Company to be
held on the _______ day of ____________ and at any adjournment thereof.
Signed this _______ day of _______________, 19__.
(Signature of member)
11.10. A vote given in accordance with the terms of a proxy is valid
notwithstanding the previous death or incapacity of the member giving the proxy
or the revocation of the proxy or of the authority under which the form of proxy
was executed or the transfer of the share in respect of which the proxy is
given, provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received at the registered office of the
Company or by the chairman of the meeting or adjourned meeting for which the
proxy was given before the vote is taken.
11.11. Every proxy may be revoked by an instrument in writing
(i) executed by the member giving the same or by his attorney authorized
in writing or, where the member is a corporation, by a duly authorized
officer or attorney of the corporation; and
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(ii) delivered either at the registered office of the Company at any
time up to and including the last business day preceding the day of the
meeting, or any adjournment thereof at which the proxy is to be used, or
to the chairman of the meeting on the day of the meeting or any
adjournment thereof before any vote in respect of which the proxy is to
be used shall have been taken
or in any other manner provided by law.
PART 12
DIRECTORS
12.1. The subscribers to the Memorandum of the Company are the first
Directors. The Directors to succeed the first Directors may be appointed in
writing by a majority of the subscribers to the Memorandum or at a meeting of
the subscribers, or if not so appointed, they shall be elected by the members
entitled to vote on the election of Directors and the number of Directors shall
be the same as the number of Directors so appointed or elected. The number of
Directors, excluding additional Directors, may be fixed or changed from time to
time by ordinary resolution, whether previous notice thereof has, been given or
not, but notwithstanding anything contained in these Articles the number of
Directors shall never be less than one or, if the Company is or becomes a
reporting company, less than three.
12.2. The remuneration of the Directors as such may from time to time be
determined by the Directors or, if the Directors shall so decide, by the
members. Such remuneration may be in addition to any salary or other
remuneration paid to any officer or employee of the Company as such who is also
a Director. The Directors shall be repaid such reasonable travelling, hotel and
other expenses as they incur in and about the business of the Company and if any
Director shall perform any professional or other services for the Company that
in the opinion of the Directors are outside the ordinary duties of a Director or
shall otherwise be specially occupied in or about the Company's business, he may
be paid a remuneration to be fixed by the Board, or, at the option of such
Director, by the Company in general meeting, and such remuneration may be either
in addition to, or in substitution for any other remuneration that he may be
entitled to receive. The Directors on behalf of the Company,
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unless otherwise determined by ordinary resolution, may pay a gratuity or
pension or allowance on retirement to any Director who has held any salaried
office or place of profit with the Company or to his spouse or dependants and
may make contributions to any fund and pay premiums for the purchase or
provision of any such gratuity, pension or allowance.
12.3. A Director shall not be required to hold a share in the capital of
the Company as qualification for his office but shall be qualified as required
by the Company Act, to become or act as a Director.
PART 13
ELECTION AND REMOVAL OF DIRECTORS
13.1. At each annual general meeting of the Company all the Directors
shall retire and the members entitled to vote thereat shall elect a Board of
Directors consisting of the number of Directors for the time being fixed
pursuant to these Articles. If the Company is, or becomes, a company that is not
a reporting company and the business to be transacted at any annual general
meeting is consented to in writing by all the members who are entitled to attend
and vote thereat such annual general meeting shall be deemed for the purpose of
this Part to have been held an such written consent becoming effective.
13.2. A retiring Director shall be eligible for re-election.
13.3. Where the Company fails to hold an annual general meeting in
accordance with the Company Act, the Directors then in office shall be deemed to
have been elected or appointed as Directors on the last day on which the annual
general meeting could have been held pursuant to these Articles and they may
hold office until other Directors are appointed or elected or until the day on
which the next annual general meeting is held.
13.4. If at any general meeting at which there should be an election of
Directors, the places of any of the retiring Directors are not filled by such
election, such of the retiring Directors who are not re-elected as Directors may
be requested by the newly-elected Directors shall, if willing to do so, continue
in office to complete the number of Directors for the time being fixed pursuant
to these Articles until further new Directors are elected at a general meeting
convened for the purpose. If any such election or continuance of Directors does
not result in the election or continuance of the number of Directors for the
time being fixed pursuant to these Articles such number shall be fixed at the
number of Directors actually elected or continued in office.
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13.5. Any casual vacancy occurring in the Board of Directors may be
filled by the remaining Directors or Director.
13.6. Between successive annual general meetings the Directors shall
have power to appoint one or more additional Directors but not more than
one-third of the number of Directors fixed pursuant to these Articles and in
effect at the last general meeting at which Directors were elected. Any Director
so appointed shall hold office only until the next following annual general
meeting of the Company, but shall be eligible for election at such meeting and
so long as he is an additional Director the number of Directors shall be
increased accordingly.
13.7. Any Director may by instrument in writing delivered to the Company
appoint any person to be his alternate to act in his place at meetings of the
Directors at which he is not present unless the Directors shall have reasonably
disapproved the appointment of such person as an alternate Director and shall
have given notice to that effect to the Director appointing the alternate
Director within a reasonable time after delivery of such instrument to the
Company. Every such alternate shall be entitled to notice of meetings of the
Directors and to attend and vote as a Director at a meeting at which the person
appointing him is not personally present, and, if he is a Director, to have a
separate vote on behalf of the Director he is representing in addition to his
own vote. A Director may it any time by instrument, telegram, telex or any
method of transmitting legibly recorded messages delivered to the Company revoke
the appointment of an alternate appointed by him. The remuneration payable to
such an alternate shall be payable out of the remuneration of the Director
appointing him.
13.8. The office of Director shall be vacated if the Director:
(i) resigns his office by notice in writing delivered to the registered
office of the Company; or
(ii) is convicted of an indictable offence and the other Directors shall
have resolved to remove him; or
(iii) ceases to be qualified to act as a Director pursuant to the
Company Act.
13.9. The Company may by special resolution remove any director before
the expiration of his period of office, and may by an ordinary resolution
appoint another person in his stead.
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PART 14
POWERS AND DUTIES OF DIRECTORS
14.1. The Directors shall manage, or supervise the management of, the
affairs and business of the Company and shall have the authority to exercise all
such powers of the Company as are not, by the Company Act or by the Memorandum
or these Articles, required to be exercised by the Company in general meeting.
14.2. The Directors may from time to time by power of attorney or other
instrument under the seal, appoint any person to be the attorney of the Company
for such purposes, and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Directors under these Articles
and excepting the powers of the Directors relating to the constitution of the
Board and of any of its committees and the appointment or removal of officers
and the power to declare dividends) and for such period, with such remuneration
and subject to such conditions as the Directors may think fit, and any such
appointment may be made in favour of any of the Directors or any of the members
of the Company or in favour of any corporation, or of any of the members,
directors, nominees or managers of any corporation, firm or joint venture and
any such power of attorney may contain such provisions for the protection or
convenience of persons dealing with such attorney as the Directors think fit.
Any such attorney may be authorized by the Directors to sub-delegate all or any
of the powers, authorities and discretions for the time being vested in him.
PART 15
DISCLOSURE OF INTEREST OF
DIRECTORS
15.1. A Director who is, in any way, directly or indirectly interested
in an existing or proposed contract or transaction with the Company or who holds
any office or possesses any property whereby, directly or indirectly, a duty or
interest might be created to conflict with his duty or interest as a Director
shall declare the nature and extent of his interest in such contract or
transaction or of the conflict or potential conflict with his duty and interest
as a Director, as the case may be, in accordance with the provisions of the
Company Act.
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15.2. A Director shall not vote in respect of any such contract or
transaction with the Company in which he is interested and if he shall do so his
vote shall not be counted, but he shall be counted in the quorum present at the
meeting at which such vote is taken. Subject to the provisions of the Company
Act, the foregoing prohibitions shall not apply to
(i) any such contract or transaction relating to a loan to the Company,
which a Director or a specified corporation or a specified firm in which
he has an interest has guaranteed or joined in guaranteeing the
repayment of the loan or any part of the loan;
(ii) any contract or transaction made or to be made with, or for the
benefit of a holding corporation or a subsidiary corporation of which a
Director is a director;
(iii) any contract by a Director to subscribe for or underwrite shares
or debentures to be issued by the Company or a subsidiary of the
Company, or any contract, arrangement or transaction in which a Director
is, directly or indirectly, interested if all the other Directors are
also, directly or indirectly interested in the contract, arrangement or
transaction;
(iv) determining the remuneration of the Directors;
(v) purchasing and maintaining insurance to cover Directors against
liability incurred by them as Directors; or
(vi) the indemnification of any Director by the Company.
These exceptions may from time to time be suspended or amended to any extent
approved by the Company in general meeting and permitted by the Company Act,
either generally or in respect of any particular contract or transaction or for
any particular period.
15.3. A Director may hold any office or place of profit with the Company
(other than the office of auditor of the Company) in conjunction with his office
of Director for such period and on such terms (as to remuneration or otherwise)
as the Directors may determine and no Director or intended Director shall be
disqualified by his office from contracting with the Company either with regard
to his tenure of any such other
<PAGE> 24
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office or place of profit or as vendor, purchaser or otherwise, and, subject to
compliance with the provisions of the Company Act, no contract or transaction
entered into by or on behalf of the Company in which a Director is in any way
interested shall be liable to be voided by reason thereof.
15.4. Subject to compliance with the provisions of the Company Act, a
Director or his firm may act in a professional capacity for the Company (except
as auditor of the Company) and he or his firm shall be entitled to remuneration
for professional services as if he were not a Director.
15.5. A Director may be or become a director or other officer or
employee of, or otherwise interested in, any corporation or form in which the
Company may be interested as a share holder or otherwise, and, subject to
compliance with the provisions of the Company Act, such Director shall not be
accountable to the Company for any remuneration or other benefits received by
him as director, officer or employee of, or from his interest in, such other
corporation or firm, unless the Company in general meeting otherwise directs.
PART 16
PROCEEDINGS OF DIRECTORS
16.1. The Chairman of the Board, if any, or in his absence, the
President shall preside as chairman at every meeting of the Directors, or if
there is no Chairman of the Board or neither the Chairman of the Board nor the
President is present within fifteen minutes of the time appointed for holding
the meeting or is willing to act as chairman, or, if the Chairman of the Board,
if any, and the President have advised the Secretary that they will not be
present at the meeting, the Directors present shall choose one of their number
to be chairman of the meeting.
16.2. The Directors may meet together for the dispatch of business,
adjourn and otherwise regulate their meetings, as they think fit. Questions
arising at any meeting shall be decided by a majority of votes. In case of an
equality of votes, the chairman shall have a second or casting vote. Meetings of
the Board held at regular intervals may be held at such place, at such time and
upon such notice (if any) as the Board may by resolution from time to time
determine.
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16.3. A Director may participate in a meeting of the Board or of any
committee of the Directors by means of conference telephones or other
communications facilities by means of which all Directors participating in the
meeting can hear each other and provided that all such Directors agree to such
participation. A Director participating in a meeting in accordance with this
Article shall be deemed to be present at the meeting and to have so agreed and
shall be counted in the quorum therefor and be entitled to speak and vote
thereat.
16.4. A Director may, and the Secretary or an Assistant Secretary upon
request of a Director shall, call a meeting of the Board at any time. Reasonable
notice of such meeting specifying the place, day and hour of such meeting shall
be given by mail, postage prepaid, addressed to each of the Directors and
alternate Directors at his address as it appears on the books of the Company or
by leaving it at his usual business or residential address or by telephone,
telegram, telex, or any method of transmitting legibly recorded messages. It
shall not be necessary to give notice of a meeting of Directors to any Director
or alternate Director (i) who is at the time not in the Province of British
Columbia, or (ii) if such meeting is to be held immediately following a general
meeting at which such Director shall have been elected or is the meeting of
Directors at which such Director is appointed.
16.5. Any Director of the Company may file with the Secretary a document
executed by him waiving notice of any past, present or future meeting or
meetings of the Directors being, or required to have been, sent to him and may
at any time withdraw such waiver with respect to meetings held thereafter. After
filing such waiver with respect to future meetings and until such waiver is
withdrawn no notice need be given to such Director and, unless the Director
otherwise requires in writing to the Secretary, to his alternate Director of any
meeting of Directors and all meetings of the Directors so held shall be deemed
not to be improperly called or constituted by reason of notice not having
been given to such Director or alternate Director.
16.6. The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors and if not so fixed shall be two
Directors or, if the number of Directors is fixed at one, shall be one Director.
16.7. The continuing Directors may act notwithstanding any vacancy in
their body, but, if and so long as their number is reduced below the number
fixed pursuant to these Articles as the necessary quorum of Directors, the
continuing Directors may act for the purpose of increasing the number of
Directors to that number, or of summoning a general meeting of the Company but
for no other purpose.
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16.8. Subject to the provisions of the Company Act, all acts done by
any meeting of the Directors or of a committee of Directors, or by any person
acting as a Director, shall, notwithstanding that it be afterwards discovered
that there was some defect in the qualification, election or appointment of any
such Directors or of the members of such committee or person acting as
aforesaid, or that they or any of them were disqualified, be as valid as if
every such person had been duly elected or appointed and was qualified to be a
Director.
16.9. A resolution consented to in writing, whether by document,
telegram, telex or any method of transmitting legibly recorded messages or other
means, by all of the Directors shall be as valid and effectual as if it had been
passed at a meeting of the Directors duly called and held. Such resolution may
be in two or more counterparts which together shall be deemed to constitute one
resolution in writing. Such resolution shall be filed with the minutes of the
proceedings of the Directors and shall be effective on the date stated thereon
or on the latest date stated on any counterpart.
PART 17
EXECUTIVE AND OTHER COMMITTEES
17.1. The Directors may by resolution appoint an Executive Committee to
consist of such member or members of their body as they think fit, which
Committee shall have, and may exercise during the intervals between the meetings
of the Board, all the powers vested in the Board except the power to fill
vacancies in the Board, the power to change the membership of, or fill vacancies
in, said Committee or any other committee of the Board and such other powers, if
any, as may be specified in the resolution. The said Committee shall keep
regular minutes of its transactions and shall cause them to be recorded in books
kept for that purpose, and shall report the same to the Board of Directors at
such times as the Board of Directors may from time to time require. The Board
shall have the power at any time to revoke or override the authority given to or
acts done by the Executive Committee except as to acts done before such
revocation or overriding and to terminate the appointment or change the
membership of such Committee and to fill vacancies in it. The Executive
Committee may make rules for the conduct of its business and may appoint such
assistants as it may deem necessary. A majority of the members of said Committee
shall constitute a quorum thereof.
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17.2. The Directors may by resolution appoint one or more committees
consisting of such member or members of their body as they think fit and may
delegate to any such committee between meetings of the Board such powers of the
Board (except the power to fill vacancies in the Board and the power to change
the membership of or fill vacancies in any committee of the Board and the power
to appoint or remove officers appointed by the Board) subject to such conditions
as may be prescribed in such resolution, and all committees so appointed shall
keep) regular minutes of their transactions and shall cause them to be recorded
in books kept for that purpose, and shall report the same to the Board of
Directors at such times as the Board of Directors may from time to time require.
The Directors shall also have power at any time to revoke or override any
authority given to or acts to be done by any such committees except as to acts
done before such revocation or overriding and to terminate the appointment or
change the membership of a committee and to fill vacancies in it. Committees may
make rules for the conduct of their business and may appoint such assistants as
they may deem necessary. A majority of the members of a committee shall
constitute a quorum thereof.
17.3. The Executive Committee and any other committee may meet and
adjourn as it thinks proper. Questions arising at any meeting shall be
determined by a majority of votes of the members of the committee present, and
in case of an equality of votes the chairman shall not have a second or casting
vote. A resolution approved in writing by all the members of the Executive
Committee or any other committee shall be as valid and effective as if it had
been passed at a meeting of such Committee duly called and constituted. Such
resolution may be in two or more counterparts which together shall be deemed to
constitute one resolution in writing. Such resolution shall be filed with the
minutes of the proceedings of the committee and shall be effective on the date
stated thereon or on the latest date stated in any counterpart.
PART 18
OFFICERS
18.1. The Directors shall, from time to time, appoint a President and a
Secretary and such other officers, if any, as the Directors shall determine and
the Directors may, at any time, terminate any such appointment. No officer shall
be appointed unless he is qualified in accordance with the provisions of the
Company Act.
<PAGE> 28
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18.2. one person may hold more than one of such offices except that the
offices of President and Secretary must be held by different persons unless the
Company has only one member. Any person appointed as the Chairman of the Board,
the President or the managing Director shall be a Director. The other officers
need not be Directors. The remuneration of the officers of the Company as such
and the terms and conditions of their tenure of office or employment shall from
time to time be determined by the Directors; such remuneration may be by way of
salary, fees, wages, commission or participation in profits or any other means
or all of these modes and an officer may in addition to such remuneration be
entitled to receive after he ceases to hold such office or leaves the employment
of the Company a pension or gratuity. The Directors may decide what functions
and duties each officer shall perform and may entrust to and confer upon him any
of the powers exercisable by them upon such terms and conditions and with such
restrictions as they think fit and may from time to time revoke, withdraw, alter
or vary all or any of such functions, duties and powers. The Secretary shall,
inter alia, perform the functions of the Secretary specified in the Company Act.
18.3. Every officer of the Company who holds any office or possesses any
property whereby, whether directly or indirectly, duties or interests might be
created in conflict with his duties or interests as an officer of the Company
shall in writing, disclose to the President the fact and the nature, character
and extent of the conflict.
PART 19
INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
19.1. Subject to the provisions of the Company Act, the Directors shall
cause the Company to indemnify a Director or former Director of the Company and
the Directors may cause the Company to indemnify a director or former director
of a corporation of which the Company is or was a shareholder and the heirs and
personal representatives of any such person against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by him or them including an amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he is or they are made a party by reason of his
being or having been a Director of the Company
<PAGE> 29
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or a director of such corporation, including any action brought by the Company
or any such corporation. Each Director of the Company on being elected or
appointed shall be deemed to have contracted with the Company on the terms of
the foregoing indemnity.
19.2. Subject to the provisions of the Company Act, the Directors may
cause the Company to indemnify any officer, employee or agent of the Company or
of a corporation of which the Company is or was a shareholder (notwithstanding
that he is also a Director) and his heirs and personal representatives against
all costs, charges and expenses whatsoever incurred by him or them and resulting
from his acting as an officer, employee or agent of the Company or such
corporation. In addition the Company shall indemnify the Secretary or an
Assistant Secretary of the Company (if he shall not be a full time employee of
the Company and notwithstanding that he is also a Director) and his respective
heirs and legal representatives against all costs, charges and expenses
whatsoever incurred by him or them and arising out of the functions assigned to
the Secretary by the Company Act or these Articles and each such Secretary and
Assistant Secretary shall on being appointed be deemed to have contracted with
the Company on the terms of the foregoing indemnity.
19.3. The failure of a Director or officer of the Company to comply with
the provisions of the Company Act or of the Memorandum or these Articles shall
not invalidate any indemnity to which he is entitled under this Part.
19.4. The Directors may cause the Company to purchase and maintain
insurance for the benefit of any person who is or was serving as a Director,
officer, employee or agent of the Company or as a director, officer, employee or
agent of any corporation of which the Company is or was a shareholder and his
heirs or personal representatives against any liability incurred by him as such
Director, officer, employee or agent.
PART 20
DIVIDENDS AND RESERVE
20.1. The Directors may from time to time declare and authorize payment
of such dividends, if any, as they may deem advisable and need not give notice
of such declaration to any member. No dividend shall be paid otherwise than out
of funds and/or assets properly available for the payment of dividends and a
declaration by the Directors as to the amount of such funds
<PAGE> 30
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or assets available for dividends shall be conclusive. The Company may pay any
such dividend wholly or in part by the distribution of specific assets and in
particular by paid up shares, bonds, debentures or other securities of the
Company or any other corporation or in any one or more such ways as may be
authorized by the Company or the Directors and where any difficulty arises with
regard to such a distribution the Directors may settle the same as they think
expedient, and in particular may fix the value for distribution of such specific
assets or any part thereof, and may determine that cash payments in substitution
for all or any part of the specific assets to which any members are entitled
shall be made to any members on the basis of the value so fixed in order to
adjust the rights of all parties and may vest any such specific assets in
trustees for the persons entitled to the dividend as may seem expedient to the
Directors.
20.2. Any dividend declared on shares of any class by the Directors may
be made payable on such date as is fixed by the Directors.
20.3. Subject to the rights of members (if any) holding shares with
special rights as to dividends, all dividends on shares of any class shall be
declared and paid according to the number of such shares held.
20.4. The Directors may, before declaring any dividend, set aside out of
the funds properly available for the payment of dividends such sums as they
think proper as a reserve or reserves, which shall, at the discretion of the
Directors, be applicable for meeting contingencies, or for equalizing dividends,
or for any other purpose to which such funds of the Company may be properly
applied, and pending such application may, at the like discretion, either be
employed in the business of the Company or be invested in such investments as
the Directors may from time to time think fit. The Directors may also, without
placing the same in reserve, carry forward such funds, which they think prudent
not to divide.
20.5. If several persons are registered as joint holders of any share,
any one of them may give an effective receipt for any dividend, bonuses or other
moneys payable in respect of the share.
20.6. No dividend shall bear interest against the Company. Where the
dividend to which a member is entitled includes a fraction of a cent, such
fraction shall be disregarded in making payment thereof and such payment shall
be deemed to be payment in full.
<PAGE> 31
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20.7. Any dividend, bonuses or other moneys payable in cash in respect
of shares may be paid by cheque or warrant sent through the post directed to the
registered address of the holder, or in the case of joint holders, to the
registered address of that one of the joint holders who is first named on the
register, or to such person and to such address as the holder or joint holders
may direct in writing. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent. The mailing of such cheque or warrant
shall, to the extent of the sum represented thereby (plus the amount of any tax
required by law to be deducted) discharge all liability for the dividend, unless
such cheque or warrant shall not be paid on presentation or the amount of tax so
deducted shall not be paid to the appropriate taxing authority.
20.8. Notwithstanding anything contained in these Articles, the
Directors may from time to time capitalize any undistributed surplus on hand of
the Company and may from time to time issue as fully paid and non-assessable any
unissued shares, or any bonds, debentures or debt obligations of the Company as
a dividend representing such undistributed surplus on hand or any part thereof.
PART 21
DOCUMENTS, RECORDS AND REPORTS
21.1. The Company shall keep at its records office or at such other
place as the Company Act may permit, the documents, copies, registers, minutes,
and records which the Company is required by the Company Act to keep at its
records office or such other place, as the case may be.
21.2. The Company shall cause to be kept proper books of account and
accounting records in respect of all financial and other transactions of the
Company in order properly to record the financial affairs and condition of the
Company and to comply with the Company Act.
21.3. Unless the Directors determine otherwise, or unless otherwise
determined by an ordinary resolution, no member of the Company shall be entitled
to inspect the accounting records of the Company.
21.4. The Directors shall from time to time at the expense of the
Company cause to be prepared and laid before the Company in general meeting such
financial statements and reports as are required by the Company Act.
<PAGE> 32
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21.5. Every member shall be entitled to be furnished once gratis on
demand with a copy of the latest annual financial statement of the Company and,
of so required by the Company Act, a copy of each such annual financial
statement and interim financial statement shall be mailed to each member.
PART 22
NOTICES
22.1. A notice, statement or report may be given or delivered by the
Company to any member either by delivery to him personally or by sending it by
mail to him to his address as recorded in the register of members. Where a
notice, statement or report is sent by mail, service or delivery of the notice,
statement or report shall be deemed to be effected by properly addressing,
prepaying and mailing the notice, statement or report and to have been given on
the day, Saturdays, Sundays and holidays excepted, following the date of
mailing. A certificate signed by the Secretary or other officer of the Company
or of any other corporation acting in that behalf for the Company that the
letter, envelope or wrapper containing the notice, statement or report was so
addressed, prepaid and mailed shall be conclusive evidence thereof.
22.2. A notice, statement or report may be given or delivered by the
Company to the joint holders of a share by giving the notice to the joint holder
first named in the register of members in respect of the share.
22.3. A notice, statement or report may be given or delivered by the
Company to the persons entitled to a share in consequence of the death,
bankruptcy or incapacity of a member by sending it through the mail prepaid
addressed to them by name or by the title of representatives of the deceased or
incapacitated person or trustee of the bankrupt, or by any like description, at
the address (if any) supplied to the Company for the purpose by the persons
claiming to be so entitled, or (until such address has been so supplied) by
giving the notice in a manner in which the same might have been given if the
death, bankruptcy or incapacity had not occurred.
22.4. Notice of every general meeting or meeting of members holding a
class of shares shall be given in a manner hereinbefore authorized to every
member holding at the time of the issue of the notice or the date fixed for
determining the members entitled to such notice, whichever is the earlier,
shares which confer the right to notice of and to attend and vote at any such
meeting. No other person except the auditor
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of the Company and the Directors of the Company shall be entitled to receive
notices of any such meeting.
PART 23
RECORD DATES
23.1. The Directors may fix in advance a date, which shall not be more
than the maximum number of days permitted by the Company Act preceding the date
of any meeting of members or any class thereof or of the payment of any dividend
or of the proposed taking of any other proper action requiring the determination
of members as the record date for the determination of the members entitled to
notice of, or to attend and vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend or for any other
proper purpose and, in such case, notwithstanding anything elsewhere contained
in these Articles, only members of record on the date so fixed shall be deemed
to be members for the purposes aforesaid.
23.2. Where no record date is so fixed for the determination of members
as provided in the preceding Article the date on which the notice is mailed or
on which the resolution declaring the dividend is adopted, as the case may be,
shall be the record date for such determination.
PART 24
SEAL
24.1. The Directors may provide a seal for the Company and, if they do
so, shall provide for the safe custody of the seal which shall not be affixed to
any instrument except in the presence of the following persons, namely,
(i) any two Directors, or
(ii) one of the Chairman of the Board, the President, the managing
Director, a Director and a Vice-President together with one of the
Secretary, the Treasurer, the Secretary-Treasurer, an Assistant
Secretary, an Assistant Treasurer and an Assistant Secretary-Treasurer,
or
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(iii) if the company shall have only one member, the President or the
Secretary or
(iv) such person or persons as the Directors may from time to time by
resolution appoint
and the said Directors, officers, person or persons in whose presence the seal
is to be affixed to an instrument shall sign such instrument. For the purpose of
certifying under seal true copies of any document or resolution the seal may be
affixed in the presence of any one of the foregoing persons.
24.2 To enable the seal of the Company to be affixed to any bonds,
debentures share certificates, or other securities of the Company's whether in
definitive or interim form, on which facsimiles of any of the signatures of the
Directors or officers of the Company are, in accordance with the Company Act
and/or may be delivered to the firm or company employed to engrave, lithograph
or print such definitive or interim bonds, debentures, share certificates or
other securities one or more unmounted dies reproducing the Company's seal and
the Chairman of the Board, the President, the Managing Director or a
Vice-President and the Secretary, Treasurer, Secretary-Treasurer, or Assistant
Secretary, an Assistant Treasurer or an Assistant Secretary Treasurer may be a
document authorized by such firm or company to cause the Company's seal to be
affixed to such definite or interim bonds, debentures, share certificates or
other securities by the use of such dies. Bonds, debentures, share certificates
or other securities to which the Company's seal has been so affixed shall for
all purposes be deemed to be under and to bear the Company's seal lawfully
affixed thereto.
24.3 The Company may have for use in any other province, state,
territory or country an official seal which shall have on its face the name of
the province, state, territory or country where it is to be used and all of the
powers conferred by the Company Act with respect thereto may be exercised by the
Directors or by a duly authorized agent of the Company.
/s/ MICHAEL L. DuMOULIN
- ------------------------------------
MICHAEL L. DuMOULIN
5375 Angus Drive
Vancouver, B. C. V6M 3N3
Barrister and Solicitor
DATED at Vancouver, British Columbia this 24th day of August, 1983.
<PAGE> 1
EXHIBIT 3.ii.2
INTERNATIONAL ACUVISION SYSTEMS, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
OFFICES
Section 1.1. Registered Office.
The registered office of International AcuVision Systems, Inc. (the
"Company") in the State of Delaware shall be located at the principal place of
business in that state of the corporation or individual acting as the Company's
registered agent in the State of Delaware.
Section 1.2. Principal Executive Office.
The principal executive office of the Company for the transaction of
the business of the Company shall be at such place as may be established by the
Board of Directors (the "Board"). The Board is granted full power and authority
to change said principal executive office from one location to another.
Section 1.3. Other Offices.
The Company may have other offices, either within or without the
State of Delaware, at such place or places as the Board from time to time may
designate or the business of the Company may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.1. Date, Time and Place.
Meetings of stockholders of the Company shall be held on such date
and at such time and place, either within or without the State of Delaware, as
shall be designated by the Board and stated in the written notice of the
meeting or in a duly executed written waiver of notice of the meeting.
Section 2.2. Annual Meetings.
Annual meetings of stockholders for the election of directors to the
Board and for the transaction of such other business as may be stated in the
written notice of the meeting or as may properly come before the meeting shall
be held on such date and at such time and place, either within or without the
State of Delaware, as shall be designated by the Board and stated in the
written notice of the meeting or in a duly executed written waiver of notice of
the meeting.
Section 2.3. Special Meetings.
Special meetings of stockholders for any purpose or purposes, unless
otherwise prescribed by the General Corporation Law of the State of Delaware,
the Certificate of Incorporation or these Bylaws, may be called by the Board or
the President. Special meetings of stockholders shall be called by the Board or
the Secretary at the written request of stockholders holding a majority of the
aggregate number of shares of the capital stock of the Company issued and
outstanding and entitled to vote at such meeting. Such written request shall
state the purpose or purposes for which the special meeting is called. The
place, date and time of a special meeting shall be fixed by the Board or the
officer calling the meeting and shall be stated in the written
1
<PAGE> 2
notice of such meeting, which notice shall state the purpose or purposes for
which the meeting is called. Business transacted at a special meeting shall be
confined to the purpose or purposes stated in the written notice of meeting and
matters germane thereto.
Section 2.4. Notice of Meetings.
Written notice of the place, date and time of, and the general
nature of the business to be transacted at, a meeting of stockholders shall be
given to each stockholder of record entitled to vote at such meeting, in the
manner prescribed by Section 6.1 of these Bylaws, not less than ten (10) nor
more than sixty (60) days prior to the date of the meeting.
Section 2.5. Stockholder List
The Secretary or other officer in charge of the stock ledger of
the Company shall prepare and make, at least ten (10) days prior to a meeting
of stockholders, a complete list of stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares of stock of the Company registered in the
name of each stockholder. Such list shall be open to examination by any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list also shall be produced and kept at
the place and time of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.6. Voting Rights.
In order that the Company may determine the stockholders
entitled to notice of, and to vote at, a meeting of stockholders or at any
adjournment(s) thereof or to express consent or dissent to corporate action in
writing without a meeting, the Board may fix a record date in the manner
prescribed by Section 9.1 of these Bylaws. Each stockholder entitled to vote at
a meeting of stockholders or to express consent or dissent to corporate action
in writing without a meeting may authorize another person or persons to act for
such stockholder by proxy in the manner prescribed by Section 2.7 of these
Bylaws. Except as specifically provided otherwise by the General Corporation
Law of the State of Delaware, the Certificate of Incorporation, or these
Bylaws, each holder of capital stock entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting shall be entitled to one vote for each share of such stock
registered in such stockholder's name or the books and records of the Company
as of the record date.
Section 2.7. Proxies
Each proxy shall be in writing and shall be executed by the
stockholder giving the proxy or by such stockholder's duly authorized attorney.
No proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy expressly provides for a longer period. Unless and until
voted, every proxy shall be revocable at the pleasure of the person who
executed it or of his or her legal representative or assigns, except in those
cases where an irrevocable proxy permitted by the General Corporation Law of
the State of Delaware shall have been given.
Section 2.8. Quorum and Adjournment(s) of Meetings.
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these Bylaws, a majority of the aggregate number of shares of each class of
capital stock issued and outstanding and entitled to vote, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at a meeting of stockholders. If such majority shall not be present in person
or represented by proxy at a meeting of stockholders, the stockholders entitled
to
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vote thereat, present in person or represented by proxy, shall have the power
to adjourn the meeting from time to time until holders of the requisite number
of shares of stock entitled to vote at the meeting shall be present in person
or represented by proxy. When a meeting of stockholders is adjourned to another
place, date or time, notice need not be given of the adjourned meeting if the
place, date, and time of such adjourned meeting are announced at the meeting at
which the adjournment is taken. At any such adjourned meeting at which a quorum
shall be present in person or represented by proxy, stockholders may transact
any business that might have been transacted at the meeting as originally
noticed, but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment(s) thereof. If
the adjournment is for more than thirty (30) days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 2.9. Required Vote.
Except as specifically provided otherwise by the General Corporation Law
of the State of Delaware, the Certificate of Incorporation or these Bylaws, the
affirmative vote of a majority of the shares of each class of capital stock
present in person or represented by proxy at a meeting of stockholders at which
a quorum is present and entitled to vote on the subject matter (including, but
not limited to, the election of directors to the Board) shall be the act of the
stockholders with respect to the matter voted upon.
Section 2.10. Action Without Meeting.
Notwithstanding contrary provisions of these Bylaws covering notices and
meetings, any action required or permitted to be taken at an annual or special
meeting of stockholders may be taken by stockholders without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, shall be signed by the holders of shares of capital stock
issued and outstanding and entitled to vote on the subject matter having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting of stockholders at which all such shares of stock
entitled to vote thereon were present and voted. Prompt notice of the taking of
corporate or other action by stockholders without a meeting by less than
unanimous written consent of stockholders shall be given to those stockholders
who have not consented in writing.
ARTICLE III
DIRECTORS
Section 3.1. Board of Directors.
The business and affairs of the Company shall be managed by, or under the
direction of, a Board of Directors. The Board may exercise all such powers of
the Company and do all such lawful acts and things on its behalf as are not by
the General Corporate Law of the State of Delaware, the Certificate of
Incorporation or these Bylaws directed or required to be exercised or done by
stockholders.
Section 3.2. Number, Election and Tenure.
The number of directors which shall constitute the whole Board shall be
fixed from time to time by the resolution of the Board. In no event shall the
total number of directors which shall constitute the whole Board be fixed by
the Board at less than one (1) or more than seven (7). The Board shall not at
any time decrease the total number of directors which shall constitute the
whole Board if to do so would shorten the term of any incumbent director. With
the exception of the initial Board which shall be elected by the incorporator
of the Company, and except as provided otherwise in these Bylaws, directors
shall be elected at the annual meeting of stockholders. Each director shall
hold office until the annual meeting of stockholders next succeeding his or her
election or appointment and until his or her successor is elected and qualified
or until his or her earlier
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resignation or removal.
Section 3.3. Resignation and Removal.
Any director or member of a committee of the Board may resign at any time
upon written notice to the Board, the Chairman of the Board, or the President.
Unless specified otherwise in the notice, such resignation shall take effect
upon receipt of the notice by the Board, the Chairman of the Board, or the
President. The acceptance of a resignation shall not be necessary to make it
effective. Any director may be removed, either with or without cause, as
provided by the General Corporation Law of the State of Delaware.
Section 3.4. Vacancies and Newly Created Directorships.
Vacancies occurring for any reason and newly-created directorships
resulting from an increase in the authorized number of directors which shall
constitute the whole Board, as fixed pursuant to Section 3.2 of these Bylaws,
shall be filled by the election of a new director or directors at a special
meeting of stockholders called for such purpose. Any director so chosen shall
hold office until the annual meeting of stockholders next succeeding his or her
election or appointment and until his or her successor shall be elected and
qualified, or until his or her earlier resignation or removal.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1. Date, Time and Place.
Meetings of the Board shall be held on such date and at such time and
place, either within or without the State of Delaware, as shall be determined by
the Board pursuant to these Bylaws.
Section 4.2. Annual Meetings.
After the annual meetings of stockholders, the newly-elected Board may
hold a meeting, on such date and at such time and place as shall be determined
by the Board, for the purpose of organization, election of officers and such
other business that may properly come before the meeting. Such meeting may be
held without notice.
Section 4.3. Regular Meetings.
Regular meetings of the Board may be held without notice on such date and
at such time and place as shall be determined from time to time by the Board.
Section 4.4. Special Meetings.
Special meetings of the Board may be held at any time upon the call of
the Chairman of the Board, the President or the Secretary by means of oral,
telephonic, written telegraphic, cable or other similar notice, duly given,
delivered, sent or mailed to each director, in the manner prescribed by Section
6.1 of these Bylaws. Special meetings of the Board may be held at any time
without notice if all of the directors are present or if those directors not
present waive notice of the meeting in writing either before or after the date
of the meeting.
Section 4.5. Quorum.
A majority of the whole Board as fixed pursuant to Section 3.2 of these
Bylaws shall constitute a quorum for the transaction of business at a meeting of
the Board. If a quorum shall not be present at a
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meeting of the Board, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 4.6. Required Vote.
Except as specifically provided otherwise by the General Corporation Law
of the State of Delaware, the affirmative vote of a majority of the directors
present at a meeting of the Board at which a quorum is present shall be the act
of the Board with respect to the matter voted upon.
Section 4.7. Action Without Meeting.
Any action required or permitted to be taken at a meeting of the Board,
or committee thereof, may be taken by directors without a meeting if all of the
members of the Board, or committee thereof, consent thereto in writing and such
writing is filed with the minutes of proceedings of the Board, or committee
thereof.
Section 4.8. Telephone Meetings.
Members of the Board, or any committee thereof, may participate in a
meeting of the Board, or committee thereof, by means of conference telephone or
similar communications equipment by means of which all of the members
participating in the meeting can hear each other. Participation by members of
the Board, or committee thereof, by such means shall constitute presence in
person of such members at such meeting.
ARTICLE V
COMMITTEES OF THE BOARD OF DIRECTORS
Section 5.1. Designation and Powers.
The Board may designate one or more committees from time to time in its
discretion, by resolution passed by the affirmative vote of a majority of the
whole Board as fixed pursuant to Section 3.2 of these Bylaws. Each committee
shall consist of one or more of the directors on the Board. The Board may
designate one or more directors as alternate members of any committee who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof 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 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, shall have and may exercise all of the powers
and authority of the Board in the management of the business and affairs of the
Company and may authorize the corporate seal of the Company affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation or these
Bylaws, adopting an agreement of merger or consolidation, recommending to
stockholders the sale, lease, or exchange of all or substantially all of the
Company's assets, or recommending to stockholders a dissolution of the Company
or a revocation of a dissolution; and, unless the resolution of the Board
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock of the Company or any
class or series of stock. Each committee shall keep regular minutes of its
meetings and shall report the same to the Board when requested to do so.
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ARTICLE VI
NOTICES
Section 6.1. Delivery of Notice.
Notices to stockholders and, except as permitted below, to directors on
the Board shall be in writing and may be delivered by mail or by messenger.
Notice by mail shall be deemed to be given at the time when such notice is
deposited in a United States post office or letter box, enclosed in a postpaid
sealed wrapper, and addressed to a stockholder or director at his respective
address appearing on the books and records of the Company, unless such
stockholder or director shall have filed with the Secretary a written request
that notices intended for such stockholder or director be mailed or delivered
to some other address, in which case the notice shall be mailed to or delivered
at the address designated in such request. Notice by messenger shall be deemed
to be given when such notice is delivered to the address of a stockholder or
director as specified above. Notices to directors also may be given orally in
person or by telephone, or by telex, telegram, cable, or other similar means,
or by leaving the notice at the residence or usual place of business of a
director. Notice by oral communication, telex, telegram, cable, or other
similar means shall be deemed to be given upon dispatch of such notice. Notice
by messenger shall be deemed to be given when such notice is delivered to a
director's residence or usual place of business. Notices, requests, and other
communications required or permitted to be given or communicated to the Company
by the Certificate of Incorporation, these Bylaws, or any other agreement shall
be in writing and may be delivered by messenger, United States mail, telex,
telegram, cable, or other similar means. Notice to the Company shall be deemed
to be given upon actual receipt of such notice by the Company.
Section 6.2. Waiver of Notice.
Whenever notice is required to be given by the General Corporation Law of
the State of Delaware, the Certificate of Incorporation, or these Bylaws, a
written waiver of notice signed by the person entitled thereto, whether before
or after the time stated in the notice, 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 the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of
stockholders, Board, or committee of the Board need be specified in any written
waiver of notice.
ARTICLE VII
OFFICERS
Section 7.1. Officers.
At its annual meeting, or at such other meeting as it may determine, or
by unanimous written consent of the directors without meeting, the Board shall
elect such officers as the Board from time to time may designate or the
business of the Company may require. The Chairman of the Board shall be
selected from among the directors on the Board, but no other executive officer
need be a member of the Board. Any number of offices may be held by the same
person.
Section 7.2. Other Officers and Agents.
The Board also may elect such other officers and agents as the Board from
time to time may determine to be advisable. Such officers and agents shall
serve for such terms, exercise such powers, and perform such duties as shall be
specified from time to time by the Board.
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Section 7.3. Tenure, Resignation, Removal and Vacancies.
Each officer of the Company shall hold his office until his or her
successor is elected and qualified, or until his or her earlier resignation or
removal; provided, that if the term of office of any officer elected pursuant to
Section 7.2 of these Bylaws shall have been fixed by the Bylaws or determined by
the Board or other governing body, such person shall cease to hold office no
later than the date of expiration of such term, regardless of whether any other
person shall have been elected or appointed to succeed such person. Each officer
shall hold his or her office until his or her successor is elected and qualified
or until his or her earlier resignation or removal. Any officer elected by the
Board may be removed at any time, with or without cause, by the Board; provided,
that any such removal shall be without prejudice to the rights, if any, of the
officer so employed under any employment contract or other agreement with the
Company. Any officer may resign at any time upon written notice to the Board,
the Chairman of the Board or the President. Unless specified otherwise in the
notice, such resignation shall take effect upon receipt of the notice by the
Board, the Chairman of the Board or the President. The acceptance of the
resignation shall not be necessary to make it effective. Any vacancy occurring
in any office of the Company by death, resignation, removal or otherwise shall
be filled by the Board and such successor or successors shall hold office for
such term as may be specified by the Board.
Section 7.4. Authority and Duties.
All officers and agents, as between themselves and the Company, shall have
such authority and perform such duties in the management of the Company as may
be provided in these Bylaws and as generally pertain or are necessarily
incidental to the particular office or agency. In addition to the powers and
duties hereinafter specifically prescribed for certain officers of the Company,
the Board from time to time may impose or confer upon any of the officers such
additional duties and powers as the Board may see fit, and the Board from time
to time may impose or confer any or all of the duties and powers hereinafter
specifically prescribed for any officer upon any other officer or officers. The
Board may give general authority to any officer to affix the corporate seal of
the Company and to attest the affixing by his or her signature.
Section 7.5. The Chairman of the Board.
The Chairman of the Board shall preside at all meetings of stockholders
and of the Board, and shall be a member of all standing committees of the
Board. The Chairman of the Board shall see that all resolutions and orders of
the Board are carried into effect, shall vote, in the name of the Company,
stock or securities in other corporations or associations held by the Company
unless another officer is designated by the Board for that purpose, and in
connection with all the foregoing shall be authorized to delegate to the
President and the other officers such of his or her powers and such of his or
her duties as he or she may deem to be advisable.
Section 7.6. The Chief Executive Officer.
The Chief Executive Officer shall have general and active management,
supervision, direction, and control of the business of the Company. He or she
shall assist the Chairman of the Board in the management of the Company and in
the absence or disability of or upon the delegation by the Chairman of the
Board he or she shall preside at all meetings of stockholders and of the Board.
He or she shall report from time to time to the Board all matters within his or
her knowledge which the interest of the Company may require to be brought to
the attention of the Board. The Chief Executive Officer shall have the general
powers and duties of supervision and management usually vested in the office of
chief executive officer of a corporation and shall exercise such powers and
perform such duties as generally pertain or are necessarily incidental to his
or her office and shall have such other powers and perform such other duties as
may be specifically assigned to him or her from time to time by the Board or
Chairman of the Board.
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Section 7.7. The President.
The President shall perform such duties as may be specifically assigned to
him or her from time to time by the Board, the Chairman of the Board, or the
Chief Executive Officer. In case of the absence or disability of the Chief
Executive Officer, and if the Board, the Chairman of the Board, or the Chief
Executive Officer has so authorized, the President shall perform the duties of
the office of the Chief Executive Officer.
Section 7.8. The Treasurer.
The Treasurer shall be the Chief Financial Officer of the Company and shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books and records belonging
to the Company. He or she shall deposit all moneys and other valuable effects in
the name and to the credit of the Company in such depositories as may be
designated by the Board or any officer of the Company authorized by the Board to
make such designation. The Treasurer shall exercise such powers and perform such
duties as generally pertain or are necessarily incidental to his or her office
and shall perform such other duties as may be specifically assigned to him or
her from time to time by the Board, the Chairman of the Board, or the Chief
Executive Officer. The Treasurer shall disburse the funds of the Company as may
be ordered by the Board, the Chairman of the Board, or the Chief Executive
Officer, taking proper vouchers for such disbursements. He or she shall render
to the Chairman of the Board, the President, and the Board (at its regular and
special meetings), or whenever any of them may request it, an account of all of
his or her transactions as Treasurer and of the financial condition of the
Company. If required by the Board, he or she shall give the Company a bond in
such sum and with such surety or sureties as shall be satisfactory to the Board
for the faithful performance of the duties of his or her office and for the
restoration to the Company, in case of his or her death, resignation,
retirement, or removal from office, of all books, papers, vouchers, moneys, and
other property of whatever kind in his or her possession or under his or her
control belonging to the Company.
Section 7.9. The Secretary.
The Secretary shall attend all meetings of the Board and all meetings of
stockholders and record all votes and record the proceedings of such meetings
in a book to be kept for that purpose. He or she shall perform like duties for
any committees of the Board when required or requested. He or she shall give,
or cause to be given, notice of all meetings of stockholders and, when
necessary, of the Board. The Secretary shall exercise such powers and perform
such duties as generally pertain or are necessarily incidental to his or her
office and shall perform such other duties as may be specifically assigned to
him or her from time to time by the Board, the Chairman of the Board or the
Chief Executive Officer. The Secretary shall have custody of the corporate seal
of the Company and he or she, or an Assistant Secretary, if any, shall have
authority to affix the corporate seal to any instrument requiring it, and when
so affixed it shall be attested by his or her signature or by the signature of
an Assistant Secretary.
Section 7.10. The Assistant Secretary(ies).
The Assistant Secretary, if any be so appointed by the Board, or if there
be more than one, the Assistant Secretaries, shall perform such duties as may
be specifically assigned to them from time to time by the Board, the Chairman
of the Board or the Chief Executive Officer. In case of the absence or
disability of the Secretary, and if the Board, the Chairman of the Board or the
Chief Executive Officer has so authorized, the Assistant Secretary, or if there
be more than one Assistant Secretary, such Assistant Secretary as the Board,
the Chairman of the Board, or the Chief Executive Officer shall designate,
shall perform the duties of the office of the Secretary.
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ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1. Form and Signature.
The stock certificates representing the stock of the Company shall be in
such form or forms not inconsistent with the General Corporation Law of the
State of Delaware, the Certificate of Incorporation and these Bylaws as the
Board shall approve from time to time. Stock certificates shall be numbered,
the certificates for the shares of stock to be numbered consecutively, and
shall be entered in the books and records of the Company as such certificates
are issued. No certificate shall be issued for any share until the
consideration therefor has been fully paid. Stock certificates shall exhibit
the holder's name, certify the class and series of stock and the number of
shares in such class and series of stock owned by the holder, and shall be
signed (a) by the Chairman of the Board, or any Vice Chairman of the Board, or
the Chief Executive Officer, or the President, and (b) by the Treasurer, or any
Assistant Treasurer, or the Secretary, or any Assistant Secretary. Any or all of
the signatures on a stock certificate may be facsimiles. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, such certificate may be
issued by the Company with the same effect as if he or she were such officer,
transfer agent or registrar on the date of issuance.
Section 8.2. Lost, Stolen or Destroyed Certificates.
The Board may direct that a new stock certificate be issued in place of any
certificate theretofore issued by the Company which is alleged to have been
lost, stolen, or destroyed, upon the making of an affidavit of that fact by the
person, or his or her legal representative, claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issuance of a new
certificate, the Board, in its discretion and as a condition precedent to the
issuance thereof, may require the owner of the lost, stolen or destroyed
certificate, or his or her legal representative, to advertise the same in such
manner as the Board shall required and/or to give the Company a bond in such sum
as the Board shall direct as indemnity against any claim that may be made
against the Company, any transfer agent or any registrar on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
such new certificate.
Section 8.3. Registration of Transfer.
Shares of common stock of the Company shall be transferable only upon the
Company's books by the holders thereof in person or by their duly authorized
attorneys or legal representatives, and upon such transfer the old certificates
shall be surrendered to the Company by the delivery thereof to the person in
charge of the stock and transfer books and ledgers of the Company, or to such
other person as the Board may designate. Upon surrender to the Company of a
certificate for shares, duly endorsed or accompanied by proper evidence of
succession, assignment, or authority to transfer, the Company shall issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction on its books and records.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Record Date.
In order that the Company may determine the stock holders entitled to
notice of, and to vote at, a meeting of stockholders, or to express consent or
dissent to corporate action in writing without meeting, 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
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lawful action, the Board may fix, in advance, a record date which shall not be
more than sixty (60) nor less than ten (10) days prior to the date of such
meeting nor more than sixty (60) days prior to any other action. A determination
of stockholders of record entitled to notice of, and to vote at, a meeting of
stockholders shall apply to any adjournment(s) of such meeting; provided,
however, that the Board may, in its discretion, and shall if otherwise required
by these Bylaws fix a new record date for the adjourned meeting.
Section 9.2. Registered Stockholders.
Except as specifically provided otherwise by the General Corporation Law
of the State of Delaware, the Company shall be entitled to recognize the
exclusive right of a person registered on its books and records as the owner of
shares of stock of the Company to receive dividends and to vote as such owner,
shall be entitled to hold such person liable for calls and assessments, and
shall not be bound to recognize any equitable or other claims to, or interest
in, such stock on the part of any other person, whether or not the Company shall
have express or other notice thereof.
Section 9.3. Dividends.
The Board shall declare and pay dividends ratably, share for share, on
the Company's capital stock in all sums so declared, out of funds legally
available therefor.
Section 9.4. Dividend Declarations.
Dividends on the capital stock of the Company may be declared quarterly,
semiannually or annually as the Board may from time to time, in its discretion,
determine.
Section 9.5. Checks and Notes.
All checks and drafts on the bank accounts of the Company, all bills of
exchange and promissory notes of the Company, and all acceptances, obligations,
and other instruments for the payment of money drawn, signed, or accepted by the
Company shall be signed or accepted, as the case may be, by such officer or
officers, agent or agents, and in such manner as shall be thereunto authorized
from time to time by the Board or by officers of the Company designated by the
Board to make such authorization.
Section 9.6. Fiscal Year.
The fiscal year of the Company shall commence on September 1 and end on
August 31 of each year, unless otherwise fixed by resolution of the Board.
Section 9.7. Corporate Seal.
The corporate seal shall be circular in form and shall have inscribed
thereon the name of the Company, the year of its organization, and the words
"Corporate Seal" and "Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 9.8. Voting of Securities of Other Issuers.
In the event that the Company shall own and/or have power to vote any
securities (including, but not limited to, shares of stock) of any other issuer,
such securities shall be voted by the Chairman of the Board as provided in
Section 7.5 of these Bylaws, or by such other person or persons, to such extent,
and in such manner as may be determined by the Board. If the Company shall be a
general partner in any partnership, the acts of the Company in such capacity may
be approved by the Board and taken by the officers as may be authorized or
determined by the Board from time to time.
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EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS
ESTABLISHING POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER RIGHTS
AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
OF
ACUBID.COM, INC
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
It is hereby certified that:
I. The name of the corporation is AcuBid.com, Inc.
II. The Certificate of Incorporation of the Company authorizes the
issuance of 10,000,000 shares of preferred stock, par value $0.001 per share
("Preferred Stock"), and expressly vests in the Board of Directors of the
Company the authority to issue any or all of said shares in one or more series
and to fix, by resolution or resolutions, the voting powers, designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof of each series to be
issued.
III. The Board of Directors of the Company, pursuant to the authority
expressly vested in it, by unanimous written consent, adopted the following
resolution relating to creating a series, and providing for the issuance, of
Preferred Stock:
RESOLVED, that pursuant to the provisions of Article __ of the
Certificate of Incorporation of AcuBid.com, Inc. (the "Company"), a Delaware
corporation, the Company has authorized and created a series of Preferred Stock,
and the designations, voting powers, preferences and relative, participating,
optional, redemption and other special rights (the "Rights and Preferences") of
the Preferred Stock are to be as follows:
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1. Designation and Amount. The designation of the series of preferred
stock created hereby is the Series A Convertible Preferred Stock, par value
$0.001 per share (the "Series A Preferred"). The number of shares which shall
constitute the Series A Preferred shall be 4,000,000 shares.
2. Stated Value. The stated value for each share of the Series A
Preferred shall be $1.00 (the "Stated Value").
3. Rank. The Series A Preferred shall, with respect to dividend rights,
redemption rights, and rights on liquidation, winding up, and dissolution, rank
junior to the "Senior Securities" (as defined below), on a parity with the
"Parity Securities" (as defined below), and senior to the Company's Common Stock
and to all other classes and series of stock of the Company now or hereafter
authorized, issued, or outstanding which are not expressly designated as senior
to the Series A Preferred and the Parity Securities (collectively, the "Junior
Securities"). For purposes hereof, "Senior Securities" shall consist of any
class or series of stock that ranks senior to the Series A Preferred as to
dividend rights, redemption rights, and rights on liquidation, winding up, and
dissolution, and "Parity Securities" shall consist of any class or series of
stock that ranks on a parity with the Series A Preferred as to dividend rights,
redemption rights, and rights on liquidation, winding up, and dissolution.
4. Dividends.
(a) The holders of the Series A Preferred, in preference to the holders
of Junior Securities, shall be entitled to receive, when, as, and if declared by
the Board of Directors of the Company, out of any assets of the Company legally
available for the payment of dividends, cumulative annual dividends per share at
the applicable per annum rate set forth in paragraph 4(b). Such dividends shall
be payable in cash. The amount of dividends per share not so paid shall be added
to the aggregate amount of dividends per share unpaid on prior payment dates
which remain unpaid on such date, and this total (the "Cumulative Deferred
Amount per share") shall be added to the Stated Value per share for purposes of
determining the amount of annual dividends per share which shall thereafter
accumulate on the Series A Preferred. Any payment of cash dividends by the
Company shall first be applied to reduce the Cumulative Deferred Amount per
share. The holders of the Series A Preferred shall not be entitled to
participate in any dividends payable in respect of any other class or series of
capital stock of the Company.
(b) The applicable per annum rate of annual dividends per share for the
Series A Preferred shall be six percent (6%) of the Stated Value per share,
payable on a semi-annual basis each June 30 and December 31.
(c) Dividends for Series A Preferred shall accrue and be cumulative,
whether or not declared, on each share of such series from and after the date of
issuance thereof. Except for the additional amounts due in respect of the
Cumulative Deferred Amount per share, no interest, or sum
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of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the shares of Series A Preferred which may be in arrears.
(d) Subject to paragraph 4(g), so long as any shares of the Series A
Preferred are outstanding, the Company shall not (i) declare, pay, or set apart
for payment any dividend on any of the Junior Securities, except if all accrued
dividends on Series A Preferred have been paid to date on the date such other
dividend is declared, or (ii) make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase, redemption,
retirement, or other acquisition for value of any of, or redeem, purchase,
retire, or otherwise acquire for value any of, the Junior Securities or any
warrants, rights, calls, or options exercisable for or convertible into any of
the Junior Securities, or (iii) make any distribution in respect of the Junior
Securities or any warrants, rights, calls, or options exercisable for or
convertible into any of the Junior Securities, in any such case either directly
or indirectly, and whether in cash, obligations, or shares of the Company or
other property (other than distributions or dividends payable solely in a
particular class or series of Junior Securities), unless prior to or
concurrently with such declaration, payment, setting apart for payment,
purchase, redemption, other acquisition for value, or distribution, as the case
may be, all accrued and unpaid dividends, if any, on shares of the Series A
Preferred not paid on the dates provided for in paragraph 4(c) hereof shall have
been paid or declared and set aside for payment.
(e) The date on which the Company initially issues any shares of the
Series A Preferred shall be deemed to be the "date of issuance" of such shares
regardless of the number of times transfers of shares of such series are made on
the stock transfer books maintained by or for the Company and regardless of the
number of certificates that may be issued to evidence such shares of Series A
Preferred.
(f) So long as any shares of Series A Preferred are outstanding, the
Company shall not declare, pay, or set apart for payment any dividend on any
Parity Securities unless concurrently with such declaration, payment, or setting
apart for payment, as the case may be all accrued and unpaid dividends and
repayments upon redemption of the Series A Preferred and all Parity Securities
have been paid or made, as the case may be. The Series A Preferred and all
Parity Securities shall share ratably in the amount of such payment in
accordance with the sums that would be payable on such shares if all dividends
were paid in full. Any repurchase, redemption, or retirement of Parity
Securities shall be made on a pro rata basis with respect to the Series A
Preferred unless all accrued and unpaid dividends and repayments upon redemption
on the Series A Preferred have been paid or made, as the case may be.
(g) Subject to the foregoing provisions of this paragraph and to the
provisions of paragraph 5 hereof, the Board of Directors may declare and the
Company may pay or set apart for payment dividends and other distributions on
any of the Junior Securities, and may purchase or otherwise redeem any of the
Junior Securities or any warrants, rights, or options exercisable for or
convertible into any of the Junior Securities, and the holders of the shares of
Series A Preferred shall not be entitled to share therein.
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5. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Company or sale of
substantially all assets, the holders of shares of any unconverted Series A
Preferred then outstanding shall be entitled to receive, in conjunction with any
provision then being made for holders of Parity Securities, if any, an amount in
cash equal to the Stated Value for each share outstanding, plus an amount in
cash equal to all accrued but unpaid dividends thereon to the date fixed for
liquidation, dissolution, or winding up before any payment shall be made or any
assets distributed to the holders of any of the Junior Securities. After payment
of the full amount of the liquidation preference payable to the holders of
shares of Series A Preferred and the payment of any other liquidation
preferences payable with respect to any Senior Securities or Parity Securities,
holders of Series A Preferred shall be entitled to share ratably in the
distribution of the remaining available assets of the Company in the proportion
that each holder's shares, calculated on an as conversed basis, bears to the
total number of shares of capital stock of the Company outstanding and eligible
to participate in such distribution, assuming conversion as applicable. If the
assets of the Company are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of Series A Preferred and the
holders of Parity Securities, if any, then the holders of all such shares shall
share ratably in such distribution of assets in accordance with the amount which
would be payable on such distribution if the amounts to which the holders of
outstanding shares of Series A Preferred and the holders of Parity Securities
were paid in full.
(b) For the purposes of this paragraph, neither the voluntary sale,
lease, conveyance, exchange, or transfer (for cash, shares of stock, securities,
or other consideration) of all or substantially all the property or assets of
the Company nor the consolidation or merger of the Company with one or more
other corporations shall be deemed to be a liquidation, dissolution, or winding
up, voluntary or involuntary, unless such voluntary sale, lease, conveyance,
exchange, or transfer shall be in connection with a plan of liquidation,
dissolution, or winding up of the Company.
6. Redemption.
(a) Right to Redemption. At any time on or after the fifth anniversary
of the issuance of the Series A Preferred, the holders of Series A Preferred may
elect to require the Company to redeem such holders' shares of Series A
Preferred at a price equal to the Stated Value per share plus all accrued and
unpaid dividends accrued as of such date. The holders of Series A Preferred may
require the Company to effect such a redemption by giving written notice to the
Company of such election. Upon receipt of such notice, the Company (and such
holders) will be obligated to redeem the percentage of shares of Series A
Preferred specified in the notice of redemption (ratably among the holders of
each series of the Series A Preferred).
(b) Continuing Obligation. If the funds of the Company legally available
for redemption of Series A Preferred upon any demand for redemption by holders
of the Series A Preferred are insufficient to redeem the total number of shares
of Series A Preferred to be redeemed in a requested
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redemption, at the option of the holders of Series A Preferred demanding
redemption, those funds that are legally available will be used to redeem the
maximum possible number of shares of Series A Preferred ratably among the
holders of the Series A Preferred to be redeemed based upon the aggregate
redemption price of such shares held by each such holder. In such case, at any
time and from time to time thereafter when additional funds of the Company are
legally available for redemption of shares of Series A Preferred, such funds
immediately will be used to redeem the balance of the shares of Series A
Preferred which the Company has become obligated to redeem but which it has not
redeemed and such funds will not be used for any other purpose, including to
redeem any shares of Series A Preferred which the Company is obligated to redeem
in connection with any subsequently requested redemption.
(c) Failure to Redeem. An Event of Default (as defined in Section 8(f)
hereof) shall be deemed to occur in the event the Company is unable to legally
redeem or otherwise fails to redeem any shares of Series A Preferred included in
a demand for redemption within 15 days following receipt by the Company of the
notice of such requested redemption.
(d) Dividends; Rights of Holders. No share of Series A Preferred is
entitled to any dividends accruing after the date on which the redemption price
of such share of Series A Preferred is paid. On such date, all rights of the
holder of such share of Series A Preferred will cease, and such share of Series
A Preferred will not be deemed to be outstanding.
(e) Reissuance; New Certificates. Any shares of Series A Preferred which
are redeemed or otherwise acquired by the Company will be canceled and will not
be reissued, sold or transferred. If fewer than the total number of shares of
Series A Preferred represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares of Series A Preferred
will be issued to the holder thereof without cost to such holder within three
(3) business days after surrender of the certificate representing the redeemed
shares.
(f) Ratable Offers. Neither the Company nor any subsidiary will redeem,
repurchase or otherwise acquire any shares of Series A Preferred pursuant to
this Section 6, except as expressly authorized herein or pursuant to a purchase
offer made pro-rata to all holders of shares of Series A Preferred on the basis
of the number of shares of Series A Preferred owned by each such holder.
7. Conversion. The holders of Series A Preferred have conversion rights
as follows (the "Conversion Rights"):
(a) Right to Convert. Except as set forth in Section 7(b) below,
each share of Series A Preferred shall initially be convertible, at the option
of the holder thereof, at any time on or after six months from the date of
issuance thereof, into a number of fully paid and nonassessable shares of Class
A Common Stock, par value $.01 per share, of the Company (the "Common Stock") as
follows ("Conversion Rate"): (i) if conversion occurs on or before the first
anniversary following issuance, such Series A Preferred will convert at a rate
of .666 shares of Common Stock for each
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share of Series A Preferred; (ii) if conversion occurs after the first
anniversary but on or before the second anniversary following issuance, such
Series A Preferred will convert at a rate of .400 shares of Common Stock for
each share of Series A Preferred; (iii) if conversion occurs after the second
anniversary but on or before the third anniversary following issuance, such
Series A Preferred will convert at a rate of .285 shares of Common Stock for
each share of Series A Preferred; (iv) if conversion occurs after the third
anniversary following issuance, such Series A Preferred will convert at a rate
of .200 shares of Common Stock for each share of Series A Preferred. The
Conversion Rate of the Series A Preferred shall be subject to adjustment from
time to time as provided in Section 7(d) hereof. The Stated Value of each series
of Series A Preferred shall not be subject to adjustment (except as provided in
Section 7(d)). Upon conversion, all accrued or unpaid dividends on the shares of
Series A Preferred so converted shall, at the option of the Company, be paid in
either cash, to the extent permitted by applicable law (and if not then
permitted by applicable law, at such time as the Company is permitted by
applicable law to pay any such dividends) or, at the Company's option, converted
into the number of fully paid and nonassessable shares of Common Stock which
results from dividing the fair market value of a share of Common Stock (as
determined in good faith by the Board of Directors) at such time into the
aggregate of all such accrued or unpaid dividends on the Series A Preferred so
converted. Notwithstanding anything else contained herein to the contrary, if,
in respect of any shares of Series A Preferred, the Company elects (whether as a
result of a voluntary or automatic conversion) to pay all accrued or unpaid
dividends in cash, then the Company shall pay all accrued or unpaid dividends
(whether declared or undeclared) on the remaining shares of Series A Preferred
in cash, and, if, in respect of any shares of Series A Preferred, the Company
elects (whether as a result of a voluntary or automatic conversion) to pay all
accrued or unpaid dividends in shares of Common Stock, then the Company shall
pay all accrued or unpaid declared dividends on the remaining shares of Series A
Preferred in shares of Common Stock.
(b) Automatic Conversion. Each share of Series A Preferred shall
automatically be converted into shares of Common Stock upon the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, which covers the offer and sale of
Common Stock for the account of the Company to the public with gross proceeds
that are equal to or greater than $20,000,000 (before deducting offering
expenses and underwriting discounts Each share of Series A Preferred shall also
automatically convert, at any time after the date hereof, upon any capital
reorganization or any reclassification of the stock of the Company (other than
as a result of a stock dividend, or subdivision, split-up or combination of
shares), or the consolidation, acquisition, purchase of substantially all
Company assets or merger of the Company with or into another person (other than
a consolidation or merger in which the Company is the continuing entity and
which does not result in any change in the Common Stock) the Series A Preferred
shall, after such reorganization, reclassification, consolidation, asset
purchase or merger be convertible into the kind and number of shares of stock or
other securities or property of the Company or otherwise to which such holder
would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, asset purchase or merger such holder had
converted his or its shares of Series A Preferred into Common Stock. Upon
automatic conversion, all accrued or unpaid dividends (whether declared or
undeclared) on the Series A Preferred shall, at
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the option of the Company, be paid in cash, to the extent permitted by
applicable law (and if not then permitted by applicable law, at such time as the
Company is permitted by applicable law to pay any such dividends) or converted
into the number of fully paid and nonassessable shares of Common Stock which
results from dividing the fair market value of a share of Common Stock (using
the offering price in the applicable underwriting), into the aggregate of all
such accrued or unpaid dividends.
(c) Mechanics of Conversion. Before any holder of Series A
Preferred shall be entitled to convert the same into shares of Common Stock and
to receive certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the principal office of the Company or
of any transfer agent for the Series A Preferred, and shall give written notice
to the Company at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 7(b) hereof, the outstanding shares of Series A Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; and provided, further, that the Company shall
not be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such automatic conversion unless and until the certificates
evidencing such shares of Series A Preferred are either delivered to the Company
or its transfer agent as provided above, or the holder notifies the Company or
its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection with such certificates.
The Company shall as soon as practicable after such delivery, or after such
agreement and indemnification, issue and deliver at such office to such holder
of Series A Preferred, a certificate or certificates for the number of shares of
Common Stock to which it, he or she shall be entitled as aforesaid and, at the
option of the Company, either a check payable to the holder in the amount of any
accrued and unpaid dividends (whether declared or undeclared) payable pursuant
to Section 4 hereof, if any, or the number of fully paid and nonassessable
shares of Common Stock which results from dividing the fair market value of a
share of Common Stock (as determined in good faith by the Board of Directors or
using the offering price in an underwriting, if the conversion is pursuant to
Section 7(b)) into the aggregate of all such accrued or unpaid dividends
(whether declared or undeclared). 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 Series A Preferred to be converted, or, in the case of automatic
conversion, simultaneously upon the occurrence of the event leading to such
automatic conversion, 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 on such date.
(d) Conversion Rate and Stated Value Adjustments. In the event
the outstanding shares of Common Stock shall be subdivided, combined or
consolidated, by stock split, stock dividend, combination or like event, into a
greater or lesser number of shares of Common Stock, the Conversion Rate and
Stated Value in effect immediately prior to such subdivision, combination,
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consolidation, or stock dividend shall, concurrently with the effectiveness of
such subdivision, combination, consolidation or stock dividend, be
proportionately adjusted.
(e) Status of Converted Stock. In case any shares of Series A
Preferred shall be converted pursuant to Section 7 hereof, the shares so
converted shall be canceled, shall not be reissuable and shall cease to be a
part of the authorized capital stock of the Company.
(f) Fractional Shares. In lieu of any fractional shares in the
aggregate to which the holder of Series A Preferred would otherwise be entitled
upon conversion, the Company shall pay cash equal to such fraction multiplied by
the fair market value of one share of Common Stock as determined by the Board of
Directors in the good faith exercise of its reasonable business judgment.
(g) Miscellaneous.
(i) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as
the case may be.
(ii) No adjustment in the Conversion Rate will be made if
such adjustment would result in a change in such Conversion Rate of less
than .01. Any adjustment of less than .01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of .01 or more in the Conversion Rate.
(h) No Impairment. The Company will not, 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 Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 7 and in the
taking of all action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Series A Preferred against impairment.
(i) Reservation of Stock Issuable Upon Conversion. The Company
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, 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 Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then issued and outstanding shares of Series A Preferred,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
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8. Registration Rights
Holders of Series A Preferred shall have registration rights under a
Registration Rights Agreement which shall be negotiated between the holders of
Series A Preferred and the Company.
9. Record Holders. The Company and any transfer agent may deem and treat
the record holder of any shares of Series A Preferred as the true and lawful
owner thereof for all purposes, and neither the Company nor any transfer agent
shall be affected by any notice to the contrary.
10. Notice. Any notice or other communication to be given under this
resolution shall be in writing and shall be deemed to have been duly given or
made (a) if delivered personally, at the time of such delivery, (b) if
transmitted by first class registered or certified mail, postage prepaid, return
receipt requested, three (3) business days after the date of such mailing, (c)
if sent by prepaid overnight delivery service, the next business day after being
sent, or (d) if transmitted by cable, telegram, facsimile, or telex, at the time
of such transmission, addressed as follows: (x) if to the Company, at its
principal executive offices, and (y) if to a holder of Series A Preferred, at
the last address of such holder as it shall appear on the register maintained by
or for the Company.
IV. The foregoing resolution was duly adopted by all necessary action on
the part of the corporation.
IN WITNESS WHEREOF, ACUBID.COM, INC. has caused this Certificate to be
duly executed by its President this _____ day of ______ , 1999.
ACUBID.COM, INC.
By:
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Michael A. Schaffer, Chief Executive Officer
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EXHIBIT 4.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE WARRANT UNDER SUCH ACT AND APPLICABLE LAWS OR SOME
OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE
LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Warrant No._______ Warrant to Purchase 10,000 Shares of
Common Stock
WARRANT TO PURCHASE COMMON STOCK
of
ACUBID.COM, INC.
Void after April 1, 2001
This certifies that, for value received,_____________________ or
registered assigns ("Holder") is entitled, subject to the terms set
forth below, to purchase from AcuBid.Com, Inc. (the "Company" or "AcuBid"), a
Delaware corporation, shares of Common Stock of the Company, as constituted on
the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the subscription form
attached hereto duly executed, and simultaneous payment therefor in lawful
money of the United States or otherwise as hereinafter provided, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of such shares of Common Stock are subject to adjustment as
provided below. The term "Warrant" as used herein shall include this Warrant,
and any warrants delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in
part, during the term commencing on the Warrant Issue Date and
ending at 5:00 p.m., Pacific Standard Time, on April 1, 2001,
and shall be void thereafter.
2. Exercise Price. The "Exercise Price" at which this Warrant may
be exercised shall be $0.45 per share of Common Stock, as
adjusted from time to time pursuant to Section 11 hereof.
3. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, but
not for less than 2,500 shares at a time (or such
lesser number of shares which may then constitute the
maximum number purchasable; such number being subject
to adjustment as provided in Section 11 below), at
any time, or from time to time, during the term
hereof as described in Section 1 above, by the
surrender of this
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Warrant and the Notice of Exercise annexed hereto
duly completed and executed on behalf of the Holder,
at the office of the Company (or such other office or
agency of the Company as it may designate by notice
in writing to the Holder at the address of the Holder
appearing on the books of the Company), upon payment
(i) in cash or by check acceptable to the Company,
(ii) by cancellation by the Holder of indebtedness or
other obligations of the Company to the Holder, or
(iii) by a combination of (i) and (ii), of the
purchase price of the shares to be purchased.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the
date of its surrender for exercise as provided above,
and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be
treated for all purposes as the holder of record of
such shares as of the close of business on such date.
As promptly as practicable on or after such date and
in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a
certificate or certificates for the number of shares
issuable upon such exercise. In the event that this
Warrant is exercised in part, the Company at its
expense will execute and deliver a new Warrant of
like tenor exercisable for the number of shares for
which this Warrant may then be exercised.
1. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the
exercise of this Warrant. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Company
shall make a prompt cash payment equal to the Fair Market
Value of a share of Common Stock multiplied by such fraction.
2. Replacement of Warrant. On 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, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or, in the
case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver,
in lieu of this Warrant, a new warrant of like tenor and
amount.
3. Rights of Stockholders. Subject to Sections 9 and 11 of
this Warrant, the Holder shall not be entitled to vote or
receive dividends or be deemed the holder of Common Stock or
any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the
Holder, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate
action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of
stock to no par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the
Warrant shall have been exercised as provided herein.
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4. Transfer of Warrant.
(a) Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the
names and addresses of the Holder or Holders. Any
Holder of this Warrant or any portion thereof may
change his or her address as shown on the Warrant
Register by written notice to the Company requesting
such change. Any notice or written communication
required or permitted to be given to the Holder may
be delivered or given by mail to such Holder as shown
on the Warrant Register and at the address shown on
the Warrant Register. Until this Warrant is
transferred on the Warrant Register of the Company,
the Company may treat the Holder as shown on the
Warrant Register as the absolute owner of this
Warrant for all purposes, notwithstanding any notice
to the contrary.
(b) Warrant Agent. The Company may, by written notice
to the Holder, appoint an agent for the purpose of
maintaining the Warrant Register referred to in
Section 7(a) above, issuing the Common Stock or other
securities then issuable upon the exercise of this
Warrant, exchanging this Warrant, replacing this
Warrant, or any or all of the foregoing. Thereafter,
any such registration, issuance, exchange, or
replacement, as the case may be, shall be made at the
office of such agent.
(c) Transferability and Nonnegotiability of Warrant.
This Warrant may not be transferred or assigned in
whole or in part without compliance with all
applicable federal and state securities laws by the
transferor and the transferee (including the delivery
of investment representation letters and legal
opinions reasonably satisfactory to the Company, if
such are requested by the Company). Subject to the
Provisions of this Warrant with respect to compliance
with the Securities Act of 1933, as amended (the
"Act"), title to this Warrant may be transferred by
endorsement (by the Holder executing the Assignment
Form annexed hereto) and delivery in the same manner
as a negotiable instrument transferable by
endorsement and delivery.
(d) Exchange of Warrant Upon a Transfer. On surrender of
this Warrant for exchange, properly endorsed on the
Assignment Form and subject to the provisions of this
Warrant with respect to compliance with the Act and
with the limitations on assignments and transfers
contained in this Section 7, the Company at its
expense shall issue to or on the order of the Holder
a new warrant or warrants of like tenor, in the name
of the Holder or as tile Holder (on payment by the
Holder of any applicable transfer taxes) may direct,
for the number of shares issuable upon exercise
hereof.
(e) Compliance with Securities Laws
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock
to be issued upon exercise hereof or conversion thereof are
being acquired solely for the Holder's own
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account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Common
Stock to be issued upon exercise hereof or conversion thereof
except under circumstances that will not result in a violation
of the Act or any state securities laws. Upon exercise of this
Warrant, the Holder shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company,
that the shares of Common Stock so purchased are being
acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a
view toward distribution or resale.
(ii) This Warrant and all shares of Common Stock issued upon
exercise hereof or conversion thereof shall be stamped or
imprinted with a legend in substantially the following form
(in addition to any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT AND APPLICABLE LAWS. COPIES OF THE AGREEMENT COVERING
THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE
COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
8. Reservation of Stock. The Company covenants that during the
term this Warrant is exercisable, the Company will reserve
from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Stock
upon the exercise of this Warrant and, from time to time, will
take all steps necessary to amend its Certificate of
Incorporation (the "Certificate") to provide sufficient
reserves of shares of its Common Stock for issuance. The
Company further covenants that all shares that may be issued
upon the exercise of rights represented by this Warrant and
payment of the Exercise Price, all as set forth herein, will
be free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein).
The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Common Stock upon the
exercise of this Warrant.
9. Notices. (a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section
11 hereof, the Company shall issue a certificate signed by
its Chief Financial Officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was
calculated, and the Exercise Price and number of shares
purchasable hereunder after giving effect to such adjustment,
and shall cause a copy of such certificate to be mailed (by
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first-class mail, postage prepaid) to the Holder of this
Warrant.
(b) In case:
(i) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time
receivable upon the exercise of this Warrant) for the purpose
of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to
receive any other right, or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation, or any conveyance of all or substantially all of
the assets of the Company to another corporation, or
(iii) of any voluntary 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 Holder or Holders a notice
specifying, as the case may be, (A) 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 (B) the date on which such
reorganization, reclassification, consolidation, merger,
conveyance, 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 stock or securities
at the time receivable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other
property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be
mailed at least 30 days prior to the date therein specified.
(c) All such notices, advices and communications shall be
deemed to have been received (i) in the case of personal
delivery, on the date of such delivery and (ii) in the case of
mailing, on the third business day following the date of such
mailing.
10. Amendments. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
11. Adjustments. The Exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to
time as follows:
(a) Merger, Sale of Assets, etc. If at any time while
this Warrant, or any portion thereof, is outstanding
and unexpired there shall be (i) a reorganization
(other than a combination, reclassification, exchange
or subdivision of shares otherwise provided for
herein), (ii) a merger or consolidation of the
Company with or into another corporation in which the
Company is not the surviving entity, or a reverse
triangular merger in which the Company is the
surviving entity but the shares of the Company's
capital stock outstanding immediately prior to the
merger are
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<PAGE> 6
converted by virtue of the merger into other
property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the
Company's properties and assets as, or substantially
as, an entirety to any other person, then, as a part
of such reorganization, merger, consolidation, sale
or transfer, lawful provision shall be made so that
the holder of this Warrant shall thereafter be
entitled to receive upon exercise of this Warrant,
during the period specified herein and upon payment
of the Exercise Price then in effect, the number of
shares of stock or other securities or property of
the successor corporation resulting from such
reorganization, merger, consolidation, sale or
transfer that a holder of the shares deliverable upon
exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation,
merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization,
merger, consolidation, sale or transfer, all subject
to further adjustment as provided in this Section 11.
The foregoing provisions of this Section 11(a) shall
similarly apply to successive reorganizations,
consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that
are at the time receivable upon the exercise of this
Warrant. If the per-share consideration payable to
the holder hereof for shares in connection with any
such transaction is in a form other than cash or
marketable securities, then the value of such
consideration shall be determined in good faith by
the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith
by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant
with respect to the rights and interests of the
Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after
that event, as near as reasonably may be, in relation
to any shares or other property deliverable after
that event upon exercise of this Warrant.
(b) Reclassification, etc. If the Company, at any time
while this Warrant, or any portion hereof, remains
outstanding and unexpired by reclassification of
securities or otherwise, shall change any of the
securities as to which purchase rights under this
Warrant exist into the same or a different number of
securities of any other class or classes, this
Warrant shall thereafter represent the right to
acquire such number and kind of securities as would
have been issuable as the result of such change with
respect to the securities that were subject to the
purchase rights under this Warrant immediately prior
to such reclassification or other change and the
Exercise Price therefor shall be appropriately
adjusted, all subject to further adjustment as
provided in this Section 11.
(c) Split, Subdivision or Combination of Shares. If the
Company at any time while this Warrant, or any
portion hereof, remains outstanding and unexpired
shall split, subdivide or combine the securities as
to which purchase rights under this Warrant exist,
into a different number of securities of the same
class, the Exercise Price for such securities shall
be proportionately decreased in the case of a split
or subdivision or proportionately increased in the
case of a combination.
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(d) Adjustments for Dividends in Stock or Other
Securities or Property. If while this Warrant, or any
portion hereof, remains outstanding and unexpired,
the holders of the securities as to which purchase
rights under this Warrant exist at the time shall
have received, or, on or after the record date fixed
for the determination of eligible stockholders, shall
have become entitled to receive, without payment
therefor, other or additional stock or other
securities or property (other than cash) of the
Company by way of dividend, then and in each case,
this Warrant shall represent the right to acquire, in
addition to the number of shares of the security
receivable upon exercise of this Warrant, and without
payment of any additional consideration therefor, the
amount of such other or additional stock or other
securities or property (other than cash) of the
Company that such holder would hold on the date of
such exercise had it been the holder of record of the
security receivable upon exercise of this Warrant on
the date hereof and had thereafter, during the period
from the date hereof to and including the date of
such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during
such period, giving effect to all adjustments called
for during such period by the provisions of this
Section 11.
(e) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment pursuant to
this Section 11, the Company at its expense shall
promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each
Holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in
detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder,
furnish or cause to be furnished to such Holder a
like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Exercise Price at the
time in effect; and (iii) the number of shares and
the amount, if any, of other property that at the
time would be received upon the exercise of the
Warrant.
(f) No Impairment. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or
performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all
the provisions of this Section 11 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.
(g) Liquidation; Dissolution. If the Company shall
dissolve, liquidate or wind up its affairs, the
Holder shall have the right, but not the obligation,
to exercise this Warrant effective as of the date of
such dissolution, liquidation or winding up. If any
such dissolution, liquidation or winding up results
in any cash distribution to the Holder in excess of
the aggregate Exercise Price for the shares of Common
Stock for which this Warrant is exercised, then the
Holder may, at its option, exercise this Warrant
without making payment of such aggregate Exercise
Price and, in such case, the Company shall, upon
distribution to the Holder,
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<PAGE> 8
consider such aggregate Exercise Price to have been
paid in full, and in making such settlement to the
Holder, shall deduct an amount equal to such
aggregate Exercise Price from the amount payable to
Holder.
12. Miscellaneous.
(a) Governing Law and Modification. This Warranty shall
be deemed to be made under, and shall be governed by,
the laws of the State of California in all respects,
including matters of construction, validity, and
performance, and its terms and provisions may not be
waived, altered, modified, or amended except in
writing duly signed by an authorized officer of the
Company and by the Holder.
(b) Attorneys' Fees and Costs. In addition to the amounts
guaranteed under this agreement, the Company agrees
to pay legal interest from the date of this Warrant,
reasonable attorneys' fees and all other costs and
expenses incurred by the Holder in enforcing this
Warrant in any action or proceeding arising out of,
or relating to, this Warrant.
(c) Saturdays, Sundays and Holidays. If the expiration
date for this Warrant falls on a Saturday, Sunday or
a day on which banks in the State of California are
authorized or required by law to close, then the
exercise date will be on the following business day.
(d) Remedies. The Company stipulates that the remedies at
law of the Holder in the event of any default or
threatened default by the Company in the performance
of or compliance with any of the terms of this
Warrant are not and will not be adequate to the
fullest extent permitted by law, and that such terms
may be specifically enforced by a decree for the
specific performance of any agreement contained
herein or by an injunction against a violation of any
of the terms hereof or otherwise.
(e) Nonwaiver; Cumulative Remedies. No course of dealing
or any delay or failure to exercise any right
hereunder on the part of the Holder shall operate as
a waiver of such right or otherwise prejudice the
rights, powers or remedies of the Holder. No single
or partial waiver by the Holder of any provision of
this Warrant or of any breach or default hereunder or
of any right or remedy shall operate as a waiver of
any other provision, breach, default right or remedy
or of the same provision, breach, default, right or
remedy on a future occasion. The rights and remedies
provided in this Warrant are cumulative and are in
addition to all rights and remedies which the Holder
and each Shareholder may have in law or in equity or
by statute otherwise.
(f) Successors and Assigns. This Warrant shall be binding
upon, the Company and any person or entity succeeding
the Company be merger, consolidation or acquisition
of all or substantially all of the Company's assets,
and all of the obligations of the Company with
respect to the shares of Common Stock issuable upon
exercise of this Warrant, shall survive the exercise,
expiration or termination of this Warrant and all of
the covenants and agreements of the Company shall
inure to the benefit of the Holder and its successors
and assigns. The Company shall, at
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the time of exercise of this Warrant, in whole or in
party, upon request of the Holder but at the
Company's expense, acknowledge in writing its
continuing obligations hereunder with respect to
rights of the Holder to which it shall continue to be
entitled after such exercise in accordance with the
terms hereof; provided that the failure of the Holder
to make any such request shall not affect the
continuing obligation of the Company to the Holder in
respect of such rights.
(g) Integration. This Warrant and that certain Stock
Purchase Agreement to which the Company and the
original Holder of this Warrant are parties replace
all prior and contemporaneous agreements and
supersede all prior and contemporaneous negotiations
between the parties with respect to the transactions
contemplated herein and constitute the entire
agreement of the parties with respect to the
transactions contemplated herein.
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(f) Survival of Representations and Warranties. The
representations and warranties of the Company in this
Warrant shall survive the execution and delivery of
this Warrant and the consummation of the transactions
contemplated hereby, notwithstanding any
investigation by the Holder or its agents.
IN WITNESS WHEREOF, ACUBID.COM, INC. has caused this Warrant
to be executed by its officers thereunto duly authorized.
Dated: , 1999
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ACUBID.COM, INC. HOLDER
By: By:
---------------------------- ---------------------------------
Lawrence Schaffer, President
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<PAGE> 10
NOTICE OF EXERCISE
To: ACUBID.COM, INC.
By:
(1) The undersigned hereby: (A) elects to purchase shares of Common
Stock of ACUBID.COM, INC. pursuant to the provisions of Section 3(a) of the
attached Warrant, and tenders herewith payment of the purchase price for such
shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock thereof are being acquired solely
for the account of the undersigned and not as a nominee for any other party, and
for investment, and that the undersigned will not offer, sell or otherwise
dispose of any such shares of Common Stock except under circumstances that will
not result in a violation of the Securities Act of 1933, as amended, or any
applicable state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-------------------------------------
(Name)
Dated:
---------
- ------------------------------------
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<PAGE> 11
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint ____________________ to make
such transfer on the books of ACUBID.COM, INC., maintained for the purpose, with
full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that this Warrant and the shares of stock to be issued
upon exercise hereof are being acquired for investment and that the Assignee
will not offer, sell or otherwise dispose of this Warrant or any shares of stock
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the Securities Act of 1933, as amended, or any
applicable state securities laws. Further, the Assignee has acknowledged that
upon exercise of this Warrant, the Assignee shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the shares of
stock so purchased are being acquired for investment and not with a view toward
distribution or resale.
Dated:
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<PAGE> 1
EXHIBIT 4.3
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER
EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS
WARRANT.
ACUBID.COM, INC.
WARRANT TO PURCHASE______________ SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, ____________ and its assignees
are entitled to subscribe for and purchase that number of shares of the fully
paid and nonassessable Common Stock as determined below (each, as adjusted
pursuant to Section 4 hereof, the "Shares") of AcuBid.com, Inc., a Delaware
corporation (the "Company"), at a price per share as determined below (such
price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, (a) the term "Date of Grant" shall mean the Date of
Grant listed on the signature page hereof, and (b) the term "Other Warrants"
shall mean any other warrants issued by the Company in connection with the
transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of this Warrant. The term "Warrant" as
used herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise. Unless otherwise defined herein all capitalized terms shall
have the meanings ascribed to them in that certain certificate of designation
dated July 23, 1999 (the "Certificate of Designation").
At any time following six months from the date of Closing, upon payment
of the Warrant Price per share, the Company shall issue to Holder up to
________ shares of Common Stock, subject to adjustment as provided herein. The
Warrant Price shall be $2.00 per share during the first eighteen months
following Closing, $3.00 per share thereafter, subject to adjustment as provided
herein.
1. TERM. Upon the earlier of a Financing Closing Date or six
months from the date hereof, the purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through five (5) years after the Date of Grant.
2. METHOD OF EXERCISE, PAYMENT; ISSUANCE OF NEW Warrant. Subject
to Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed)
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<PAGE> 2
at the principal office of the Company and by the payment to the Company, by
certified or bank check, or by wire transfer to an account designated by the
Company (a "Wire Transfer") of an amount equal to the then applicable Warrant
Price multiplied by the number of Shares then being purchased, or (b) if in
connection with a registered public offering of the Company's securities, the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A-1 duly completed and executed) at the principal office of the Company
together with notice of arrangements reasonably satisfactory to the Company for
payment to the Company either by certified or bank check or by Wire Transfer
from the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased or (c) exercise of the
right provided for in Section 10.3 hereof. The person or persons in whose
name(s) any certificate(s) representing shares of Series Preferred shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty (30) days after such exercise and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may
be issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock, as
the case may be, to provide for the exercise of the rights represented by this
Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification or Merger. In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or as a result of a subdivision or combination), or in case of any merger
of the Company with or into another corporation (other than a merger with
another corporation in which the Company is the acquiring and the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall duly
execute and deliver to the holder of this Warrant a new Warrant (in form and
substance satisfactory to the holder of this Warrant), so that the holder of
this Warrant shall have the night to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such
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<PAGE> 3
reclassification, change or merger by a holder of the number of shares of Common
Stock then purchasable under this Warrant. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this subparagraph
(a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.
(b) Stock Dividends and Other Distributions. If the
Company at any time while this Warrant is outstanding and unexpired shall (i)
pay a dividend with respect to Common Stock payable in Common Stock or (ii) make
any other distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 4(a) and 4(b)), of Common Stock then the
Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution.
(c) Adjustment of Number of Shares. Upon each adjustment
in the Warrant Price, the number of Shares of Common Stock purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price and the number of Shares purchasable hereunder
after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (without regard to Section 13 hereof, by first class
mail, postage prepaid) to the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Common Stock on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
7. COMPLIANCE WITH ACT; DISPOSITION OF WARRANT OR SHARES OF
COMMON STOCK.
(a) Compliance with Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Common Stock to
be issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant, or any shares
of Common Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Act or any applicable state
securities laws. Upon exercise of this Warrant, unless the Shares being acquired
are registered under the Act and any applicable state securities laws or an
exemption from such registration is available, the holder hereof shall confirm
in writing that the shares of Common
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<PAGE> 4
Stock so purchased are being acquired for investment and not with a view toward
distribution or resale in violation of the Act and shall confirm such other
matters related thereto as may be reasonably requested by the Company. This
Warrant and all shares of Common Stock issued upon exercise of this Warrant
(unless registered under the Act and any applicable state securities laws) shall
be stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance of
this Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.
(2) The holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The holder is aware of the provisions of
Rule 144, promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any
offer, sale or other disposition of this Warrant or any shares of Common Stock
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or shares, the holder hereof agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, or other evidence, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state securities law then in effect) of this
Warrant or such shares of Common Stock and indicating whether or not under the
Act certificates for this Warrant or such shares of Common Stock to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability
-4-
<PAGE> 5
in order to ensure compliance with such law. Promptly upon receiving such
written notice and reasonably satisfactory opinion or other evidence, if so
requested, the Company, as promptly as practicable but no later than fifteen
(15) days after receipt of the written notice, shall notify such holder that
such holder may sell or otherwise dispose of this Warrant or such shares of
Common Stock, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this Section 7(b) that the
opinion of counsel for the holder or other evidence is not reasonably
satisfactory to the Company, the Company shall so notify the holder promptly
with details thereof after such determination has been made. Notwithstanding the
foregoing, this Warrant or such shares of Common Stock may, as to such federal
laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or
144A under the Act, provided that the Company shall have been furnished with
such information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Applicability of Restrictions. Neither any
restrictions of any legend described in this Warrant nor the requirements of
Section 7(b) above shall apply to any transfer of, or grant of a security
interest in, this Warrant (or the Common Stock obtainable upon exercise thereof)
or any part hereof (i) to a partner of the holder if the bolder is a
partnership, (ii) to a partnership of which the holder is a partner, or (iii) to
any affiliate of the holder if the holder is a corporation; provided, however,
in any such transfer, if applicable, the transferee shall on the Company's
request agree in writing to be bound by the terms of this Warrant as if an
original signatory hereto.
8. RIGHTS AS STOCKHOLDERS; INFORMATION. No holder of this
Warrant, as such, shall be entitled to vote or receive dividends or be deemed
the holder of Common Stock or any other securities of the Company which may at
any time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
stockholders.
9. REGISTRATION RIGHTS. The Company grants piggyback registration
rights to the holder of this Warrant for any Common Stock of the Company
obtained pursuant to the Warrant as further set forth in the Preferred Stock and
Warrant Purchase Agreement between the Company and the Holder.
-5-
<PAGE> 6
10. ADDITIONAL RIGHTS.
10.1 Secondary Sales. The Company agrees that it will not
interfere with the holder of this Warrant in obtaining liquidity if
opportunities to make secondary sales of the Company's securities become
available. To this end, the Company will promptly provide the holder of this
Warrant with notice of any offer (of which it has knowledge) to acquire from the
Company's security holders more than five percent (5%) of the total voting power
of the Company and will not interfere with any attempt by the holder in
arranging the sale of this Warrant to the person or persons making such offer.
10.2 Mergers. The Company shall provide the holder of this
Warrant with at least twenty (20) days' notice of the terms and conditions of
any of the following potential transactions: (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly owned subsidiary of the Company), or any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of. The Company will reasonably cooperate with the holder in arranging
the sale of this Warrant in connection with any such transaction.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by
the Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The shares of Common Stock issuable hereunder have
been duly authorized and reserved for issuance by the Company and, when issued
in accordance with the terms of the Certificate will be validly issued, fully
paid and nonassessable;
(c) The execution and delivery of this Warrant are not,
and the issuance of the Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Company's Certificate or
by-laws, do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and do not and will not
conflict with or contravene any provision of, or constitute a default under, any
material indenture, mortgage, contract or other instrument of which the Company
is a party or by which it is bound or require the consent or approval of, the
giving of notice to, the registration or filing with or the taking of any action
in respect of or by, any Federal, state or local government authority or agency
or other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(d) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
-6-
<PAGE> 7
12. MODIFICATION AND WAIVER. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
13. NOTICES. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the Shares) to which the holder hereof
shall continue to be entitled after such exercise or conversion in accordance
with this Warrant; provided, that the failure of the holder hereof to make any
such request shall not affect the continuing obligation of the Company to the
holder hereof in respect of such rights.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
the holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of Delaware.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. REMEDIES. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the
-7-
<PAGE> 8
Company (in the case of a breach by a holder), may proceed to protect and
enforce their or its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Warrant.
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment
of its Charter or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
21. SEVERABILITY. The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
22. RECOVERY OF LITIGATION COSTS. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
-8-
<PAGE> 9
23. ENTIRE AGREEMENT; MODIFICATION. This Warrant constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations,
and undertakings of the parties, whether oral or written, with respect to such
subject matter.
ACUBID.COM, INC.
a Delaware corporation
By
------------------------------------------------
Title
---------------------------------------------
Address:
------------------------------------------
------------------------------------------
Date of Grant: July __,1999
-9-
<PAGE> 10
EXHIBIT A
NOTICE OF EXERCISE
To: AcuBid.com, Inc.
1. The undersigned hereby elects to purchase ____ shares of Common Stock
AcuBid.com, Inc.] pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-------------------------------
(Name)
-------------------------------
-------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
(Signature)
(Date)
<PAGE> 1
EXHIBIT 10.1
[ACUBID.COM LETTERHEAD]
March 1, 1999
Kurt Bevacqua
2536 La Costa Avenue
La Costa, Ca. 92009
Dear Mr. Bevacqua,
This letter shall serve as an understanding of the agreement between Kurt
Bevacqua (Advisor) and AcuBid.com Incorporated (Company).
A: ADVISOR AGREES TO PERFORM THE FOLLOWING FUNCTIONS FOR THE COMPANY.
1. Use his best efforts to create a sports memorabilia advisory
board consisting of not less than three additional high profile
name athletes (active or retired) as mutually agreed upon by the
parties.
2. Advisor will act as Chairman of the Board.
3. Advisor will assist the Company in obtaining and creating sports
memorabilia to be sold on the Company's website.
4. Advisor will assist the Company on an ongoing basis to develop a
relationship with and obtain collectible items from active and
retired professional athletes as the parties shall agree.
5. All members of the Advisory Board shall grant the Company the
right to use their names as members of such board on all
advertising endeavors undertaken by the Company.
6. All Advisory Board members shall make themselves available not
less than 2 hours per month to hold online conversations with
customers and clients of the Company on its website. Advisor
shall not be in breach of this agreement should the Company
accept any Board member not agreeing to this provision.
<PAGE> 2
B: COMPANY AGREES TO PAY ADVISOR THE FOLLOWING COMPENSATION
1. 50,000 Shares for the Company's Common Stock for services
previously performed.
2. 200,000 options at $0.45 for services as Chairman of the
Advisory Board. The options shall vest immediately and upon
exercise and written notice to the Company the shares issued
under paragraph B1 and B2 will be registered for sale under
Section S8 of the Securities Act of 1934.
3. All options shall have a three-year term.
4. The Company shall make available additional Common Stock and
options of the Company to compensate other members of the
Advisory Board in such amounts as the parties agree.
THIS AGREEMENT SHALL BE RENEWABLE EACH YEAR AT THE MUTUAL AGREEMENT OF
THE PARTIES FOR SUCCESSIVE ONE-YEAR TERMS.
Agreed to by;
/s/ Kurt Bavacqua 3/1/99
------------------------------- -------------------------------
Kurt Bavacqua Date
/s/ MICHAEL A. SCHAFFER 3/1/99
------------------------------- -------------------------------
AcuBid.com Incorporated Date
<PAGE> 1
EXHIBIT 10.2
AcuBid.com Inc.
Joe Morgan
3523 Country Club Place
Danville, California 94506
Dear Mr. Morgan:
This letter shall serve as an understanding of the agreement between Joe
Morgan (Advisor) and AcuBid.com Inc. (Company).
A: ADVISOR AGREES TO PERFORM THE FOLLOWING FUNCTIONS FOR THE COMPANY.
1. Act as a member of the Company's Sports Advisory Board.
2. Advisor will assist the Company in obtaining and creating sports
memorabilia to be sold on the Company's website.
3. Advisor will assist the Company on an ongoing basis to develop a
relationship with and obtain collectible items from active and retired
professional athletes as the parties shall agree.
4. Advisor shall grant the Company the right to use his name as member of
such board on all advertising endeavors undertaken by the Company.
5. Advisor shall make himself available not less than 2 hours per month to
hold online conversations with customers and clients of the Company on its
website.
B. COMPANY AGREES TO PAY ADVISOR THE FOLLOWING COMPENSATION
1. 20,000 Shares for the Company's Common Stock for services previously
performed.
2. 25,000 options at $0.45 for services as an Advisory Board member. The
options shall vest immediately and upon exercise and written notice to the
Company the share issued under this paragraph will be registered for sale
under Section S8 of the Securities Act of 1934.
THIS AGREEMENT SHALL BE RENEWABLE EACH YEAR AT THE MUTUAL AGREEMENT OF THE
PARTIES FOR SUCCESSIVE ONE YEAR TERMS.
Agreed to by:
/s/ JOE MORGAN 4-20-99 /s/ [SIGNATURE ILLEGIBLE] 4/19/99
- -------------- ------- ------------------------- -------
Joe Morgan Date AcuBid.com Inc. Date
7720 B El Camino Real, Suite 503 Carlsbad, California 92009
<PAGE> 1
EXHIBIT 10.3
AcuBid.com Inc.
May 6, 1999
Rollie Fingers
4894 Cliff Street
San Diego, Ca.
Dear Mr. Fingers:
This letter shall serve as an understanding of the agreement between
Rollie Fingers (Advisor) and AcuBid.com Inc. (Company).
A: ADVISOR AGREES TO PERFORM THE FOLLOWING FUNCTIONS FOR THE COMPANY.
1. Act as a member of the Company's Sports Advisory Board.
2. Advisor will assist the Company in obtaining and creating sports
memorabilia to be sold on the Company's website.
3. Advisor will assist the Company on an ongoing basis to develop a
relationship with and obtain collectible items from active and retired
professional athletes as the parties shall agree.
4. Advisor shall grant the Company the right to use his name as a member of
such board on all advertising endeavors undertaken by the Company.
5. Advisor shall make himself available not less than 2 hours per month to
hold online conversations with customers and clients of the Company on its
website.
B: COMPANY AGREES TO PAY ADVISOR THE FOLLOWING COMPENSATION
1. 25,000 options at $1.75 for services as an Advisory Board member. The
options shall vest immediately and upon exercise and written notice to the
Company the shares issued under this paragraph will be registered for sale
under Section S8 of the Securities Act of 1934.
3. The Company agrees to explore the possibility of involving Advisor
directly in sales which would involve negotiating an increased
compensation package.
THIS AGREEMENT SHALL BE RENEWABLE EACH YEAR AT THE MUTUAL AGREEMENT OF THE
PARTIES FOR SUCCESSIVE ONE YEAR TERMS.
Agreed to by:
/s/ ROLLIE FINGERS 5/6/99 /s/ [Signature Illegible] 5/6/99
- -------------------- ---------- -------------------------- ------
Rollie Fingers Date AcuBid.com, Inc. Date
7720 B El Camino Real, Suite 503 Carlsbad, California 92009
<PAGE> 1
EXHIBIT 10.4
ENDORSEMENT AGREEMENT
THIS AGREEMENT is entered into as of August ___, 1999 by and between
AcuBid.Com, Inc. ("AcuBid" or "the Company"), a Delaware domesticated
corporation whose address is 1947 Camino Vida Roble, Suite 102, Carlsbad,
California 92008 on the one hand, and Lawrence (Yogi) Berra ("Yogi Berra") and
LTD Enterprises, a Delaware Corporation whose mailing address is
_________________, on the other hand.
W I T N E S S E T H
WHEREAS, Yogi Berra is a well-known athletic personality having
consumer recognization through television and other media exposure;
WHEREAS, AcuBid is in the business of conducting an internet auction
house for high-end collectibles, specifically, sports memorabilia;
WHEREAS, AcuBid desires to obtain Yogi Berra's services and to use Yogi
Berra's name and likeness in connection with a planned television and
multi-media advertising campaign to promote AcuBid's high-end sports memorabilia
auctions; and,
WHEREAS, Yogi Berra wishes to provide such services and grants AcuBid
the use of his name and likeness in connection with such promotion and
endorsement of AcuBid's on-line sports memorabilia auctions.
NOW THEREFORE, for and in consideration of the promises and mutual
covenants contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed as follows:
1. Definitions. As used herein, the terms set forth below shall be
defined as follows:
(a) "Endorsement" shall mean the right to use the name, nickname,
character, visual representation, likeness, videotapes, photographs, voice or
endorsement.
(b) "Contract Period" shall mean that period of time commencing
August ___, 1999 and concluding August ____, 2001.
1
<PAGE> 2
(c) "Contract Territory" shall be worldwide, including the
world wide reach of the internet.
2. Services Provided and Rights Granted by Yogi Berra. Yogi Berra
agrees to provide the following services and grants the following rights to
AcuBid:
(a) Chat Room. During the term of the contact Yogi Berra shall
make himself available six hours per calendar quarter to participate in live
"chat room" discussions on the Company's internet site. In no event shall any
single "chat room" sitting exceed one (1) hour.
(b) Film Sessions. Yogi Berra shall be available for one (1)
day(s) of film\tape and such further sessions as both Yogi Berra and AcuBid
mutually agree for creation of films or tapes of him to be used in connection
with the advertising, promotion and endorsement of the AcuBid website and
high-end sports memorabilia auctions, specifically for the production of a
television commercial.
(c) Voice Over. Yogi Berra shall be available for one (1) day
of voice over taping sessions to be used in connection with the television
commercial for the advertising, promotion, and endorsement of the AcuBid website
and its high-end sports memorabilia auctions.
(d) Photography Session. Yogi Berra shall be available for one
(1) day for photograph session(s) and such further sessions as Yogi Berra and
AcuBid mutually agree for the creation of photographs of him to be used in
connection with advertising, promotion and endorsement of the AcuBid.Com, Inc.
and its sports memorabilia auction, including, without limitation, trade
brochures and other point of sale materials. One day, for the purpose of this
Section 2, shall be limited to eight hours.
(e) Advisory Board. Yogi Berra will join and participate in
the advisory board of AcuBid.Com for the contract period.
(f) Yogi Berra shall be available for such additional
photographic and film/tape sessions and appearances in the future as the parties
shall mutually agree.
(g) All expenses incurred by Mr. Berra in conjunction with
this Paragraph 2 will be borne by AcuBid and paid in advance or promptly
reimbursed. All travel will be First Class including, but not limited to, air
and ground travel and hotel lodgings.
2
<PAGE> 3
3. Grant of Endorsement Rights. Yogi Berra hereby grants AcuBid the
exclusive right and license within the Contract Territory during the Contract
Period to use his endorsement in connection with the promotion, advertising,
marketing and sale of AcuBid.Com and its on-line auctions. Yogi Berra further
covenants and agrees that he will not, during the Contract Period, endorse any
other on-line auctions.
4. Approval of Advertising. It is understood and agreed that AcuBid
will supply Yogi Berra with all advertising copy, and material generated in
connection with the production of any television commercial provided for in
paragraph 2 above used or to be used in connection with his endorsement and that
such copy and material will be so supplied prior to the use thereof insofar as
AcuBid can conveniently do so, but in any event, be supplied as soon thereafter
as possible. AcuBid further agrees that it will prevent the use or further use,
as the case may be, of any such advertising copy or materials in connection with
such commercial as is at any time expressly disapproved by Yogi Berra. Yogi
Berra agrees that he will not unreasonably disapprove or reject any such
advertising material. If Yogi Berra does not disapprove any advertising copy or
other materials associated with such commercial, submitted to him for approval
within three (3) days after the receipt thereof, said materials shall deem to
have been approved hereunder. Use of all advertising materials developed
hereunder shall be limited in use to the duration of this Agreement
5. No Conflicting Agreements. Yogi Berra represents and warrants that
he has made no prior agreements regarding endorsement of any other internet
on-line auctions or websites which would be effective at any period of time
during the contract period, and that he is free to enter into this Agreement and
to be bound by the terms herein. Yogi Berra further represents and warrants that
he has no knowledge of any rule, regulations, or policies of any organization
which would prohibit or limit his power and right to enter into and be bound by
the terms of this Agreement. Yogi Berra further agrees that during the Contract
Period he will not authorize or permit the use of his name, picture, portraits,
performance, likeness, voice, biographical material or endorsement by any other
person, firm, or entity other than AcuBid in connection with the advertising,
promotion or sale of internet or on-line auctions or websites.
6. Company to Purchase Sports Memorabilia. During the Contract Period,
AcuBid may, from time to time, purchase sports memorabilia from LTD Enterprises,
a company owned by Yogi Berra and the Berra family, at wholesale not retail
prices.
7. Additional Promotion. During the Contract Period, both Yogi Berra
and AcuBid agree that it would be of mutual benefit for Yogi Berra to promote
AcuBid's online auctions and
3
<PAGE> 4
websites whenever the opportunity for such promotion arises as specifically
agreed to by the parties.
8. Compensation. For the rights and benefits granted to AcuBid pursuant
to this Agreement, AcuBid agrees to transfer Thirty Thousand (30,000) shares of
its Common Stock to Yogi Berra and or his designees in accordance with
instructions provided by Yogi Berra, the family or their company LTD
Enterprises. In accordance therewith, the Company represents and warrants as
follows:
Pursuant to Rule 6530 and 6540 of the Marketplace Rules of the NASDAQ
Stock Market, the Company must undertake all acts required by law and the
Marketplace Rules by December 1, 1999 to become a reporting company within the
meaning of Section 13 of the Securities Exchange Act of 1934. Once the Company
becomes a reporting company, the Company will be eligible to register the shares
of its employee and consultants, including the shares covered by this Agreement,
on Form S-8 promulgated under the Securities Act of 1933, which is a summary
form of registration. The Company will use its best efforts to file a Form 10 or
Form 10SB registration, the first act required to become a reporting company,
not later than September 1, 1999 and thereafter will assist Yogi Berra, the
Berra family and/or LTD Enterprises in processing the registration of its shares
on Form S-8. The purpose of this provision is to insure the fastest and most
complete marketability of the shares transferred under this Paragraph 8 as
registered shares which may be freely traded.
9. No Obligation. Yogi Berra acknowledges that AcuBid has no obligation
to produce or use any of the promotional, advertising, or endorsement materials
referred to herein, its entire obligation hereunder being fulfilled by conveying
and transferring the Thirty Thousand (30,000) shares of stock.
10. Union Membership. Yogi Berra agrees that if any of the services
rendered by him hereunder necessitate his membership in any union(s) having
jurisdiction, and he is not a member in good standing of such union(s), he will
immediately take all necessary steps to secure and maintain such membership at
the cost and expense of, and with the assistance of, AcuBid.
11. Injunctive Relief. Yogi Berra acknowledges that the services and
rights he is performing and granting hereunder are unique and of peculiar value
and impossible to replace, and thus, any breach of this Agreement will cause
irreparable damage to AcuBid. Yogi Berra therefore agrees AcuBid shall be
entitled as a matter of right to seek the enforcement of this Agreement and all
if its terms by way of an injunction or other relief in a court of equity in
addition to such other and further relief as AcuBid shall be entitled to at law.
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<PAGE> 5
12. Indemnification. AcuBid agrees to protect, indemnify, and save
harmless Yogi Berra, the Berra family and the Berra entity LTD Enterprises from
and against any and all expenses, damages, claims, suits, actions, judgments,
and costs whatsoever, including reasonable attorneys fees, arising out of or in
any way connected with any claim or action relating to AcuBid's online auctions,
its website or its chat room, and the memorabilia that is the subject of such
auctions. This indemnification specifically excludes any action by Yogi Berra,
the Berra family, or LTD Enterprises that may arise in connection with their
trading of AcuBid stock after they receive the shares provided for in Paragraph
8.
13. Right of Termination of AcuBid and Yogi Berra. (a) In the event of:
(1) any material breach by Yogi Berra of any of the terms or provisions of this
Agreement; or, (2) in the event that Yogi Berra shall cease for any reason (such
as resignation, termination, death, disability or otherwise) to be a well known
athletic personalty; or, (3) fails, refuses, neglects or is unable to render
services contemplated herein or fulfill the obligations of this Agreement
because of willful failure to cooperate with AcuBid; or, (4) suffers any mental
or physical disability or illness or substantial change of appearance, including
facial or bodily disfigurement; and, such breach, cessation, failure or physical
or mental impairment is not cured within fifteen (15) days after written notice
thereof from AcuBid to Yogi Berra, AcuBid shall have the right in its sole
discretion to terminate this Agreement upon fifteen (15) days' prior written
notice to Yogi Berra, such termination to be effective upon the expiration of
such notice period. AcuBid may elect in its sole discretion not to terminate the
contract, should any of the events of termination described in this paragraph
13(a) occur.
(b) In the event AcuBid shall materially breach of any of the
terms or provisions of this Agreement, and such non-payment or breach has not
been cured within fifteen (15) days' after written notice thereof from Yogi
Berra to AcuBid, Yogi Berra shall have the right to terminate this Agreement
upon ten (10) days' prior written notice to AcuBid, such termination to be
effective upon the expiration of such notice period.
14. Use of Name in Conjunction with Likeness. AcuBid agrees to display
Yogi Berra's name in reasonable proximity to any use of his likeness in
connection with the promotion, advertisement or endorsement of AcuBid online
auction or website in the form of print, script, Yogi Berra's signature and/or
any other legible form, at AcuBid's discretion. Yogi Berra agrees to provide
AcuBid with a sample of his signature for such purpose if AcuBid so requests.
5
<PAGE> 6
15. Competitive Products. During the term of this Agreement and until
July ___, 2001, Yogi Berra agrees that he will not furnish services or
materials, or authorize or permit the use of his name, pictures, portraits,
performances, likeness, voice, biographical material or endorsement by any
person, firm or entity other than AcuBid in connection with the advertising,
promotion, endorsement or sale of internet/online auction services including,
but not limited, to those relating to sports memorabilia, other than AcuBid's.
16. Agreement to Negotiate. Yogi Berra and AcuBid agree at the end of
the Contract Period to negotiate in good faith any extension, or modification of
this Agreement or such new agreement as the parties in good faith deem
applicable.
17. Confidentiality of Agreement. The substance of this Agreement shall
not be divulged by Yogi Berra or his representatives, agents, or attorneys,
except to any person in the course of any legal proceeding to which any of the
parties to this Agreement is a party for the purpose of securing compliance with
this Agreement.
18. Notices. All statements, notices and mailings of any nature
contemplated hereunder shall be sufficient if mailed certified mail, return
receipt requested, postage prepaid, addressed to the respective parties at the
addresses set forth below, unless a party notifies the other by such notice of a
new address, in which event such new address shall be employed for all
subsequent mailings:
To AcuBid.Com, Inc.: AcuBid.Com, Inc.
1947 Camino Vida Roble
Suite 102
Carlsbad, CA 92008
With a copy to: Kristin M. Cano
Law Offices of Kristin M. Cano
One Corporate Plaza, Suite 110
Newport Beach, CA 92660
To Yogi Berra:
To the Agent: Tim Berra
LTD Enterprises
6
<PAGE> 7
19. Significance of Headings. Paragraph headings contained herein are
solely for the purpose of aiding in speedy location of subject matter and are
not in any sense to be given weight in the construction of this Agreement.
20. Entire Agreement. This Agreement embodies the entire agreement
between the parties as of the date hereof, and no modifications, amendments or
variations therefrom shall be of any effect unless in writing signed by a duly
authorized office of the Partners and by Yogi Berra.
21. No Partnership, Etc. This Agreement does not constitute and shall
not be construed as constituting a partnership or joint venture between AcuBid
and Yogi Berra.
22. Bind and Inure. This Agreement shall bind against and inure to the
benefit of any successor and assign of AcuBid. The parties hereto expressly
agree that in view of the personal services contemplated pursuant to this
Agreement, Yogi Berra, shall have no right to assign his obligations or
covenants hereunder to any third party without the express written approval of a
duly authorized officer of AcuBid.
23. Controlling Law. This Agreement shall be deemed to be a contract
made under, governed by and construed in accordance with the laws of the State
of California and venue shall be in San Diego, California.
24. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association and judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Any arbitration hereunder shall be conducted in San Diego,
California.
7
<PAGE> 8
25. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AcuBid.Com, Inc.
By: /s/ LAWRENCE SCHAFFER
---------------------------------------
Lawrence Schaffer, President
Lawrence (Yogi) Berra
---------------------------------------
By: /s/ LAWRENCE BERRA
---------------------------------------
Lawrence (Yogi) Berra, an individual
LTD Enterprises
By: [SIGNATURE ILLEGIBLE]
---------------------------------------
Pres. L.T.D.
---------------------------------------
(Name and Title)
8
<PAGE> 1
EXHIBIT 10.5
ACUBID.COM INC.
This Agreement entered into this 16th day of August 1999 between Johnny
Bench ("Athlete") and AcuBid.com Inc. (the "Company").
A. Athlete Agrees to:
1. Serve as a Member of the Company's Sports Advisory Board.
2. As a member of said board the Athlete shall allow the Company
to use the Athlete's name for promotional purposes during the
term of this Agreement to promote the Company's Internet
website but not any specific products without the prior
written approval of Athlete.
3. The Athlete will make himself available for two (2) hours per
month for live online chats on the Company's Internet website
on dates and at times mutually agreeable to Athlete and the
Company.
4. The Athlete will sign sports memorabilia as requested by the
Company during the term of this Agreement and grants to the
Company the right to market said memorabilia but Athlete has
the right to approve all such memorabilia as to quality and
content. Such approval by Athlete shall not be unreasonably
withheld. No item bearing Athlete's name or likeness will be
sold by the Company without Athlete's written approval.
B. The Company Agrees to:
1. Issue to the Athlete as of the date of this Agreement 20,000
(twenty thousand) shares of common stock of the Company for
serving on its Advisory Board.
2. Use its best efforts to create and market memorabilia signed
by the Athlete on behalf of the Company pursuant to Section
A(4).
3. Issue to the Athlete, or his nominee, as of the date of his
Agreement an additional 10,000 (ten thousand) shares of
common stock in the Company for the rights granted under
Section A(4) of this Agreement.
4. Pay to the Athlete 70% (seventy percent) of the gross
proceeds (gross sales price less actual costs of goods only)
of all memorabilia sold by the Company pursuant to this
Agreement. Payment to be made monthly on the tenth day of
each month for all memorabilia sold in the previous month.
<PAGE> 2
5. Upon the signing of this Agreement pay to the Athlete $25,000
(twenty five thousand dollars) as an advance against any
amounts due to the Athlete for sports memorabilia sold
pursuant to this Agreement.
C. The Parties Agree:
1. The term of this Agreement shall be two years and shall be
renewable annually at the mutual agreement of the parties.
2. That should the amounts due to the Athlete under Section B(4)
of this Agreement not total $25,000 (twenty five thousand
dollars) during the term of this Agreement, the Athlete shall
nonetheless be entitled to retain the entire amount of
$25,000 (twenty five thousand dollars) as additional
compensation providing that no material provision of this
Agreement has been breached by Athlete and not cured by
Athlete within 30 days after receiving written notice of such
breach from the Company.
3. The Athlete shall not be precluded from signing memorabilia
for any non-commercial purpose, but may not sign any
memorabilia for compensation during the term of the Agreement
except on behalf of the Company or with the Company's
approval in writing. The Company will not unreasonably
withhold such consent. Notwithstanding this Agreement,
Athlete may: (i) sign any memorabilia pursuant to any
agreement entered into before the date of this Agreement;
(ii) participate in major league baseball's "All Century Team
Program" otherwise known as "the All Century Celebration";
(iii) participate once in each year in any 1975 and 1976 Big
Red Machine reunions or similar Big Red Machine promotions;
(iv) sign and/or sell Athlete's memorabilia on Athlete's own
website and Athlete will work with the Company to link such
website with Company's website; and (v) participate in the
pending five all time greatest catchers promotion including
show, picture and poster. Athlete will use his best efforts
to obtain 25 memorabilia items from each program in which he
participates under (iii) and (v) above for sale by the
Company for which Athlete will be compensated under B(4).
4. The Company hereby covenants and agrees to (i) register its
common shares under the Securities and Exchange Act of 1934,
as amended, and (ii) register the Shares awarded pursuant to
Section B(1) and (3) (the "Shares") to Athlete pursuant to an
2
<PAGE> 3
effective Registration Statement on Form S-8. In the event
the Company fails to satisfy the foregoing covenants on or
before December 1, 1999 Athlete shall have the right, at his
option, to terminate this Agreement upon written notice to
the Company at any time prior to December 31, 1999, in which
event the stock issuance shall be voided and the Shares
returned by Athlete to the Company; provided however, Athlete
shall be entitled to retain or receive all other amounts paid
or payable under this Agreement. In the event Athlete does
not elect to terminate this Agreement, this Agreement shall
remain in full force and effect, provided that the
exclusivity provisions contained in Section C(3) shall be
terminated and of no further and effect on and after December
1, 1999.
5. The Company covenants that to date it has not provided more
favorable compensation and/or terms to any other athlete for
comparable services.
6. All notices required or given hereunder or in connection
herewith shall be in writing and shall be considered to have
been given when mailed, certified or registered mail, postage
prepaid, to the other party addressed as hereinafter set
forth or in such other manner as the addressee party shall
have designated by notice in writing:
AcuBid.com Inc.
1947 Camino Vida Roble, Suite 102
Carlsbad, California 92008
Mr. Johnny Banco
c/o, Reuven J. Katz, Esq.
Katz, Teller, Brant & Hild
255 East Fifth Street, Suite 2400
Cincinnati, Ohio 45202-4724
Agreed to by: Agreed to by:
AcuBid.com Inc.
/s/ JOHNNY BENCH By: [Illegible]
- ----------------------------------- --------------------------------
Johnny Bench Its: CFO
------------------------------
3
<PAGE> 1
EXHIBIT 10.6
[ACUBID.COM LETTERHEAD]
October 1, 1999
Neil J. Salkind
Studio B Literary Agency
734 Indiana Street
Lawrence, KS 66044
Re: Acubid.com
Deal Neil:
Thank you for taking the time to visit our facilities and share your
thoughts with us. It was very informative and helpful. After discussing what
you could bring to the Company with our Board of Directors we would like to
invite you to become a member of our Advisory Board.
As a member you would be available, consistent with your own schedule, to
consult with the Company regarding the design, functionality, use and all other
phases of our website. The Company would have the right to use your name and
credentials as a member of said Board in any of its marketing endeavors.
In exchange for serving on the Advisory Board from 10/1/99 through
10/1/2000 you would receive and option to purchase 10,000 shares of common
stock of the Company for $2.00 per share. The option shall be for a two year
term. In addition you would receive 5,000 shares of stock in the Company as
payment for your advisory services.
If this is acceptable please sign and return a copy of this letter. We all
look forward to working with you and gaining from your knowledge and experience
in this area to make Acubid.com the premier auction site on the worldwide web.
Very sincerely, Approved
/s/ M. A. SCHAFFER /s/ NEIL J. SALKIND
AcuBid.com Inc. Neil J. Salkind
Michael Schaffer CEO
<PAGE> 1
EXHIBIT 10.7
[AcuBid.com Inc. Letterhead]
April 26, 1999
Waddy Stephenson
Dear Mr. Stephenson,
It is the purpose of this letter to set forth the terms of an employment
agreement between Waddy Stephenson residing at 2969 Lexington Circle, Carlsbad,
California 92008 and AcuBid.com Inc. at 2185 Faraday Ave., Suite 1 00, Carlsbad,
California 92008.
1. It is the desire of AcuBid.com Inc. to employ the services of Waddy
Stephenson on a full time basis for a period of one-year beginning May 1,
1999.
2. During the period, Waddy Stephenson will serve as Vice President of Technical
Development.
3. Waddy Stephenson will be responsible for software development that the
Company is actively working on, which will include development and
implementation of an online Internet auction website including all features
as agreed upon by the parties.
4. Waddy Stephenson will be compensated at a rate of $8,333.33 gross pay per
month for $1 00,000 per year. 5. Waddy Stephenson shall receive 30,000 shares
of the Company for services previously preformed.
6. Waddy Stephenson shall receive an option to purchase 100,000 shares of the
Company's stock at $0.45 per share.
Agreed to by: Agreed to by:
/s/ NORMAN SCHWARTZ /s/ WADDY STEPHENSON
- ----------------------------------- -----------------------------------
Norman Schwartz Waddy Stephenson
<PAGE> 1
EXHIBIT 10.8
[AcuBid.com Letterhead]
July 29, 1999
Richard Schwartz
4676 Serenata Place
San Diego, CA. 92130
Re: Employment Contract
Dear Richard:
Pursuant to our conversations and the conclusion of a month consulting
Agreement with AcuBid.com (the Company), the Company is prepared to offer you a
one year employment contract.
Your position would be Vice President Marketing and Marketing Director.
Your duties would include, but not be limited to, directing and coordinating all
marketing efforts on behalf of the Company. This would include developing and
implementing a strategic marketing plan for the Company, as well as organizing
and implementing all phases of business development activities. Your duties
would also include working with our P.R. firm and supervising all advertising as
well as assisting with our CSR system to be implemented.
Your compensation would be a base salary of $6750 per month plus an
additional $250 per month as credit toward a medical plan. The Company will also
grant you a qualified two year option to purchase 50,000 shares of common stock
in the Company at $3. 00 per share. As a signing bonus the Company would also
issue 15,000 shares of common stock in the Company contingent on you completing
one year of employment with the Company commencing August 1, 1999.
If this is agreeable please sign and return a copy of this letter and we
will draft a more formal agreement.
Very sincerely, Approved
Michael Schaffer Richard Schwartz
CEO
<PAGE> 1
EXHIBIT 10.9
PACIFIC RIDGE COMMERCE CENTRE
OFFICE SPACE LEASE
THIS AGREEMENT OF LEASE is made in duplicate originals in Carlsbad, San
Diego County, this 30th day of April, 1999, by and between PACIFIC RIDGE
COMMERCE CENTRE, a California Limited Partnership, hereinafter called "Landlord"
as Lessor, and Acubid.com, Inc., a Delaware Corporation, hereinafter called
"Tenant" as Lessee.
Exhibits A, B, C, D and E and Addendums 48, 49, 50 and 51 are attached
hereto and incorporated into and form a part of this Lease as included on Pages
n/a through and including n/a.
Landlord and Tenant agrees as follows:
1. LEASE INFORMATION AND SUMMARY
(a) Address of Premises: Suites 102 and 103, 1947 Camino Vida, Roble,
Carlsbad, California
(b) Floor(s) upon which Premises are located: 1st
(c) Premises consist of approximately 3,081 square feet.
(d) Basic Annual rent is $59,155.20, payable at the rate of $4,929.60 per
month. Security deposit is $4,929.60 (Does not include rent).
(e) Period of term (in months or years): Thirty-six (36) months
(f) Commencement Date: June 1, 1999 (Upon completion of T.I.'s and prior
to June 1 commencement, Tenant may occupy Premises rent free)
(g) Termination Date: May 31, 2002
(h) Estimated Commencement Date: June 1, 1999
(i) Base Direct Expense Year: 1999
% of Building Direct Expenses: 12.5%
% of Common Area Direct Expenses: 12.5%
(j) Permitted use of Premises (Section 8):
General Office
(k) Address of payments, notices and deliveries:
Owner: Pacific Ridge Corporate Centre
1947 Camino Vida Roble, Suite 104, Carlsbad, CA 92008
Tenant: 1947 Camino Vida Roble, Suite 102/103, Carlsbad, CA 92008
(l) Cancellation Date: n/a
(m) Receipt is hereby acknowledged by Owner of the following sums:
$4,929.60 for Security Deposit.
$4,393,60 for rent for first full month of term. ($4,929.60 less
$536.00 rent abatement for the 335 square foot "open office")
"LANDLORD": PACIFIC RIDGE COMMERCE CENTRE
BY: /s/ WILLIAM A. SHIRLEY DATE: 5/4/99
----------------------------------------- ----------------
William A. Shirley, General Partner
BY:
----------------------------------------- DATE:
----------------
"TENANT": Acubid.com, Inc., a Delaware Corporation
BY: /s/ NORMAN SCHWARTZ DATE: 5/3/99
----------------------------------------- ----------------
Norman Schwartz, CFO
BY:
----------------------------------------- DATE:
----------------
<PAGE> 2
WITNESSETH:
2. LEASE OF PREMISES.
In consideration of the rent and other charges to be paid, and the covenants and
conditions to be performed and observed by Tenant, Landlord does hereby lease to
tenant and Tenant does hereby hire from Landlord those premises delineated and
described in Exhibit "A" and located within the office building located at the
address set out in Article 1. The parties hereto agree that said letting and
hiring is upon and subject to the terms, covenants and conditions herein set
forth and Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition of
such performance.
3. TERM.
The term of this Lease shall begin on the Commencement Date and shall run for
the period set out in Article 1 plus any period of less than one (1) month
between the Commencement Date and the first (1st) day of the next succeeding
calendar month.
4. COMMENCEMENT.
If the Commencement Date is known upon the execution of this Lease, that date
and the termination date are as set forth in Article 1. If that date is not
known upon the execution of this Lease, the parties shall upon agreeing on such
date immediately execute a supplement in such form as required by Owner stating
such commencement date and termination date, which dates shall also be inserted
in Article 1. If no such date is agreed upon, the Commencement Date shall be the
date upon which Landlord tenders possession of the Premises to Tenant.
Notwithstanding anything to the contrary contained in this Lease, should
Commencement Date not occur on or before the date set forth in Article 1 as the
Cancellation Date, this Lease shall be deemed canceled as of the Cancellation
Date without further act of the parties.
Should Landlord tender possession of the Premises to Tenant prior to the
date specified for commencement of the term hereof, and Tenant elects to accept
such prior tender, such prior occupancy shall be subject to all of the terms,
covenants and conditions of this Lease, including the payment of rent.
5. BASIC RENTAL.
(a) Throughout the term Tenant shall pay as rent the basic annual rental
for said premises in the amount set forth in Article 1 plus the adjustment for
increases in the cost of operation and maintenance as hereinafter provided. The
rent shall be payable in equal monthly installments in advance on the first
(1st) day of each and every calendar month. The payment for the first full month
of the term is to be made concurrently with the execution of this Lease. When
the Commencement Date is other than the first (1st) day of a calendar month, the
rent payable for the partial month following the Commencement Date shall be
prorated on a daily basis and shall be payable on the Commencement Date of the
term. Tenant acknowledges that late payment by Tenant to Landlord of rent or
other sums due hereunder will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which would be extremely difficult and
impractical to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Landlord by the
terms of any mortgage or trust deed covering the premises. Therefore, in the
event Tenant shall fail to pay any installment of rent or any sum due hereunder
after such amount is due, Tenant shall pay to Landlord as additional rent a late
charge equal to ten percent (10%) of such installment or other sum of $25.00 per
month whichever is greater. A $10.00 charge will be paid by the Tenant to the
Landlord for each returned check. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant. Acceptance of such late charge by Landlord
shall neither constitute a waiver of Tenant's default with respect to such
overdue amount nor prevent Landlord from exercising any other right or remedy
granted under this Lease.
(b) The minimum monthly rental shall be adjusted on each anniversary of
the commencement date of this lease in the following manner:
The Consumer Price Index for all Urban Consumers (base year 1967 =
100) for San Diego California, published by the United States Department
of Labor, Bureau of Labor Statistics ("Index"), which is published for the
date nearest the anniversary of the commencement date of this lease
("Anniversary Index"), shall be compared with the Index published for the
date immediately preceding the month in which the term of this lease
commences ("Beginning Index").
If this Anniversary Index has increased over the Index applicable to
the previous year, the minimum monthly rent payable during the succeeding
year shall be set by multiplying the minimum monthly rental for the
immediately preceding year by a fraction, the numerator of which is the
Anniversary Index and the denominator of which is the prior year's
Anniversary Index except in the second year when the denominator shall be
the beginning year.
If the Index is changed so that the base year differs from that used
as of the month immediately preceding the month in which the lease term
commences, the Index shall be converted in accordance with the conversion
factor published by the United States Department of Labor, Bureau of Labor
Statistics. In the Index is discontinued or revised during the term, such other
government index or computation with which it is replaced shall be used in
order to obtain substantially the same result as would be obtained if the Index
had not been discontinued or revised, as Landlord shall select. However, in no
event shall rent be reduced below the monthly rental in effect immediately
preceding such adjustment. Failure of Landlord to demand any adjustment
hereunder shall not constitute waiver of Landlord's rights hereunder.
<PAGE> 3
6. RENTAL ADJUSTMENT.
(a) Commencing with the beginning of the calendar year next following the
calendar year in which this Lease commences, and for each succeeding calendar
year thereafter, Tenant shall pay to Landlord monthly upon demand as additional
Rent the percentage shares set forth in Article 1 with respect to the areas
outlined on Exhibit "B" of any increase in "Building or Common Area Direct
Expenses" over and above the "Building or Common Area Direct Expenses" actually
incurred during the calendar year in which the term of this Lease commenced.
The "Building Direct Expenses" percentage is that portion of the tenant's space
as it relates to total space available to rent in the building. The "Common
Area Direct Expenses" percentage is that portion of the tenant's space as it
relates to the space available to rent in all of the completed buildings, which
shall be adjusted downward as additional buildings are completed. Landlord
shall bill Tenant for the actual or estimated increase in expenses. Within
sixty (60) days after the end of each calendar year, Landlord will provide
Tenant with a statement of actual direct expenses for said calendar year and
all payments to Landlord by Tenant for said calendar year which were made on
the basis of estimates will be adjusted accordingly.
(b) For the purpose of this article the term "Building Direct Expenses" as
used herein shall include: All direct costs of operation and maintenance paid
by Landlord with respect to the building or the land on which the building is
located as outlined in Exhibit "B", as determined by standard accounting
practices, and shall include the following costs by way of illustration: real
property taxes and assessments, including any form of assessment, licensing
fee, rental tax, gross receipts tax, levy or penalty imposed by any authority
having the direct or indirect power to tax at any time during the term of this
lease, whether assessed against the Landlord or assessed against the Tenant and
collected by the Landlord, or both; water and sewer charges; insurance
premiums; utilities; janitorial services; labor; professional fees and costs;
management fees; air conditioning and heating; elevator maintenance; supplies;
materials; equipment; and tools. ("Building Direct Expenses" and "Common Area
Direct Expenses" shall not include depreciation on the Building of which the
Premises are a part or equipment therein, loan payments, or real estate brokers
commission.)
(c) For the purposes of this article the term "Common Area Direct
Expenses" as used herein shall include: All direct cost of operation and
maintenance paid by Landlord with respect to the common area surrounding the
building as outlined in Exhibit "C", as determined by standard accounting
practices and shall include the following costs by way of illustration: water
and sewer charges; insurance premiums; utilities; labor; landscape
maintenance; supplies; materials; equipment; tools; cost of resurfacing and
upkeep of all parking areas, structures and common areas; real property taxes
and assessments.
(d) The rent payable hereunder shall be further adjusted as follows:
Tenant shall pay Landlord as additional rent the percentage established in
sub-paragraph (a) above of the Cost Saving Capital Improvement Amortization
amount with respect to such Cost Saving Capital Improvements as may be made by
Landlord. For purpose hereof, "Cost Saving Capital Improvements" shall mean any
equipment, device or other improvement acquired subsequent to the commencement
of the construction of the Building (1) to achieve economies in the operation,
maintenance and repair of the Building, (2) to comply with any statute,
ordinance, code, controls or guidelines, or (3) to comply with any other
governmental requirement with respect to the Building or land on which the
Building is located (the "Land") including, without limitation, energy, fire,
safety or construction requirements, if the cost thereof is capitalized on the
books of Landlord in accordance with generally accepted accounting practices.
"Cost Saving Capital Improvement Amortization" shall mean the amount
determined by multiplying the actual cost, including financing costs, of each
Cost Saving Capital Improvement acquired by Landlord by the constant annual
percentage required to fully amortize such cost over the useful life of the
Cost Saving Capital Improvement (as reasonably estimated by Landlord at the
time acquisition). To the extent any Cost Saving Capital Improvement is not
financed by Landlord, Cost Saving of Capital Improvement Amortization shall
include interest on the unamortized cost of the Cost Saving Capital Improvement
at the rate of 2% above the prime rate charged by the Bank of America National
Trust and Savings Association for short term unsecured loans to its most
preferred customers, but not in excess of the maximum rate permitted by law.
7. SECURITY DEPOSIT.
Concurrently with the execution of this Lease, Tenant has deposited with
Owner the sum stated in the attached Article 1, receipt of which is hereby
acknowledged, to secure the faithful performance by Tenant of all terms,
covenants and conditions of this Lease by Tenant to be kept and performed
during the term hereof. Said sum shall be held by Landlord as security for the
faithful performance by Tenant of all of the terms, covenants, and conditions
of this Lease to be kept and performed by Tenant during the term hereof. If
Tenant defaults with respect to any provision of this Lease, including but not
limited to the provisions relating to the payment of rent, Landlord may (but
shall not be required to) use, apply or retain all or any part of this security
deposit for the payment of any rent or any other sum in default, or for the
payment of any other amount when Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other
loss or damage which Landlord may suffer by reason of Tenant's default. If any
portion of said deposit is so used or applied, Tenant shall, upon demand
therefore, deposit cash with Landlord in an amount sufficient to restore the
security deposit to its original amount and Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interests hereunder) at the expiration
of the Lease term, provided that Landlord may retain the security deposit until
such time as any amount due from Tenant in accordance with Articles 5 and 6
hereof has been determined and paid in full.
<PAGE> 4
8. USE.
The premises shall be occupied and used by Tenant and Tenant's employees
solely for the purpose of conducting therein the business set forth in Article 1
and shall not use or permit the Premises to be used for any other purpose
without the prior written consent of Landlord. Tenant shall not use or occupy
the Premises in violation of law or of the certificate of occupancy issued for
the Building of which the Premises are a part, and shall, upon five (5) days
written notice from Landlord, discontinue any use of the Premises which is
declared by any governmental authority having jurisdiction to be not in
compliance with any applicable statute, ordinance, rule, regulation, order,
restriction of record or requirement which shall, by reason of the nature of
tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
thereof. Tenant shall not do or permit to be done anything which will invalidate
or increase the cost of any fire, extended coverage or any other insurance
policy covering the Building and/or property located therein and shall comply
with all rules, orders, regulations and requirements of the Pacific Fire Rating
Bureau or any other organization performing a similar function. Tenant shall
promptly upon demand reimburse Landlord for any additional premium charges for
such policy by reason of Tenant's failure to comply with the provisions of this
article. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building, or injure or annoy them, or use or allow
the Premises to be used for improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall not commit or suffer to be committed any waste in or
upon Premises.
9. NOTICES.
Any notice required or permitted to be delivered to tenant may be
delivered personally or by mail and if given by mail shall be deemed
sufficiently given if sent by registered or certified mail addressed to Tenant
at the Building of which the Premises are a part, or to Landlord at 1947 Camino
Vida Roble #104, Carlsbad, CA 92008. Either party may by written notice to the
other specify a different address for notice purposes except that the Landlord
may in any event use the Premises as tenant's address for notice purposes.
10. BROKERS.
Tenant warrants that it has had no dealing with any real estate broker or
agent in connection with the negotiation of this Lease, excepting only those
which Landlord has been notified of by Tenant in writing on or before this date
and that it knows of no other real estate broker or agent who is or might be
entitled to a commission in connection with this Lease.
11. HOLDING OVER.
If Tenant holds over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord, Tenant shall
become a tenant at sufferance only, at the rental rate in effect upon the date
of such expiration (subject to adjustment as provided in Article 5 hereof and
prorated on a daily basis), and otherwise upon the terms, covenants and
conditions herein specified, so far as applicable. Acceptance by Landlord of
rent after such expiration or earlier termination shall not constitute a
holdover hereunder or result in a renewal. The foregoing provisions of this
paragraph are in addition to and do not affect Landlord's right of re-entry or
any other rights of Landlord hereunder or as otherwise provided by law.
12. TAXES ON TENANT'S PROPERTY.
Tenant shall pay before delinquency all taxes, assessments, license fees,
and other charges ("taxes") that are levied and assessed against Tenant's
personal property installed or located in or on the Premises, and that become
payable during the term of this Lease. On demand by Landlord, Tenant shall
furnish Landlord with satisfactory evidence of these payments. If any taxes on
Tenant's personal property are levied against Landlord or Landlord's property,
or if the assessed value of the Building and other improvements in which the
Premises are located is increased by the inclusion of a value placed on
Tenant's personal property or any part thereof, and if Landlord pays the taxes
based on the increased assessment of these items, Tenant, on demand, shall
immediately reimburse Landlord for the sum of the taxes levied against
Landlord's assessment. Landlord shall have the right to pay these taxes
regardless of the validity of the levy.
13. CONDITION OF THE PREMISES.
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises or the
Building or with respect to the suitability of either for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises of said Building were at such time in
satisfactory condition, except as tenant notes in a written statement of
condition to Landlord within 30 days of Commencement Date.
14. ALTERATIONS.
(a) Tenant shall make no alterations, additions or improvements in or to
the Premises without Landlord's prior written consent, and then only by
contractors or mechanics approved by Landlord. Tenant agrees that there shall be
no construction of partitions or other obstructions which might interfere with
Landlord's free access of mechanical installations or service facilities of the
Building or interfere with the moving of Landlord's equipment to or from the
enclosures containing said installations or facilities. All such work shall be
done at such times and in such manner as Landlord may from time to time
designate. Tenant covenants and agrees that all work done by Tenant shall be
performed in full compliance with all laws, rules, orders, ordinances,
directions, regulations and requirements of all governmental agencies, offices,
departments, bureaus and boards
<PAGE> 5
having jurisdiction, and in full compliance with the rules, orders, directions,
regulations and requirements of the Pacific Fire Rating Bureau, and of any
similar body. Before commencing any work, Tenant shall give Landlord at least
five (5) days written notice of the proposed commencement of such work and
shall, unless waived in writing by Landlord, secure at Tenant's own cost and
expense, a completion and lien indemnity bond, satisfactory to Landlord, for
said work. Tenant further covenants and agrees that any mechanic's lien filed
against the Premises or against the Building for work claimed to have been done
for, or materials claimed to have been furnished to Tenant, will be discharged
by Tenant, by bond or otherwise, within ten (10) days after filing thereof, at
the cost and expense of Tenant. All alterations, additions or improvements upon
the Premises, made by either party, including (without limiting the generality
of the foregoing) all wallcovering, built-in cabinet work, paneling and the
like, shall, unless Landlord elects otherwise, become the property of the
Landlord, and shall remain upon, and be surrendered with the Premises, as a part
thereof, at the end of the term hereof, except that Landlord may, by written
notice to Tenant, given at least thirty (30) days prior to the end of the term,
require Tenant to remove all partitions, counters, railings and the like
installed by Tenant, and Tenant shall restore the Premises to its condition
following completion of Landlord's work of construction and installation of
tenant improvements in the premises at the commencement of the term of this
Lease.
(b) All articles of personal property and all business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the
property of Tenant and may be removed by Tenant any time during the lease term.
If Tenant shall fail to remove all of its effects from said premises upon
termination of this Lease for any cause whatsoever, Landlord may, at its option,
remove the same in any manner that Landlord shall choose, and store said effects
without liability to Tenant for loss thereof, and Tenant agrees to pay storage
charges on such effects for any length of time that the same shall be in
Landlord's possession, or Landlord may, at its option, without notice, sell said
effects, or any of the same, at private sale and without legal process, for such
price as Landlord may obtain and apply the proceeds of such sale upon any
amounts due under this Lease from Tenant to landlord and upon the expense
incident to the removal and sale of said effects.
15. REPAIRS.
(a) Tenant shall at Tenant's sole cost and expense keep the Premises and
every part thereof in good condition and repair, damage thereto from causes
beyond the reasonable control of Tenant and ordinary wear and tear excepted.
Tenant shall upon the expiration or sooner termination of the term hereof,
surrender the Premises to Landlord in the same condition as when received,
ordinary wear and tear and damage from causes beyond the reasonable control of
Tenant excepted. Landlord shall have no obligation to alter, remodel, improve,
repair, decorate or paint the premises or any part thereof and the parties
hereto affirm that Landlord has made no representations to Tenant respecting the
condition of the premises or the building except as specifically herein set
forth.
(b) Anything contained in the foregoing sub-article to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions of
the Building, including the basic plumbing, air conditioning and electrical
systems installed or furnished by Landlord, unless such maintenance and repairs
are caused in part or in whole by the act, neglect, fault of or omission of any
duty by Tenant, its agents, servants, employees or invitees, in which case
Tenant shall pay to Landlord the reasonable cost of such maintenance and
repairs. Landlord shall not be liable for any failure to make any such repairs
or to perform any maintenance unless such failure shall persist for any
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in Article 23
hereof there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements in or to any portion of the
Building or the Premises or in or to fixtures, appurtenances and equipment
therein.
16. LIENS.
Tenant shall keep the Premises, the Building and the property upon which
the Building is situated, free from any liens arising out of the work performed,
materials furnished or obligations incurred by Tenant.
17. ENTRY BY LANDLORD.
Landlord reserves and shall at any and all reasonable times have the right
to enter the Premises to inspect the same, to supply janitor service and any
other service to be provided by Landlord to Tenant hereunder, to submit said
Premises to prospective purchases or Tenants, to post notices of
nonresponsibility, to alter, improve or repair the Premises or any other portion
of the Building, all without being deemed guilty of an eviction of Tenant and
without abatement of rent, and may for that purpose erect scaffolding and other
necessary structures where reasonably required by the character of the work to
be performed, providing that the folding and other necessary structures where
reasonably required by the character of the work to be performed, providing that
the business of Tenant shall be interfered with as little as is reasonably
practicable. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and other loss occasioned thereby. For each
of the aforesaid purposes, Landlord shall at all times have and retain a key
with which to unlock all of the doors in, upon and about the Premises, excluding
Tenant's vaults and safes, and Landlord shall have the right to use any and all
means which landlord may deem proper to open said door in an emergency in order
to obtain entry to the Premises, and any entry to the Premises obtained by
Landlord by any of said means, or otherwise, shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises, or an eviction of Tenant from the Premises or any portion
thereof. It is understood and agreed that no provision of the within Lease shall
be construed as obligating Landlord to perform any repairs, alterations or
decorations except as otherwise expressly agreed herein to be performed by
Landlord.
<PAGE> 6
18. UTILITIES AND SERVICES.
Landlord agrees to furnish to the Premises during reasonable hours of
generally recognized business days, reasonable quantities of electric current
for normal lighting and fractional horsepower office machines, water for
lavatory and drinking purposes, heat and air conditioning required in
Landlord's judgment for the comfortable use and occupation of the Premises,
janitorial service and elevator service by non-attended automatic elevator.
19. ASSIGNMENT AS A RESULT OF TENANT'S BANKRUPTCY.
(a) In the event this Lease is assigned to any person or entity pursuant
to provisions of the Bankruptcy Code, 11 USC ?? 101, et seq. (the "Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall remain the exclusive property of Landlord, and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other consideration constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of Landlord and be promptly
paid to or turned over to Landlord.
(b) If Tenant, pursuant to this Lease, proposes to assign the same
pursuant to the provisions of the Bankruptcy Code, to any person or entity who
shall have made a bona fide offer to accept an assignment of this Lease on
terms acceptable to Tenant, then notice of the proposed assignment setting forth
(i) the name and address of such person, (ii) all of the terms and conditions
of such offer, and (iii) the assurances referred to in Section 365(b)(3) of the
Bankruptcy Code, shall be given to the Landlord by the Tenant no later than
twenty (20) days after receipt of such offer by the Tenant, but in any event no
later then ten (10) days prior to the date that Tenant shall make application
to a court of competent jurisdiction for authority and approval to enter into
such assignment and assumption, and Landlord shall thereupon have the prior
right and option, to be exercised by notice to the Tenant given at any time
prior to the effective date of such proposed assignment, to accept an
assignment of this Lease upon the same terms and conditions and for the same
consideration, if any as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
such person for the assignment of this Lease.
(c) Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed
to have assumed all of the obligations arising under this Lease on and after
the date of such assignment. Any such assignment shall, upon demand, execute
and deliver to Landlord an instrument confirming such assumption.
(d) The following factors may be considered by the Landlord as necessary
in order to determine whether or not the proposed assignee has furnished
Landlord with adequate assurances of its ability to perform the obligations of
this Lease:
(1) The adequacy of a security deposit.
(2) Net worth and other financial elements of this proposed assignee.
(3) Demonstration that assumption or assignment will not disrupt
substantially any tenant mix or balance in the office building.
(4) It is hereby acknowledged that this is a Lease within an office
building within the meaning of Section 365(b)(3) of the Bankruptcy Code.
(5) In the event Landlord rejects the proposed assignee, the rights
and obligations of the parties hereto shall continue to be governed by the
terms of this Lease, and Tenant shall have all the rights of a Tenant under
applicable California law.
20. INDEMNIFICATION.
Tenant shall indemnify and hold harmless Landlord against and from any and
all claims arising from Tenant's use of the Premises or the conduct of its
business or form any activity, work, or thing done, permitted or suffered by
the Tenant in or about the Premises, and shall further indemnify and hold
harmless Landlord against and from any and all claims arising from any breach
or default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease, or arising from any act, neglect,
fault or omission of the Tenant, or of its agents or employees, and from and
against all costs, attorney's fees, expenses and liabilities brought against
Landlord by reason of any such claim. Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to person in, upon or about the
Premises from any cause whatsoever except that which is caused by the failure
of Landlord to observe any of the terms and conditions of this Lease and such
failure has persisted for an unreasonable period of time after written notice
of such failure, and Tenant hereby waives all claims in respect thereof against
Landlord.
21. DAMAGE TO TENANT'S PROPERTY.
Notwithstanding the provisions of Article 20 to the contrary, Landlord or
its agents shall not be liable for any damage to property entrusted to
employees of the Building, nor for any loss of or damage to any property by
theft or otherwise, nor for any injury or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electricity, water
or rain which may leak from any part of the Building or from any pipes,
appliances or plumbing works therein or from the roof, street or sub-surface or
from any other place or resulting from dampness or any other cause whatsoever.
Landlord or its agents shall not be liable for interference with the light or
other incorporated hereditaments, nor shall Landlord be liable for any latent
defect in the Premises or in the Building. Tenant shall give prompt notice to
Landlord in case of fire or accidents in
<PAGE> 7
the premies or in the Building or of defects therein or in the fixtures or
equipment. Tenant agrees to carry sprinkler leakage coverage in addition to fire
coverage on Tenant's property.
22. INSURANCE -- MUTUAL WAIVER OF SUBROGATION.
(a) All insurance required to be carried by Tenant hereunder shall be
issued by responsible insurance companies, qualified to do business in the
State of California, acceptable to Landlord and Landlord's lender. Each policy
shall name Landlord, and at Landlord's request any mortgagee of Landlord, as an
additional insured, as their respective interests may appear, and copies of all
policies or certificates evidencing the existence and amounts of such insurance
shall be delivered to Landlord by Tenant at least ten (10) days prior to
Tenant's occupancy of the Premises. No such policy shall be cancellable except
after ten (10) days prior written notice to Landlord and Landlord's lender.
Tenant shall furnish Landlord with renewals or "binders" of any such policy at
least ten (10) days prior to the expiration thereof. Tenant shall have the
right to provide such insurance coverage pursuant to blanket policies obtained
by the Tenant provided such blanket policies expressly afford coverage to the
Premises and to Tenant as required by this Lease.
(b) At all times during the term hereof, Tenant shall maintain in effect
policies of casualty insurance covering (1) all leasehold improvements
(including any alterations, additions of improvements as may be made by Tenant
pursuant to provisions of Article 14 hereof), and (2) trade fixtures,
merchandise and other personal property from time to time in, on or upon the
Premises, in an amount not less than one hundred percent (100%) of their actual
replacement cost from time to time during the term of this Lease, providing
protection against any peril included within the classification "Fire and
Extended Coverage" together with insurance against sprinkler damage, vandalism
and malicious mischief. The proceeds of such insurance shall be used for the
repair or replacement of the property so insured. Upon termination of this
Lease following a casualty as set forth herein, the proceeds under (1) shall be
paid to Landlord, and the proceeds under (2) above shall be paid to Tenant.
(c) Tenant shall at all times during the term hereof, and at its own cost
and expense procure and continue in force workers' compensation insurance and
bodily injury liability and property damage liability insurance adequate to
protect Landlord against liability for injury or death of any person in
connection with the construction of improvements on the Premises or with the
use, operation or condition of the Premises. Such insurance at all times shall
be in an amount of not less than Two Million Dollars ($2,000,000) for injuries
to persons on one accident, not less than One Million Dollars (1,000,000) for
injury to any one person and not less than Two Hundred Thousand Dollars
($200,000) with respect to damage to property.
(d) All insurance policies which are carried by both Landlord and Tenant
respecting the Premises, the Building, and the surrounding property, and this
Lease shall contain a clause whereby the insurer waives its rights of
subrogation against the other party to this Lease. Landlord will not carry
insurance on Tenant's possessions.
23. DAMAGE OR DESTRUCTION.
(a) In the event the Building of which the Premises are a part is
damaged by fire or other perils covered by extended coverage insurance the
Landlord shall:
(i) In the event of total destruction at Landlord's opinion within a
period of ninety (90) days thereafter, commence repair, reconstruction and
restoration of said Building and prosecute the same diligently to
completion, in which event this Lease shall remain in full force and
effect; or within said ninety (90) day period elect not to so repair,
reconstruct or restore said Building, in which event this Lease shall
terminate. In either event, Landlord shall give the Tenant written notice
of its intention within said ninety (90) day period. In the event Landlord
elects not to restore said Building, this Lease shall be deemed to have
terminated as of the date of such total destruction.
(ii) In the event of a partial destruction of the Building to an
extent not exceeding Twenty-Five Percent (25%) of the full insurable value
thereof and if the damage thereto is such that the Building may be
repaired, reconstructed or restored within a period of ninety (90) days
from the date of the happening of such casualty and Landlord will receive
insurance proceeds sufficient to cover the cost of such repairs, the
Landlord shall commence and proceed diligently with the work of repair,
reconstruction or restoration and the Lease shall continue in full force
and effect; or if such work or repair, reconstruction or restoration is
such as to require a period of longer than ninety (90) days or exceed
Twenty-Five Percent (25%) of the full insurable value thereof or if said
insurance proceeds will not be sufficient to cover the cost of such
repairs, the Landlord may either elect not to repair, reconstruct or
restore and the Lease shall in such event terminate. Under any of the
conditions, the Landlord shall give written notice to the Tenant of its
intention within the period of ninety (90) days. In the event Landlord
elects not to restore said Building, this Lease shall be deemed to have
terminated as of the date of such partial destruction.
(b) Upon any termination of this Lease under any of the provisions of
this Article, the parties shall be released thereby without further obligation
to the other from the date possession of the Premises is surrendered to the
Landlord except for items which have theretofore accrued and are then unpaid.
(c) In the event of repair, reconstruction or restoration as herein
provided, the rental provided to be paid under this Lease shall be abated
proportionately in the ratio which the Tenant's use of said Premises is
impaired during the period of such repair, reconstruction or restoration. The
Tenant shall not be entitled to any compensation or damages for loss in the use
of the whole or any part of said Premises and/or any inconvenience or
annoyance occasioned by any such damage, repair, reconstruction or restoration.
(d) Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Article. Notwithstanding anything to the contrary contained in this Article,
should Landlord be delayed or prevented from repairing or restoring said
damaged Premises within one (1) year after the occurrence of such damage or
destruction by reason of acts of God, war, governmental restrictions, inability
to procure the necessary labor or materials, or other cause beyond the control
of
<PAGE> 8
Landlord, the Landlord shall be relieved of its obligation to make such repairs
or restoration and Tenant shall be released from its obligations under this
Lease as of the end of said one (1) year period.
(e) In the event that damage is due to any cause other than fire or other
peril covered by extended coverage insurance, Landlord may elect to terminate
this Lease.
(f) It is hereby understood that if Landlord is obligated to or elects to
repair or restore as herein provided, Landlord shall be obligated to make
repairs or restoration only to those portions of said Building and said Premises
which were originally provided at Landlord's expense; and the repair and
restoration of items not provided at Landlord's expense shall be the obligation
of Tenant.
(g) Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twelve (12) months of the term of this Lease
or any extension thereof.
24. EMINENT DOMAIN.
In case the whole of the Premises, or such part thereof as shall
substantially interfere with the Tenant's use and occupancy thereof, shall be
taken for any public or quasi-public purpose by any lawful power or authority by
exercise of the right of appropriation, condemnation or eminent domain, or be
sold under threat of such taking, the Tenant or the Landlord may at its or his
option terminate this Lease effective as of the date possession is required to
be surrendered pursuant to such taking or sale, Tenant shall not because of such
taking by sale asset any claim against the Landlord or the taking authority for
any compensation because of such taking or sale, and Landlord shall be entitled
to receive the entire amount of any award without deduction for any estate or
interest of Tenant. In the event the amount of property or the type of estate
taken shall not substantially interfere with the conduct of Tenant's business,
Landlord shall be entitled to the entire amount of the award without deduction
for any estate or interest of Tenant, and Landlord at his option may terminate
this Lease. If Landlord does not so elect, Landlord shall promptly proceed to
restore the Premises to substantially their same condition prior to such partial
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant shall be so deprived on account of such taking and restoration.
Nothing contained in this Article shall be deemed to give Landlord any interest
in any award made to Tenant for the taking of personal property and fixtures
belonging to Tenant.
25. DEFAULTS AND REMEDIES.
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The vacating or abandonment of the Premises by Tenant.
Abandonment is herein defined to include, but is not limited to any absence by
Tenant from the Premises for five (5) days or longer while in default of any
provision of this Lease.
(ii) The failure by Tenant to make any payment of rent or additional
rent required to be made by Tenant hereunder, as and when due where such failure
shall continue for a period of three (3) days after written notice thereof from
Landlord to Tenant; provided however, that any such notice shall be in lieu of,
and not in addition to, any notice required under California Code of Civil
Procedure 1161.
(iii) The failure by Tenant to observe or perform any of the express or
implied covenants or provisions of this Lease to be observed or performed by
Tenant, other than as specified in (i) or (ii) above, where such failure shall
continue for a period of ten (10) days after written notice thereof from
Landlord to Tenant; provided however, that any such notice shall be in lieu of,
and not in addition to, any notice required under California Code of Civil
Procedure 1161; provided, further, that if the nature of Tenant's default is
such that more than ten (10) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant shall commence such cure
within said ten-day period and thereafter diligently prosecute such cure to
completion.
(iv) (1) The making by Tenant of any general assignment for the
benefit of creditors; (2) the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within thirty (30) days); (3) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or (4) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within thirty (30) days.
(v) The discovery by Landlord that any financial or other statement
given to Landlord by Tenant, any assignee of Tenant, any subtenant of Tenant,
any successor in interest of Tenant, or any guarantor of Tenant's obligations
hereunder, was materially false.
(b) In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option with or without notice or demand to terminate this Lease and
all rights to Tenant hereunder. In the event that Landlord shall elect to
terminate this Lease then Landlord may recover from Tenant:
(i) The worth at the time of award of any unpaid rent which had been
earned at the time of such damage; plus
(ii) The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss Tenant proves could have been reasonably
avoided; plus
<PAGE> 9
(iii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided; plus
(iv) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform his
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom.
As used in sub-articles (i) and (ii) above, the "worth at the
time of award" shall be computed by allowing interest at the rate of ten
percent (10%) per annum or at the maximum interest rate allowed by law,
whichever is greater. As used in sub-article (iii) above, the "worth at
the time of award" shall be computed by allowing interest at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%). As used in sub-article (iv) above, the "detriment
proximately caused by Tenant's failure to perform" shall include, without
limitation, any and all broker commissions incurred in re-leasing the
Premises or any portion thereof as well as the portion of any leasing
commission applicable to the unexpired term of this Lease.
(c) In the event of any such default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, to reenter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant.
No reentry or taking possession of the Premises by Landlord pursuant to
this sub-article shall be construed as an election to terminate this Lease
unless a written notice of such intention be given to Tenant or unless the
Termination thereof be decreed by a court of competent jurisdiction.
(d) Any efforts by Landlord to mitigate the detriment caused by Tenant's
breach of this Lease shall not waive Landlord's right to recover the damages
set forth above.
(e) Nothing herein shall be construed to affect other provisions of this
Lease regarding Landlord's right to indemnification from Tenant for liability
arising prior to the termination of this Lease for personal injury or property
damage.
(f) No right or remedy conferred upon or reserved to Landlord in this
Lease is intended to be exclusive of any other right to remedy granted, to
Landlord by statute or common law, and each and every such right and remedy
shall be cumulative.
26. ASSIGNMENT AND SUBLETTING.
Tenant shall not, either voluntarily or by operation of law, sell, assign,
hypothecate or transfer this Lease, or sublet the Premises or any part thereof
to be occupied by anyone other than Tenant or Tenant's employees, without the
prior written consent of Landlord in each instance, which consent shall not be
unreasonably withheld. Any sale, assignment, mortgage, transfer or subletting of
this Lease which is not in compliance with the provisions of this Article shall
be void and shall, at the option of Landlord, terminate this Lease. The consent
by Landlord to an assignment or subletting shall be construed as relieving
Tenant from obtaining the express written consent of Landlord to any further
assignment or subletting or as releasing Tenant from any liability or obligation
hereunder whether or not then accrued.
In the event Tenant shall assign or sublet the Premises or any portion
thereof, or request the consent of Landlord for any act that Tenant proposes to
do, then Tenant shall pay Landlord's reasonable attorney's fees incurred in
connection therewith.
27. SUBORDINATION.
This Lease, at Landlord's option, shall be subject and subordinate at all
times to all ground and underlying leases which not exist or may hereafter be
executed affecting the Building or the land upon which the Building is situated
or both, and to the lien of any mortgages or deeds of trust in any amount or
amounts whatsoever now or hereafter placed on or against the land and Building
or either thereof or on Landlord's interest or estate therein, or portion
thereof, or on or against any ground or underlying lease without the necessity
of the execution and delivery of any further instruments on the part of Tenant
to effectuate such subordination; provided, however, that so long as Tenant is
not in default, the terms of this Lease shall not be affected by termination
proceedings in respect to such ground or underlying lease or foreclosure or
other proceedings under such mortgages or deeds of trust, Tenant hereby agreeing
at the written request of the Landlord under such ground or underlying lease or
the purchaser of the Building, in such foreclosure or other proceedings, to
assign to such Landlord or to such purchaser or, at such Landlord's or such
purchaser's option, to enter into a new lease for the balance of the term hereof
upon the same terms and provisions as are contained in this Lease.
Notwithstanding the foregoing, Tenant shall execute and deliver upon demand such
further instrument or instruments evidencing such subordination of this Lease to
the lien of any such mortgage or mortgages or deeds of trust as may be required
by Landlord.
28. ESTOPPEL CERTIFICATION.
(a) Tenant shall, at anytime and from time to time upon not less than ten
(10) days prior written notice from Landlord, execute, acknowledge and deliver
to Landlord a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as so modified, is in full force
and effect) and the dates to which the rental and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder or specifying
such defaults if any are claimed. Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the real
property of which the Premises are a part.
(b) Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (i) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there
<PAGE> 10
are no uncured defaults in Landlord's performance, and (iii) that not more than
one month's rental has been paid in advance, and such failure may be considered
by Landlord as a default by Tenant under this Lease.
29. RULES AND REGULATIONS.
Tenant shall faithfully observe and comply with the rules and regulations
printed on or annexed to this Lease and all reasonable and nondiscriminatory
modifications thereof and additions thereto from time to time put into effect
by Landlord. Landlord shall not be responsible to Tenant for the violation or
nonperformance by any other tenant or occupant of the Building of any said
rules and regulations.
30. CONFLICT OF LAWS.
This Lease shall be governed by and construed pursuant to the laws of the
State of California.
31. COMMON AREAS.
Tenant shall have the nonexclusive right, in common with others, to the
use of common entrances, lobbies restrooms, showers, elevator, ramps, drives,
stairs and similar access and serviceways and common areas in and adjacent to
the Building of which the Premises are a part subject to such nondiscriminatory
rules and regulations as may be adopted by Landlord.
32. SUCCESSORS AND ASSIGNS.
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure
to the benefit of the parties hereto and respective heirs, personal
representatives, successors and assigns.
33. SURRENDER OF PREMISES.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, terminate all or any existing subtenancies or may, at the option of
Landlord operate as an assignment to it of any or all subleases or subtenancies.
34. ATTORNEY'S FEES.
(a) In the event that Landlord should bring suit for the possession of
the Premises, for the recovery of any sum due under this Lease, or because of
the breach of any provision of this Lease, or for any other relief against
Tenant hereunder, then all costs and expenses, including reasonable attorney's
fees, incurred by the prevailing party therein shall be paid by the other party
which obligation on the part of the other party shall be deemed to have accrued
on the date of the commencement of such action and shall be enforceable whether
or not the action is prosecuted by judgement.
(b) Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder,
Tenant shall pay to Landlord its costs and expenses incurred in such suit,
including a reasonable attorney's fee.
35. PERFORMANCE OF TENANT.
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any sum
of money, other than rent, required to be paid by it hereunder or shall fail to
perform any other act on its part to be performed hereunder, and such failure
shall continue for ten (10) days after notice thereof by Landlord, Landlord may,
without waiving or releasing Tenant from any obligations of Tenant, but shall
not be obligated to, make any such payment or perform any such other act on
Tenant's part to be made or performed as in this Lease provided. All sums so
paid by Landlord and all necessary incidental costs together with interest
thereon at an annual rate two (2) percentage points above the prime annual
interest rate of the Bank of America National Trust and Savings Association in
effect at the due date (but not more than the maximum rate permissible by law),
from the date of such payment by Landlord shall be payable to Landlord on
demand. Tenant covenants to pay any such sums, and the Landlord shall have (in
addition to any other right or remedy of Landlord) the same rights and remedies
in the event of the non-payment thereof by Tenant as in the case of default by
Tenant in the payment of the rent.
36. MORTGAGE PROTECTION.
In the event of any default on the part of Landlord, at any time there is
an outstanding Mortgage covering the Premises, Tenant will give notice by
registered or certified mail to any beneficiary of a deed of trust or mortgagee
of a mortgage covering the Premises whose address shall have been furnished it,
and shall offer such beneficiary or mortgagee a reasonable opportunity to cure
the default, including time to obtain possession of the Premises by power of
sale or a judicial foreclosure, if such should prove necessary to effect a cure.
37. DEFINITION OF LANDLORD.
The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the Owner or Owners at the time in question of the fee of the
Premises, and in the event of any transfer, assignment or other conveyance or
transfers of any such title or leasehold the Landlord herein named (and in case
of any subsequent transfers or conveyance, the then grantor) shall be
automatically freed and relieved from and after the date of such transfer,
assignment or conveyance of all liability with respect to Landlord contained in
this Lease thereafter to be performed and, without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to observe
and perform any and all obligations of the Landlord hereunder, during its
ownership of the Premises. Landlord may transfer its
<PAGE> 11
interest in the Premises without the consent of Tenant and such transfer or any
subsequent transfer shall not be deemed a violation on Landlord's part of any
of the terms and conditions of this Lease.
38. WAIVER.
The waiver by either party hereto of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition herein contained,
nor shall any custom or practice which may grow up between the parties in the
administration of the terms, hereof be deemed a waiver of, or in any way
affect, the right of either party hereto to insist upon the performance by the
other party in strict accordance with said terms. The subsequent acceptance of
rent hereunder by Landlord 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 rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
39. IDENTIFICATION OF TENANT.
If more than one person executes this Lease as Tenant, (a) each of them is
jointly and severally liable for the keeping, observing and performing of all
of the terms, covenants, conditions, provisions and agreements of this Lease to
be kept, observed and performed by Tenant, and
(b) The term "Tenant" as used in this Lease shall mean and include each of
them jointly and severally and the act of or notice from, or notice or refund
to, or the signature of, any one or more of them, with respect to the tenancy
of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed.
40. PARKING.
Tenant shall have the right to use the Building's parking facilities that
currently exist or that may be built in the future including multi-story
parking structures in common with other tenants of the building upon terms and
conditions as may from time to time be reasonably established by Landlord.
41. TERMS AND HEADINGS.
The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. Words used in any gender include other genders. If
there be more than one Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several. The article headings of this Lease are not a part
of this Lease and shall have no effect upon the construction or interpretation
of any part hereof.
42. EXAMINATION OF LEASE.
Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for Lease, and it is not effective as
a Lease or otherwise until execution by and delivery to both Landlord and
Tenant.
43. TIME.
Time is of the essence with respect to the performance of every provision
of this Lease in which time or performance is a factor.
44. PRIOR AGREEMENT: AMENDMENTS.
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreement or understanding pertaining to any such matter shall be effective for
any purpose. No provision of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective
successors in interest.
45. SEPARABILITY.
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
and such other provisions shall remain in full force and effect.
46. RECORDING.
Neither Landlord nor Tenant shall record this Lease or a short form
memorandum thereof without the consent of the other.
47. LIMITATION ON LIABILITY.
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
(a) The sole and exclusive remedy shall be against the partnership named
as Landlord herein and its partnership assets;
(b) No partner of Landlord shall be sued or named as a party in any suit
or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) No service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(d) No partner of Landlord shall be required to answer or otherwise plead
to any service of process;
(e) No judgment will be taken against any partner of Landlord;
(f) Any judgment taken against any partner of Landlord may be vacated and
set aside at any time nunc pro tunc;
<PAGE> 12
(g) No writ of execution will ever be levied against the assets of any
partner of Landlord;
(h) These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
The Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or at common law.
<PAGE> 13
ADDENDUM TO
PACIFIC RIDGE COMMERCE CENTRE
OFFICE SPACE LEASE
Lessor: Pacific Ridge Commerce Centre, a California Limited Partnership
Lessee: Acubid.com, Inc. a Delaware Corporation
Property: 1947 Camino Vida Roble, Suite 102 and 103, Carlsbad, CA 92008
Date: April 30, 1999
48. RENTAL RATE:
The monthly rental rate shall be as follows, superseding Paragraph 5(b) of this
Lease:
<TABLE>
<CAPTION>
Rental Monthly
Rate Rent
------ -------
<S> <C> <C>
Months 1 - 12: $1.60 $4,393.60*
Months 13 - 24: $1.65 $5,083.65
Months 25 - 26: $1.70 $5,237.70
</TABLE>
*The monthly rental rate in the first year is based on a square footage of
2,746 square feet (3,081 total square feet less the 335 sf "open office" shown
on Exhibit B). In years two and three, the rental rate is based on the actual
rentable square footage (3,081) of Suite 102/103.
49. TENANT IMPROVEMENTS:
Prior to commencement, Lessor shall, at Lessor's sole expense, have the
following completed:
Tenant accepts the Premises in its present configuration. Landlord, at
Landlord's expense, shall replace the carpet, repaint the Premises,
replace any damaged or discolored ceiling tiles and insure that all
mechanical systems are in proper working condition.
50. BASE YEAR:
Tenant shall pay Operating Expense pass-throughs in excess of those established
in the Base Year. Pass-throughs shall be capped at a five percent (5%) increase
over the previous year's expenses. Base Year shall be 1999.
51. OPTION TO EXTEND:
Tenant shall have the right to extend the lease term for one (1) two (2) year
period, at the then-prevailing market rate. Tenant must give Landlord ninety
(90) days written notice of their intention to extend the lease term.
EXHIBIT A: Site Plan
EXHIBIT B: Space Plan
EXHIBIT C: Standard for Utilities and Services
EXHIBIT D: Rules & Regulations
EXHIBIT E: Hazardous Substance/ADA Disclaimer
LESSOR: PACIFIC RIDGE COMMERCE CENTRE, A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ WILLIAM A. SHIRLEY 5/4/99
------------------------------------ ------------------------------
William A. Shirley, General Partner Date
LESSEE: ACUBID.COM, A DELAWARE CORPORATION
By: /s/ NORMAN SCHWARTZ 5/3/99
------------------------------------ ------------------------------
Norman Schwartz, CFO Date
<PAGE> 14
EXHIBIT A
SITE PLAN
[DRAWING OF SITE]
PACIFIC RIDGE
COMMERCE CENTRE
SITE PLAN
<PAGE> 15
EXHIBIT B
SUITES 102 & 103
PACIFIC RIDGE COMMERCE CENTRE
1947 CAMINO VIDA ROBLE
CARLSBAD, CA 92008
PROJECT NO.: 16301
DATE: 03/04/99
NOT TO SCALE
SUITE 102 1502 RSF.
SUITE 103 1579 RSF.
TOTAL 3081 RSF.
[DRAWING OF LAYOUT OF SUITES 102 & 103]
COOPER ROBERTS & CO.
COMMERCIAL DESIGN
SPACE PLANNING
1010 UNIVERSITY AVENUE, SUITE C203
SAN DIEGO, CA 92103
(619) 297-1011 FAX (619) 397-3832
<PAGE> 16
EXHIBIT C
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect. Landlord
reserves the right to adopt nondiscriminatory modifications and additions
hereto:
As long as Tenant is not in default under any of the terms, covenants,
conditions, provisions or agreements (including payment of Tenants own separate
metered utilities) of this Lease, Landlord shall:
(a) Provide non-attended automatic elevator facilities Monday through
Friday, except holidays, from 7 a.m. to 6 p.m.
(b) On Monday through Friday, except holidays, from 7 a.m. to 6 p.m. (and
at other times for a reasonable additional charge to be fixed by Landlord,
currently $10.00 per heat pump per hour), ventilate the Premises and furnish air
conditioning or heating on such days and hours, when in the judgment of Landlord
it may be required for the comfortable occupancy of the Premises. The air
conditioning system achieves maximum cooling when the window coverings are
closed. Landlord shall not be responsible for room temperatures if Tenant does
not keep all window coverings in the Premises closed whenever the system is in
operation. Tenant agrees to cooperate fully at all times with Landlord, and to
abide by all regulations and requirements which Landlord may prescribe for the
proper functioning and protection of said air conditioning system. Tenant agrees
not to connect any apparatus, device conduit or pipe to the Building chilled and
hot water air conditioning supply lines. Tenant further agrees that neither
Tenant nor its servants, employees, agents, visitors, licensees or contractors
shall at any time enter mechanical installations of facilities of the Building
or adjust, tamper with, touch or otherwise in any manner affect said
installations or facilities.
(c) The Landlord shall furnish to the Premises during the usual business
hours on business days, electric current (which shall be separately metered and
paid for by Tenant) as required by the Building standard office lighting and
fractional horsepower office business machines. The Tenant agrees, should its
electrical installation or electrical consumption be in excess of the aforesaid
quantity or extend beyond normal business hours, to reimburse Landlord monthly
for measured consumption at the terms, classifications and rates charged to
similar consumers by said public utility serving the neighborhood in which the
Building is located. If a separate meter is not installed at Tenant's cost, such
excess cost will be established by an estimate agreed upon by Landlord and
Tenant and if the parties fail to agree, as established by an independent
licensed engineer. Tenant agrees not to use any apparatus or device in, or upon,
or about the Premises which may in any way increase the amount of such services
usually furnished or supplied to said Premises, and Tenant further agrees not to
connect any apparatus or device with wires, conduits or pipes, or other means by
which such services are supplied, for the purpose of using additional or unusual
amounts of such services without written consent of Landlord. Should Tenant use
the same to excess, the refusal on the part of Tenant to pay upon demand of
Landlord the amount established by Landlord for such excess charge shall
constitute a breach of the obligation to pay rent under this Lase and shall
entitle Landlord to the rights therein granted for such breach. At all times,
Tenant's use of electric current shall never exceed the capacity of the feeders
to the Building or the risers or wiring installation and Tenant shall not
install or use or permit the installation or use of any computer or electronic
data processing equipment in the Premises without the prior written consent of
Landlord.
(d) Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any purpose in
addition to ordinary drinking or lavatory purposes, of which fact Tenant
constitutes Landlord to be the sole judge, Landlord may install water meter and
thereby measure Tenant's water consumption for all purposes. Tenant shall pay
Landlord for the cost of the meter and the cost of the installation thereof and
throughout the duration of Tenant's occupancy; Tenant shall keep said meter and
installation in good working order and repair at Tenant's own cost and expense,
in default of which Landlord may cause such meter and equipment to be replaced
or repaired and collect the cost thereof from Tenant. Tenant agrees to pay for
water consumed, as shown on said meter, as when bills are rendered, and on
default in making such payment, Landlord may pay such charges and collect the
same from Tenant. Any such costs or expenses incurred, or payments made by
Landlord for any of the reasons or purposes hereinabove stated shall be deemed
to be additional rent payable by Tenant and collectible by Landlord as such.
(e) Provide janitor service to the Premises, provided the same are used
exclusively as offices, and are kept reasonably in order by Tenant, and if to be
kept clean by Tenant, no one other than persons approved by Landlord shall be
permitted to enter the Premises for such purposes. If the Premises are not used
exclusively as offices, they shall be kept clean and in order by Tenant, at
Tenant's expense, and to the satisfaction of Landlord, and by persons approved
by Landlord, Tenant shall pay to Landlord the cost of removal of any of Tenant's
refuse and rubbish to the extent that the same exceeds the refuse and rubbish
usually attendant upon the use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning, and electric system, when necessary, by reason of
accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed, and shall further have no
responsibility or liability for failure to supply elevator facilities, plumbing,
ventilating, air conditioning or electric service, when prevented from so doing
by strike or accident or by any cause beyond Landlord's reasonable control, or
by laws, rules orders, ordinances, directions, regulations or requirements of
any federal, state, county or municipal authority or failure of gas, oil or
other suitable fuel supply or inability by exercise of reasonable diligence to
obtain gas, oil or other suitable fuel. It is expressly understood and agreed
that any covenants on Landlord's part to furnish any service pursuant to any of
the terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever beyond Landlord's control.
<PAGE> 17
EXHIBIT D
RULES AND REGULATIONS
WHICH CONSTITUTE A PART OF THE LEASE
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress.
2. No awnings or other projection shall be attached to the outside walls
of the Building. No curtains, blinds, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of the Premises, other
than Landlord's standard window coverings. All electric ceiling fixtures hung
in offices or spaces along with the perimeter of the Building must be
fluorescent, of a quality, type, design and bulb color approved by Landlord.
Neither the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the express written consent of Landlord.
3. No sign, advertisement or notice shall be exhibited, painted or affixed
by any Tenant on any part of the Premises or the Building without the prior
written consent of the Landlord. In the event of the violation of the foregoing
by any Tenant, Landlord may remove same without any liability, and may charge
the expense incurred in such removal to the Tenant violating this rule.
Interior signs on doors and directory tablet shall be inscribed, painted or
affixed for each Tenant by the Landlord at the expense of such Tenant, and
shall be of a size, color and style acceptable to the Landlord. The directory
tablet will be provided exclusively for the display of the name and location of
Tenants only and Landlord reserves the right to exclude any other names
therefrom. Nothing may be placed on the exterior of corridor walls or corridor
doors other than Landlord's standard lettering.
4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into halls, passageways or other public places in the
Building shall not be covered or obstructed by any Tenant, nor shall any
bottles, parcels or other articles be placed on the windowsills.
5. The water and wash closets and other pluming fixtures shall not be used
for any purpose other than for which they are constructed, and no sweepings,
rubbish, rags or other substances shall be thrown therein. All damages
resulting from any misuse of the fixtures shall be borne by the Tenant who, or
whose servants, employees, agents, visitors or licensees, shall have caused the
same.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the premises or the Building. No boring, cutting or stringing of wires or
laying of linoleum or similar floor covering shall be permitted, except with
the prior written consent of the Landlord and as the Landlord may direct.
7. No bicycles, vehicles, birds or animals of any kind shall be brought
into or kept in or about the Premises, and no cooking shall be done or
permitted by any Tenant on the Premises, except that in the preparation of
coffee, tea, hot chocolate and similar items for Tenants and their employees
shall be permitted. No tenant shall cause or permit any unusual or
objectionable odors to be produced or to permeate the Premises.
8. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
for general office purposes. No Tenant shall occupy or permit any portion of
his premises to be occupied as an office for a public stenographer or typist,
or for the manufacture or sale of liquor, narcotics, or tobacco in any form, or
as a medical office, or as a barber or as an employment bureau. No Tenant shall
engage or pay any employees on the Premises except those actually working for
such Tenant on the Premises nor advertise for laborers giving an address at the
Premises. The Premises shall not used for lodging or sleeping or for any
immoral or illegal purposes.
9. No Tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises or those having business with them, whether by the use of any
musical instrument, radio, phonograph, unusual noise, or any other way. No
Tenant shall throw anything out of doors, windows or skylight or down the
passageways.
10. No Tenant nor any of Tenant's servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the Premises any inflammable,
combustible or explosive fluid, chemical or substance.
11. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or the mechanism thereof. Tenant will be furnished with one key for each
full-time employee at the time Tenant takes possession of the Premises.
Thereafter, Tenant will be charged for all keys. Each Tenant must, upon the
termination of his tenancy, restore to the Landlord all keys of stores, offices
and toilet rooms, either furnished to, or otherwise procured by, such Tenant
and in the event of the loss of any keys so furnished, such Tenant shall pay to
the Landlord the cost of replacing the same or of changing the lock or locks
opened by such lost key if Landlord shall deem it necessary to make such change.
12. All removals, or the carrying in or out of any safes, freight,
furniture, or bulky matter of any description must take place during the hours
which the Landlord may determine from time to time. The moving of safes or
other fixtures or bulky matter of any kind must be made upon previous notice to
the superintendent of the Building and under his supervision, and the persons
employed by any Tenant for such work must be acceptable to the Landlord. The
Landlord reserves the right to inspect all safes, freight or other bulky
articles to be brought into the Building and to exclude from the Building all
safes, freight or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part. The
Landlord reserves the right to prescribe the weight and position of all safes,
which must be placed upon supports approved by Landlord to distribute weight.
13. No Tenant shall purchase spring water, ice, towel, janitorial
maintenance or other like services from any company or persons not approved by
the Landlord.
14. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the Building or
its desirability as an office building and upon written notice from Landlord
any Tenant shall refrain from or discontinue such advertising.
15. The Landlord reserves the right to exclude from the Building between
the hours of 6 P.M. and 8 A.M. and at all hours on weekends and legal holidays
all persons who have not received clearance as a result of a written request
from Tenant or who do not present a pass to the Building signed by the
Landlord. The Landlord will furnish passes or at Landlord's option, clearances,
requests passes or clearances and shall be liable to the Landlord for all acts
of such persons. Landlord shall in no case be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person.
In case of an invasion, mob riot, public excitement or other circumstances
rendering such action advisable in Landlord's opinion, Landlord reserves the
right to prevent access to the Building during the continuance of the same by
closing the doors or otherwise, for the safety of the Tenants and the protection
of the Building and the property in the Building.
16. Any persons employed by any Tenant to do janitor work, shall, while in
the Building and outside of the Premises, be subject to and under the control
and direction of the superintendent of the Building (but not as an agent or
servant of said superintendent or of the Landlord), and Tenant shall be
responsible for all acts of such persons. No such person shall be allowed in
the Building after regular building hours.
17. All doors opening onto public corridors shall be kept closed, except
when in use for ingress and egress.
18. The requirements of Tenant will be attended to only upon application
to the Office of the Building.
19. Canvassing, soliciting and peddling in the building are prohibited and
each Tenant shall cooperate to prevent the same.
20. All office equipment of any electrical or mechanical nature shall be
placed by Tenant in the Premises in settings approved by Landlord to absorb or
prevent any vibration, noise or annoyance.
21. No air conditioning unit or other similar apparatus shall be installed
or used by any Tenant without the written consent of Landlord.
22. There shall not be used in any space, or in the public halls of the
Building, either by any Tenant or others, any hand trucks except those equipped
with rubber tires and rubber side guards.
23. Landlord shall have the right, exercisable without notice or without
liability to any Tenant, to change the name and address of the Building.
24. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without written consent of Landlord.
25. The scheduling of moves of Tenant's furniture and equipment into or
out of the Building is subject to the reasonable discretion of Landlord.
<PAGE> 18
[BUSINESS REAL ESTATE BROKERAGE CO. LOGO] EXHIBIT E
HAZARDOUS MATERIALS WARNING AND DISCLAIMER
(SALE AND/OR LEASE OF PROPERTY)
RE: PACIFIC RIDGE CORPORATE CENTRE, 1947 CAMINO VIDA ROBLE, CARLSBAD, CA
---------------------------------------------------------------------------
Various materials utilized in the construction of any improvements to the
Property may contain materials that have been or may in the future be
determined to be toxic, hazardous or undesirable and may need to be specially
treated, specially handled and/or removed from the Property. For example, some
electrical transformers and other electrical components can contain PCBs, and
asbestos has been used in a wide variety of building components such as
fire-proofing, air duct insulation, acoustical tiles, spray-on acoustical
materials, linoleum, floor tiles and plaster. Due to current or prior uses, the
Property or improvements may contain materials such as metals, minerals,
chemicals, hydrocarbons, biological or radioactive materials and other
substances which are considered, or in the future may be determined to be,
toxic wastes, hazardous materials or undesirable substances. Such substances
may be in above- and below-ground containers on the Property or may be present
on or in soils, water, building components or other portions of the Property in
areas that may or may not be accessible or noticeable.
Current and future federal, state and local laws and regulations may require
the clean-up of such toxic, hazardous or undesirable materials at the expense
of those persons who in the past, present or future have had any interest in
the Property including, but not limited to, current, past and future owners and
users of the Property. Owners and Buyers/Lessees are advised to consult with
independent legal counsel or experts of their choice to determine their
potential liability with respect to toxic, hazardous, or undesirable materials.
Owners and Buyers/Lessees should also consult with such legal counsel or
experts to determine what provisions regarding toxic, hazardous or undesirable
materials they may wish to include in purchase and sale agreements, leases,
options and other legal documentation related to transactions they contemplate
entering into with respect to the Property.
The real estate salespersons and brokers in this transaction have no expertise
with respect to toxic wastes, hazardous materials or undesirable substances.
Proper inspections of the Property by qualified experts are an absolute
necessity to determine whether or not there are any current or potential toxic
wastes, hazardous materials or undesirable substances in or on the Property.
The real estate salespersons and brokers in this transaction have not made, nor
will they make, any representations, either express or implied, regarding the
existence or nonexistence of toxic wastes, hazardous materials or undesirable
substances in or on the Property Problems involving toxic wastes hazardous
materials or undesirable substances can be extremely costly to correct. It is
the responsibility of the Owners and Buyers/Lessees to retain qualified experts
to deal with the detection and correction of such matters.
AMERICANS WITH DISABILITIES ACT DISCLOSURE
The United States Congress has enacted the Americans With Disabilities Act (the
"ADA"), a federal law codified at 42 USC Section 12101 et seq., which became
effective January 26, 1992. Owners and lessees are subject to this law which,
among other things, is intended to make business establishments equally
accessible to persons with a variety of disabilities. Under this law,
modifications to real property improvements may be required by owners and
lessees. Owners and lessees may delegate between themselves costs and
responsibilities for meeting the requirements of the law but the fact that
responsibilities have been allocated does not reduce or negate liability to an
individual with a disability who files and wins a lawsuit. Broker strongly
recommends that owners and lessees consult design professionals, architects or
attorneys to advise them with respect to the law's applicability and to
prepare, if necessary, any language in leases or other contracts. The
undersigned acknowledge that Broker is not qualified as an expert in this
matter.
OWNER BUYER/LESSEE:
Pacific Ridge Corporate Centre Acubid.com, Inc.
By: /s/ WILLIAM A. SHIRLEY By: /s/ NORMAN SCHURTZ
----------------------------- -----------------------------
Norman Schurtz CFO
Title: General Partner Title: CFO
------------------------- --------------------------
Date: 5/4/99 Date: 5/3/99
--------------------------- ---------------------------
<PAGE> 1
LEVEL(3) EXHIBIT 10.10
COMMUNICATIONS
TERMS AND CONDITIONS
FOR DELIVERY OF SERVICE
These Terms and Conditions for Delivery of Service (the "Terms and Conditions")
shall be applicable to Customer Orders executed by Customer for Services
delivered by Level 3 Communications, LLC ("Level 3"), and shall be incorporated
into each Customer Order. These Terms and Conditions are applicable to sales of
Services originating or terminating in the United States.
DEFINITIONS
CONFIDENTIAL INFORMATION: Licensed Software, and all source code, source
documentation, inventions, know-how, and ideas, updates and any documentation
and information related to the Licensed Software, and any non-public information
regarding the business of a party provided to either party by the other party
where such information is marked or otherwise communicated as being
"proprietary" or "confidential" or the like, or where such information is, by
its nature, confidential.
CUSTOMER: The person, firm or corporation so named on the Customer Order.
CUSTOMER ORDER: A request for Level 3 Service submitted by the Customer in the
format devised by Level 3 and accepted by Level 3.
FIRM ORDER COMMITMENT: A written communication from Level 3 to Customer within
which Level 3 commits to deliver some or all of the Services requested in a
Customer Order.
LICENSED SOFTWARE: Computer software, in object code format only, the use of
which is required for use of Service ordered by Customer hereunder.
PREMISES: The location(s) occupied by Customer or its end users specified in the
Customer Order to (or from) which Service will be delivered.
REVENUE COMMITMENT: A commitment which, if made by Customer in a Customer Order
or in any other form specified and accepted by Level 3, obligates Customer to
order and pay for a minimum volume of Services during an agreed term.
SERVICE: Any communications (or related) service offered by Level 3 pursuant to
a Customer Order.
SECTION 1. CUSTOMER ORDERS
1.1 SUBMISSION OF CUSTOMER ORDERS. Customer may submit to Level 3 Customer Order
forms requesting the provision of Service. Each Customer Order form shall be
submitted on a form designated by Level 3. Level 3 shall confirm the accuracy of
information on the Customer Order form and the availability of the Services
requested. Level 3's delivery of a Firm Order Commitment respecting such
Services shall constitute Level 3's acceptance of the Customer Order for such
Services. The Customer Order form and attachments shall set forth the Service,
the locations for delivery of same, the prices to be charged for same and any
applicable term and/or Revenue Commitment.
1.2 UNDERTAKING OF LEVEL 3. If Level 3 issues a Firm Order Commitment respecting
Services, Level 3 will furnish such Services in accordance with these Terms and
Conditions and any Customer Orders executed by Customer. All title to equipment
or materials used to deliver the Services (except as otherwise expressly agreed)
shall be and remain with Level 3.
SECTION 2. BILLING AND PAYMENT
2.1 PAYMENT AND RENDERING OF BILLS. Level 3 shall bill all charges incurred by
and credits due to Customer on a monthly basis (unless otherwise agreed in
writing by Level 3 and Customer). Level 3 shall bill in advance charges for all
Services to be provided during the ensuing month except for charges which are
dependent upon usage of Service (which charges shall be billed in arrears).
Adjustments for the quantities of Service established or discontinued in any
billing period will be prorated to the number of days based on a 30-day month.
Level 3 will, upon request and if available, furnish such detailed information
as may reasonably be required for verification of the bill.
2.2 PAYMENT OF BILLS. All bills are due upon receipt thereof by Customer, and
become past due thirty (30) days thereafter. The unpaid balance of any past due
bills shall bear interest at a rate of 1.5% per month (prorated on a daily
basis), or the highest rate allowed by law, whichever is less. Interest will be
applied for the number of days from the date the bill became past due to and
including the date that payment is received by Level 3.
2.3 TAXES AND FEES. Except for taxes based on Level 3's net income and except
with respect to ad valorem personal and real property taxes imposed on Level 3's
property, Customer shall be responsible for payment of all sales, use, gross
receipts, excise, access, bypass, franchise or other local, state and federal
taxes, fees, charges, or surcharges, however designated, imposed on or based
upon the provision, sale or use of the Services delivered by Level 3 (including,
but not limited to, taxes and fees lawfully assessed by nations outside of the
United States). Any taxes shall be separately stated on Customer's bill. Any
state or
Page 1 of 17
<PAGE> 2
local tax, fee, charge, or surcharge shall be payable only for Services that
are subject to such imposition.
2.4 REGULATORY AND LEGAL CHANGES. In the event of any change in applicable law
or regulation that materially increases the cost of delivery of Service, Level 3
and Customer shall negotiate regarding the rates charged to Customer to reflect
such increase in cost and, in the event that the parties are unable to reach
agreement respecting new rates within thirty (30) days after Level 3's delivery
of written notice requesting renegotiation, then (a) Level 3 may pass such
increased costs through to Customer, and (b) Customer may terminate the affected
Customer Order upon no less than sixty (60) days' prior written notice without
payment of any applicable termination charge.
2.5 DISPUTED BILLS. In the event that Customer disputes any portion of the
charges contained in a bill, Customer must pay the undisputed portion of the
invoice in full and submit a documented claim for the disputed amount. All
claims must be submitted to Level 3 within sixty (60) days of receipt of billing
for those Services. If Customer does not submit a claim within such period and
in the manner stated above, Customer waives all rights to dispute such charges.
2.6 CREDIT APPROVAL AND DEPOSITS. Customer shall provide Level 3 with credit
information as requested in advance of the commencement of delivery of Service
under any Customer Order. Delivery of Service is subject to credit approval.
Level 3 may require any Customer to make a deposit as a condition to Level 3's
acceptance of any Customer Order submitted by Customer, or as a condition to
Level 3's continuation of Service under any Customer Order (but only when
Customer's consumption of Service materially exceeds Customer's anticipated use
or when, in Level 3's reasonable discretion, such deposit is required in order
to secure Customer's continued payment obligation), which deposit shall be held
by Level 3 as security for payment of charges. A deposit may not exceed the
actual or estimated rates and charges for the Service for a two (2) month
period. At such time as the provision of Service to Customer is terminated, the
amount of the deposit will be credited to Customer's account and any credit
balance which may remain will be refunded.
2.7 FRAUDULENT USE OF SERVICES. Customer shall be solely responsible for all
charges incurred respecting the Services, even if such charges were incurred
through or as a result of fraudulent or unauthorized use of the Services, unless
Level 3 has actual knowledge of such fraudulent or unauthorized use and fails to
inform Customer thereof or otherwise limit or preclude such use. Nothing in this
Section 2.7, however, shall be construed to obligate Level 3 to detect or report
unauthorized or fraudulent use of Services.
SECTION 3. CANCELLATION OF CUSTOMER ORDERS
3.1 CANCELLATION OF CUSTOMER ORDER BY LEVEL 3.
A. For nonpayment: Level 3 may, upon fourteen (14) days' written notice,
discontinue Service without incurring any liability when there is an unpaid
balance for Service that is past due.
B. For any violation of law or of any of the provisions governing the furnishing
of Service: Any Customer Order shall be subject to cancellation, without notice,
for any violation of any law, rule, regulation or policy of any government
authority having jurisdiction over Service or by reason of any order or decision
of a court or other government authority having jurisdiction which prohibits
Level 3 from furnishing such Service.
C. For other causes: Any Customer Order shall be subject to cancellation, upon
fourteen (14) days' prior written notice, in the event of a breach of a Customer
Order, fraudulent use of the Service, or fraud or misrepresentation in any
submission of information required in a Customer Order or any other information
submitted to Level 3.
D. For any Customer filing of bankruptcy or reorganization or failing to
discharge an involuntary petition therefor within sixty (60) days after filing:
Level 3 may immediately discontinue or suspend delivery of Service without
incurring any liability.
E. For consumption of Services that materially exceeds Customer's credit limit:
Level 3 may, upon fourteen (14) days prior written notice and provided Customer
has not provided additional security for payment which is sufficient in Level
3's reasonable discretion, discontinue or suspend delivery of Service without
incurring any liability.
3.2 EFFECT OF CANCELLATION. Upon Level 3's discontinuance of Service to Customer
under any of the foregoing subparagraphs, Level 3 may, in addition to all other
remedies that may be available to Level 3 at law or in equity or under any other
provision of a Customer Order, assess and collect from Customer any termination
charge set forth herein (to the extent applicable).
3.3 RESUMPTION OF SERVICE. If Service has been discontinued by Level 3, and
Customer requests that Service be restored, Level 3 shall have the sole and
absolute discretion to restore such Service only after satisfaction of such
conditions as Level 3 determines to be required for its protection. Nonrecurring
charges apply to restoration of Service.
SECTION 4. DELIVERY OF SERVICES
4.1 LEVEL 3 ACCESS TO PREMISES. Customer shall allow Level 3 continuous and
reasonable access to the Premises to the extent reasonably determined by Level 3
to be appropriate to the installation, inspection and maintenance of equipment,
facilities and systems relating to the Service. Level 3 shall notify Customer
two (2) business days in advance of any regularly scheduled maintenance that
will require access to the Premises.
4.2 LEVEL 3 FACILITIES. Level 3 will use reasonable efforts to maintain the
facilities and equipment required to deliver Service. Customers shall not and
shall not permit others to rearrange, disconnect, remove, attempt to repair, or
otherwise tamper with any of the facilities or equipment installed by Level 3,
except upon the written consent of Level
Page 2 of 17
<PAGE> 3
3. Equipment provided or installed at the Premises by Level 3 for use in
connection with the Service shall not be used for any purpose other than that
for which Level 3 provided it. In the event that Customer or a third party
attempts to operate or maintain any Level 3-owned equipment without first
obtaining Level 3's written approval, in addition to any other remedies of Level
3 for a breach by Customer of Customer's obligations hereunder, Customer shall
pay Level 3 for any damage to Level 3-owned equipment caused thereby. Customer
shall be responsible for the payment of service charges in the event that
maintenance or inspection of the equipment is required as a result of Customer's
breach of this Section. Level 3 shall, in the event that such expenses are
incurred, deliver to Customer a written invoice therefor. In no event shall
Level 3 be liable to Customer or any other person for interruption of Service or
for any other loss, cost or damage caused or related to improper use or
maintenance of Level 3-owned equipment.
4.3 TITLE AND POWER. Title to all facilities (except as otherwise agreed),
including terminal equipment, shall remain with Level 3. The electric power
consumed by such equipment on the Premises shall be provided by and maintained
at the expense of Customer.
4.4 CUSTOMER-PROVIDED EQUIPMENT. Level 3 shall not be responsible for the
operation or maintenance of any Customer-provided communications equipment.
Level 3 may install certain Customer provided communications equipment upon
installation of Service; unless otherwise agreed by Level 3 in writing, Level 3
shall not thereafter be responsible for the operation or maintenance of such
equipment. Level 3 shall not be responsible for the transmission or reception of
signals by Customer-provided equipment or for the quality of, or defects in,
such transmission.
4.5 REMOVAL OF EQUIPMENT. Customer agrees to allow Level 3 to remove all Level
3-owned equipment from the Premises:
A. after termination, interruption or suspension of the Service in connection
with which the equipment was used; and
B. for repair, replacement or otherwise as Level 3 may determine is necessary or
desirable.
At the time of such removal, such equipment shall be in the same condition as
when delivered to Customer or installed in the Premises, normal wear and tear
only excepted. Customer shall reimburse Level 3 for the depreciated cost of any
equipment which is not in such condition.
4.6 SERVICE SUBJECT TO AVAILABILITY. The furnishing of Service under these Terms
and Conditions is subject to the availability on a continuing basis of all the
necessary facilities and is limited to the capacity of Level 3's facilities, as
well as facilities Level 3 may obtain from other carriers to furnish Service
from time to time as required at the sole discretion of Level 3. Nothing in
these Terms and Conditions shall be construed to obligate Customer to submit, or
Level 3 to accept, Customer Orders.
4.7 NO LIABILITY FOR FAILURE TO TRANSMIT MESSAGES. Level 3 does not undertake to
transmit messages, but offers the use of its Service when available, and, as
more fully set forth elsewhere in these Terms and Conditions and any applicable
Customer Orders, shall not be liable for errors in transmission or for failure
to establish connections.
4.8 SERVICE LEVEL AGREEMENTS. All warranties respecting the Service, and the
remedies applicable to a failure of Level 3 to meet such warranties, shall be
set forth in Service Level Agreements applicable to the particular Service,
which Service Level Agreements (when and if issued by Level 3) shall be deemed
attached hereto and by this reference incorporated herein.
SECTION 5. OBLIGATIONS AND LIABILITY LIMITATION
5.1 OBLIGATIONS OF THE CUSTOMER. Customer shall be responsible for:
A. The payment of all charges applicable to the Service (including charges
incurred as a result of fraud or unauthorized use of the Service).
B. Damage or loss of Level 3's facilities or equipment installed on the Premises
(unless caused by the negligence or willful misconduct of the employees or
agents of Level 3);
C. Providing the level of power, heating and air conditioning necessary to
maintain the proper environment on the Premises for the provision of Service;
D. Providing a safe place to work and complying with all laws and regulations
regarding the working conditions on the Premises;
E. Granting Level 3 or its employees access to the Premise for the purpose of
maintaining Level 3's facilities in accordance herewith;
F. Keeping Level 3's equipment and facilities located on Premises free and clear
of any liens or encumbrances.
5.2 LIABILITY. The liability of Level 3 for damages arising out of the
furnishing of Service, including but not limited to mistakes, omissions,
interruptions, delays, tortious conduct or errors, or other defects,
representations, use of Service or arising out of the failure to furnish
Service, whether caused by acts of commission or omission, shall be limited to
the extension of credit allowances due under any Service Level Agreement. The
extension of such credit allowances or refunds shall be the sole remedy of
Customer and the sole liability of Level 3. Neither party shall be liable for
any indirect, incidental, special, consequential, exemplary or punitive damages
(including but not limited to damages for lost profits or lost revenues),
whether or not caused by the acts or omissions or negligence of its employees or
agents, and regardless of whether such party has been informed of the
possibility or likelihood of such damages.
5.3 DISCLAIMER OF WARRANTIES. LEVEL 3 MAKES NO WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR
OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
USE, EXCEPT THOSE EXPRESSLY SET FORTH HEREIN OR IN ANY APPLICABLE SERVICE
Page 3 of 17
<PAGE> 4
LEVEL AGREEMENT.
SECTION 6. SOFTWARE TERMS
6.1 LICENSE. If and to the extent that Customer requires the use of Licensed
Software in order to use the Service supplied under any Customer Order, then
Customer shall have a nonexclusive, nontransferable license to use such Licensed
Software only and solely to the extent required to permit delivery of the
Service. Customer shall in no event be entitled to claim title to or any
ownership interest in any Licensed Software (or any derivations or improvements
thereto), and Customer shall execute any documentation reasonably required by
Level 3 to memorialize Level 3's existing and continued ownership of Licensed
Software.
6.2 RESTRICTIONS. Customer agrees that it shall not:
A. copy the Licensed Software except as allowed and permitted by the express
written consent of Level 3;
B. reverse engineer, decompile or disassemble the Licensed Software;
C. sell, lease, license or sublicense the Licensed Software; or
D. create, write or develop any derivative software or any other software
program based on the Licensed Software or any Confidential Information of Level
3.
SECTION 7. CONFIDENTIAL INFORMATION
7.1 DISCLOSURE AND USE. The Confidential Information disclosed by either party
constitutes the confidential and proprietary information of the disclosing party
and the receiving party shall retain same in strict confidence and not disclose
to any third party (except as authorized by these Terms and Conditions) without
the disclosing party's express written consent. Each party agrees to treat all
Confidential Information of the other in the same manner as it treats its own
proprietary information, but in no case will the degree of care be less than
reasonable care.
7.2 RESTRICTED USE. Each party agrees:
A. to use Confidential Information only for the purposes of performance of any
Customer Order or as otherwise expressly permitted by these Terms and
Conditions;
B. not to make copies of Confidential Information or any part thereof except for
purposes consistent with these Terms and Conditions; and
C. to reproduce and maintain on any copies of any Confidential Information such
proprietary legends or notices (whether of disclosing party or a third party) as
are contained in or on the original or as the disclosing party may otherwise
reasonably request.
7.3 EXCEPTIONS. Notwithstanding the foregoing, each party's confidentiality
obligations hereunder shall not apply to information which:
A. is already known to the receiving party;
B. becomes publicly available without fault of the receiving party;
C. is rightfully obtained by the receiving party from a third party without
restriction as to disclosure, or is approved for release by written
authorization of the disclosing party;
D. is developed independently by the receiving party without use of the
disclosing party's Confidential Information;
E. is required to be disclosed by law.
7.4 REMEDIES. Notwithstanding any other section of these Terms and Conditions,
the non-breaching party shall be entitled to seek equitable relief to protect
its interests, including but not limited to preliminary and permanent injunctive
relief. Nothing stated herein shall be construed to limit any other remedies
available to the parties.
7.5 SURVIVAL. The obligations of confidentiality and limitation of use shall
survive the termination of any applicable Customer Order.
SECTION 8. GENERAL TERMS
8.1 FORCE MAIEURE. Except with respect to payment obligations, neither party
shall be liable, nor shall any credit allowance or other remedy be extended, for
any failure of performance or equipment due to causes beyond such party's
reasonable control, including but not limited to: acts of God, fire, flood or
other catastrophes; any law, order, regulation, direction, action, or request of
any governmental entity or agency, or any civil or military authority; national
emergencies, insurrections, riots, wars; unavailability of rights-of-way or
materials; or strikes, lock-outs, work stoppages, or other labor difficulties.
8.2 ASSIGNMENT OR TRANSFER. Customer may not transfer or assign the use of
Service without the express prior written consent of Level 3, and then only when
such transfer or assignment can be accomplished without interruption of the use
or location of Service. These Terms and Conditions shall apply to all such
permitted transferees or assignees. Customer shall, unless otherwise expressly
agreed by Level 3 in writing, remain liable for the payment of all charges due
under each Customer Order.
8.3 NOTICES. Any notice Level 3 may give to Customer or Customer shall give to
Level 3 shall be deemed properly given when delivered, if delivered in person,
or when sent via facsimile, overnight courier, electronic mail or when deposited
with the U.S. Postal Service, (a) with respect to Customer, the address listed
on each Customer Order, or (b) with respect to Level 3, to: Contracts
Administration, Level 3 Communications, LLC, 1450 Infinite Drive, Louisville, CO
80027. Customer shall notify Level 3 of any changes to its addresses listed on
any Customer Order.
8.4 INDEMNIFICATION BY CUSTOMER. Customer shall indemnify, defend and hold Level
3 harmless from claims, loss, damage, expense (including attorney's fees and
court costs), or liability (including liability for patent infringement) arising
from (1) any claims made against Level 3 by any end user in connection with the
delivery or consumption of Service, (2) use of facilities furnished by Level 3
in a manner inconsistent with the terms hereof or in a manner that Level
Page 4 of 17
<PAGE> 5
3 did not contemplate and over which Level 3 exercises no control and (3) all
other claims, loss, damage, expense (including attorneys fees and court costs),
or liability arising out of any commission or omission by Customer in connection
with the Service.
8.5 INDEMNIFICATION BY LEVEL 3. Level 3 shall indemnify, defend and hold
Customer harmless from claims, loss, damage, expense (including attorney's fees
and court costs), or liability (including liability for patent infringement)
arising from all claims, loss, damage, expense (including attorneys fees and
court costs), or liability for property damage or personal injury to the extent
that such claims arise out of or are caused by Level 3's negligence or willful
misconduct.
8.6 APPLICATION OF TARIFFS. Level 3 may elect or be required by law to file with
the appropriate regulatory agency tariffs respecting the delivery of certain
Service. In the event and to the extent that such tariffs have been or are filed
respecting Service ordered by Customer, then (to the extent such provisions are
not inconsistent with the terms of a Customer Order) the terms set forth in the
applicable tariff shall govern Level 3's delivery of, and Customer's consumption
or use of, such Service.
8.7 CONTENTS OF COMMUNICATIONS. Level 3 shall have no liability or
responsibility for the content of any communications transmitted via the Service
by Customer or any other party, and Customer shall hold Level 3 harmless from
any and all claims (including claims by governmental entities seeking to impose
penal sanctions) related to such content.
8.8 ENTIRE UNDERSTANDING. These Terms and Conditions, including any Customer
Orders executed hereunder (and any tariff applicable to the delivery of
Service), constitutes the entire understanding of the parties related to the
subject matter hereof. These Terms and Conditions may be amended by Level 3 at
any time, and Customer agrees to be bound by the amended Terms and Conditions
from and after the effective date of such amendment. In the event of a conflict
between these Terms and Conditions and any Customer Order executed hereunder,
the Customer Order shall control. These Terms and Conditions shall be governed
and construed in accordance with the laws of the state of Colorado.
8.9 NO WAIVER. No failure by either party to enforce an rights hereunder shall
constitute a waiver of such right.
Page 5 of 17
<PAGE> 6
TERMS AND CONDITIONS
PRIVATE LINE SERVICE
The following Terms and Conditions shall be applicable to metropolitan (local),
city to city (within the United States) and international (from the United
States to another country) private line, non-switchable circuits (the "Private
Line Services") ordered by Customer under any Customer Order.
1. Any state or federal tariffs applicable to the Private Line Services to be
delivered under any Customer Order are incorporated into the terms thereof.
2. The nonrecurring charges and monthly recurring rates for the Private Line
Services provided by Level 3 to Customer shall be set forth in each Customer
Order.
3. Customer hereby agrees to pay for the Private Line Services for the period of
time specified in each Customer Order, which period shall commence with the
initiation of delivery of such Services. The rates and other charges set forth
in each Customer Order are established in reliance on the term commitment made
therein. In the event that Customer terminates Services ordered in any Customer
Order or in the event that the delivery of Services terminated due to a failure
of Customer to satisfy the requirements set forth herein or in the Terms and
Conditions prior to the end of the agreed term, Customer shall (unless Customer
has made a Revenue Commitment) pay a termination charge equal to the termination
or other charges paid or to be paid by Level 3 for services purchased from other
sources used to deliver the Private Line Services to Customer, plus the
percentage of the monthly recurring charges for the terminated Private Line
Services calculated as follows:
A. 100% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 1-12 of the agreed term; plus
B. 75% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 13-24 of the agreed term; plus
C. 50% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 25 through the end of the agreed term,
Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Private Line
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
6 of 17
<PAGE> 7
Standard Service Level Agreement (SLA)
Release 1
INTERNATIONAL/NATIONAL PRIVATE LINE
International/National Private Line service will be backed by a Standard Service
Level Agreement that has two components: a Service Delivery SLA and a Network
Performance SLA.
NOTE: The total number of credits per month for both Service Delivery and
Network Performance is limited to four days.
SERVICE DELIVERY SLA
<TABLE>
<CAPTION>
NATIONAL/INTERNATIONAL PL STANDARD SERVICE DELIVERY INTERVALS
- ------------------------- --------------------------------------------
GATEWAY CITIES ONLY NX64K,T1,EL* DS3 >DS3
NPLS IPL NPLS IPL NPLS IPL
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
ON-NET 15 15 30 30 ICB ICB
working working working working
days days days days
OFF-NET WITHIN SSA 20 20 45 60 ICB ICB
(either end) working working working working
days days days days
OUTSIDE SSA (BUT <50 30 60 ICB ICB ICB ICB
MILES (KM IN EUROPE)) working working
(either end) days days
</TABLE>
- - Single toll-free number to reach Level 3 Customer Service for all
customer issues, including technical, billing, and product inquiries.
- - Mean Time to Respond - Within 30 minutes
- - 2 hour calendar month Average Time To Repair (MTTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:
- - Any customer inquiry to the Level 3 Customer Service Center that results
in a Time to Respond of >30 minutes will result in a one day service
credit when the customer notifies Level 3 of the failure.
- - MTTR is calculated as a monthly average. All reported customer trouble
tickets will be totaled over the month, then the average time to close
each ticket will be calculated. If the MTTR is greater than 2 hours, the
customer will receive a one day service credit.
- - Credits will only be applied to events where the Customer reports a
failure to the Level 3 Customer Care organization. Customers must report
any Service Delivery failures within five business days of the event.
Page 7 of 17
<PAGE> 8
NETWORK PERFORMANCE SLA
- - 99.99 % Service Availability
- - Target Bit Error Rate(1)
End-to-end link (Level 3 on-net) > 5 x 10(-8) at T1 Rate (equivalent
rate for DSO 1 x 10(-6)
End-to-end link (Non-Level 3 access) > 1 x 10(-7) (Dependent on local
supplier)
- - Target Severely Errored Seconds(2)
End-to-end link (Level 3 fiber access) < 0.008%
End-to-end link (Non-Level 3 access) < 0.013% (Dependent on
local supplier)
- Availability refers to customer's access point to the Level 3
Backbone Network, including their Level 3 provided local access
circuit.
- Availability does not include regularly scheduled or emergency
maintenance events, or customer caused outages or disruptions.
- Customers may report service unavailability events of longer
than 15 consecutive minutes to Level 3 customer service within
48 hours of the event. If the event is confirmed by Level 3
customer service, the customer will receive a pro-rated service
credit that equals the time of the unavailability.
NOTES:
- - All measurements are based on monthly averages.
- - These guarantees only apply to the Level 3 Network (including the Local
Access to the customer). They do not apply to off-net city circuits
which do not transit the Level 3 Backbone Network (or the portion the
circuit which does not transit the Level 3 Backbone)
- - This SLA does not apply to periods of regularly scheduled or emergency
maintenance that Level 3 performs on its network or associated hardware
and software.
- - Credits will only be applied to events where the Customer reports a
network performance failure to the Level 3 Customer Care organization.
- - Customers must report any Network Performance failures (unavailability
or delay) within 48 hours (two business days) of the service affecting
event in order to receive a credit. Customers must report any Service
Delivery failures within five business days of the event.
- ----------
(1) Bit Error Rate figure excludes periods of more than 10 seconds
having error rates equal to, or worse than WV
(2) Severely Errored Seconds have bit error rates equal to, or worse
than I X1 0-3
Page 8 of 17
<PAGE> 9
TERMS AND CONDITIONS
TELEPHONY COLOCATION
The following Terms and Conditions shall be applicable to Customer's use of
space within Level 3 facilities used for the purpose of colocating
telecommunications equipment (the "Space") ordered by Customer under any
Customer Order.
1. Upon execution and performance of Customer's obligations under a Customer
Order for use of Space, Customer shall be granted the right to occupy the Space
identified therein. Customer may submit multiple Customer Orders requesting use
of different Space, each of which shall be governed by the terms hereof.
2. Customer shall be permitted to use the Space only for placement and
maintenance of communications equipment which shall be interconnected to the
network services offered by Level 3. Customer may use the Space to cross connect
to the facilities of other communications carriers if and only if Level 3 cannot
or will not provide such services to Customer on commercially reasonable terms.
The nonrecurring and monthly recurring charges for the Space and any Services
ordered by Customer shall be set forth in each Customer Order.
3. During the term for use of the Space set forth in each Customer Order,
Customer shall commit to use, order and pay for Level 3 network communications
services (not including monthly recurring fees charged for the use of the Space)
with monthly recurring charges of at least $4,000.00 for each cabinet ($2,000.00
for each half cabinet) of Space ordered by Customer. Customer shall achieve the
minimum service level no later than six (6) months after submission and
acceptance of each Customer Order. Level 3 may terminate use of the Space in the
event that Customer does not satisfy this minimum service commitment.
4. Level 3 shall perform such janitorial services, environmental systems
maintenance, power plant maintenance and other actions as are reasonably
required to maintain the facility in which the Space is located in good
condition which is suitable for the placement of communications equipment.
Customer shall maintain the Space in orderly and safe condition, and shall
return the Space to Level 3 at the conclusion of the term set forth in the
Customer Order in the same condition (reasonable wear and tear excepted) as when
such Space was delivered to Customer. EXCEPT AS EXPRESSLY STATED HEREIN OR IN
ANY CUSTOMER ORDER, THE SPACE SHALL BE DELIVERED AND ACCEPTED "AS IS" BY
CUSTOMER, AND NO REPRESENTATION HAS BEEN MADE BY LEVEL 3 AS TO THE FITNESS OF
THE SPACE FOR CUSTOMER'S INTENDED PURPOSE.
5. The term of use of the Space shall begin on the later to occur of the date
requested by Customer or the date that Level 3 completes the build-out of the
Space. Customer's use of the Space beyond the initial term shall be on a
month-to-month basis, unless Customer and Level 3 have agreed in writing to a
renewal of the right to use such Space.
6. Level 3 shall use reasonable efforts to complete the build-out and make the
Space available to Customer on or before the date requested by Customer. In the
event that Level 3 fails to complete the build-out within sixty (60) days of the
date requested by Customer, then Customer may terminate its rights to use such
Space and receive a refund of any fees paid for the use or build-out of such
Space.
7. Customer shall abide by any posted or otherwise communicated rules relating
to use of, access to, or security measures respecting the Space. In the event
that unauthorized parties gain access to the Space through access cards, keys or
other access devices provided to Customer, Customer shall be responsible for any
damages incurred as a result thereof. Customer shall be responsible for the cost
of replacing any security devices lost or stolen after delivery thereof to
Customer. In addition, Level 3 shall have the right to terminate Customer's use
of the Space in the event that: (a) Level 3's rights to use the facility within
which the Space is located terminates or expires for any reason; (b) Customer
has violated the terms hereof or any Customer Order submitted hereunder; (c)
Customer makes any material alterations to the Space without first obtaining the
written consent of Level 3; (d) Customer allows personnel or contractors to
enter the Space who have not been approved by Level 3 in advance; or (e)
Customer violates any posted or otherwise communicated rules relating to use of
or access to the Space. Level 3 shall use reasonable efforts to notify Customer
of any events that may result in termination of the use of the Space.
8. Customer shall pay all monthly recurring fees, cross-connect fees, power
charges and nonrecurring fees specified in each Customer Order for the agreed
term thereof. In the event that Customer terminates a Customer Order for Space
or in the event that the Customer Order is terminated due to a failure of
Customer to satisfy the requirements set forth herein or in the Customer Order
prior to the end of the agreed term, Customer shall pay a termination charge
equal to the costs incurred by Level 3 in returning the Space to a condition
suitable for use by other parties, plus the percentage of the monthly recurring
fees for the terminated Space calculated as follows:
A. 100% of the monthly recurring fees that would
Page 9 of 17
<PAGE> 10
have been charged for the Space for months 1-12 of the agreed term; plus
B. 75% of the monthly recurring fees that would have been charged for the Space
for months 13-24 of the agreed term; plus
C. 50% of the monthly recurring fees that would have been charged for the Space
for months 25 through the end of the agreed term.
9. Level 3 reserves the right to change the location or configuration of the
Space, provided, however, that Level 3 shall not arbitrarily or discriminatorily
require such changes. Level 3 and Customer shall work in good faith to minimize
any disruption in Customer's services that may be caused by such changes in
location or configuration of the Space.
10. Prior to occupancy and during the term of use of any Space, Customer shall
procure and maintain the following minimum insurance coverage: (a) Workers'
Compensation in compliance with all applicable statutes of appropriate
jurisdiction. Employer's Liability with limits of $500,000 each accident; (b)
Commercial General Liability with combined single limits of $1,000,000 each
occurrence; and (c) "All Risk" Property insurance covering all of Customer's
personal property located in the Space. Customer's Commercial General Liability
policy shall be endorsed to show Level 3 (and any underlying property owner, as
requested by Level 3) as an additional insured. All policies shall provide that
Customer's insurers waive all rights of subrogation against Level 3. Customer
shall furnish Level 3 with certificates of insurance demonstrating that Customer
has obtained the required insurance coverages prior to occupancy of the Space.
Such certificates shall contain a statement that the insurance coverage shall
not be materially changed or cancelled without at least thirty (30) days' prior
written notice to Level 3. Customer shall require any contractor entering the
Space on its behalf to procure and maintain the same types, amounts and coverage
extensions as required of Customer above.
11. The liability of Level 3 for damages arising out of the furnishing of Space,
including but not limited to mistakes, omissions, interruptions, delays,
tortious conduct or errors, or other defects arising out of the failure to
furnish Space, whether caused by acts of commission or omission, shall be
limited to a prorated refund of the charges paid by Customer for the use of the
Space hereunder. The extension of such refunds shall be the sole remedy of
Customer and the sole liability of Level 3.
Page 10 of 17
<PAGE> 11
of the date requested by Customer, then Customer may terminate its rights to use
such Space and receive a refund of any fees paid for the use or build-out of
such Space.
7. Customer shall abide by any posted or otherwise communicated rules relating
to use of, access to, or security measures respecting the Space. In the event
that unauthorized parties gain access to the Space through access cards, keys or
other access devices provided to Customer, Customer shall be responsible for any
damages incurred as a result thereof. Customer shall be responsible for the cost
of replacing any security devices lost or stolen after delivery thereof to
Customer. In addition, Level 3 shall have the right to terminate Customer's use
of the Space or the Services in the event that: (a) Level 3's rights to use the
facility within which the Space is located terminates or expires for any reason;
(b) Customer has violated the terms hereof or of any Customer Order submitted
hereunder; (c) Customer makes any material alterations to the Space without
first obtaining the written consent of Level 3; (d) Customer allows personnel or
contractors to enter the Space who have not been approved by Level 3 in advance;
or (e) Customer violates any posted or otherwise communicated rules relating to
use of or access to the Space. Level 3 shall use reasonable efforts to notify
Customer of any events that may result in termination of the use of the Space or
delivery of Services.
8. Level 3 reserves the right to change the location or configuration of the
Space, provided, however, that Level 3 shall not arbitrarily or discriminatorily
require such changes. Level 3 and Customer shall work in good faith to minimize
any disruption in Customer's services that may be caused by such changes in
location or configuration of the Space.
9. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.
10. Prior to occupancy and during the term of use of any Space, Customer shall
procure and maintain the following minimum insurance coverage: (a) Workers'
Compensation in compliance with all applicable statutes of appropriate
jurisdiction. Employer's Liability with limits of $500,000 each accident; (b)
Commercial General Liability with combined single limits of $1,000,000 each
occurrence; and (c) "All Risk" Property insurance covering all of Customer's
personal property located in the Space. Customer's Commercial General Liability
policy shall be endorsed to show Level 3 (and any underlying property owner, as
requested by Level 3) as an additional insured. All policies shall provide that
Customer's insurers waive all rights of subrogation against Level 3. Customer
shall furnish Level 3 with certificates of insurance demonstrating that Customer
has obtained the required insurance coverages prior to occupancy of the Space.
Such certificates shall contain a statement that the insurance coverage shall
not be materially changed or cancelled without at least thirty (30) days prior
written notice to Level 3. Customer shall require any contractor entering the
Space on its behalf to procure and maintain the same types, amounts and coverage
extensions as required of Customer above.
11. The liability of Level 3 for damages arising out of the furnishing of
Services or the Space, including but not limited to mistakes, omissions,
interruptions, delays, tortious conduct or errors, or other defects arising out
of the failure to furnish Services or Space, whether caused by acts of
commission or omission, shall be limited to a prorated refund of the charges
paid by Customer for the use of the Space hereunder. The extension of such
refunds shall be the sole remedy of Customer and the sole liability of Level 3.
Page 12 of 17
<PAGE> 12
TERMS AND CONDITIONS
INTERNET ACCESS - DEDICATED AND DIAL UP
The following Terms and Conditions shall be applicable to dedicated and dial-up
Internet Access Service (the "Internet Access Services") ordered by Customer
under any Customer Order.
1. Any state or federal tariffs applicable to the Internet Access Services to be
delivered under any Customer Order are incorporated into the terms thereof. The
Internet Access Services shall at all times be used in compliance with Level 3's
then-current Acceptable Use Policy and Privacy Policy, as amended by Level 3
from time to time and which are available through Level 3's web site.
2. The nonrecurring charges and monthly recurring rates for the Internet Access
Services provided by Level 3 to Customer shall be set forth in each Customer
Order.
3. Customer hereby agrees to pay for the Internet Access Services for the period
of time specified in each Customer Order, which period shall commence with the
initiation of delivery of such Internet Access Services. The rates and other
charges set forth in each Customer Order are established in reliance on the term
and/or volume commitment made therein. In the event that Customer terminates
Internet Access Services ordered in any Customer Order or in the event that the
delivery of Internet Access Services is terminated due to a failure of Customer
to satisfy the requirements set forth herein or in the Customer Order prior to
the end of the agreed term, Customer shall (unless Customer has made a Revenue
Commitment) pay a termination charge equal to the termination or other charges
paid or to be paid by Level 3 for services purchased from other sources used to
deliver the Internet Access Services to Customer, plus the percentage of the
monthly recurring charges for the terminated Internet Access Services calculated
as follows:
a. 100% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 1-12 of the agreed term; plus
b. 75% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 13-24 of the agreed term; plus
c. 50% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 25 through the end of the agreed term.
Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Internet Access
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
4. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.
5. This Section 5 shall apply only to Customers who order Dial-Up Internet
Access Services. The Dial-Up Internet Access Services shall be used only by an
officer, director, employee or agent ("Employee") of Customer. Customer shall
assure that each Employee accessing the Dial-Up Internet Access Service abides
by these Terms and Conditions. Prior to any Employee accessing Dial-Up Internet
Access Services, such Employee will be required to accurately complete an
on-line registration process. During this registration process, each Employee
will be required to identify himself/herself through some means satisfactory to
Level 3. Pursuant to the registration process, by clicking an "ACCEPT" icon,
each Employee will (i) agree to accurately complete the registration; (ii) agree
to abide by all of the provisions, terms, limitations, conditions and
restrictions of these Terms and Conditions; and (iii) agree to use the Dial-Up
Internet Access Services in accordance with any requirements set forth in the
online registration process and for the legitimate business purposes of Customer
only. Each Employee will also receive a password which such Employee will agree
to keep in strict confidence and which will be required whenever accessing the
Dial-Up Internet Access Services.
Page 13 of 17
<PAGE> 13
Standard Service Level Agreement (SLA)
Release 1
INTERNET DEDICATED ACCESS
Dedicated Internet Access service will be backed by a Standard Service Level
Agreement that has two components: a Service Delivery SLA and a Network
Performance SLA.
NOTE: The total number of credits per month for both Service Delivery and
Network Performance is limited to four days.
SERVICE DELIVERY SLA
- - 30 Calendar Day Installation Guarantee for Customers buying Dedicated
Internet Access in speeds from 64 Kbps - 1.544 Kbps within the Standard
Service Area.
- - 45 Calendar Day Installation Guarantee for Customers buying Dedicated
Internet Access in speeds from 3 Mbps - 45 Mbps within the Standard
Service Area.
- - Single toll-free number to reach Level 3 Customer Service for all
customer issues, including technical, billing, and product inquiries.
- - Time to Respond - Within 30 minutes
- - 2 hour calendar month Average Time To Repair (ATTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:
- - Any customer inquiry to the Level 3 Customer Service Center that results
in a Time to Respond of >30 minutes will result in a one day service
credit when the customer notifies Level 3 of the failure.
- - ATTR is calculated as a monthly average. All reported customer trouble
tickets will be totaled over the month, then the average time to close
each ticket will be calculated. If the ATTR is greater than 2 hours, the
customer will receive a one day service credit.
- - Credits will only be applied to events where the Customer reports a
failure to the Level 3 Customer Care organization. Customers must report
any Service Delivery failures within five business days of the event.
NETWORK PERFORMANCE SLA
- - SERVICE AVAILABILITY
- Availability refers to customer's access point to the Level 3
Internet network, including their Level 3 provided local access
circuit, and the customer's port.
- Unavailability Events are defined as any outage of the Level 3
provided local access circuit and the customer's port of longer
than 15 consecutive minutes.
- The Availability Guarantee does not extend to the performance of
Internet networks controlled
Page 14 of 17
<PAGE> 14
by other companies, or traffic exchange points (including NAPs
and MAEs) which are controlled by other companies.
- Availability does not include regularly scheduled or emergency
maintenance events, or customer caused outages or disruptions.
- Customers may report service unavailability events of longer
than 15 consecutive minutes to Level 3 customer service within
48 hours of the event. If the event is confirmed by Level 3
customer service, the customer will receive a pro-rated service
credit that equals the time of the unavailability.
- - 40 MS ONE-WAY DELAY GUARANTEE
- The Delay guarantee refers to the average delay parameters among
the Level 3 Gateway sites in the United States. It does not
extend to the customer's local access circuit, transit or
peering connections, or to circuits to the traffic exchange
points, including NAPs and MAEs.
- Delay is measured as the average delay, over a calendar month,
of traffic between all major Gateways on the Level 3 U.S.
Internet network.
- Level 3 will publicly report the Average Monthly Delay
measurement for the Level 3 U.S. Internet Network at the end of
every month.
- If the customer reports that Level 3 has failed to meet the
Delay guarantee, and this is confirmed by Level 3 customer
service, the customer will be issued one day service credit.
NOTES:
- - All measurements are based on monthly averages.
- - These guarantees only apply to the Level 3 Internet Network. They do not
apply to NAP or transit connections, or to any traffic once it leaves
the Level 3 network.
- - This SLA does not apply to periods of regularly scheduled or emergency
maintenance that Level 3 performs on its network or associated hardware
and software.
- - Credits will only be applied to events where the Customer reports a
network performance failure to the Level 3 Customer Care organization.
- - Customers must report any Network Performance failures (unavailability
or delay) within 48 hours (two business days) of the service affecting
event in order to receive a credit. Customers must report any Service
Delivery failures within five business days of the event.
Page 15 of 17
<PAGE> 15
TERMS AND CONDITIONS
MANAGED MODEM -- DEDICATED, QUICKSTART AND TRANSIT SERVICES
The following Terms and Conditions shall be applicable to services required to
allow access to "Dedicated Services," "Dedicated Service with QuickStart" and
"Transit Services" as offered by Level 3 (the 'Managed Modem Services") ordered
by Customer under any Customer Order.
1. Any state or federal tariffs applicable to the Managed Modem Services to be
delivered under any Customer Order are incorporated into the terms thereof. The
Managed Modem Services shall at all times be used in compliance with Level 3's
then-current Acceptable Use Policy and Privacy Policy, as amended by Level 3
from time to time and which are available through Level 3's web site.
2. In the event Customer orders "Dedicated Service," end user traffic will be
routed through and aggregated in Level 3's facility, sent to the Customer's
Premises via a dedicated circuit, and then routed to its final destination by
Customer. In the event that Customer orders "Transit Services," End User traffic
will be routed to Level 3's facility and then routed to its final destination by
Level 3 via the Internet. Dedicated Service with "QuickStart" will initially be
provisioned to the Customer in the same fashion as Transit Services, until such
time as Level 3 has provisioned the dedicated circuit to send end user traffic
from Level 3's facility to the Customer's Premises. QuickStart will then be
migrated to standard Dedicated Service. Customers ordering Dedicated Services
will be required to make a portion of the Premises available to Level 3 for the
placement of equipment necessary to provide such Dedicated Services. For
Dedicated Service, all Customer CPE as well as the private line necessary to
support this service will be ordered, installed and managed by Level 3. Any
telephone numbers assigned to Customer for the purpose of providing Managed
Modem Services hereunder shall be property of Customer; PROVIDED, however, that
Level 3 shall be obligated to release such numbers to Customer upon expiration
or termination hereof if and only if Customer is then in compliance with all of
the terms contained herein or in the Standard Terms and Conditions.
3. The nonrecurring charges and monthly recurring rates for the Managed Modem
Services provided by Level 3 to Customer shall be set forth in each Customer
Order. Level 3 will dedicate the specified number of ports to Customer in the
Level 3 facilities as identified in each Customer Order. Customer may be
responsible for additional monthly charges if Customer's use of the Managed
Modem Services requires and utilizes more ports than the number committed to and
ordered by Customer.
4. Customer hereby agrees to pay for the Services for the period of time
specified in each Customer Order, which period shall commence with the
initiation of delivery of such Managed Modem Services. The rates and other
charges set forth in each Customer Order are established in reliance on the term
commitment made therein. In the event that Customer terminates Managed Modem
Services ordered in any Customer Order or in the event that the delivery of
Managed Modem Services is terminated due to a failure of Customer to satisfy the
requirements set forth herein or in the Customer Order prior to the end of the
agreed term, Customer shall (unless Customer has made a Revenue Commitment) pay
a termination charge equal to the termination or other charges paid or to be
paid by Level 3 for services purchased from other sources used to deliver the
Managed Modem Services to Customer, plus the percentage of the monthly recurring
charges for the terminated Managed Modem Services calculated as follows:
a. 100% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 1-12 of the agreed term; plus
b. 75% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 13-24 of the agreed term; plus
c. 50% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 25 through the end of the agreed term.
Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Managed Modem
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
5. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.
Page 16 of 17
<PAGE> 16
LEVEL (3)
COMMUNICATIONS CUSTOMER ORDER FORM
<TABLE>
<S> <C> <C>
Section 1: Contracting Customer Information CON:__________ SON:__________
Customer: AcuBid.com DBA:
Address 1: 1947 Camino Vida Roble Address 2: Suite 102 Country: USA
City/Town: Carlsbad State/Prov: CA Postal/ZIP: 92008
Contact: Waddy Stephenson Title: MIS Telephone: 760-604-0023
Facsimile: Pager: e-mail: [email protected]
Section 2: Services Requested Quote ID:
Private Line Co-Location Services IP & Related Services
[ ] Point-to-Point Intercity [X] Web Co-Location Internet Access: [ ] Dedicated [ ] Dial-Up
Metropolitan: [ ] Access [ ] Point-to-Point [ ] Telephony Co-Location Managed Modem: [ ] Dedicated [ ] Transit
Dealer Circuit: [ ] Intercity [ ] Metropolitan Voice Services: [ ] Long Distance [ ] Local
[ ] Hubbed Service [ ] Cross-Connect [ ] VPN Services [ ] Other__________________
Section 3: Charges Related to Order
MRC: 1800 NRC: 0 Revenue [X] 1 yr [ ] 2 yr [ ] 3 yr
MRC Commitment: 0
Product: IP Colocation Other: Ramp Period: Zero Days [ ] 4 yr [ ] 5 yr [ ] Month-to-Month
By making a Revenue Commitment, Customer agrees that during the term specified
at left, Customer will order and pay for Services which, on a monthly basis
during the agreed term (after any applicable "Ramp Period" specified above),
have monthly recurring charges which are, in the aggregate, at least equal to
the Revenue Commitment. In the event that, during any month, Customer's invoice
for actual Services used is less than the Revenue Commitment, Customer shall
nevertheless be invoiced for, and shall be responsible to pay, an amount equal
to the Revenue Commitment.
Section 4: Order Type & Customer Service Date Request
[X] New [ ] Add [ ] Up/Downgrade [ ] Move End: [ ] [ ] Reenginer [ ] Voice Change [ ] pre-install cxl
[ ] Delete [ ] Record Request: 1 7 99
Day Month Year
Section 5: Billing Address & Details [X] Address Same as Contracting Customer Information, Above
Customer: AKA: County:
Address 1: Address 2: Country:
City/Town: State/Prov.: Postal/ZIP:
Contact: Title: Telephone:
Facsimile: Pager: e-mail:
Currency: Language: Split Bill %:
Section 6: Customer Site Details, Originating End [ ] Address Same as Contracting Customer Information, Above Site A
Bldg. Code: [ ] On-Net [ ] Off-Net [ ] With-in SSA [ ] Outside of SSA (additional charges may apply)
Customer: AKA: County: Time Zone:
Address 1: Floor: Room: Suite: Country:
City/Town: State/Prov.: Postal/ZIP:
Site Contact: Title: Telephone:
Facsimile: Pager: e-mail:
Tech Contact: Title: Telephone:
Facsimile: Pager: e-mail:
24 Hr. Fault: Telephone: e-mail:
Section 7: Customer Site Details or Gateway Details, Terminating End [ ] This is a Gateway-termination Site B
Bldg. Code: [X] On-Net [ ] Off-Net [X] With-in SSA [ ] Outside of SSA (additional charges may apply)
Customer: AcuBid.com AKA: County: San Diego Time Zone: PST
Address 1: 8929 Aero Drive Floor: First Room: Suite: Country: USA
City/Town: San Diego State/Prov.: CA Postal/ZIP: 92123
Site Contact: Tech on Duty Title: N/A Telephone: 619-292-2140
Facsimile: Pager: e-mail: [email protected]
Tech Contact: Tech on Duty Title: N/A Telephone: 619-292-2140
Facsimile: Pager: e-mail:
24 Hr. Fault: Tech on Duty Telephone: 877-4LLEVEL3 e-mail:
For additional sites see separate sheet(s) [X] No [ ] Yes If yes, the total number of sites: [ ]
Section 8: Sales Account Executive Information
Name I ID: Michael A. Lowry Telephone: 619-292-2114 e-mail: [email protected]
Section 9: Acceptance and Terms
This Customer Order is governed by Level 3 communications, LLC's Terms and Conditions for Delivery of Service (which are
available for Customer's review either upon request or on Level 3's web site), which are hereby incorporated into this
Customer Order. Neither party shall be liable for any indirect, incidental, special, consequential, exemplary or punitive
damages (including but not limited to damages for lost profits or lost revenues), whether or not caused by the acts or
omissions or negligence of its employees or agents and regardless of whether such party has been informed of the
possibility or likelihood of such damages.
/s/ LARRY SCHAFFER 5/25/99 Authorized Customer Name: Larry Schaffer
Title: CEO
Authorized Customer Signature Date
</TABLE>
<PAGE> 17
CUSTOMER ORDER FORM
[ILLEGIBLE]
<PAGE> 1
EXHIBIT 10.11
AcuBid.com, Inc.
1999 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
<PAGE> 2
AcuBid.com, Inc.
1998 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purposes .......................................................................................1
2. Definitions ....................................................................................1
3. Shares Available under the Plan ................................................................2
4. Automatic Grants of Nonqualified Options to Nonemployee
Directors ......................................................................................3
5. Adjustments ....................................................................................4
6. Fractional Shares ..............................................................................5
7. Administration of the Plan .....................................................................5
8. Amendments and Other Matters ...................................................................5
9. No Additional Rights ...........................................................................5
10. Securities Law Matters .........................................................................6
11. Change in Control ..............................................................................6
12. Termination of the Plan ........................................................................8
13. Effective Date .................................................................................8
14. Nontransferability .............................................................................8
</TABLE>
<PAGE> 3
AcuBid.com, Inc.
1998 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purposes. The purposes of this Plan are to encourage outside
Directors of AcuBid.com, Inc. (the "Corporation") to own
shares of the Corporation's stock and thereby to align their
interests more closely with the interests of the other
stockholders of the Corporation, to encourage the highest
level of Director performance by providing the Directors with
a direct interest in the Corporation's attainment of its
financial goals, and to provide financial incentives that will
help attract and retain the most qualified Directors.
2. Definitions. As used in this Plan:
"Board" means the Board of Directors of the Corporation.
"Change in Control" has the meaning set forth in Section 11.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Committee described in Section 7 of this
Plan.
"Common Shares" means (i) shares of the Common Stock, $.01 par
value, of the Corporation and (ii) any security into which
Common Shares may be converted by reason of any transaction or
event of the type referred to in Section 5 of this Plan.
"Date of Grant" means the date on which a grant of
Nonqualified Options shall become effective as provided in
Section 4(a).
"Director" means a member of the Board who is not an employee
of the Corporation. For purposes of this Plan, an employee is
an individual whose wages are subject to the withholding of
federal income tax under Section 3401 and 3402 of the Code. A
Director who becomes an employee (within the meaning of this
Section) shall not forfeit any Option Right granted hereunder
solely by reason of assuming employee status.
"Disability" means the inability to engage in any substantial
gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result
in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. A Director shall
not be considered to be subject to a Disability until he
furnishes a certification from a practicing physician in good
standing to the effect that such Director meets the criteria
described in this Section.
"Effective Date" has the meaning set forth in Section 13.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Market Value" as of a given date means (a) the closing sale
price of the Common Shares on the principal securities
exchange on which such Common Shares are then trading on such
date, or (b) if the Common Shares are not listed on a
securities exchange, the closing sale price of the Common
Shares as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on such date. If
there are no Common Share transactions on such date, the
Market Value per
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Common Share shall be determined as of the immediately
preceding date on which there were Common Share transactions.
"Nonqualified Option" means an option to purchase shares of
Common Stock that is not intended to qualify as an incentive
stock option under Section 422 of the Code.
"Optionee" means the Director so designated in an agreement
evidencing an outstanding Option Right, or the Successor of an
Optionee, as the context so requires.
"Option Price" means the purchase price payable upon the
exercise of an Option Right.
"Option Right" means the right to purchase Common Shares from
the Corporation upon the exercise of a Nonqualified Option
granted pursuant to this Plan. Option Rights shall be
evidenced by written agreements containing terms and
conditions not inconsistent with this Plan.
"Plan" means the AcuBid.com, Inc. 1998 Stock Option Plan for
NonEmployee Directors, as the same may be amended from time to
time.
"Rule 16b-3" means Rule 16b-3, as promulgated and amended from
time to time by the Securities and Exchange Commission under
the Exchange Act.
"Successor" of an Optionee means the legal representative of
the estate of a deceased Optionee or the person or persons who
shall acquire the right to exercise a Nonqualified Option by
bequest or inheritance or by reason of the death of the
Optionee.
"Termination of Service" means the time at which the Optionee
ceases to serve as a member of the Board for any reason, with
or without cause, which includes termination by resignation,
removal, death or retirement.
"Voting Stock" has the meaning set forth in Section 11(a).
3. Shares Available under the Plan. (a) Subject to Sections 3(b)
and 5 of this Plan, the number of Common Shares issued or
transferred, plus the number of Common Shares covered by
outstanding awards granted under this Plan, shall not in the
aggregate exceed 250,000 Common Shares, which may be Common
Shares of original issuance or Common Shares held in treasury
or a combination thereof.
(b) For the purposes of this Section 3, any Common Shares
subject to an Option Right that has been canceled or
terminated shall again be available for the grant of Option
Rights under this Plan.
4. Automatic Grants of Nonqualified Options to NonEmployee
Directors.
(a) The following Nonqualified Options shall be granted under
this Plan:
(i) As of the Effective Date, a Nonqualified Option to
purchase 3,000 Common Shares is granted to each person who on such date is an
incumbent Director, and a Nonqualified Option to purchase 3,000 Common Shares
shall be automatically granted to each such person on of each year thereafter
for so long as he continues to serve as a Director.
(ii) With respect to each person who first becomes a
Director of the Corporation after the Effective Date of this Plan, an option to
purchase 3,000 Common Shares shall be automatically granted as of the date such
person first becomes a Director, and a Nonqualified Option to purchase
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3,000 Common Shares shall be automatically granted to each such person on of
each year thereafter for so long as he or she continues to serve as a Director
and provided that he or she has served as a Director for at least six months
prior thereto.
(b) The Option Price per share of each Nonqualified Option
shall be the Market Value per Common Share as of the Date of Grant.
(c) (i) Subject to subsection (ii) of this Section 4(c) and
Section 11 of this Plan, each Nonqualified Options, until terminated as provided
in Section 4(d), shall become exercisable to the extent of 20% of the Common
Shares subject thereto on the Date of Grant and to the extent of an additional
20% of the Common Shares subject thereto after each of the first four
anniversaries of such date, for so long as the Optionee continues to serve as a
member of the Board. To the extent exercisable, each Nonqualified Option shall
be exercisable in whole or in part from time to time.
(ii) If an Optionee ceases to be a Director by reason of
death or Disability, all Nonqualified Options held by such Optionee that would
have otherwise become exercisable had such Director continuously served as a
Director through the date of the Corporation's annual meeting of stockholders
immediately following such death or Disability shall, notwithstanding subsection
(i) of this Section 4(c), become immediately exercisable in full.
(d) Each Nonqualified Option shall terminate on the earliest
of the following dates:
(i) Three (3) months following the effective date of the
Optionee's Termination of Service, if such Termination of Service results other
than from Optionee's death or Disability;
(ii) One (1) year following the effective date of the
Optionee's Termination of Service, if such Termination of Service results from
Optionee's death or Disability; or
(iii) Ten (10) years from the Date of Grant.
(e) The Option Price shall be payable (i) in cash or by check
acceptable to the Corporation, (ii) by transfer to the Corporation of Common
Shares which have been owned by the Optionee for more than six months prior to
the date of exercise and which have a Market Value on the date of exercise equal
to the Option Price, or (iii) by a combination of such methods of payment. The
requirement of payment in cash shall be deemed satisfied if the Optionee shall
have made arrangements satisfactory to the Corporation with a broker who is a
member of the National Association of Securities Dealers, Inc. to sell on the
exercise date a sufficient number of the shares being purchased so that the net
proceeds of the sale transaction will at least equal the option exercise price
and pursuant to which the broker undertakes to deliver the full option exercise
price to the Corporation not later than the date on which the sale transaction
will settle in the ordinary course of business.
(f) Nonqualified Options granted pursuant to this Section 4
shall be options that are not intended to qualify under any particular provision
of the Code.
(g) If and to the extent otherwise advisable herein or under
the applicable option agreement, upon and after the death of an Optionee, such
Optionee's Nonqualified Options, to the extent exercisable after death may be
exercised by the Successors of the Optionee. A Nonqualified Option may be
exercised, and payment in full of the aggregate Option Price made, by the
Successors of an Optionee only by written notice (in the form prescribed by the
Committee) to the Corporation specifying the number of Common Shares to be
purchased. Such notice shall state that the aggregate Option Price will be paid
in full, or that the Nonqualified Option will be exercised as otherwise provided
hereunder, in the discretion of the Corporation or the Committee, if and as
applicable.
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5. Adjustments. The Committee shall make or provide for such
adjustments in the number of Common Shares covered by awards made hereunder, the
Option Prices per Common Share applicable to any such awards, and the kind of
shares (including shares of another issuer) covered thereby, as the Committee
shall in good faith determine to be equitably required in order to prevent
dilution or expansion of the rights of Optionee that otherwise would result from
(a) any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Corporation, or (b) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of warrants or
other rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. The Committee shall also make
or provide for such adjustments in the maximum number of Common Shares specified
in Section 3(a) of this Plan as the Committee may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section 5.
6. Fractional Shares. The Corporation shall not be required to
issue any fractional Common Shares pursuant to this Plan. Whenever under the
terms of this Plan a fractional Common Share would otherwise be required to be
issued, an amount in lieu thereof shall be paid in cash based upon the Market
Value of such fractional Common Share.
7. Administration of the Plan. This Plan shall be administered by
a committee of the Board, which shall be composed of not less than two members
of the Board ("Committee"). Notwithstanding the foregoing, grants of Option
Rights under this Plan shall be automatic as described in Section 4, and the
Committee shall have no authority, discretion or power to determine the terms of
the Option Rights to be granted pursuant to this Plan, the number of Common
Shares to be issued thereunder or the time at which such Option Rights are to be
granted, or establish the duration and nature of Option Rights, except in the
sense of administering the Plan subject to the provisions of this Plan.
8. Amendments and other Matters.
(a) This Plan may be terminated, and from time to time amended,
by the Board; provided, however, that except as expressly authorized by this
Plan, no such amendment shall (i) increase the number of Common Shares specified
in Section 3(a) hereof, materially modify the requirements as to eligibility for
participation in this Plan, or otherwise cause this Plan or any grant, award or
election made pursuant to this Plan to cease to satisfy any applicable condition
of Rule 16b-3, without further approval of the stockholders of the Corporation,
or (ii) cause any Optionee to fail to qualify as a "disinterested person" within
the meaning of Rule 16b-3; provided, further, that Plan provisions relating to
the amount and price of securities to be awarded and the timing of awards under
the Plan shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employees Retirement Income Security Act,
as amended, or the rules promulgated thereunder. No amendment or termination of
this Plan shall adversely affect any outstanding award theretofore granted under
the Plan without the consent of the Director holding such award.
(b) Any grant, award or election that may be made pursuant to an
amendment to this Plan shall be null and void if it is subsequently determined
that (i) stockholder approval of such amendment was required in order for this
Plan to continue to satisfy the applicable conditions of Rule 16b-3, or (ii)
such grant, award, election or amendment disqualified any optionee as a
"disinterested person" within the meaning of Rule 16b-3.
9. No Additional Rights. Nothing contained in this Plan or in any
award granted under this Plan shall interfere with or limit in any way the right
of the stockholders of the Corporation to remove any Director from the Board
pursuant to state law or the Bylaws or Articles of Incorporation of the
Corporation, nor confer upon any Director any right to continue in the service
of the Corporation.
10. Securities Law Matters.
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(a) The Corporation may require any Optionee, as a condition of
receiving Option Rights, to give written assurances in substance and form
satisfactory to the Corporation and its counsel to the effect that such person
is acquiring the Common Shares subject to the Option Rights for his own account
for investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Corporation deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) Each award of Option Rights shall be subject to the
requirement that, if at any time counsel to the Corporation shall determine that
the listing, registration or qualification of the Common Shares subject to such
Option Rights upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental or regulatory body, is necessary as
a condition of, or in connection with, the issuance of shares thereunder, such
award of Option Rights may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to such counsel. Nothing
herein shall be deemed to require the Corporation to apply for or to obtain such
listing, registration or qualification.
(c) To the extent necessary for an Option Right, its exercise or
the sale of Common Shares acquired thereunder to be exempt from Section 16(b) of
the Exchange Act, such Option Right shall be held six months from the Date of
Grant, or at least six months shall elapse from the Date of Grant to the date of
disposition of the Common Shares acquired upon exercise of such Option Right.
11. Change in Control. Upon a Change in Control (as hereinafter
defined), all Nonqualified Options held by an Optionee that would become
exercisable with respect to such Optionee's service as a Director through the
date of the Corporation's annual meeting of stockholders immediately following
such Change in Control shall, notwithstanding Section 4(c) of this Plan, become
immediately exercisable in full, If any event or series of events constituting a
Change in Control shall be abandoned, the effect thereof shall be null and of no
further force and effect and the provisions of section 4(c) shall be reinstated
but without prejudice to any exercise of any Option Right that may have occurred
prior to such nullification. For purposes of this Plan, "Change in Control"
means the occurrence of any of the following events:
(a) The execution by the Corporation of an agreement for the
merger, consolidation or reorganization into or with another corporation or
other legal person; provided, however, that no such merger, consolidation or
reorganization shall constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Corporation ("Voting Stock") immediately prior to such transaction;
(b) The execution by the Corporation of an agreement for the sale
or other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such sale or other
transfer shall constitute a Change in Control if as a result of such sale or
transfer not less than a majority of the combined voting power of the then
outstanding securities of such corporation or person immediately after such sale
or transfer is held in the aggregate by the holders of Voting Stock of the
Corporation immediately prior to such sale or transfer.
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to the
Exchange Act disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) (other than any person (or any
of their affiliates) that owns beneficially or of record more than ten percent
of the Common Shares on the Effective Date) has or intends to become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the
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Exchange Act) of securities representing a majority or more of the combined
voting power of the then-outstanding Voting Stock, including, without
limitation, pursuant to a tender offer or exchange offer;
(d) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors of the
Corporation cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this subsection (d) each director who is
first elected, or first nominated for election by the Corporation's
stockholders, by a vote of at least two-thirds of the directors of the
Corporation (or a committee thereof) then still in office who were directors of
the Corporation at the beginning of any such period shall be deemed to have been
a director of the Corporation at the beginning of such period; or
(e) except pursuant to a transaction described in the proviso to
subsection (a) of this Section 11, the Corporation adopts a plan for the
liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, to the extent necessary for an
Option Right, its exercise or the sale of Common Shares acquired thereunder to
be exempt from Section 16(b) of the Exchange Act (i) except in the case of death
or Disability, an Optionee shall not be entitled to exercise any Option Rights
granted within six months prior to the occurrence of a Change in Control until
the expiration of the six-month period following the Date of Grant of such
Option Rights, or (ii) at least six months shall elapse from the Date of Grant
of such Option Rights to the date of disposition of the Common Shares acquired
upon exercise of such Option Rights.
12. Termination of the Plan. No further awards shall be granted
under this Plan after the passage of ten years from the date on which this Plan
is first approved by the stockholders of the Corporation.
13. Effective Date. The effective date of this Plan (the
"Effective Date") shall be January 1, 1998, provided, however, that this Plan
and each award granted hereunder shall be void and of no force or effect until
and unless this Plan shall have been approved by a vote of the holders of the
majority of the Corporation present, or represented, and entitled to vote at a
meeting duly held in accordance with Delaware law.
14. Nontransferability. Each Option granted under this Plan shall
by its terms be nontransferable by the Optionee except by will or the laws of
decent and distribution of the state wherein the Optionee is domiciled at the
time of his death; provided, however, that the committee may (but need not)
permit other transfers, to the extent consistent with Rule 16b-3, where the
Committee concludes that such transferability does not result in accelerated
taxation and is otherwise appropriate and desirable.
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AcuBid.com, Inc.
1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
NONQUALIFIED STOCK OPTION AGREEMENT
WHEREAS, __________________ (the "Optionee") is a Director (as
defined in the AcuBid.com, Inc. 1999 Stock Option Plan for Non-Employee
Directors (the "Plan")) of AcuBid.com, Inc., a Delaware corporation (the
"Corporation"); and
WHEREAS, the execution of an Agreement in the form hereof has
been duly authorized by a resolution of the Board of Directors of the
Corporation duly adopted on ____________, 1999.
NOW, THEREFORE, the Corporation hereby grants to the Optionee
a nonqualified option pursuant to the Plan to purchase _____ shares of the
Corporation's Common Stock, $0.01 par value per share ("Common Stock"), at the
price of $______ per share and agrees to cause certificates for any shares
purchased hereunder to be delivered to the Optionee upon payment of the purchase
price in full, all subject, however, to the terms and conditions hereinafter set
forth. Unless otherwise defined, capitalized terms used herein shall have the
meanings set forth in the Plan.
1 . This option (until terminated as hereafter provided) shall become
exercisable to the extent of 20% of the shares of Common Stock specified above
on __________ [insert date of grant/effective date of Plan] and to the extent of
an additional 20% of the shares specified above after each of the first four
anniversaries of such date, for so long as the Optionee continues to serve as a
member of the Board of Directors. To the extent exercisable, the option shall be
exercisable in whole or in part from time to time.
Notwithstanding the first sentence of this paragraph 1, if the
Optionee ceases to be a Director by reason of death or Disability (as defined in
Section 5 hereof), the option granted hereby shall become immediately
exercisable to the extent such option would have otherwise become exercisable
had the Optionee continuously served as a Director through the date of the
Corporation's annual meeting of stockholders immediately following such death or
Disability.
Upon a Change in Control (as hereinafter defined), the option
granted hereby shall, notwithstanding the first sentence of this paragraph 1,
become immediately exercisable to the extent the option would have become
exercisable with respect to the Optionee's service as a Director through the
date of the Corporation's annual meeting of stockholders immediately following
such Change in Control. If any event or series of events constituting a Change
in Control shall be abandoned, the effect thereof shall be null and of no
further force and effect and the provisions of the first sentence of this
paragraph 1 shall be reinstated but without prejudice to any exercise of this
option that may have occurred prior to such nullification. For purposes of this
Agreement, "Change in Control" means the occurrence of any of the following
events:
(a) The execution by the Corporation of an agreement of the
merger, consolidation or reorganization into or with another corporation or
other legal person; provided, however, that no such merger, consolidation or
reorganization will constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the combined
voting power of the then-outstanding securities of such Corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Corporation ("Voting Stock") immediately prior to such transaction;
(b) The execution by the Corporation of an agreement for the
sale or other transfer of all
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<PAGE> 10
or substantially all of its assets to another corporation or other legal person;
provided, however, that no such merger, consolidation or reorganization will
constitute a Change in Control if as a result of such sale or transfer not less
than a majority of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such sale or transfer is held in
the aggregate by the holders of Voting Stock of the Corporation immediately
prior to such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing
that any person (as the term "person" is used Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) (other than any person (or any of their
affiliates) that owns beneficially or of record more than ten percent of the
Common Stock on __________ [insert effective date of plan] has or intends to
become the beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing a majority or more of the combined voting power
of the then outstanding Voting Stock, including, without limitation, pursuant to
a tender offer or exchange offer;
(d) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors of
the Corporation cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this subsection (d) each director who is
first elected, or first nominated for election by the Corporation's
stockholders, by a vote of at least two-thirds of the directors of the
Corporation (or a committee thereof) then still in office who were directors of
the Corporation at the beginning of any such period will be deemed to have been
a director of the Corporation at the beginning of such period; or
(e) except pursuant to a transaction described in the proviso
to clause (a) of this paragraph 1, the Corporation adopts a plan for the
liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, to the extent necessary for the
grant of this option, its exercise or the sale of the Common Stock acquired
hereunder to be exempt from Section 16(b) of the Exchange Act, (i) except in the
case of death or Disability, the Optionee shall not be entitled to exercise the
option granted hereby if granted within six months prior to the occurrence of a
Change in Control until the expiration of the six-month period following the
Date of Grant of this option, or (ii) at least six months shall elapse from the
Date of Grant of this Option to the date of disposition of the shares of Common
Stock acquired upon exercise of this option.
2. The option price shall be payable (a) in cash or by check acceptable
to the Corporation, (b) by transfer to the Corporation of shares of Common Stock
which have been owned by the Optionee for more than six months prior to the date
of exercise and which have a fair market value on the date of exercise equal to
the option price, or (c) by a combination of such methods of payment. The
requirement of payment in cash shall be deemed satisfied if the Optionee shall
have made arrangements satisfactory to the Corporation with a broker who is a
member of the National Association of Securities Dealers, Inc. to sell on the
exercise date a sufficient number of the shares being purchased so that the net
proceeds of the sale transaction will at least equal the option exercise price
and pursuant to which the broker undertakes to deliver the full option exercise
price to the Corporation not later than the date on which the sale transaction
will settle in the ordinary course of business.
3. This Option shall terminate on the earliest of the following dates:
(a) Three months following the effective date of the
Optionee's Termination of Service (as defined in Section 5 hereof), if such
Termination of Service results other than from Optionee's death or Disability;
(b) One year following the effective date of the Optionee's
Termination of Service, if
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<PAGE> 11
such Termination of Service results from Optionee's death or Disability; and
(c) Ten years from the date of this Agreement.
4. This Agreement shall be subject to all of the terms and conditions
of the Plan, which is incorporated herein by reference.
5. As used in this Agreement:
"Director" means a member of the Board of Directors of the Corporation
who is not an employee of the Corporation. For purposes of this Agreement, an
employee is an individual whose wages are subject to the withholding of federal
income tax under Sections 3401 and 3402 of the Internal Revenue Code of 1986, as
amended from time to time. A Director who becomes an employee (within the
meaning of this Section) shall not forfeit the option granted by this Agreement
solely by reason of assuming employee status.
"Disability" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. A Director shall not
be considered to be subject to a Disability until he furnishes a certification
from a practicing physician in good standing to the effect that such Director
meets the criteria described in this definition.
/////
/////
/////
////
"Termination of Service" means the time at which the Optionee ceases to
serve as a member of the Board of Directors of the Corporation for any reason,
with or without cause, which includes termination by resignation, removal, death
or retirement.
EXECUTED at ______________, California, as of ___________, 1999.
AcuBid.com, Inc.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ACCEPTED AND AGREED
By:
-----------------------------
Name:
-----------------------------
Optionee
Page 3 of 3
<PAGE> 1
EXHIBIT 10.12
AcuBid.com, Inc.
1999 INCENTIVE EQUITY PLAN
Page 1 of 11
<PAGE> 2
ACUBID.COM, INC.
INCENTIVE EQUITY PLAN
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purpose .................................................................................................1
2. Definitions .............................................................................................1
3. Shares and Performance Units Available under the Plan ...................................................3
4. Option Rights ...........................................................................................4
5. Appreciation Rights .....................................................................................6
6. Restricted Shares .......................................................................................8
7. Deferred Shares .........................................................................................9
8. Performance Shares and Performance Units ................................................................9
9. Transferability ........................................................................................10
10. Adjustments ............................................................................................10
11. Fractional Shares ..................................................................................... 11
12. Withholding Taxes ......................................................................................11
13. Certain Terminations of Employment or Consulting
Services, Hardship and Approved Leaves of Absence ......................................................12
14. Administration of the Plan .............................................................................12
2. Amendments and Other Matters ...........................................................................12
3. Termination of the Plan ................................................................................13
4. Effective Date..........................................................................................13
5. Nontransferability .....................................................................................13
</TABLE>
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<PAGE> 3
ACUBID.COM, INC.
INCENTIVE EQUITY PLAN
1. Purpose. The purpose this Plan is to attract and retain officers and
other key employees of and consultants to AcuBid.com, Inc. (the "Corporation")
and its Subsidiaries and to provide such persons with incentives and rewards for
superior performance.
2. Definitions. As used in this Plan,
"APPRECIATION RIGHT" means a right granted Pursuant to Section 5 of this
Plan, including a Freestanding Appreciation Right and a Tandem Appreciation
Right.
"BASE PRICE" means the price to be used as the basis for determining the
Spread upon the exercise of a Free-standing Appreciation Right.
"BOARD" means the Board of Directors of the Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMITTEE" means the committee described in Section 14(a) of this Plan.
"COMMON SHARES" means (i) shares of the Common Stock, no par value, of
the Corporation and (ii) any security into which Common Shares may be converted
by reason of any transaction or event of the type referred to in Section 10 of
this Plan.
"DATE OF GRANT" means the date specified by the Committee on which a
grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares shall become
effective, which shall not be earlier than the date on which the Committee takes
action with respect thereto.
"DEFERRAL PERIOD" means the period of time during which Deferred Shares
are subject to deferral limitations under Section 7 of this Plan.
"DEFERRED SHARES" means an award pursuant to Section 7 of this Plan of
the right to receive Common Shares at the end of a specified Deferral Period.
"EFFECTIVE DATE" shall have the meaning set forth in Section 17.
"FREE-STANDING APPRECIATION RIGHT" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right or similar right.
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<PAGE> 4
"INCENTIVE STOCK OPTION" means an Option Right that is intended to
qualify as an "incentive stock option" under Section 422 of the Code or any
successor provision thereto. "Management Objectives" means the achievement of
performance objectives established pursuant to this Plan, which may be described
in terms of Corporation-wide objectives or objectives that are related to the
performance of the individual Participant, or the Subsidiary, division,
department or function within the corporation or Subsidiary in which the
Participant is employed or with respect to which the Participant provides
consulting services. The Committee may adjust Management Objectives and the
related minimum acceptable level of achievement if, in the sole judgment of the
Committee, events or transactions have occurred after the Date of Grant that are
unrelated to the performance of the Participant and result in distortion of the
Management Objectives or the related minimum acceptable level of achievement.
"MARKET VALUE PER SHARE" means the fair market value of the Common
Shares as determined by the Committee from time to time.
"NONQUALIFIED OPTION" means an Option Right that is not intended to
qualify as an Incentive Stock Option.
"OPTIONEE" means the person so designated in an agreement evidencing an
outstanding Option Right or the Successor of an Optionee, as the context so
requires.
"OPTION PRICE" means the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option or an Incentive Stock
Option granted pursuant to Section 4 of this Plan.
"PARTICIPANT" means a person who is selected by the Committee to receive
benefits under this Plan and (i) is at that time an officer, including without
limitation an officer who may also be a member of the Board, or other key
employee of or a consultant to the Corporation or any Subsidiary or (ii) has
agreed to commence serving in any such capacity, or the Successor of a
Participant, as the context requires.
"PERFORMANCE PERIOD" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating thereto are to be achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"RELOAD OPTION RIGHTS" means additional Option Rights automatically
granted to an Optionee upon the exercise of Option Rights pursuant to Section
4(f) of this Plan.
"RESTRICTED SHARES" means Common Shares granted or sold pursuant to
Section 6 of this Plan as to which neither the substantial risk of forfeiture
nor the restrictions on transfer referred to in Section 6 hereof has expired.
"RULE 16b-3" means Rule 16b-3, as promulgated and amended from time to
time by the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended, or any successor rule to the same effect.
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<PAGE> 5
"SPREAD" means, in the case of a Free-standing Appreciation Right, the
amount by which the Market Value per Share on the date when the Appreciation
Right is exercised exceeds the Base Price specified therein or, in the case of a
Tandem Appreciation Right, the amount by which the Market Value per Share on the
date when the Appreciation Right is exercised exceeds the Option Price specified
in the related Option Right.
"SUBSIDIARY" means any corporation in which the Corporation owns or
controls directly or indirectly more than 50 percent of the total combined
voting power represented by all classes of stock issued by such corporation at
the time of the grant.
"SUCCESSOR" of a Participant means the legal representative of the
estate of a deceased Participant or the person or persons who shall acquire the
right to exercise an award hereunder by bequest or inheritance or by reason of
death of the Participant.
"TANDEM APPRECIATION RIGHT" means an Appreciation Right granted pursuant
to Section 5 of this Plan that is granted in tandem with an Option Right or any
similar right granted under any other plan of the Corporation.
3. Shares and Performance Units Available under the Plan. (a) Subject to
adjustment as provided in Section 10 of this Plan, the number of Common Shares
issued or transferred, plus the number of Common Shares covered by outstanding
awards granted under this Plan, shall not in the aggregate exceed 1,250,000
Shares, which may be Common Shares of original issuance or Common Shares held in
treasury or a combination thereof. For the purposes of this Section 3(a):
(i) Upon payment in cash of the benefit provided by any award
granted under this Plan, any Common Shares that were covered by
that award shall again be available for issuance or transfer
hereunder.
(ii) Common Shares covered by any award granted under this Plan shall
be deemed to have been issued or transferred, and shall cease to
be available for future issuance or transfer in respect of any
other award granted hereunder, at the earlier of the time when
they are actually issued or transferred or the time when
dividends or dividend equivalents are paid thereon; provided,
however, that Restricted Shares shall be deemed to have been
issued or transferred at the earlier of the time when they cease
to be subject to a substantial risk of forfeiture or the time
when dividends are paid thereon.
(b) The number of Performance Units that may be granted under this Plan
shall not in the aggregate exceed 100,000. Performance Units that are granted
under this Plan, but are paid in Common Shares or are not earned by the
Participant at the end of the Performance Period, shall be available for future
grants of Performance Units hereunder.
4. Option Rights. The Committee may from time to time authorize grants
to Participants of options to purchase Common Shares upon such terms and
conditions as the Committee may determine in accordance with the following
provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains; provided, however, that no participant shall be granted
Option Rights for more than 100,000 Common Shares in any one fiscal year of the
Corporation, subject to adjustment as provided in Section 10 of this Plan.
(b) Each grant shall specify an Option Price per Common Share,
which may be less than, equal to or greater than the Market Value per Share on
the Date of Grant; provided, however, (i) the Option Price shall equal at least
85% of the Market Value per Share on the Date of Grant, or (ii) the
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<PAGE> 6
Option Price with respect to each Incentive Stock Option shall not be less than
100% (or 110%, in the case of an individual described in Section 422(b)(6) of
the Code (relating to certain 10% owners)) of the Market Value per Share on the
Date of Grant.
(c) Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalents acceptable to the Committee, (ii) subject to Section
4(d), nonforfeitable, unrestricted Common Shares, which are already owned by the
Optionee and have a value at the time of exercise that is equal to the Option
Price, (iii) any other legal consideration that the Committee may deem
appropriate, including without limitation any form of consideration authorized
under Section 4(d) below, on such basis as the Committee may determine in
accordance with this Plan and (iv) any combination of the foregoing.
(d) On or after the Date of Grant of any Nonqualified Option,
the Committee may determine that payment of the Option Price may also be made in
whole or in part in the form of Restricted Shares or other Common Shares that
are subject to risk of forfeiture or restrictions on transfer. Unless otherwise
determined by the Committee on or after the Date of Grant, whenever any Option
Price is paid in whole or in part by means of any of the forms of consideration
specified in this Section 4(d), the Common Shares received by the Optionee upon
the exercise of the Nonqualified Option shall be subject to the same risks of
forfeiture or restrictions on transfer as those that applied to the
consideration surrendered by the Optionee; provided, however, that such risks of
forfeiture and restrictions on transfer shall apply only to the same number of
Common Shares received by the Optionee as applied to the forfeitable or
restricted Common Shares surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker on the date of exercise of some
or all of the Common Shares to which the exercise relates.
(f) On or after the Date of Grant of any Option Rights, the
Committee may provide for the automatic grant to the Optionee of Reload Option
Rights upon the exercise of Option Rights, including Reload Option Rights for
Common Shares or any other noncash consideration authorized under Sections 4(c)
and (d) above.
(g) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to the Participant
remain unexercised.
(h) Each grant shall specify the conditions, including as and to
the extent determined by the Committee, the period or periods of continuous
employment, or continuous engagement of the consulting services, of the Optionee
by the Corporation or any Subsidiary, or the achievement of Management
Objectives, that are necessary before the Option Rights or installments thereof
shall become exercisable, and any grant may provide for the earlier exercise of
the Option Rights, including, without limitation, in the event of a change in
control of the Corporation or other similar transaction or event.
(i) Option Rights granted pursuant to this Section 4 may be
Nonqualified Options or Incentive Stock Options or combinations thereof, as set
forth in the award agreement.
(j) On or after the Date of Grant of any Nonqualified Option,
the Committee may provide for the payment to the Optionee of dividend
equivalents thereon in cash or Common Shares on a current, deferred or
contingent basis, or the Committee may provide that any dividend equivalents
shall be credited against the Option Price.
(k) No Option Right granted pursuant to this Section 4 may be
exercised more than 10 years from the Date of Grant (except that, in the case of
an individual described in Section 422(b)(6)
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<PAGE> 7
of the Code (relating to certain 10% owners) who is granted an Incentive Stock
Option, the term of such Option Right shall be no more than five years from the
Date of Grant).
(l) Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Plan.
(m) The aggregate Market Value per Share, determined as of the
Date of Grant, of the Common Shares for which any Optionee may be awarded
Incentive Stock Options which are first exercisable by the Optionee during any
calendar year under this Plan (or any other stock option plan required to be
taken into account under Section 422(d) of the Code) shall not exceed $100,000.
(o) Option granted pursuant to this Section 4 shall terminate on
the earliest of the following dates:
(1) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary unless he ceases to be such an employee
in a manner described in (2) or (3) below.
(2) 60 days after the Optionee ceases to be an employee
of the Company or any Subsidiary if (i) Optionee retires from employment with
the Company or any Subsidiary after reaching the age of 65 years, or (ii)
Optionee's employment is terminated under circumstances determined by the
Committee to be for the convenience of the Company.
(3) 90 days after the date on which Optionee's
employment is terminated as a result of the Optionee's death or Disability (as
hereinafter defined).
(4) Ten years from the date of this Agreement.
(5) In the event the Optionee shall intentionally commit
an act materially inimical to the interests of the Company or a Subsidiary, and
the Committee shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
(p) If and to the extent otherwise advisable herein or under the
applicable option agreement, upon and after the death of an Optionee, such
Optionee's Option Rights, to the extent exercisable after death may be exercised
by the Successors of the Optionee. An Option Right may be exercised, and payment
in full of the aggregate Option Price made, by the Successors of an Optionee
only by written notice (in the form prescribed by the Committee) to the
Corporation specifying the number of Common Shares to be purchased. Such notice
shall state that the aggregate Option Price will be paid in full, or that the
Option Right will be exercised as otherwise provided hereunder, in the
discretion of the Corporation or the Committee, if and as applicable.
5. Appreciation Rights. The Committee may also authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined by the Committee and shall be expressed an a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of an
Appreciation Right. Any grant of Appreciation Rights under this Plan shall be
upon such terms and conditions as the Committee may determine in accordance with
the following provisions:
(a) Any grant may specify that the amount payable upon the
exercise of an Appreciation Right may be paid by the Corporation in cash, Common
Shares or any combination thereof and may (i) either grant to the Participant or
reserve to the Committee the right to elect among those alternatives or (ii)
preclude the right of the Participant to receive and the Corporation to issue
Common Shares or other equity securities in lieu of cash; provided, however,
that no form of consideration or manner of payment that would cause Rule 16b-3
to cease to apply to this Plan shall be permitted.
(b) Any grant may specify that the amount payable upon the
exercise of an Appreciation Right shall not exceed a maximum specified by the
Committee on the Date of Grant.
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<PAGE> 8
(c) Any grant may specify (i) a waiting period or periods before
Appreciation Rights shall become exercisable and (ii) permissible dates or
periods an or during which Appreciation Rights shall be exercisable.
(d) Any grant may specify that an Appreciation Right may be
exercised only in the event of a change in control of the Corporation or other
similar transaction or event.
(e) On or after the Date of Grant of any Appreciation Rights,
the Committee may provide for the payment to the Participant of dividend
equivalents thereon in cash or Common Shares on a current, deferred or
contingent basis.
(f) Each grant shall be evidenced by an agreement, which shall
be executed an behalf of the Corporation by any officer thereof and delivered to
and accepted by the Optionee and shall contain such other terms and provisions
an the Committee may determine consistent with this Plan.
(g) Regarding Tandem Appreciation Rights only: Each grant shall
provide that a Tandem Appreciation Right may be exercised only (i) at a time
when the related Option Right (or any similar right granted under any other plan
of the Corporation) is also exercisable and the Spread is positive and (ii) by
surrender of the related Option Right (or such other right) for cancellation.
(h) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of each
Free-standing Appreciation Right a Base Price
per Common Share, which shall be equal to or
greater than the Market Value per Share on the
Date of Grant;
(ii) Successive grants may be made to the same
Participant regardless of whether any
Free-standing Appreciation Rights previously
granted to the Participant remain unexercised;
provided, however , that no participant shall be
granted more than 100,000 Freestanding
Appreciation Rights in any one fiscal year of
the Corporation, subject to adjustment as
provided in Section 10 of this Plan;
(iii) Each grant shall specify the conditions,
including as and to the extent determined by the
Committee, the period or periods of continuous
employment, or continuous engagement of the
consulting services, of the Participant by the
Corporation or any Subsidiary, or the
achievement of Management Objectives, that are
necessary before the Free-standing Appreciation
Rights or installments thereof shall become
exercisable, and any grant may provide for the
earlier exercise of the Free-standing
Appreciation Rights, including, without
limitation, in the event of a change in control
of the Corporation or other similar transaction
or event; and
(iv) No Free-standing Appreciation Right granted
under this Plan may be exercised more than 10
years from the Date of Grant.
6. Restricted Shares. The Committee may also authorize grants or sales
to Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, or as and to the
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<PAGE> 9
extent determined by the Committee, the achievement of Management Objectives,
entitling such Participant to dividend, voting and other ownership rights,
subject to the substantial risk of forfeiture and restrictions on transfer
hereinafter referred to.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture" within
the meaning of Section 83 of the Code for a period to be determined by the
Committee on the Date of Grant, and any grant or sale may provide for the
earlier termination of such period, including without limitation, in the event
of a change in control of the Corporation or other similar transaction or event.
(d) Each grant or sale shall provide that, during the period for
which such substantial risk of forfeiture is to continue, the transferability of
the Restricted Shares shall be prohibited or restricted in the manner and to the
extent prescribed by the Committee on the Date of Grant. Such restrictions may
include, without limitation, rights of repurchase or first refusal in the
Corporation or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee.
(e) Any grant or sale may require that any or all dividends or
other distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Common Shares, which may be subject to the same
restrictions as the underlying award or such other restrictions as the Committee
may determine.
(f) Each grant or sale shall be evidenced by an agreement, which
shall be executed an behalf of the Corporation by any officer thereof and
delivered to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan. Unless
otherwise directed by the Committee, all certificates representing Restricted
Shares, together with a stock power that shall be endorsed in blank by the
Participant with respect to the Restricted Shares, shall be held in custody by
the Corporation until all restrictions thereon lapse.
7. Deferred Shares. The Committee may also authorize grants or sales of
Deferred Shares to Participants upon such terms and conditions as the Committee
may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute the agreement by the
Corporation to issue or transfer Common Shares to the Participant in the future
in consideration of the performance of services rendered, subject to the
fulfillment during the Deferral Period of such conditions as the Committee may
specify.
////
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Deferred Shares
covered thereby shall be subject to a Deferral Period, which shall be fixed by
the Committee on the Date of Grant, and any grant or sale may provide for the
earlier termination of the Deferral Period, including without limitation, in the
event of a change in control of the Corporation or other similar transaction or
event.
(d) During the Deferral Period, the Participant shall not have
any right to transfer any rights under the subject award, shall
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<PAGE> 10
not have any rights of ownership in the Deferred Shares and shall not have any
right to vote the Deferred Shares, but the Committee may on or after the Date of
Grant authorize the payment of dividend equivalents on the Deferred Shares in
cash or additional Common Shares on a current, deferred or contingent basis.
(e) Each grant or sale shall be evidenced by an agreement, which
shall be executed an behalf of the Corporation by any officer thereof and
delivered to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
8. Performance Shares and Performance Units. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall become
payable to the Participant upon the achievement of specified Management
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment to
reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall be determined by the Committee on the Date of
Grant and may be subject to earlier termination, including, without limitation,
in the event of a change in control of the Corporation or other similar
transaction or event.
(c) Each grant shall specify the Management Objectives that are
to be achieved by the Participant.
(d) Each grant shall specify in respect of the specified
Management Objectives a minimum acceptable level of achievement below which no
payment will be made and shall set forth a formula for determining the amount of
any payment to be made if performance is at or above the minimum acceptable
level but falls short of full achievement of the specified Management
Objectives.
(e) Each grant shall specify the time and manner of payment of
Performance Shares or Performance units that shall have been earned, and any
grant may specify that any such amount may be paid by the Corporation in cash,
Common Shares or any combination thereof and may either grant to the Participant
or reserve to the Committee the right to elect among those alternatives;
provided, however, that no form of consideration or manner of payment that would
cause Rule 16b-3 to cease to apply to this Plan shall be permitted.
(f) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the Committee
on the Date of Grant. Any grant of Performance Units may specify that the amount
payable, or the number of Common Shares issued, with respect thereto may not
exceed maximums specified by the Committee on the Date of Grant.
(g) On or after the Date of Grant of Performance Shares, the
Committee may provide for the payment to the Participant of dividend equivalents
thereon in cash or additional Common Shares on a current, deferred or contingent
basis.
(h) Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall contain such terms and provisions as
the Committee may determine consistent with this Plan.
9. Transferability. (a) No Option Right or other derivative security (as
that term is used in Rule 16b-3) granted under this Plan may be transferred by a
Participant except by will or the laws of descent and distribution. Option
Rights and Appreciation Rights granted under this Plan may not be exercised
during a Participant's lifetime except by the Participant or, in the event of
the Participant's
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<PAGE> 11
legal incapacity, by his guardian or legal representative acting in a fiduciary
capacity on behalf of the Participant under state law and court supervision.
(b) Any grant made under this Plan may provide that all or any
part of the Common Shares that are to be issued or transferred by the
Corporation upon the exercise of Option Rights or Appreciation Rights or upon
the termination of the Deferral Period applicable to Deferred Shares or in
payment of Performance Shares or Performance Units, or are no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions upon transfer.
10. Adjustments. The Committee may make or provide for such adjustments
in the number of Common Shares covered by outstanding awards granted hereunder,
the Option Prices per Common Share or Base Prices per Common Share applicable to
any such awards, and the kind of shares (including shares of another issuer)
covered thereby, as the Committee may in good faith determine to be equitably
required in order to prevent dilution or expansion of the rights of Participants
that otherwise would result from (a) any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Corporation or (b) any merger, consolidation, spin-off, spin-out,
split-off, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of warrants or other rights to purchase
securities or any other corporate transaction or event having an effect similar
to any of the foregoing. In the event of any such transaction or event, the
Committee may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it may in good faith determine to be
equitable under the circumstances and may require in connection therewith the
surrender of all awards so replaced. Moreover, the Committee may on or after the
Date of Grant provide in the agreement evidencing any award under this Plan that
the holder of the award may elect to receive an equivalent award in respect of
securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect, or the Committee may provide that
the holder will automatically be entitled to receive such an equivalent award.
The Committee may also make or provide for such adjustments in the maximum
number of Common Shares specified in Section 3(a) of this Plan, the maximum
number of Performance Units specified in Section 3(b), and the maximum number of
Common Shares and Free-standing Appreciation Rights specified in Sections 4(a)
and 5(h)(ii) of this Plan as the Committee may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section 10.
11. Fractional Shares. The Corporation shall not be required to issue
any fractional Common Shares pursuant to this Plan. The Committee may provide
for the elimination of fractions or for the settlement thereof in cash.
12. Withholding Taxes. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Corporation for the withholding are insufficient,
it shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Corporation for payment of the balance of any taxes required
to be withheld. At the discretion of the Committee and subject to the provisions
of Rule 16b-3, any such arrangements may include relinquishment of a portion of
any such payment or benefit. The Corporation and any Participant or such other
person may also make similar arrangements with respect to the payment of any
taxes with respect to which withholding is not required.
13. Certain Terminations of Employment or Consulting Services, Hardship
and Approved Leaves of Absence. Notwithstanding any other provision of this Plan
to the contrary, in the event of termination of employment or consulting
services by reason of death, disability, normal retirement, early retirement,
with the consent of the Corporation, termination of employment or consulting
services to enter public service with the consent of the Corporation or leave of
absence approved by the Corporation, or in the event of hardship or other
special circumstances, of a Participant who holds an
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<PAGE> 12
Option Right or Appreciation Right that is not immediately and fully
exercisable, any Restricted Shares as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, any
Deferred Shares as to which the Deferral Period is not complete, any Performance
Shares or Performance Units that have not been fully earned, or any Common
Shares that are subject to any transfer restriction pursuant to Section 9(b) of
this Plan, the Committee may take any action that it deems to be equitable under
the circumstances or in the best interests of the Corporation, including without
limitation, waiving or modifying any limitation or requirement with respect to
any award under this Plan.
14. Administration of the Plan. (a) This Plan shall be administered by a
Committee of the Board, which shall be composed of not less than two members of
the Board, each of whom shall be a "disinterested person" within the meaning of
Rule 16b-3.
(b) The interpretation and construction by the Committee of any
provision of this Plan or any agreement, notification or document evidencing the
grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Shares or Performance Units, and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable for any such action taken or determination made in good faith.
15. Amendments and Other Matters. (a) This Plan may be amended from time
to time by the Committee; provided, however, that except as expressly authorized
by this Plan, no such amendment shall increase the number of Common Shares
specified in Section 3(a) hereof, increase the number of Performance Units
specified in Section 3(b) hereof, or otherwise cause this Plan to cease to
satisfy any applicable condition of Rule 16b-3, without further approval of the
stockholders of the Corporation.
(b) With the concurrence of the affected Participant, the
Committee may cancel any agreement evidencing Option Rights or any other award
granted under this Plan. In the event of any such cancellation, the Committee
may authorize the granting of new Option Rights or other awards hereunder, which
may or may not cover the same number of Common Shares or Performance Units as
had been covered by the canceled Option Rights or other award, at such Option
Price, in such manner and subject to such other terms, conditions and discretion
as would have been permitted under this Plan had the canceled Option Rights or
other award not been granted.
(c) The Committee may grant under this Plan any award or
combination of awards authorized under this Plan in exchange for the
cancellation of an award that was not granted under this Plan, including without
limitation any award that was granted prior to the adoption of this Plan by the
Board, and any such award or combination of awards so granted under this Plan
may or may not cover the same number of Common Shares as had been covered by the
cancelled award and shall be subject to such other terms, conditions and
discretion as would have been permitted under this Plan had the cancelled award
not been granted.
(d) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Corporation
or any Subsidiary and shall not interfere in any way with any right that the
Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.
(e) (i) To the extent that any provision of this Plan would
prevent any Option Right that was intended to quality as
an Incentive Stock Option from so qualifying, any such
provision shall be null and void with respect to any
such Option Right: provided, however, that any such
provision shall remain in effect with respect to other
Option Rights, and there shall be no further effect on
any provision of this Plan.
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<PAGE> 13
(ii) Any award that may be made pursuant to an amendment
to this Plan that shall have been adopted without the
approval of the stockholders of the Corporation shall be
null and void if it is subsequently determined that such
approval was required in order for this Plan to continue
to satisfy the applicable conditions of Rule 16b-3.
16. Termination of the Plan. No further awards shall be granted under
this Plan after the passage of 10 years from the date on which this Plan is
first approved by the stockholders of the Corporation.
17. Effective Date. The effective date of this Plan (the Effective
Date") shall be January 1, 1999, provided, however, that this Plan and each
award granted hereunder shall be void and of no force or effect until and unless
this Plan shall have been approved by a vote of the holders of the majority of
the Corporation present, or represented, and entitled to vote at a meeting duly
held in accordance with Delaware law.
18. Nontransferability. Each award granted under this Plan shall by its
terms be nontransferable by the Participant except by will or the laws of decent
and distribution of the state wherein the Participant is domiciled at the time
of his death; provided, however, that the Committee may (but need not) permit
other transfers, to the extent consistent with Rule 16b-3; where the Committee
concludes that such transferability does not result in accelerated taxation and
is otherwise appropriate and desirable.
Page 11 of 11
<PAGE> 14
AcuBid.com, Inc.
1999 INCENTIVE EQUITY PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of ___________ ,
1999 (the "Agreement"), between _________________________________ (the
"Optionee") and AcuBid.com, Inc. a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Optionee is a key employee of the Company;
WHEREAS, the execution of a Nonqualified Stock Option Agreement
in the form hereof has been duly authorized by a resolution of the Committee
administering the AcuBid.com, Inc. 1999 Incentive Equity Plan (the "Plan"),
which Plan was approved by a resolution of the Board of Directors of the Company
duly adopted on February 26, 1999 and is incorporated herein by reference; and
WHEREAS, the option granted hereby is intended as a nonqualified
stock option and shall not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to the Plan, the Company hereby grants to the
Optionee an option (the "Option") to purchase _________ shares (the "Option
Shares") of Common Stock, $.01 par value, of the Company (the "Common Stock") at
a purchase price per share of $_____ (the "Option Price") which is the fair
market value of the Option Shares as of the date hereof, and agrees to cause
certificates for any shares purchased hereunder to be delivered to the Optionee
upon payment of the Option Price in full, all subject, however, to the terms and
conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
100% of the shares of Common Stock specified above on or after the first
anniversary of the date of this Agreement for so long as the Optionee continues
to be in the employ of the Company or any Subsidiary. For purposes of this
Agreement, the employment of the Optionee with the Company with the Company or a
Subsidiary shall not be deemed interrupted, and the Optionee shall not be deemed
to have ceased to be an employee of the Company or any Subsidiary by reason of
the transfer of his employment among or between the Company or its Subsidiaries.
For the purpose of this paragraph, leaves of absence approved by the Board of
Directors of the Company, or any committee thereof, for illness, military or
government service, or other cause, shall be considered as employment.
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the following
dates:
(i) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary unless he ceases
to be such an employee in a manner described in (ii) or
(iii) below.
Page 1 of 6
<PAGE> 15
(ii) 60 days after the Optionee ceases to be an employee
of the Company or any Subsidiary if (i) Optionee retires
from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (ii) Optionee's
employment is terminated under circumstances determined
by the Committee to be for the convenience of the
Company.
(iii) 90 days after the date on which Optionee's
employment is terminated as a result of the Optionee's
death or Disability (as hereinafter defined).
(iv) Ten years from the date of this Agreement.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Committee shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing. The requirement of
payment in cash shall be deemed satisfied if the Optionee shall have made
arrangements satisfactory to the Company with a broker who is a member of the
National Association of Securities Dealers, Inc. to sell on the exercise date a
sufficient number of the shares being purchased so that the net proceeds of the
sale transaction will at least equal the option exercise price and pursuant to
which the broker undertakes to deliver the full option exercise price to the
Company not later than the date on which the sale transaction will settle in t
he ordinary course of business.
(c) If the Company shall be required to withhold any federal,
state, local or foreign tax in connection with exercise of the Option, it shall
be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control, Adjustments.
(a) Upon a Change in Control (as hereinafter defined), the
Option shall, notwithstanding Section 1(b), become immediately exercisable in
full. If any event or series of events constituting a Change in Control shall be
abandoned, the effect thereof shall be null and of no further force and effect
and the provisions of Section 1(b) shall be reinstated but without prejudice to
any exercise of the Option that may have occurred prior to such nullification.
Page 2 of 6
<PAGE> 16
(b) Notwithstanding the provisions of Section 3(a), to the
extent necessary for the Option, its exercise or the sale of Common Stock
acquired thereunder to be exempt from Section 16(b) of the Exchange Act of 1934,
as amended, (i) except in the case of death or Disability, the Optionee shall
not be entitled to exercise the Option if granted within six months prior to the
occurrence of a Change in Control until the expiration of the six-month period
following the date of this Agreement, or (ii) at least six months shall elapse
from the date of this Agreement to the date of disposition of the Option Shares
acquired upon exercise of the Option.
(c) (i) The Committee may make or provide for such good
faith adjustments- in the number and kind of
shares of the Company's Common Stock covered by
the Option and in the Option Price, as the
Committee may in good faith determine to be
equitably required in order to prevent dilution
or expansion of the rights of the Optionee that
otherwise would result from (a) any stock
dividend, stock split, combination of shares,
recapitalization or other change in the capital
structure of the Company, or (b) any merger,
consolidation, spinoff, spin-out, split-off,
split-up, reorganization, partial or complete
liquidation or other distribution of assets,
issuance of warrants or other rights to purchase
securities or any other corporate transaction or
event having an effect similar to the foregoing.
(ii) In the event of any such transaction or event,
the Committee may provide in substitution for
the Option such alternative consideration as it
may in good faith determine to be equitable
under the circumstances and may require in
connection therewith the surrender of this
Option.
4. No Transfer Of Option.
The Option may not be transferred by the Optionee except by will
or the laws of descent and distribution. The Option may not be exercised during
the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Limitations on Exercise of the Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
6. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
7. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for
the merger, consolidation or reorganization into
or with another corporation or other
Page 3 of 6
<PAGE> 17
legal person; provided, however, that no such
merger, consolidation or reorganization shall
constitute a Change in Control if as a result of
such merger, consolidation or reorganization not
less than a majority of the combined voting
power of the then-outstanding securities of such
corporation or person immediately after such
transaction are held in the aggregate by the
holders of securities entitled to vote generally
in the election of directors of the Company
("Voting Stock") immediately prior to such
transaction;
(ii) The execution by the Company of an agreement for
the sale or other transfer of all or
substantially all of its assets to another
corporation or other legal person; provided,
however, that no such sale or other transfer
shall constitute a Change in Control if as a
result of such sale or transfer not less than a
majority of the combined voting power of the
then outstanding securities of such corporation
or person immediately after such sale or
transfer is held in the aggregate by the holders
of Voting Stock of the Company immediately prior
to such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form
or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") disclosing that any person (as
the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) (other
than any person (or any of their affiliates)
that owns beneficially or of record more than
ten percent of the Common Stock on 1996) has or
intends to become the beneficial owner (as the
term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of
securities representing a majority or more of
the combined voting power of the
then-outstanding Voting Stock, including,
without limitation, pursuant to a tender offer
or exchange offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such
period constitute the directors of the Company
cease for any reason to constitute at least a
majority thereof; provided, however , that for
purposes of this subsection (iv) each director
who is first elected, or first nominated for
election by the Company's stockholders, by a
vote of at least two-thirds of the directors of
the Company (or a committee thereof) then still
in office who were directors of the Company at
the beginning of any such period shall be deemed
to have been a director of the Company at the
beginning of such period; or
(v) except pursuant to a transaction described in
the proviso to subsection (i) of this
definition, the Company adopts a plan for the
liquidation or dissolution of the Company.
(b) "Disability" means, as of any date, the permanent disability
of the Optionee in accordance with the then applicable provisions of the
disability benefit program of the Company generally available to key employees
of the Company or any Subsidiary.
8. Terms of Plan. This Agreement shall be subject to all of the terms
and conditions of the Plan which is incorporated herein by reference. All
capitalized terms used herein and not defined herein are used as defined in the
Plan.
Page 4 of 6
<PAGE> 18
EXECUTED at __________________, California this________ day
of__________________ 19___.
WEBGLAXY, INC.
By:____________________________
Name:__________________________
Title:_________________________
ACCEPTED AND AGREED
By:_________________________
Name:_______________________
Optionee
Page 5 of 6
<PAGE> 19
ANNEX A
to
NonQualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the NonQualified Stock Option Agreement dated as of
____________________, 199__ between the undersigned and AcuBid.com, Inc. (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:_______________________
(b) Total purchase price ((a) x Option Exercise Price): $_______
Please issue a single certificate for the shares being purchased
in the name of the undersigned. The registered address on such certificate
should be:
____________________________________________
____________________________________________
____________________________________________
The undersigned's social security number is:______________________
Date:____________________ __________________________
Optionee
Page 6 of 6
<PAGE> 20
AcuBid.com, Inc.
1999 INCENTIVE EQUITY PLAN
QUALIFIED INCENTIVE STOCK OPTION AGREEMENT
QUALIFIED INCENTIVE STOCK OPTION AGREEMENT, dated as of ______________,
1999 (the "Agreement"), between _________________ __________________ (the
"Optionee") and AcuBid.com, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Optionee is a key employee of the Company;
WHEREAS, the execution of a Qualified Incentive Stock Option
Agreement in the form hereof has been duly authorized by a resolution of the
Committee administering the AcuBid.com, Inc. 1999 Incentive Equity Plan (the
"Plan"), which Plan was approved by a resolution of the Board of Directors of
the Company duly adopted on ________________, 19___ and is incorporated herein
by reference; and
WHEREAS, the option granted hereby is intended as a qualified
stock option and shall be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to the Plan, the Company hereby grants to the
Optionee an option (the "Option") to purchase ________ shares (the "Option
Shares") of Common Stock, ____ par value, of the Company (the "Common Stock") at
a purchase price per share of $_____ (the "Option Price") which is the fair
market (or 110% of the fair market value in the case of an optionee holding more
than 10% of the Company's voting stock) value of the Option Shares as of the
date hereof, and agrees to cause certificates for any shares purchased hereunder
to be delivered to the Optionee upon payment of the Option Price in full, all
subject, however, to the terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
100% of the shares of Common Stock specified above on or after the first
anniversary of the date of this agreement for so long as the Optionee continues
to be in the employ of the Company or any Subsidiary. For purposes of this
Agreement, the employment of the Optionee with the Company with the Company or a
Subsidiary shall not be deemed interrupted, and the Optionee shall not be deemed
to have ceased to be an employee of the Company or any Subsidiary by reason of
the transfer of his employment among or between the Company or its Subsidiaries.
For the purpose of this paragraph, leaves of absence approved by the Board of
Directors of the Company, or any committee thereof, for illness, military or
government service, or other cause, shall be considered as employment.
Page 1 of 6
<PAGE> 21
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the following
dates:
(i) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary unless he ceases
to be such an employee in a manner described in (ii) or
(iii) below.
(ii) 60 days after the Optionee ceases to be an employee
of the Company or any Subsidiary if (I) Optionee retires
from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (ii) Optionee's
employment is terminated under circumstances determined
by the Committee to be for the convenience of the
Company.
(iii) 90 days after the date on which Optionee's
employment is terminated as a result of the Optionee's
death or Disability (as hereinafter defined).
(iv) Ten years from the date of this Agreement or 5
years from the date of the grant if the Optionee owns
more than 10% of the Company's voting securities.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Committee shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing. The requirement of
payment in cash shall be deemed satisfied if the Optionee shall have made
arrangements satisfactory to the Company with a broker who is a member of the
National Association of Securities Dealers, Inc. to sell on the exercise date a
sufficient number of the shares being purchased so that the net proceeds of the
sale transaction will at least equal the option exercise price and pursuant to
which the broker undertakes to deliver the full option exercise price to the
Company not later than the date on which the sale transaction will settle in t
he ordinary course of business.
(c) If the Company shall be required to withhold any federal,
state, local or foreign
Page 2 of 6
<PAGE> 22
tax in connection with exercise of the Option, it shall be a condition to such
exercise that the Optionee pay or make provision satisfactory to the Company for
payment of all such taxes.
3. Change in Control, Adjustments.
(a) Upon a Change in Control (as hereinafter defined), the
Option shall, notwithstanding Section 1(b), become immediately exercisable in
full. If any event or series of events constituting a Change in Control shall be
abandoned, the effect thereof shall be null and of no further force and effect
and the provisions of Section 1(b) shall be reinstated but without prejudice to
any exercise of the Option that may have occurred prior to such nullification.
(b) Notwithstanding the provisions of Section 3(a), to the
extent necessary for the Option, its exercise or the sale of Common Stock
acquired thereunder to be exempt from Section 16(b) of the Exchange Act of 1934,
as amended, (i) except in the case of death or Disability, the Optionee shall
not be entitled to exercise the Option if granted within six months prior to the
occurrence of a Change in Control until the expiration of the six-month period
following the date of this Agreement, or (ii) at least six months shall elapse
from the date of this Agreement to the date of disposition of the Option Shares
acquired upon exercise of the Option.
(c) (i) The Committee may make or provide for such good
faith adjustments in the number and kind of shares of
the Company's Common Stock covered by the Option and in
the Option Price, as the Committee may in good faith
determine to be equitably required in order to prevent
dilution or expansion of the rights of the Optionee that
otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or
(b) any merger, consolidation, spinoff, spin-out,
split-off, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of
warrants or other rights to purchase securities or any
other corporate transaction or event having an effect
similar to the foregoing.
(ii) In the event of any such transaction or event, the
Committee may provide in substitution for the Option
such alternative consideration as it may in good faith
determine to be equitable under the circumstances and
may require in connection therewith the surrender of
this Option.
4. No Transfer Of Option.
The Option may not be transferred by the Optionee except by will
or the laws of descent and distribution. The Option may not be exercised during
the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Limitations on Exercise of the Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
6. Rights as Stockholder.
Page 3 of 6
<PAGE> 23
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
7. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for
the merger, consolidation or reorganization into
or with another corporation or other legal
person; provided, however, that no such merger,
consolidation or reorganization shall constitute
a Change in Control if as a result of such
merger, consolidation or reorganization not less
than a majority of the combined voting power of
the then-outstanding securities of such
corporation or person immediately after such
transaction are held in the aggregate by the
holders of securities entitled to vote generally
in the election of directors of the Company
("Voting Stock") immediately prior to such
transaction;
(ii) The execution by the Company of an agreement for
the sale or other transfer of all or
substantially all of its assets to another
corporation or other legal person; provided,
however, that no such sale or other transfer
shall constitute a Change in Control if as a
result of such sale or transfer not less than a
majority of the combined voting power of the
then outstanding securities of such corporation
or person immediately after such sale or
transfer is held in the aggregate by the holders
of Voting Stock of the Company immediately prior
to such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form
or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") disclosing that any person (as
the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) (other
than any person (or any of their affiliates)
that owns beneficially or of record more than
ten percent of the Common Stock on 1996) has or
intends to become the beneficial owner (as the
term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of
securities representing a majority or more of
the combined voting power of the
then-outstanding Voting Stock, including,
without limitation, pursuant to a tender offer
or exchange offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such
period constitute the directors of the Company
cease for any reason to constitute at least a
majority thereof; provided, however , that for
purposes of this subsection (iv) each director
who is first elected, or first nominated for
election by the Company's stockholders, by a
vote of at least two-thirds of the directors of
the Company (or a committee thereof) then still
in office who were directors of the Company at
the beginning of any such period shall be deemed
to have been a director of the Company at the
beginning of such period; or
(v) except pursuant to a transaction described in
the proviso to subsection
Page 4 of 6
<PAGE> 24
(i) of this definition, the Company adopts a
plan for the liquidation or dissolution of the
Company.
(b) "Disability" means, as of any date, the permanent disability
of the Optionee in accordance with the then applicable provisions of the
disability benefit program of the Company generally available to key employees
of the Company or any Subsidiary.
8. Terms of Plan. This Agreement shall be subject to all of the terms
and conditions of the Plan which is incorporated herein by reference. All
capitalized terms used herein and not defined herein are used as defined in the
Plan.
EXECUTED at __________________, California this _______ day of
________________ 19___.
AcuBid.com, Inc.
By: ________________________________
Name: ______________________________
Title: _____________________________
ACCEPTED AND AGREED
By:_______________________________
Name:_____________________________
Optionee
Page 5 of 6
<PAGE> 25
ANNEX A
to
Qualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the Qualified Stock Option Agreement dated as of
____________________, 199___ between the undersigned and AcuBid.com, Inc. (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased: _______________
(b) Total purchase price ((a) x Option Exercise Price): $_______
Please issue a single certificate for the shares being purchased
in the name of the undersigned. The registered address on such certificate
should be:
____________________________________________
____________________________________________
____________________________________________
The undersigned's social security number is: ___________________
Date:____________________ ______________________________
Optionee
Page 6 of 6
<PAGE> 26
AcuBid.com, Inc.
1999 INCENTIVE EQUITY PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of ___________ ,
1999 ( the"Agreement"), between _________________________________ (the
"Optionee") and AcuBid.com, Inc. a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Optionee is a key employee of the Company;
WHEREAS, the execution of a Nonqualified Stock Option Agreement
in the form hereof has been duly authorized by a resolution of the Committee
administering the AcuBid.com, Inc. 1999 Incentive Equity Plan (the "Plan"),
which Plan was approved by a resolution of the Board of Directors of the Company
duly adopted on February 26, 1999 and is incorporated herein by reference; and
WHEREAS, the option granted hereby is intended as a nonqualified
stock option and shall not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to the Plan, the Company hereby grants to the
Optionee an option (the "Option") to purchase_________ shares (the "Option
Shares") of Common Stock, $.01 par value, of the Company (the "Common Stock") at
a purchase price per share of $_____ (the "Option Price") which is the fair
market value of the Option Shares as of the date hereof, and agrees to cause
certificates for any shares purchased hereunder to be delivered to the Optionee
upon payment of the Option Price in full, all subject, however, to the terms and
conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
20% of the shares of Common Stock specified above on or after the first
anniversary of the date of this Agreement and to the extent of an additional 20%
of the shares specified above after each of the successive anniversaries of such
date, for so long as the Optionee continues to be in the employ of the Company
or any Subsidiary. For purposes of this Agreement, the employment of the
Optionee with the Company with the Company or a Subsidiary shall not be deemed
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company or any Subsidiary by reason of the transfer of his
employment among or between the Company or its Subsidiaries. For the purpose of
this paragraph, leaves of absence approved by the Board of Directors of the
Company, or any committee thereof, for illness, military or government service,
or other cause, shall be considered as employment.
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the following
dates:
(i) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary unless he ceases
to be such an employee in a manner
Page 1 of 6
<PAGE> 27
described in (ii) or (iii) below.
(ii) 60 days after the Optionee ceases to be an employee
of the Company or any Subsidiary if (i) Optionee retires
from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (ii) Optionee's
employment is terminated under circumstances determined
by the Committee to be for the convenience of the
Company.
(iii) 90 days after the date on which Optionee's
employment is terminated as a result of the Optionee's
death or Disability (as hereinafter defined).
(iv) Ten years from the date of this Agreement.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Committee shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares .
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing. The requirement of
payment in cash shall be deemed satisfied if the Optionee shall have made
arrangements satisfactory to the Company with a broker who is a member of the
National Association of Securities Dealers, Inc. to sell on the exercise date a
sufficient number of the shares being purchased so that the net proceeds of the
sale transaction will at least equal the option exercise price and pursuant to
which the broker undertakes to deliver the full option exercise price to the
Company not later than the date on which the sale transaction will settle in t
he ordinary course of business.
(c) If the Company shall be required to withhold any federal,
state, local or foreign tax in connection with exercise of the Option, it shall
be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control, Adjustments.
(a) Upon a Change in Control (as hereinafter defined), the
Option shall, notwithstanding Section 1(b), become immediately exercisable in
full. If any event or series of events constituting a Change in Control shall be
abandoned, the effect thereof shall be null and of no further force and effect
and the provisions of Section 1(b) shall be reinstated but without prejudice to
any
Page 2 of 6
<PAGE> 28
exercise of the Option that may have occurred prior to such nullification.
(b) Notwithstanding the provisions of Section 3(a), to the
extent necessary for the Option, its exercise or the sale of Common Stock
acquired thereunder to be exempt from Section 16(b) of the Exchange Act of 1934,
as amended, (i) except in the case of death or Disability, the Optionee shall
not be entitled to exercise the Option if granted within six months prior to the
occurrence of a Change in Control until the expiration of the six-month period
following the date of this Agreement, or (ii) at least six months shall elapse
from the date of this Agreement to the date of disposition of the Option Shares
acquired upon exercise of the Option.
(c) (i) The Committee may make or provide for such good
faith adjustments- in the number and kind of shares of
the Company's Common Stock covered by the Option and in
the Option Price, as the Committee may in good faith
determine to be equitably required in order to prevent
dilution or expansion of the rights of the Optionee that
otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or
(b) any merger, consolidation, spinoff, spin-out,
split-off, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of
warrants or other rights to purchase securities or any
other corporate transaction or event having an effect
similar to the foregoing.
(ii) In the event of any such transaction or event, the
Committee may provide in substitution for the Option
such alternative consideration as it may in good faith
determine to be equitable under the circumstances and
may require in connection therewith the surrender of
this Option.
4. No Transfer Of Option.
The Option may not be transferred by the Optionee except by will
or the laws of descent and distribution. The Option may not be exercised during
the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Limitations on Exercise of the Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
6. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
7. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
Page 3 of 6
<PAGE> 29
(i) The execution by the Company of an agreement for
the merger, consolidation or reorganization into
or with another corporation or other legal
person; provided, however, that no such merger,
consolidation or reorganization shall constitute
a Change in Control if as a result of such
merger, consolidation or reorganization not less
than a majority of the combined voting power of
the then-outstanding securities of such
corporation or person immediately after such
transaction are held in the aggregate by the
holders of securities entitled to vote generally
in the election of directors of the Company
("Voting Stock") immediately prior to such
transaction;
(ii) The execution by the Company of an agreement for
the sale or other transfer of all or
substantially all of its assets to another
corporation or other legal person; provided,
however, that no such sale or other transfer
shall constitute a Change in Control if as a
result of such sale or transfer not less than a
majority of the combined voting power of the
then outstanding securities of such corporation
or person immediately after such sale or
transfer is held in the aggregate by the holders
of Voting Stock of the Company immediately prior
to such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form
or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") disclosing that any person (as
the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) (other
than any person (or any of their affiliates)
that owns beneficially or of record more than
ten percent of the Common Stock on 1996) has or
intends to become the beneficial owner (as the
term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of
securities representing a majority or more of
the combined voting power of the
then-outstanding Voting Stock, including,
without limitation, pursuant to a tender offer
or exchange offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such
period constitute the directors of the Company
cease for any reason to constitute at least a
majority thereof; provided, however , that for
purposes of this subsection (iv) each director
who is first elected, or first nominated for
election by the Company's stockholders, by a
vote of at least two-thirds of the directors of
the Company (or a committee thereof) then still
in office who were directors of the Company at
the beginning of any such period shall be deemed
to have been a director of the Company at the
beginning of such period; or
(v) except pursuant to a transaction described in
the proviso to subsection (i) of this
definition, the Company adopts a plan for the
liquidation or dissolution of the Company.
(b) "Disability" means, as of any date, the permanent disability
of the Optionee in accordance with the then applicable provisions of the
disability benefit program of the Company generally available to key employees
of the Company or any Subsidiary.
Page 4 of 6
<PAGE> 30
8. Terms of Plan. This Agreement shall be subject to all of the terms
and conditions of the Plan which is incorporated herein by reference. All
capitalized terms used herein and not defined herein are used as defined in the
Plan.
EXECUTED at __________________, California this________ day
of__________________ 19___.
WEBGLAXY, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
ACCEPTED AND AGREED
By:__________________________
Name:________________________
Optionee
Page 5 of 6
<PAGE> 31
ANNEX A
to
NonQualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the NonQualified Stock Option Agreement dated as of
____________________, 199__ between the undersigned and AcuBid.com, Inc. (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:_______________________
(b) Total purchase price ((a) x Option Exercise Price):$________
Please issue a single certificate for the shares being purchased
in the name of the undersigned. The registered address on such certificate
should be:
____________________________________________
____________________________________________
____________________________________________
The undersigned's social security number is:______________________
Date:____________________ __________________________
Optionee
Page 6 of 6
<PAGE> 32
AcuBid.com, Inc.
1999 INCENTIVE EQUITY PLAN
QUALIFIED INCENTIVE STOCK OPTION AGREEMENT
QUALIFIED INCENTIVE STOCK OPTION AGREEMENT, dated as of ______________,
1999 (the "Agreement"), between _________________ __________________ (the
"Optionee") and AcuBid.com, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Optionee is a key employee of the Company;
WHEREAS, the execution of a Qualified Incentive Stock Option
Agreement in the form hereof has been duly authorized by a resolution of the
Committee administering the AcuBid.com, Inc. 1999 Incentive Equity Plan (the
"Plan"), which Plan was approved by a resolution of the Board of Directors of
the Company duly adopted on ________________, 19___ and is incorporated herein
by reference; and
WHEREAS, the option granted hereby is intended as a qualified
stock option and shall be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to the Plan, the Company hereby grants to the
Optionee an option (the "Option") to purchase ________ shares (the "Option
Shares") of Common Stock, ____ par value, of the Company (the "Common Stock") at
a purchase price per share of $_____ (the "Option Price") which is the fair
market (or 110% of the fair market value in the case of an optionee holding more
than 10% of the Company's voting stock) value of the Option Shares as of the
date hereof, and agrees to cause certificates for any shares purchased hereunder
to be delivered to the Optionee upon payment of the Option Price in full, all
subject, however, to the terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
20% of the shares of Common Stock specified above on or after the first
anniversary of the date of this agreement and to the extent of an additional 20%
of the shares specified above after each of the successive anniversaries of such
date, for so long as the Optionee continues to be in the employ of the Company
or any Subsidiary. For purposes of this Agreement, the employment of the
Optionee with the Company with the Company or a Subsidiary shall not be deemed
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company or any Subsidiary by reason of the transfer of his
employment among or between the Company or its Subsidiaries. For the purpose of
this paragraph, leaves of absence approved by the Board of Directors of the
Company, or any committee thereof, for illness, military or government service,
Page 1 of 6
<PAGE> 33
or other cause, shall be considered as employment.
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the following
dates:
(i) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary unless he ceases
to be such an employee in a manner described in (ii) or
(iii) below.
(ii) 60 days after the Optionee ceases to be an employee
of the Company or any Subsidiary if (I) Optionee retires
from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (ii) Optionee's
employment is terminated under circumstances determined
by the Committee to be for the convenience of the
Company.
(iii) 90 days after the date on which Optionee's
employment is terminated as a result of the Optionee's
death or Disability (as hereinafter defined).
(iv) Ten years from the date of this Agreement or 5
years from the date of the grant if the Optionee owns
more than 10% of the Company's voting securities.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Committee shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing. The requirement of
payment in cash shall be deemed satisfied if the Optionee shall have made
arrangements satisfactory to the Company with a broker who is a member of the
National Association of Securities Dealers, Inc. to sell on the exercise date a
sufficient number of the shares being purchased so that the net proceeds of the
sale transaction will at least equal the option exercise price and pursuant to
which the broker undertakes to deliver the full option exercise price to the
Company not later than the date on which the sale transaction will settle in t
he ordinary course of business.
Page 2 of 6
<PAGE> 34
(c) If the Company shall be required to withhold any federal,
state, local or foreign tax in connection with exercise of the Option, it shall
be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control, Adjustments.
(a) Upon a Change in Control (as hereinafter defined), the
Option shall, notwithstanding Section 1(b), become immediately exercisable in
full. If any event or series of events constituting a Change in Control shall be
abandoned, the effect thereof shall be null and of no further force and effect
and the provisions of Section 1(b) shall be reinstated but without prejudice to
any exercise of the Option that may have occurred prior to such nullification.
(b) Notwithstanding the provisions of Section 3(a), to the
extent necessary for the Option, its exercise or the sale of Common Stock
acquired thereunder to be exempt from Section 16(b) of the Exchange Act of 1934,
as amended, (i) except in the case of death or Disability, the Optionee shall
not be entitled to exercise the Option if granted within six months prior to the
occurrence of a Change in Control until the expiration of the six-month period
following the date of this Agreement, or (ii) at least six months shall elapse
from the date of this Agreement to the date of disposition of the Option Shares
acquired upon exercise of the Option.
(c) (i) The Committee may make or provide for such good
faith adjustments in the number and kind of shares of
the Company's Common Stock covered by the Option and in
the Option Price, as the Committee may in good faith
determine to be equitably required in order to prevent
dilution or expansion of the rights of the Optionee that
otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or
(b) any merger, consolidation, spinoff, spin-out,
split-off, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of
warrants or other rights to purchase securities or any
other corporate transaction or event having an effect
similar to the foregoing.
(ii) In the event of any such transaction or event, the
Committee may provide in substitution for the Option
such alternative consideration as it may in good faith
determine to be equitable under the circumstances and
may require in connection therewith the surrender of
this Option.
4. No Transfer Of Option.
The Option may not be transferred by the Optionee except by will
or the laws of descent and distribution. The Option may not be exercised during
the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Limitations on Exercise of the Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
Page 3 of 6
<PAGE> 35
6. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
7. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for
the merger, consolidation or reorganization into
or with another corporation or other legal
person; provided, however, that no such merger,
consolidation or reorganization shall constitute
a Change in Control if as a result of such
merger, consolidation or reorganization not less
than a majority of the combined voting power of
the then-outstanding securities of such
corporation or person immediately after such
transaction are held in the aggregate by the
holders of securities entitled to vote generally
in the election of directors of the Company
("Voting Stock") immediately prior to such
transaction;
(ii) The execution by the Company of an agreement for
the sale or other transfer of all or
substantially all of its assets to another
corporation or other legal person; provided,
however, that no such sale or other transfer
shall constitute a Change in Control if as a
result of such sale or transfer not less than a
majority of the combined voting power of the
then outstanding securities of such corporation
or person immediately after such sale or
transfer is held in the aggregate by the holders
of Voting Stock of the Company immediately prior
to such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form
or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") disclosing that any person (as
the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) (other
than any person (or any of their affiliates)
that owns beneficially or of record more than
ten percent of the Common Stock on 1996) has or
intends to become the beneficial owner (as the
term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of
securities representing a majority or more of
the combined voting power of the
then-outstanding Voting Stock, including,
without limitation, pursuant to a tender offer
or exchange offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such
period constitute the directors of the Company
cease for any reason to constitute at least a
majority thereof; provided, however , that for
purposes of this subsection (iv) each director
who is first elected, or first nominated for
election by the Company's stockholders, by a
vote of at least two-thirds of the directors of
the Company (or a committee thereof) then still
in office who were directors of the Company at
the beginning of any such period shall be deemed
to have been a director of the Company at the
beginning of such period; or
Page 4 of 6
<PAGE> 36
(v) except pursuant to a transaction described in
the proviso to subsection (i) of this
definition, the Company adopts a plan for the
liquidation or dissolution of the Company.
(b) "Disability" means, as of any date, the permanent disability
of the Optionee in accordance with the then applicable provisions of the
disability benefit program of the Company generally available to key employees
of the Company or any Subsidiary.
8. Terms of Plan. This Agreement shall be subject to all of the terms
and conditions of the Plan which is incorporated herein by reference. All
capitalized terms used herein and not defined herein are used as defined in the
Plan.
EXECUTED at __________________, California this _______ day of
________________ 19___.
AcuBid.com, Inc.
By: ________________________________
Name: ______________________________
Title: _____________________________
ACCEPTED AND AGREED
By:_______________________________
Name:_____________________________
Optionee
Page 5 of 6
<PAGE> 37
ANNEX A
to
Qualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the Qualified Stock Option Agreement dated as of
____________________, 199___ between the undersigned and AcuBid.com, Inc. (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased: _______________
(b) Total purchase price ((a) x Option Exercise Price): $_______
Please issue a single certificate for the shares being purchased
in the name of the undersigned. The registered address on such certificate
should be:
____________________________________________
____________________________________________
____________________________________________
The undersigned's social security number is: ___________________
Date:____________________ ______________________________
Optionee
Page 6 of 6
<PAGE> 1
EXHIBIT 10.13
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT, dated as of June____,
1999, (this "Agreement") is entered into by and among ACUBID.COM, INC., a
Delaware corporation ("Company"), with its principal executive office at 1947
Camino Vida Roble, Suite #102, Carlsbad, California 92008 and THE ENTITIES OR
PERSONS LISTED ON THE SCHEDULE OF PURCHASERS attached hereto as Schedule I (each
a "Purchaser," and collectively, the "Purchasers").
RECITALS
A. On the terms and subject to the conditions set forth herein, each
Purchaser is willing to purchase from Company, and Company is willing to sell to
such Purchaser, shares of Series A Convertible Preferred Stock (the "Preferred
Stock") in the principal amount set forth opposite such Purchaser's name on
Schedule I hereto and warrant(s) to purchase shares of the Company's Common
Stock.
B. The Company desires to enter into this Agreement for the purposes,
among others, of inducing the Purchasers to purchase the Preferred Stock and
warrants.
C. Capitalized terms not otherwise defined herein shall have the meaning
set forth in the Certificate of Designation attached hereto as Exhibit A. This
Agreement, the Certificate of Designation, and the Warrant are sometimes
collectively referred to as Transaction Documents.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the representations,
warranties, and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. THE PREFERRED STOCK AND WARRANTS.
(a) Issuance of Preferred Stocks. At the Closing (as defined below),
Company agrees to issue and sell to each of the Purchasers, and, subject to all
of the terms and conditions hereof, each of the Purchasers agrees to purchase a
number of shares of Preferred Stock issued pursuant to the Company's
Certificate of Designation attached hereto as Exhibit A (the "Certificate of
Designation") in the principal amount set forth opposite the respective
Purchaser's name on Schedule I hereto. The obligation of the Purchasers to
purchase Preferred Stock are several and not joint.
(b) Issuance of Warrants. In consideration for the purchase by the
Purchasers of the Preferred Stock and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Company will issue to each
Purchaser a warrant in the form attached hereto as Exhibit B (each
individually, a "Warrant" and collectively, the "Warrants"), to purchase up to
the number of shares of Common Stock (the "Warrant Shares") as set forth on
Schedule I.
<PAGE> 2
(c) Delivery. The sale and purchase of the Preferred Stock and the
Warrants shall take place at a closing (the "Closing") to be held at such place
and time as Company and the Purchasers may determine (the "Closing Date"). At
the Closing, Company will deliver to each of the Purchasers the respective
Preferred Stock and the Warrant to be purchased by such Purchaser, against
receipt by Company of the corresponding purchase price (by wire transfer of
immediately available funds) set forth on Schedule I hereto (the "Purchase
Price"). Each of the shares of Preferred Stock and Warrants will be registered
in such Purchaser's name in Company's records.
(d) Use of Proceeds. The proceeds of the sale and issuance of the
Preferred Stock and Warrants shall be used for capital to establish an
inventory of collectable merchandise, advertising, advances on royalties
related to exclusive memorabilia contracts with sports figures and celebrities
and other general corporate purposes.
(e) Interest Payments. Company will make all cash interest payments
due pursuant to the terms of the Preferred Stock in immediately available on
the date such payment is due in the manner and at the address for such purpose
specified below each Purchaser's name on Schedule I hereto, or at such other
address as a Purchaser or other registered holder of the Preferred Stock may
from time to time direct in writing; provided, however, that no payment shall
be due in the event of conversion of the Preferred Stock pursuant to the
Certificate of Designation.
(f) Piggyback Registration Rights. With respect to any shares of the
Company's Common Stock issued pursuant to this Agreement, the Purchaser will
receive Piggyback Registration Rights to include such shares in up to two (2)
registration statements filed by the Company to the extent the Company, any
underwriter and any other party to the registration statement deem it feasible
to include such shares.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY. Parent and Company,
jointly and severally, represent and warrant to each Purchaser that:
(a) Due Incorporation, Qualification, etc. Company (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation; (ii) has the power and authority to own,
lease and operate its properties and carry on its business as now conducted;
and (iii) is duly qualified, licensed to do business and in good standing as a
foreign corporation in each jurisdiction where the failure to be so qualified
or licensed could reasonably be expected to have a Material Adverse Effect.
(b) Authority. The execution, delivery and performance by Company of
each Transaction Document to be executed by Company and the consummation of the
transactions contemplated thereby (i) are within the power of Company and (ii)
have been duly authorized by all necessary actions on the part of Company.
(c) Enforceability. Each Transaction Document executed, or to be
executed, by Company has been, or will be, duly executed and delivered by
Company and constitutes, or will constitute, a legal, valid and binding
obligation of Company, enforceable against Company in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
<PAGE> 3
(d) Non-Contravention. The execution and delivery by Company of the
Transaction Documents executed by Company and the performance and consummation
of the transactions contemplated thereby do not and will not (i) violate the
Certificate of Incorporation or Bylaws of the Company or any material judgment,
order, writ, decree, statute, rule or regulation applicable to Company; (ii)
violate any provision of, or result in the breach or the acceleration of, or
entitle any other Person to accelerate (whether after the giving of notice or
lapse of time or both), any material mortgage, indenture, agreement, instrument
or contract to which Company is a party or by which it is bound; or (iii) result
in the creation or imposition of any Lien upon any property, asset or revenue of
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization or approval applicable to Company,
its business or operations, or any of its assets or properties.
(e) Approvals. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or other
Person (including, without limitation, the shareholders of any Person) is
required in connection with the execution and delivery of the Transaction
Documents executed by Company and the performance and consummation of the
transactions contemplated thereby.
(f) No Violation or Default. Company is not in violation of or in
default with respect to (i) its Certificate of Incorporation or Bylaws or any
material judgment, order, writ, decree, statute, rule or regulation applicable
to such Person; (ii) any material mortgage, indenture, agreement, instrument or
contract to which such Person is a party or by which it is bound (nor is there
any waiver in effect which, if not in effect, would result in such a violation
or default), where, in each case, such violation or default, individually, or
together with all such violations or defaults, could reasonably be expected to
have a Material Adverse Effect. No Event of Default or default, which after the
giving of notice or the lapse of time or both would constitute an Event of
Default, has occurred and is continuing.
(g) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending or, to
the knowledge of Company, threatened against Company at law or in equity in any
court or before any other governmental authority which if adversely determined
(i) would (alone or in the aggregate) have a Material Adverse Effect or (ii)
seeks to enjoin, either directly or indirectly, the execution, delivery or
performance by Company of the Transaction Documents or the transactions
contemplated thereby.
(h) Title. Company owns and has good and marketable title in fee
simple absolute to, or a valid leasehold interest in, all real properties and
good title to its other respective assets and properties as reflected in the
most recent Financial Statements delivered to Purchasers (except those assets
and properties disposed of in the ordinary course of business since the date of
such Financial Statements) and all assets and properties acquired by Company
since such date (except those disposed of in the ordinary course of business).
Such assets and properties are subject to no Lien, except for Permitted Liens.
(i) Intellectual Property. To the best of their knowledge, Company
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information, processes
and other intellectual property rights necessary for its business as now
conducted and as proposed to be conducted without any conflict with, or
infringement of the rights of, others.
-3-
<PAGE> 4
(j) Financial Statements. Except as set forth in Item 2(j) of
Schedule II hereto (the "Disclosure Schedule"), the Financial Statements of
Company which have been delivered to the Purchasers, (i) are in accordance with
the books and records of Company, which have been maintained in accordance with
good business practice; and (ii) fairly present the consolidated financial
position of Company as of the dates presented therein and the results of
operations, changes in financial positions or cash flows, as the case may be,
for the periods presented therein. Company has no contingent obligations,
liability for taxes or other outstanding obligations which are material in the
aggregate, except as disclosed in the unaudited Financial Statements as of April
30, 1999 furnished by Company to Purchasers prior to the date hereof.
(k) Equity Securities. Company's total authorized and issued
capitalization is as set forth in Item 2(k)(a) of the Disclosure Schedule. The
Equity Securities of Company have the respective rights, preferences and
privileges set forth in Company's Certificate of Incorporation in effect on the
date hereof. All of the outstanding Equity Securities of the Company have been
duly authorized and are validly issued, fully paid and nonassessable. Except as
expressly referenced herein or as set forth in Item 2(k)(a) of the Disclosure
Schedule, there are as of the date of this Agreement no options, warrants or
rights to purchase Equity Securities of the Company authorized, issued or
outstanding, nor is Company obligated in any other manner to issue shares of its
Equity Securities. There are no restrictions on the transfer of Equity
Securities of Company, other than those imposed by Company's Certificate of
Incorporation and Bylaws as of the date hereof, or relevant state and federal
securities laws, and no holder of any Equity Security of Company is entitled to
preemptive or similar statutory or contractual rights, either arising pursuant
to any agreement or instrument to which Company is a party or that are otherwise
binding upon Company. The offer and sale of all Equity Securities of Company
issued before the Closing Date complied with or were exempt from registration or
qualification under all applicable federal and state securities laws. No Person
has the right to demand or other rights to cause Company to file any
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), relating to any Equity Securities of Company presently
outstanding or that may be subsequently issued, or any right to participate in
any such registration statement.
(l) No Agreements to Sell Assets or Merge. Company has no legal
obligation, absolute or contingent, to any Person to sell the assets of Company
or Company's Subsidiaries (other than sales in the ordinary course of business),
or to effect any merger, consolidation or other reorganization of Company or to
enter into any agreement with respect thereto.
(m) Employee Benefit Plans.
(i) Neither Company nor any Person (each, an "ERISA Affiliate")
which is treated as a single employer with Company under section 414 of the
Internal Revenue Code of 1986, as amended (the "Code") has an employee benefit
plan (an "Employee Benefit Plan") within the meaning of the Employee Retirement
Income Security Act of 1974 (as the same may from time to time be amended or
supplemented, and including any rules or regulations issued in connection
therewith, "ERISA") that is an "employee pension benefit plan" (within the
meaning of section 3(2) of ERISA). Neither Company nor any ERISA Affiliate has
any liability with respect to any post-retirement benefit under any Employee
Benefit Plan which is a welfare plan (as defined in section 3(1) of ERISA),
other than liability for health plan continuation coverage described in Part 6
of Title I(B) of ERISA, which liability for health plan continuation coverage
cannot reasonably be expected to have a Material Adverse Effect.
-4-
<PAGE> 5
(ii) Each Employee Benefit Plan complies, in both form and
operation, in all material respects, with its terms, ERISA and the Code, and no
condition exists or event has occurred with respect to any such Employee Benefit
Plan which would result in the incurrence by either Company or any ERISA
Affiliate of any material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of Company or any
ERISA Affiliate is legally valid and binding and in full force and effect. No
Employee Benefit Plan is being audited or investigated by any governmental
authority or is subject to any pending or threatened claim or suit. Neither
Company nor any ERISA Affiliate nor any fiduciary of any Employee Benefit Plan
has engaged in a prohibited transaction under sections 406 or 407 of ERISA or
section 4975 of the Code (other than transactions which are otherwise exempt
under either Section 408 of ERISA or 4975(d) of the Code).
(iii) Neither Company nor any ERISA Affiliate (A) has incurred
or expects to incur any liability under Title IV of ERISA or Section 412 of the
Code, or (B) contributes to any multiemployer plan within the meaning of ERISA
(a "Multiemployer Plan"). Neither Company nor any ERISA Affiliate has incurred
any material liability (including secondary liability) to any Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan
under section 4201 of ERISA or as a result of a sale of assets described in
section 4204 of ERISA. Neither Company nor any ERISA Affiliate has been notified
that any Multiemployer Plan is in reorganization or insolvent under and within
the meaning of section 4241 or section 4245 of ERISA or that any Multiemployer
Plan intends to terminate or has been terminated under section 4041A of ERISA.
(n) Other Regulations. Company is not subject to regulation under the
Investment Company Act of 1940, or to any federal or state statute or regulation
limiting its ability to incur Indebtedness.
(o) Governmental Charges and Other Indebtedness. Company has filed or
caused to be filed all tax returns which are required to be filed by it. Company
has paid, or made provision for the payment of, all taxes and other levies,
assessments, fees, claims or other charges imposed by any governmental authority
which have or may have become due pursuant to said returns and all other
Indebtedness, except such taxes, levies, assessments, fees, claims or other
charges or Indebtedness, if any, which are being contested in good faith and as
to which adequate reserves (determined in accordance with generally accepted
accounting principles) have been provided or which could not reasonably be
expected to have a Material Adverse Effect if unpaid.
(p) Subsidiaries, etc. Company has no Subsidiaries, and is not a
partner in any partnership or a joint venturer in any joint venture.
(q) Solvency, Etc. Company is Solvent (as defined below) and, after
the execution and delivery of the Transaction Documents and the consummation of
the transactions contemplated thereby, Company will be Solvent. "Solvent" shall
mean, with respect to any Person on any date, that on such date (a) the present
fair saleable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured, (b) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature and (c) such Person is not
engaged in business or a transaction, and is not about in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital.
-5-
<PAGE> 6
(r) Catastrophic Events; Labor Disputes. Neither Company nor its
properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty that could reasonably be expected to have a Material
Adverse Effect. There are no disputes presently subject to grievance procedure,
arbitration or litigation under any of the collective bargaining agreements,
employment contracts or employee welfare or incentive plans to which Company is
a party, and there are no strikes, lockouts, work stoppages or slowdowns, or,
to the best knowledge of Company, jurisdictional disputes or organizing
activity occurring or threatened which could reasonably be expected to have a
Material Adverse Effect.
(s) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a Material Adverse
Effect since March 31, 1999.
(t) Accuracy of Information Furnished. None of the Transaction
Documents and none of the other certificates, statements or information
furnished to Purchasers by or on behalf of Company in connection with the
Transaction Documents or the transactions contemplated thereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Purchasers
recognize that all financial projections furnished to the Purchasers by or on
behalf of Company in connection with the Transaction Documents or the
transactions contemplated thereby are not to be viewed as facts and that actual
results during the period or periods covered by such projections may differ from
the projected or forecasted results.
(u) Certain Agreements of Officers, Employees and Consultants.
(i) No officer, employee or consultant of Company or Company's
Subsidiaries is, or is now expected to be, in violation of any term of any
employment contract, proprietary information agreement, nondisclosure
agreement, noncompetition agreement, or any other contract or agreement or any
restrictive covenant relating to the right of any such officer, employee or
consultant to be employed by Company because of the nature of the business
conducted or to be conducted by Company or relating to the use of trade secrets
or proprietary information of others, and to the best of Company's knowledge,
after due inquiry, the continued employment of Company's officers, employees
and consultants do not subject Company to any liability for any claim or claims
arising out of or in connection with any such contract, agreement, or covenant.
(ii) To the knowledge of Company, no officers of Company, and no
employee or consultant of Company whose termination, either individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
has any present intention of terminating his or her employment or consulting
relationship with Company.
(v) Contracts or Commitments; Indebtedness. Neither Company nor any
of its properties is subject to any material judgment, order, writ, decree,
statute, rule or regulation, or any material mortgage, indenture, agreement,
instrument or contract which could reasonably be expected to have a Material
Adverse Effect. Except for this Agreement and the other Transaction Documents,
and except as set forth in Item 2(v) of the Disclosure Schedule, neither
Company nor any of its Subsidiaries is a party to any contracts or commitments
(or group of related contracts or commitments) involving more than Fifty
-6-
<PAGE> 7
Thousand Dollars ($50,000) or having a term (including renewals or extensions
optional with another party) of more than one (1) year from the date thereof.
Company and its Subsidiaries have no Indebtedness other than Permitted
Indebtedness.
(w) Transactions with Affiliates; Investments: Except as set forth
below or on the Disclosure Schedule, there are no loans, leases, royalty
agreements or other continuing transactions between Company and any Affiliate of
Company, except transactions in the ordinary course of business and on terms at
least as favorable to Company as would be the case in an arms-length transaction
with an unaffiliated Person. Company and its Subsidiaries have no Investments
other than Permitted Investments.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser, for
that Purchaser alone, represents and warrants to Company upon the acquisition
of the Note and Warrant as follows:
(a) Binding Obligation. Such Purchaser has full legal capacity,
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Each of this Agreement and the Preferred Stock and
Warrant issued to such Purchaser is a valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and general principles
of equity.
(b) Securities Law Compliance. Such Purchaser has been advised that
the Preferred Stock and Warrants have not been registered under the Securities
Act, or any state securities laws and, therefore, cannot be resold unless they
are registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration requirements is available. Such
Purchaser is aware that Company is under no obligation to effect any such
registration with respect to the Preferred Stock and Warrants or to file for or
comply with any exemption from registration. Such Purchaser has not been formed
solely for the purpose of making this investment and is purchasing the Preferred
Stock and Warrant(s) to be acquired by such Purchaser hereunder for its own
account for investment, not as a nominee or agent, and not with a view to, or
for resale in connection with, the distribution thereof. Such Purchaser has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the merits and risks of such investment, is able to
incur a complete loss of such investment and is able to bear the economic risk
of such investment for an indefinite period of time. Except as set forth on
Schedule III, such Purchaser is an accredited investor as such term is defined
in Rule 501 of Regulation D under the Securities Act.
(c) Access to Information. Such Purchaser acknowledges that Company
has given such Purchaser access to the corporate records and accounts of Company
and to all information in its possession relating to Company, has made its
officers and representatives available for interview by such Purchaser, and has
furnished such Purchaser with all documents and other information required for
such Purchaser to make an informed decision with respect to the purchase of the
Preferred Stock and Warrant, including without limitation the Company's business
plan.
4. CONDITIONS TO CLOSING OF THE PURCHASERS. Each Purchaser's obligations
at the Closing are subject to the fulfillment, on or prior to the Closing Date,
of all the following conditions, any of which may be waived in whole or in part
by all of the Purchasers:
-7-
<PAGE> 8
(a) Representations and Warranties. The representations and
warranties made by Company in Section 2 hereof shall have been true and correct
when made, and shall be true and correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any notices
required or permitted to be filed after the Closing Date with certain federal
and state securities commissions, Company shall have obtained all governmental
approvals required in connection with the lawful sale and issuance of the Notes
and Warrants.
(c) Legal Requirements. At the Closing, the sale and issuance by
Company, and the purchase by the Purchasers, of the Preferred Stock and Warrants
shall be legally permitted by all laws and regulations to which the Purchasers
or Company are subject.
(d) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers.
(e) Transaction Documents. Company shall have duly executed and
delivered to the Purchasers the following documents:
(A) This Agreement;
(B) The shares of Preferred Stock issued hereunder; and
(C) Each Warrant issued hereunder.
(f) Corporate Documents. Company shall have delivered to the
Purchasers each of the following:
(i) The Certificate of Incorporation of Company, including the
Certificate of Designation, certified as of a recent date prior to the Closing
Date by the Secretary of State of Delaware.
(ii) A Certificate of Good Standing or comparable certificate as
to Company, certified as of a recent date prior to the Closing Date by the
Secretary of State of Delaware.
(iii) A certificate of the Secretary of Company, dated the
Closing Date, certifying (a) that the Certificate of Incorporation of Company,
delivered to Purchasers pursuant to Section 4(g)(i) hereof, is in full force and
effect and has not been amended, supplemented, revoked or repealed since the
date of such certification; (b) that attached thereto is a true and correct copy
of the Bylaws of Company as in effect on the Closing Date; (c) that attached
thereto are true and correct copies of resolutions duly adopted by the Board of
Directors of Company and continuing in effect, which authorize the execution,
delivery and performance by Company of this Preferred Stock and Warrant Purchase
Agreement and the Preferred Stock and Warrants and the consummation of the
transactions contemplated hereby and thereby; and (d) that there are no
proceedings for the dissolution or liquidation of Company (commenced or
threatened); and
-8-
<PAGE> 9
(iv) A certificate of the Secretary of Company, dated the
Closing Date, certifying the incumbency, signatures and authority of the
officers of Company authorized to execute and deliver this Preferred Stock
and Warrant Purchase Agreement and the Preferred Stock and Warrants on
behalf of Company and perform the Company's obligations thereunder on
behalf of Company.
5. CONDITIONS TO OBLIGATIONS OF COMPANY. Company's obligation to issue
and sell the Notes and Warrants at the Closing is subject to the fulfillment, on
or prior to the Closing Date, of the following conditions, any of which may be
waived in whole or in part by Company:
(a) Representations and Warranties. The representations and
warranties made by the Purchasers in Section 3 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any notices
required or permitted to be filed after the Closing Date with certain federal
and state securities commissions, Company shall have obtained all governmental
approvals required in connection with the lawful sale and issuance of the
Preferred Stock and Warrants.
(c) Legal Requirements. At the Closing, the sale and issuance by
Company, and the purchase by the Purchasers, of the Preferred Stock and Warrants
shall be legally permitted by all laws and regulations to which the Purchasers
or Company are subject.
(d) Purchase Price. Each Purchaser shall have delivered to Company
the Purchase Price in respect of the Preferred Stock and Warrant(s) being
purchased by such Purchaser referenced in Section 1(b) hereof.
6. MISCELLANEOUS.
(a) Waivers and Amendments. Any provision of this Agreement may be
amended, waived or modified only upon the written consent of Company and a
Majority in Interest of the Purchasers.
(b) Governing Law. This Agreement and all actions arising out of or
in connection with this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of law provisions of the State of Delaware or of any other state.
(c) Survival. The representations, warranties, covenants and
agreements made herein shall survive the execution and delivery of this
Agreement.
(d) Successors and Assigns. Subject to the restrictions on transfer,
the rights and obligations of Company and the Purchasers of the Preferred Stock
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.
(e) Entire Agreement. This Agreement together with the Preferred
Stock and Warrants and other Transaction Documents constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
-9-
<PAGE> 10
(f) Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail,
postage prepaid, or by recognized overnight courier or personal delivery,
addressed (i) if to a Purchaser, at such Purchaser's address set forth in the
Schedule of Purchasers attached as Schedule I, or at such other address as such
Purchaser shall have furnished Company in writing, or (ii) if to Company, at
its address set forth at the beginning of this Agreement, or at such other
address as Company shall have furnished to the Purchasers in writing.
(g) Expenses. Company shall pay on demand all reasonable fees and
expenses, including reasonable attorneys fees and expenses in connection with
the preparation, execution and delivery of this Agreement and the other
Transaction Documents. Company shall pay on demand all reasonable fees and
expenses, including reasonable attorneys' fees and expenses, incurred by
Purchasers with respect to any amendment or waivers hereof requested by Company
or in the enforcement or attempted enforcement of any of the obligations of
Company to the Purchasers under the Transaction Documents or in preserving any
of the Purchasers' rights and remedies (including, without limitation, all such
fees and expenses incurred in connection with any "workout" or restructuring
affecting the Transaction Documents or the obligations thereunder or any
bankruptcy or similar proceeding involving Company or any of its Subsidiaries).
(h) Separability of Agreements; Severability of this Agreement.
Company's agreement with each of the Purchasers is a separate agreement and the
sale of the Preferred Stock and Warrants to each of the Purchasers is a
separate sale. Unless otherwise expressly provided herein, the rights of each
Purchaser hereunder are several rights, not rights jointly held with any of the
other Purchasers. Any invalidity, illegality or limitation on the
enforceability of the Agreement or any part thereof, by any Purchaser whether
arising by reason of the law of the respective Purchaser's domicile or
otherwise, shall in no way affect or impair the validity, legality or
enforceability of this Agreement with respect to other Purchasers. If any
provision of this Agreement shall be judicially determined to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
COMPANY:
ACUBID.COM, INC.
a Delaware corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
PURCHASERS:
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-12-
<PAGE> 12
SCHEDULE I
SCHEDULE OF PURCHASERS
Share of Shares Subject
Name and Address Preferred Stock to Warrant Purchase Price
- ---------------- --------------- -------------- --------------
<PAGE> 13
SCHEDULE II
DISCLOSURE SCHEDULE
<PAGE> 14
A C U B I D . C O M I N C .
BALANCE SHEET
As of April 30, 1999
<TABLE>
<CAPTION>
Apr 30, '99
-------------
<S> <C>
ASSETS
Current Assets
Checking/Savings
1050 - WCMA 594,154.09
1575 - K Cano Trust Fund 402,848.00
-------------
Total Checking/Savings 997,000.09
Accounts Receivable
1200 - Accounts Rec. Trade 10,701.94
-------------
Total Accounts Receivable 10,701.94
Other Current Assets
1290 - Allowance for Doubtful Accounts (885.00)
1300 - Inventory - AcuVision 1000 5,858.89
1310 - Inventory - Computer Chips 100.00
1320 - Inventory - AcuVision VTA 10,969.80
1350 - Work-in-progress 6,589.45
1380 - Inventory Asset (2,500.00)
1405 - Prepaid Advance Royalties 1,614.00
-------------
Total Other Current Assets 21,648.14
-------------
Total Current Assets 1,029,350.17
Fixed Assets
1830 - Computer Equipment 3,000.00
1831 - Computer Equip - Accum Amort (1,950.00)
1840 - Equipment 18,905.72
1841 - Equipment - Accum Amort (11,222.17)
1850 - Furniture and Fixtures 2,214.85
1851 - Furn and Fix - Accum Amort (1,592.25)
1880 - Accum Amort (489.00)
-------------
Total Fixed Assets 8,714.15
-------------
TOTAL ASSETS 1,038,144.22
=============
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
2100 - Accounts Payable Trade 26,919.13
-------------
Total Accounts Payable 26,919.13
Other Current Liabilities
2200 - Accrued Liabilities 5,000.00
2220 - Payroll Tax Liabilities 807.07
-------------
Total Other Current Liabilities 5,807.07
-------------
Total Current Liabilities 32,726.20
-------------
Total Liabilities 32,726.20
Equity
3010 - Common Shares - Class 5,578,388.83
3020 - Additional Paid in Capital 1,257,357.09
3700 - Retained Earnings (6,863,519.78)
Net Income (74,955.04)
-------------
Total Equity 1,005,418.12
-------------
TOTAL LIABILITIES & EQUITY 1,038,144.32
=============
</TABLE>
Page 1
<PAGE> 15
ITEM 2(j)
FINANCIAL STATEMENTS
<PAGE> 16
ITEM 2(k)(a)
50,000,000 shares of Common Stock, par value $0.001
10,000,000 shares of Preferred Stock, par value $0.001
<PAGE> 17
ITEM 2(k)(b)
Outstanding Options
<TABLE>
<CAPTION>
# of Shares
Name Subject to Options Exercise Price
- ----------------- ------------------ --------------
<S> <C> <C>
Lawrence Schaffer 100,000 $0.45
Norman Schwartz 100,000 $0.45
Waddy Stephenson 100,000 $0.45
Kurt Bevacqua 200,000 $0.45
Joe Morgan 25,000 $0.45
Larry Herbinaux 10,000 $0.45
Devin Singleton 10,000 $0.45
</TABLE>
<PAGE> 18
EXHIBIT A
CERTIFICATE OF DESIGNATION
<PAGE> 19
EXHIBIT B
FORM OF WARRANT
<PAGE> 1
EXHIBIT 10.14
PROPRIETARY INFORMATION AGREEMENT
This Agreement is entered into on the date signed below by and between
AcuBid.com, Inc., ("AcuBid.com, Inc." or "Corporation") and ______________.
_____________, Salesman/Employee/Consultant ("S/E/C").
1. CONFIDENTIAL INFORMATION AND INVENTIONS
During employment by the Corporation, S/E/C will have access to certain
confidential information and materials including, but not limited to, formulas,
patterns, devices, processes, compilations, records, specifications, financial
data, manner of operation, customer/client lists, costing procedures, custom
application source code, custom scripts, website graphic design, web design
content, agreements and understandings with service providers, agreements and
contracts with content aggregators, web page source code, network design and
topology, agreements and understandings of contracts with third party vendors,
information concerning union relationships, system integration, customer
billing, customer support, originated in the Corporation or disclosed to the
Corporation by others, under agreements to hold the same confidential
("Confidential Information"); and S/E/C may during the period of employment
make, develop, or conceive inventions, discoveries, concepts, ideas,
information and improvements, either patentable or not, which relate to or are
useful in the business or activities in which the Corporation is or may have
become engaged, and which may or may not also constitute confidential
information ("Inventions").
2. RESTRICTION ON USE OF CONFIDENTIAL INFORMATION
S/E/C agrees not to utilize any such confidential information for his own
benefit nor to disclose, disseminate, lecture upon, or publish articles about
any such confidential information to anyone outside the Corporation or to any
officer or employee of the Corporation not also having access to such
information, at any time either during or after employment by the Corporation,
unless the Corporation expressly consents beforehand in writing.
Page 1 of 7
<PAGE> 2
3. CORPORATION'S OWNERSHIP OF INVENTIONS
S/E/C agrees to disclose promptly, in writing, if so requested, to the
President, any Inventions that he may make, develop, or conceive during the
period of his employment by the Corporation or by its predecessors or
successors in business. All such Inventions shall be and remain the property of
the Corporation. S/E/C hereby assigns (and agrees to assign) to the
Corporation all S/E/C's right, title and interest in any such Inventions,
whether or not during the period of his employment such inventions may be
reduced to practice, and to execute all patent applications, assignments and
other documents, and take all other steps necessary, to vest in the Corporation
the entire right, title and interest in and to those Inventions and in and to
any patents obtainable therefor, in the United States and in foreign countries.
4. COSTS OF PATENT APPLICATIONS
If it chooses to prosecute the applications for patent for any such
Inventions, it being understood that the Corporation is not obligated to do so,
the Corporation shall bear the entire expense of preparing, filing, and
prosecuting such applications, through patent counsel appointed by the
Corporation.
5. RIGHT OF USE
It is understood and agreed that the Corporation shall have the royalty
free right to use, or to adapt and to develop in any way all inventions
conceived or made by S/E/C, whether or not patentable, including, but not
limited to, processes, methods, formulas, and techniques, as well as
improvements thereof or know-how related thereto, or not to use them at all
should the Corporation so choose.
6. PROPERTY OF THE CORPORATION
All records and other materials pertaining to Confidential Information,
whether developed by S/E/C or others, shall be and remain the property of the
Corporation. Upon termination of S/E/C's employment with the Corporation, all
documents, records, notebooks and other materials of any kind pertaining to or
containing Confidential Information then in S/E/C's possession, whether
prepared by S/E/C or others will be left with a return to the Corporation.
Page 2 of 7
<PAGE> 3
7. PRIOR INVENTIONS
Except as listed on Appendix A which is attached to this Agreement, S/E/C
will not assert any rights to any Inventions, discoveries, concepts, ideas, or
improvements thereof or know-how related thereto, as having been made or
acquired by S/E/C prior to being employed by the Corporation, or since then,
and not otherwise covered by the terms of this Agreement.
8. UNRELATED INVENTIONS
S/E/C shall not be obligated to assign to the Corporation any Invention,
made by him while in the Corporation's employ which does not relate to any
business or activity in which the Corporation is or may become engaged, except
that he is still obligated if the same relates to or is based on Confidential
or Proprietary Information to which S/E/C shall have had access during and by
virtue of his employment arising out of work assigned to him by the
Corporation. Nor shall S/E/C be obligated to assign any Invention which may be
wholly conceived by S/E/C after he leaves the employ of the Corporation, except
that he is still obligated if such Invention shall involve the utilization of
Confidential or Proprietary Information obtained while in the employ of the
Corporation. Nor shall S/E/C be obligated to assign any Invention which relates
to or would be useful in any business or activity in which the Corporation is
engaged if such Invention was conceived and reduced to practice by S/E/C prior
to his employment with the Corporation, provided that all such Inventions are
listed at the time of employment on the attached Appendix A.
9. MISAPPROPRIATION OF TRADE SECRETS
S/E/C promises and agrees that he or she shall not misuse, misappropriate,
or disclose any of the trade secrets or Confidential Information described
herein, directly or indirectly, or use them in any way, either during the term
of this Agreement or at any time thereafter, except as required in the course
of his or her employment.
10. NONCOMPETITION DURING THE TERM OF EMPLOYMENT
During the term of the working relationship, S/E/C shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual
or representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of AcuBid.com, Inc.
Page 3 of 7
<PAGE> 4
11. UNFAIR COMPETITION AFTER TERMINATION OF EMPLOYMENT
S/E/C acknowledges and agrees that the sale or unauthorized use or
disclosure of any of AcuBid.com, Inc.'s trade secrets or Confidential
Information obtained by S/E/C during his or her working relationship with
AcuBid.com, Inc. constitute unfair competition. S/E/C promises and agrees not
to engage in any unfair competition with Employer either during the term of
this Agreement or at any time thereafter.
12. SOLICITING CUSTOMERS AFTER TERMINATION OF EMPLOYMENT
(a) S/E/C acknowledges and agrees that the names and addresses of
AcuBid.com, Inc.'s customers constitute trade secrets of AcuBid.com, Inc. and
that the sale of unauthorized use or disclosure of any of AcuBid.com, Inc.'s
trade secrets obtained by S/E/C during his or her employment with AcuBid.com,
Inc. constitute unfair competition. S/E/C promises and agrees not to engage in
any unfair competition with AcuBid.com, Inc.
(b) For a period of one years immediately following the termination of his
or her working relationship with AcuBid.com, Inc., S/E/C shall not directly or
indirectly make known to any person, firm, or corporation the names or
addresses of any of the customers or clients of AcuBid.com, Inc. or any other
information pertaining to them, or call on, solicit, take away, or attempt to
call on, solicit, or take away of the customers or clients of AcuBid.com, Inc.
on whom S/E/C called or with whom S/E/C became acquainted during his or her
working relationship with AcuBid.com, Inc., either for himself or herself or
the any other person, firm, or corporation.
13. NO BREACH
S/E/C represents that his/her employment with the Corporation does not and
will not breach any agreement or duty which S/E/C has with anyone else to keep
in confidence confidential information belonging to others. S/E/C will not
disclose to the Corporation or use in its behalf any confidential information
belonging to others.
Page 4 of 7
<PAGE> 5
14. IRREPARABLE INJURY
S/E/C acknowledges the failure to carry out any obligations, or breach by
S/E/C of any provision herein, will constitute immediate and irreparable damage
to Corporation which cannot be fully and adequately compensated by money
damages and which will warrant preliminary and other injunctive relief, an
order for specific performance, and other equitable relief. S/E/C also
understands that other action may be taken and remedies enforced against S/E/C.
15. PRIOR AGREEMENTS
This Agreement supersedes any prior contemporaneous agreement concerning
assignment of patent rights or trade secrets between Corporation and S/E/C.
16. SUCCESSORS AND ASSIGNS
S/E/C's obligation under this Agreement shall continue after termination
by the Corporation. This Agreement shall inure to the benefit of the
Corporation, its successors, assigns and designees and is binding upon the
assigns, executors and administrators and other legal representatives of S/E/C.
17. GOVERNING LAW
This Agreement shall be construed in accordance with, and governed for all
purposes, by the law of the State of California and venue shall be in the
County of San Diego.
18. ATTORNEYS' FEES AND COSTS
If any legal action or any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties will be entitled to
recover reasonable attorney fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
Page 5 of 7
<PAGE> 6
IN WITNESS WHEREOF the parties have signed this Agreement as of the
_______ day of _____________________, 19____.
AcuBid.com, Inc.,
Dated: By:
---------------------------- --------------------------------
Lawrence Schaffer
President
Dated: S/E/C
----------------------------
--------------------------------
(Signature)
--------------------------------
(Print Name)
Page 6 of 7
<PAGE> 7
APPENDIX A TO S/E/C CONFIDENTIAL INFORMATION
AND INVENTIONS AGREEMENT
I represent that I have indicated on this Appendix all Inventions (as
defined in the Agreement) in which I owned any right or interest prior to my
employment with the Corporation. I agree that any present or future Inventions
not listed in this Appendix are subject to assignment under the attached S/E/C
Confidential Information and Inventions Agreement.
Brief Description of Right, Title or Interest
Inventions and Date Acquired
- ----------------------------------- ------------------------------------
Dated:
---------------------------- ------------------------------------
S/E/C
Page 7 of 7
<PAGE> 8
IN WITNESS WHEREOF the parties have signed this Agreement as of the 15
day of October, 1999.
AcuBid.com, Inc.
Dated: 10/18/99 By: /s/ LAWRENCE SCHAFFER
----------------- -----------------------------
Lawrence Schaffer
President
Dated: 10/15/99 S/E/C
-----------------
/s/ MICHAEL A. SCHAFFER
-----------------------------
(Signature)
Michael A. Schaffer
-----------------------------
(Print Name)
Page 1 of 2
<PAGE> 9
IN WITNESS WHEREOF the parties have signed this Agreement as of the
18 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
-------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/18/99 S/E/C
--------------
/s/ Richard E. Schwartz
------------------------------------
(Signature)
Richard E. Schwartz
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 10
IN WITNESS WHEREOF the parties have signed this Agreement as of the
18 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/18/99 S/E/C
---------------
/s/ Lawrence Schaffer
------------------------------------
(Signature)
Lawrence Schaffer
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 11
IN WITNESS WHEREOF the parties have signed this Agreement as of the
13 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/13/99 S/E/C
---------------
/s/ Keith Garcia
------------------------------------
(Signature)
Keith Garcia
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 12
IN WITNESS WHEREOF the parties have signed this Agreement as of the
15 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/15/99 S/E/C
---------------
/s/ Waddy Stephenson
------------------------------------
(Signature)
Waddy Stephenson
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 1
EXHIBIT 10.15
PROPRIETARY INFORMATION AGREEMENT
This Agreement is entered into on the date signed below by and between
AcuBid.com, Inc., ("AcuBid.com, Inc." or "Corporation") and ___________________
______________________, Salesman/Employee/Consultant ("S/E/C").
1. CONFIDENTIAL INFORMATION AND INVENTIONS
During employment by the Corporation, S/E/C will have access to certain
confidential information and materials including, but not limited to, formulas,
patterns, devices, processes, compilations, records, specifications, financial
data, manner of operation, customer/client lists, costing procedures, custom
application source code, custom scripts, website graphic design, web design
content, agreements and understandings with service providers, agreements and
contracts with content aggregators, web page source code, network design and
topology, agreements and understandings of contracts with third party vendors,
information concerning union relationships, system integration, customer
billing, customer support, originated in the Corporation or disclosed to the
Corporation by others, under agreements to hold the same confidential
("Confidential Information"); and S/E/C may during the period of employment
make, develop, or conceive inventions, discoveries, concepts, ideas, information
and improvements, either patentable or not, which relate to or are useful in the
business or activities in which the Corporation is or may have become engaged,
and which may or may not also constitute confidential information
("Inventions").
2. RESTRICTION ON USE OF CONFIDENTIAL INFORMATION
S/E/C agrees not to utilize any such confidential information for his
own benefit nor to disclose, disseminate, lecture upon, or publish articles
about any such confidential information to anyone outside the Corporation or to
any officer or employee of the Corporation not also having access to such
information, at any time either during or after employment by the Corporation,
unless the Corporation expressly consents beforehand in writing.
Page 1 of 7
<PAGE> 2
3. CORPORATION'S OWNERSHIP OF INVENTIONS
S/E/C agrees to disclose promptly, in writing, if so requested, to the
President, any Inventions that he may make, develop, or conceive during the
period of his employment by the Corporation or by its predecessors or
successors in business. All such Inventions shall be and remain the property of
the Corporation. S/E/C hereby assigns (and agrees to assign) to the Corporation
all S/E/C's right, title and interest in any such Inventions, whether or not
during the period of his employment such Inventions may be reduced to practice,
and to execute all patent applications, assignments and other documents, and
take all other steps necessary, to vest in the Corporation the entire right,
title and interest in and to those Inventions and in and to any patents
obtainable therefor, in the United States and in foreign countries.
4. COSTS OF PATENT APPLICATIONS
If it chooses to prosecute the applications for patent for any such
Inventions, it being understood that the Corporation is not obligated to do so,
the Corporation shall bear the entire expense of preparing, filing, and
prosecuting such applications, through patent counsel appointed by the
Corporation.
5. RIGHT OF USE
It is understood and agreed that the Corporation shall have the royalty
free right to use, or to adapt and to develop in any way all inventions
conceived or made by S/E/C, whether or not patentable, including, but not
limited to, processes, methods, formulas, and techniques, as well as
improvements thereof or know-how related thereto, or not to use them at all
should the Corporation so choose.
6. PROPERTY OF THE CORPORATION
All records and other materials pertaining to Confidential Information,
whether developed by S/E/C or others, shall be and remain the property of the
Corporation. Upon termination of S/E/C's employment with the Corporation, all
documents, records, notebooks and other materials of any kind pertaining to or
containing Confidential Information then in S/E/C's possession, whether
prepared by S/E/C or others will be left with a return to the Corporation.
Page 2 of 7
<PAGE> 3
7. PRIOR INVENTIONS
Except as listed on Appendix A which is attached to this Agreement, S/E/C
will not assert any rights to any Inventions, discoveries, concepts, ideas, or
improvements thereof or know-how related thereto, as having been made or
acquired by S/E/C prior to being employed by the Corporation, or since then,
and not otherwise covered by the terms of this Agreement.
8. UNRELATED INVENTIONS
S/E/C shall not be obligated to assign to the Corporation any Invention,
made by him while in the Corporation's employ which does not relate to any
business or activity in which the Corporation is or may become engaged, except
that he is still obligated if the same relates to or is based on Confidential
or Proprietary Information to which S/E/C shall have had access during and by
virtue of his employment arising out of work assigned to him by the
Corporation. Nor shall S/E/C be obligated to assign any Invention which may be
wholly conceived by S/E/C after he leaves the employ of the Corporation, except
that he is still obligated if such Invention shall involve the utilization of
Confidential or Proprietary Information obtained while in the employ of the
Corporation. Nor shall S/E/C be obligated to assign any Invention which relates
to or would be useful in any business or activity in which the Corporation is
engaged if such Invention was conceived and reduced to practice by S/E/C prior
to his employment with the Corporation, provided that all such Inventions are
listed at the time of employment on the attached Appendix A.
9. MISAPPROPRIATION OF TRADE SECRETS
S/E/C promises and agrees that he or she shall not misuse, misappropriate,
or disclose any of the trade secrets or Confidential Information described
herein, directly or indirectly, or use them in any way, either during the term
of this Agreement or at any time thereafter, except as required in the course
of his or her employment.
10. NONCOMPETITION DURING THE TERM OF EMPLOYMENT
During the term of the working relationship, S/E/C shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of AcuBid.com, Inc.
Page 3 of 7
<PAGE> 4
11. UNFAIR COMPETITION AFTER TERMINATION OF EMPLOYMENT
S/E/C acknowledges and agrees that the sale or unauthorized use or
disclosure of any of AcuBid.com, Inc.'s trade secrets or Confidential
Information obtained by S/E/C during his or her working relationship with
AcuBid.com, Inc. constitute unfair competition. S/E/C promises and agrees not
to engage in any unfair competition with Employer either during the term of
this Agreement or at any time thereafter.
12. SOLICITING CUSTOMERS AFTER TERMINATION OF EMPLOYMENT
(a) S/E/C acknowledges and agrees that the names and addresses of
AcuBid.com, Inc.'s customers constitute trade secrets of AcuBid.com, Inc. and
that the sale of unauthorized use or disclosure of any of AcuBid.com, Inc.'s
trade secrets obtained by S/E/C during his or her employment with AcuBid.com,
Inc. constitute unfair competition. S/E/C promises and agrees not to engage in
any unfair competition with AcuBid.com, Inc.
(b) For a period of ten years immediately following the termination of
his or her working relationship with AcuBid.com, Inc., S/E/C shall not directly
or indirectly make known to any person, firm, or corporation the names or
addresses of any of the customers or clients of AcuBid.com, Inc. or any other
information pertaining to them, or call on, solicit, take away, or attempt to
call on, solicit, or take away of the customers or clients of AcuBid.com, Inc.
on whom S/E/C called or with whom S/E/C became acquainted during his or her
working relationship with AcuBid.com, Inc., either for himself or herself or the
any other person, firm, or corporation.
13. NO BREACH
S/E/C represents that his/her employment with the Corporation does not and
will not breach any agreement or duty which S/E/C has with anyone else to keep
in confidence confidential information belonging to others. S/E/C will not
disclose to the Corporation or use in its behalf any confidential information
belonging to others.
Page 4 of 7
<PAGE> 5
14. IRREPARABLE INJURY
S/E/C acknowledges the failure to carry out any obligations, or breach by
S/E/C of any provision herein, will constitute immediate and irreparable damage
to Corporation which cannot be fully and adequately compensated by money
damages and which will warrant preliminary and other injunctive relief, an
order for specific performance, and other equitable relief. S/E/C also
understands that other action may be taken and remedies enforced against S/E/C.
15. PRIOR AGREEMENTS
This Agreement supersedes any prior contemporaneous agreement concerning
assignment of patent rights or trade secrets between Corporation and S/E/C.
16. SUCCESSORS AND ASSIGNS
S/E/C's obligation under this Agreement shall continue after termination
by the Corporation. This Agreement shall inure to the benefit of the
Corporation, its successors, assigns and designees and is binding upon the
assigns, executors and administrators and other legal representatives of S/E/C.
17. GOVERNING LAW
This Agreement shall be construed in accordance with, and governed for all
purposes, by the law of the State of California and venue shall be in the
County of San Diego.
18. ATTORNEYS' FEES AND COSTS
If any legal action or any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties will be entitled to
recover reasonable attorney fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
Page 5 of 7
<PAGE> 6
IN WITNESS WHEREOF the parties have signed this Agreement as of the
______ day of ______________, 19________.
AcuBid.com, Inc.,
Dated: By:
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: S/E/C
---------------
------------------------------------
(Signature)
------------------------------------
(Print Name)
Page 6 of 7
<PAGE> 7
APPENDIX A TO S/E/C CONFIDENTIAL INFORMATION
AND INVENTIONS AGREEMENT
I represent that I have indicated on this Appendix all Inventions (as
defined in the Agreement) in which I owned any right or interest prior to my
employment with the Corporation. I agree that any present or future Inventions
not listed in this Appendix are subject to assignment under the attached S/E/C
Confidential Information and Inventions Agreement.
Brief Description of Right, Title or Interest
Inventions and Date Acquired
- ----------------------------------- ------------------------------------
Dated:
---------------------------- ------------------------------------
S/E/C
Page 7 of 7
<PAGE> 8
IN WITNESS WHEREOF the parties have signed this Agreement as of the
7th day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/7/99 S/E/C
---------------
/s/ Angelica A. Lauriano
------------------------------------
(Signature)
Angelica A. Lauriano
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 9
IN WITNESS WHEREOF the parties have signed this Agreement as of the
7th day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/7/99 SEC
---------------
/s/ Richard Hein
------------------------------------
(Signature)
Richard Hein
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 10
IN WITNESS WHEREOF the parties have signed this Agreement as of the
7th day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/7/99 SEC
---------------
/s/ Les Greene
------------------------------------
(Signature)
Les Greene
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 11
IN WITNESS WHEREOF the parties have signed this Agreement as of the
13 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/13/99 S/E/C
---------------
/s/ Norman Schwartz
------------------------------------
(Signature)
Norman Schwartz
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 12
IN WITNESS WHEREOF the parties have signed this Agreement as of the
14 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/14/99 S/E/C
---------------
/s/ Margaret Rose
------------------------------------
(Signature)
Margaret Rose
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 13
IN WITNESS WHEREOF the parties have signed this Agreement as of the
18 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/18/99 S/E/C
---------------
/s/ Byron A. Boner
------------------------------------
(Signature)
Byron A. Boner
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 14
IN WITNESS WHEREOF the parties have signed this Agreement as of the
13 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/13 99 S/E/C
---------------
/s/ Justin Paine
------------------------------------
(Signature)
Justin Paine
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 15
IN WITNESS WHEREOF the parties have signed this Agreement as of the
7 day of October, 1999.
AcuBid.com, Inc.,
Dated: 10/18/99 By: /s/ Lawrence Schaffer
--------------- ------------------------------------
Lawrence Schaffer
President
Dated: 10/7/99 S/E/C
---------------
/s/ Natalie Blenderman
------------------------------------
(Signature)
Natalie Blenderman
------------------------------------
(Print Name)
Page 1 of 2
<PAGE> 1
EXHIBIT 16
[KELLY & COMPANY LETTERHEAD]
October 20, 1999
Securities Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Gentlemen:
We have read the statements made by AcuBid.Com, Inc. in their Form 10SB, Part
II, Item 3, paragraphs 3 and 4, which we understand will be filed with the
Commission pursuant to Regulation SB. We agree with the statements in these
paragraphs concerning our firm.
Very truly yours,
/s/ KELLY & COMPANY
Kelly & Company
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<PERIOD-START> SEP-01-1997 SEP-01-1998
<PERIOD-END> AUG-31-1998 JUN-30-1999
<CASH> 9,870 807,471
<SECURITIES> 0 0
<RECEIVABLES> 11,565 25
<ALLOWANCES> 4,650 0
<INVENTORY> 4,778 81,136
<CURRENT-ASSETS> 27,727 895,076
<PP&E> 4,799 80,296
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 32,526 975,372
<CURRENT-LIABILITIES> 250,766 126,340
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<COMMON> 2,640 5,631
<OTHER-SE> (6,955,233) (7,986,266)
<TOTAL-LIABILITY-AND-EQUITY> 32,526 975,372
<SALES> 157,140 0
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