<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------------
STOCKPOINT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 7375 36-3775977
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
2600 CROSSPARK ROAD
CORALVILLE, IOWA 52241
(319) 626-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------------------
WILLIAM MCNALLY
GENERAL COUNSEL
STOCKPOINT, INC.
2600 CROSSPARK ROAD
CORALVILLE, IOWA 52241
(319) 626-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------------
COPIES TO:
THOMAS MARTIN, ESQ. JEFFREY C. ROBBINS, ESQ.
KIRK COZINE, ESQ. ANNA C. LINDER, ESQ.
DORSEY & WHITNEY LLP MESSERLI & KRAMER P.A.
PILLSBURY CENTER SOUTH 1800 FIFTH STREET TOWERS
220 SOUTH SIXTH STREET 150 SOUTH FIFTH STREET
MINNEAPOLIS, MINNESOTA 55402 MINNEAPOLIS, MN 55402
(612) 340-2600 (612) 672-3600
FAX: (612) 340-8738 FAX: (612) 672-3777
-----------------------
<PAGE> 2
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
-----------------------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
Title of Each Class of Proposed Maximum Aggregate Amount of
Securities to be Registered Offering Price (1) Registration Fee
Common Stock, $.01 par value........ $45,000,000 $11,880
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE> 3
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS Subject to Completion dated March 31, 2000
SHARES
[LOGO] STOCKPOINT
COMMON STOCK
---------------
We are an Internet services company that provides global online market
analysis tools and financial information. This is the initial public offering of
our common stock and no public market currently exists for our common stock.
We are offering _____ shares of our common stock. We currently expect the
initial public offering price will be between _____ and _____ per share. We have
applied for our common stock to be quoted on the Nasdaq National Market under
the symbol "STKP."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE REGULATOR HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Per Share Total
- -------------------------------------------------------------------------------
<S> <C> <C>
Public offering price $ $
- -------------------------------------------------------------------------------
Underwriting discount $ $
- -------------------------------------------------------------------------------
Proceeds, before expenses, to Stockpoint $ $
- -------------------------------------------------------------------------------
</TABLE>
The underwriters may purchase up to ________ additional shares of common
stock from us at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over- allotments.
The underwriters expect to deliver the shares of common stock to purchasers
in Newport Beach, California on or about _______________, 2000.
[GRAPHIC] ROTH CAPITAL PARTNERS, INC.
The date of this prospectus is ________, 2000
<PAGE> 4
INSIDE COVER PAGE-- DESCRIPTION OF ARTWORK
Text at top of page reads: "Stockpoint seamlessly integrates customizable
financial content and applications into client web sites." To the right of the
text is the Stockpoint logo. Below the text are 11 client web site pages.
In the upper left-hand corner is the web site page of WR HAMBRECHT + CO,
depicting quote information for Microsoft Corp. Below the web page there is text
that reads: "WR Hambrecht + Co" and "wrhambrecht.com." Overlaying a portion of
this web page is the web page of Italia-iNvest.com depicting quote information
for Fiat in the Italian language. Below the web page is text that reads
"GlobalNetFinancial.com, Inc." and "italia-invest.com."
In the upper middle of the page is the web site page of LookSmart Ltd.,
depicting performance information for five individual stocks. The performance
information includes Market Price, Today's Change, Shares, Current Value, $
Gain/Loss and % Gain/Loss. Above the web page, there is text that reads:
"LookSmart Ltd".and "money.looksmart.com"
In the upper-right corner are the web site pages of National Discount Brokers
and SURETRADE, Inc. National Discount Brokers' web site page depicts
"stockfinder pro" and several optional sample screens a viewer can select. The
sample screens include: a Blue Chip stocks screen, Growth & Value Screen, Strong
Growth Screen and High Dividend Yield Screen. The web site page of
SURETRADE.COM. overlays a portion of National Discount Brokers' web page,
depicting "Fund Finder Pro" with twenty two Fund objectives that a viewer can
select. Below the web site page of SURETRADE.COM is text that reads: "SURETRADE,
INC." and " suretrade.com."
In the lower right-hand corner are the web site pages of Worldly Information
Network and Barclays Global Investors. The web page of Worldly Information
Network includes a graph of the Dow Jones Industrial Average and "global
indexes" for the Americas, Asia and Europe. The Americas indexes include Brazil
Bovespa Index, DJ Industrials, Dow Jones 20 Bond Average and Mexican Bolsa.
Below the web site is text that reads: "Worldly Information Network, Inc" and
"Worldlyinvestor.com". The Asia indexes include Australian All Ordinaries and
Hong Kong Seng.
Barclays Global Investors web site page overlays a portion of the
worldlyinvestors.com's web page. The background screen of Barclays Global
Investors' web site page is black, and the screen shows "Currency Calculator"
and a list of currencies a viewer can choose from. Below the web site page of
Barclays Global Investors, there is text that reads: "Barclays Global Investors
"and" barclaysglobal.com.".
In the lower middle of the page are the web site pages of A.B. Watley, Inc. and
MyWay.com. The MyWay.com web site depicts AT&T Corporation and its Analyst
Rating Summary, which includes Analyst Opinions and Average Recommendation.
Below the web site page of MyWay.com there is text that reads "MyWay.com" and
"myway.com." The web page of A.B. Watley, Inc. depicts three graphs: Equity
Indices, Interest Rates and Currency tables. Right below the three tables, there
is text that reads: "A.B. Watley Inc. is a wholly owned subsidiary of A.B.
Watley Group Inc." Below A.B. Watley's web site page there is text that reads:
"A.B. Watley Group Inc." and "abwatley.com."
In the lower left-hand corner are the web site pages of Robertson Stephens and
Quick & Reilly. The Robertson Stephens screen shows a graph named "The Kebdex"
and a viewer can click either "Weekly" or "interactive" to view different
charts. Above the web site page there is text that reads: "Robertson Stephens
"and" internetstocks.com". Quick & Reilly's web site page shows a graph of
"Bristol Myers Squibb Co." dated November 16, 1999. The lower half of the web
site page shows "Indicators and Display" a viewer can select. Below the web site
page reads "Quick & Reilly" and "quickandreilly.com."
<PAGE> 5
TABLE OF CONTENTS
Prospectus Summary......................................................... 4
Risk Factors............................................................... 7
Forward-Looking Statements................................................. 14
Use of Proceeds............................................................ 15
Dividend Policy............................................................ 15
Dilution................................................................... 16
Capitalization............................................................. 17
Selected Consolidated Financial Information................................ 18
Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 20
Business.................................................................. 27
Management................................................................. 38
Certain Transactions....................................................... 43
Principal Stockholders..................................................... 45
Description of Capital Stock............................................... 46
Shares Eligible for Future Sale............................................ 48
Underwriting............................................................... 50
Legal Matters.............................................................. 51
Experts.................................................................... 52
Where You Can Find More Information........................................ 52
Index to Financial Statements.............................................. F-1
------------------------
In making a decision to buy our common stock, you should only rely on the
information contained in this prospectus. We have not authorized anyone to
provide you with other information. We are offering to sell these shares only
where it is legal to sell them. The information in this prospectus is complete
and accurate as to the date on the front cover, but the information may have
changed since that date.
3
<PAGE> 6
PROSPECTUS SUMMARY
Because this is only a summary, it does not contain all of the information
that may be important to you. For a more complete understanding of this
offering, we encourage you to read the entire prospectus, including the detailed
information and consolidated financial statements that it contains, before
making an investment decision.
STOCKPOINT
Stockpoint is a leading business-to-business provider of global online
market analysis tools and financial information. We integrate sophisticated
financial applications to provide our clients customized financial web pages
that we host using our proprietary architecture. This enables our clients to
outsource their financial web page production and maintenance, and provide
robust financial content to their users. Our clients include traditional and
online brokerage firms, commercial banks, asset managers, web portals, media
companies, electronic communication networks, 401(k) sponsors and insurance
companies. As of February 29, 2000, we had over 200 clients, including companies
such as Barclays Global Investors, LookSmart Ltd., Quick & Reilly Group Inc.
and U.S. Bancorp Piper Jaffray Inc.
We offer comprehensive solutions for businesses seeking to add financial
content to their web sites. With the solutions we provide and host, our clients
are able to offer their users real-time stock quotes, charting capabilities,
portfolio management and analysis tools, currency utilities, company research
and business news. Our services create an online environment that allows our
clients' users to easily analyze and manage their holdings using detailed
financial information and advanced Internet technologies.
In recent years, there has been a dramatic increase in the use of online
financial information services and trading. Investors are increasingly
looking to the Internet for information about their financial assets.
According to Forrester Research Inc., in 1999 there were 5.7 million
households using the Internet to execute financial transactions and obtain
financial information. Forrester Research predicts that this number will
increase to 21 million households by 2003, a number that would represent nearly
53% of U.S. households. In addition, both retail and institutional investors
increasingly demand up-to-the-minute information on security prices and business
trends, and the market analysis tools necessary to assimilate this information.
Many investors are using this information to manage their financial assets more
actively. Moreover, instead of resorting to a broker or other financial
intermediary, individual investors now have access to online trading services
that allow them to rapidly execute their own transactions at a lower cost than
that previously charged. Forrester Research has projected that online investment
accounts in the U.S. will grow from $374 billion of assets in 5.4 million online
accounts in 1999 to $3.1 trillion of assets in 20.4 million online accounts by
2003.
As a result of these developments, many companies that have an Internet
presence, including web portals and media companies, have developed or are
developing financial market content for their web sites in an effort to enhance
their attractiveness to Internet users and to assist in user retention. In
particular, many financial services companies such as commercial and investment
banks, mutual fund companies and 401(K) plan sponsors are concluding that the
availability of stock quotes, analysis and business information on their web
sites is a prerequisite to the generation of significant web traffic and
e-commerce transactions. The quality and breadth of financial information
offered is rapidly becoming a differentiator among financial services providers.
Our objective is to be the leading business-to-business provider of global
online market analysis tools and financial information. Key elements of our
strategy include:
o PENETRATING VERTICAL MARKETS. We intend to rapidly expand our sales
force to target businesses in industries that require robust online
market analysis tools and financial information on their web sites.
Our broad client experience enables us to intelligently recommend and
sell new products, content and services to improve web site
functionality.
O CREATING A WORLDWIDE PRESENCE. We intend to expand our product
offerings and international presence to serve the global online
financial information needs of our clients and their users. To further
our international objectives, we expect to open an office in London,
England in the next few months and intend to open an office in Asia
during 2000.
O USING TECHNOLOGY TO LEVERAGE OUR GROWTH. We intend to develop and
market innovative products and services to attract and retain clients.
We also intend to establish new facilities to maintain the scalability
and availability of our high quality web hosting services.
o PURSUING STRATEGIC ALLIANCES OR ACQUISITIONS. We intend to accelerate
our global sales and marketing efforts and technology development, and
gain access to compelling content, applications and functionality,
through strategic alliances and acquisitions. We intend to seek
acquisitions of businesses to complement our products or services or
to give us access to new markets.
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<PAGE> 7
Our corporate headquarters are located at 2600 Crosspark Road, Coralville, Iowa
52241 and our phone number is (319) 626-5000. Our Internet address is
www.stockpoint.com. Information on our web site is not part of this prospectus.
THE OFFERING
Common stock offered...................... shares.
Common stock to be outstanding
after the offering..................... shares.
Use of proceeds........................... We intend to use the net proceeds to
repay most of our outstanding
indebtedness, to add sales and
marketing personnel, to continue
Internet product development, to
finance additional hosting
facilities and capacity and for
working capital and other general
corporate purposes.
Risk factors.............................. Investing in our common stock
involves risks.
Proposed Nasdaq National Market symbol.... "STKP."
----------------------
"Stockpoint" is our federally registered trademark. This prospectus also
contains names, trademarks, service marks and registered trademarks and service
marks of other companies.
----------------------
Except as otherwise noted, all information in this prospectus:
o reflects the automatic conversion of all our outstanding shares of
convertible preferred stock into an aggregate of 1,838,813 shares of
common stock upon completion of this offering;
o assumes no exercise of the underwriters' over-allotment option; and
o reflects our disposition on May 29, 1999 of technology and operational
assets related to the steel-making industry.
The number of shares of our common stock to be outstanding immediately
after this offering excludes 1,652,300 shares of common stock that we may issue
on the exercise of options outstanding as of December 31, 1999 and 1,810,639
shares of common stock that we may issue on the exercise of warrants outstanding
as of December 31, 1999.
5
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..................................... $ 1,427,908 $ 2,177,946 $ 6,829,869
Cost of revenues ............................. 308,608 764,965 2,289,881
------------ ------------ ------------
Gross profit ................................. 1,119,300 1,412,981 4,539,988
Operating expenses ........................... 4,366,476 6,856,777 7,429,328
------------ ------------ ------------
Operating loss from continuing operations .... (3,247,176) (5,443,796) (2,889,340)
Other expense primarily interest ............. (688,525) (784,546) (1,058,545)
Income (loss) from discontinued operations ... (405,722) (356,946) 347,675
Gain on disposition of discontinued operations -- -- 433,133
------------ ------------ ------------
Net loss ..................................... $ (4,341,423) $ (6,585,288) $ (3,167,077)
============ ============ ============
Basic and diluted loss per common share:
Historical loss from continuing operations . $ (1.90) $ (3.15) $ (2.03)
Historical net loss ........................ $ (2.10) $ (3.32) $ (1.67)
Pro forma loss from continuing operations .. $ (0.73)
Pro forma net loss ......................... $ (0.53)
Weighted average common shares outstanding ... 2,089,701 2,106,906 2,141,404
OTHER OPERATING DATA:
Contracted revenue backlog at period end (1) . $ 140,078 $ 1,458,447 $ 10,703,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------
ACTUAL AS ADJUSTED(2)
--------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $2,203,623
Working capital (deficit).................................. (2,668,644)
Total assets............................................... 6,089,138
Total debt................................................. 12,292,502
Stockholders' equity (deficiency)......................... $(11,426,863)
</TABLE>
- -----------
(1) Represents contracted revenues at period end less amounts recognized
as revenue in the statement of operations. The balance of contracted
revenue backlog at period end represents amounts to be recognized in
the statement of operations in future periods over the duration of our
contracts.
(2) As adjusted to reflect the sale of shares of common stock in this
offering at an assumed offering price of $ per share, after
deducting the underwriting discount and estimated offering expenses
payable by us, and the application of a portion of the estimated net
proceeds from this offering to repay most of our outstanding
indebtedness, as described in "Use of Proceeds."
6
<PAGE> 9
RISK FACTORS
Before investing in our common stock, you should be aware that there are
various risks, including those described below. As a Stockpoint stockholder, you
will be subject to the risks inherent in our business. The value of your
investment may decline, and could result in a loss of your entire investment.
You should carefully consider the following factors as well as the other
information contained in this prospectus before deciding to buy our common
stock.
RISKS RELATED TO OUR OPERATIONS
WE HAVE A HISTORY OF LOSSES AND EXPECT TO CONTINUE TO GENERATE LOSSES IN
THE FUTURE.
As of December 31, 1999, we had an accumulated deficit of $23.1 million, of
which $19.0 million is attributable to our continuing operations. We have not
achieved profitability and expect to continue to incur net losses into 2001. We
expect to continue to incur significant operating expenses and, as a result,
will need to generate significant revenues to achieve profitability, which may
not occur. Even if we do achieve profitability, we may be unable to sustain or
increase profitability on a quarterly or annual basis in the future.
WE HAVE A LIMITED HISTORY IN OPERATING OUR INTERNET-BASED LICENSING BUSINESS.
Our business model depends largely on our ability to license our Internet
products and hosting services to third parties. We began to emphasize this model
only in mid-1998. For us, this means that we have only limited experience in
operating an Internet-based licensing business from which to evaluate our
business prospects and analyze the risks and uncertainties that we face. We will
be adversely affected if we are unsuccessful in anticipating potential business
issues or in addressing unexpected issues as they arise. For you, this means
that you have limited historical information from which to evaluate our
prospects.
WE MAY NEED MORE CASH AFTER THIS OFFERING AND WE MAY NOT BE ABLE TO OBTAIN IT.
If we do not achieve or maintain significant revenues or profitability or
have not accurately predicted our cash needs, or if we decide to change our
business plans, we may need to raise additional funds in the future. Any
required funding may not be available to us on favorable terms, if at all. If we
raise additional funds by issuing equity securities, you may experience dilution
in your ownership interest. If we raise additional funds by issuing debt
securities, we may incur significant interest expense and become subject to
covenants that could limit our ability to operate and fund our business. If
additional funds are not available when required, we may be unable to
effectively realize our current plans.
IF WE ARE UNABLE TO ATTRACT OR RETAIN QUALIFIED DEVELOPMENT STAFF, OUR
BUSINESS COULD BE HARMED.
Our future success depends substantially upon the continued efforts of our
software applications and web programming staff to provide the integration
services necessary to timely create, implement and host web site financial
content for our clients, and to update and expand our web site offerings. None
of our software engineers and web programmers are bound by employment
agreements. Competition for software engineers is intense, particularly in San
Francisco and surrounding communities where we maintain offices, and we may not
be able to retain existing or attract additional highly qualified programmers in
the future. If we lose the services of a significant number of our applications
staff and web programming staff or are unable to continue to attract additional
applications and web programming staff with appropriate qualifications, the
quality of our product offerings and our ability to retain and expand our client
base could suffer.
WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY OFFICERS.
Our future success depends to a significant extent on the continued service
and coordination of our management team. The departure of any of our officers or
key employees could materially adversely affect our ability to implement our
business plan.
7
<PAGE> 10
OUR BUSINESS DEPENDS ON OUR ABILITY TO ENTER INTO AND MAINTAIN RELATIONSHIPS
WITH CONTENT PROVIDERS.
Our business depends on financial data and information, such as stock
pricing information and financial news and research information, obtained from
third-party providers through non-exclusive contractual relationships. Many of
our providers compete with each other and, to some extent, with us for clients.
Given the nature of our contracts with providers, we will be required to
renegotiate contracts, including the contract with our key supplier, S & P
Comstock, when they expire (usually one to two years). We may not be able to
renew these contracts on favorable terms or at all. There is intense competition
for relationships with these firms. We may have to pay significant fees to
establish additional content syndication relationships, particularly if we
expand, as expected, in international markets, or maintain existing
relationships in the future. We may be unable to enter into relationships with
these firms or sites on favorable terms or at all. Many of the financial content
providers that we have contracts with or have approached also provide financial
news and information to our competitors and clients. These companies may be
reluctant to enter into or maintain strategic relationships with us. In
addition, while we are not solely reliant on any one content provider, the loss
of a key vendor could render all or a portion of our services unavailable for a
period of time, which could have a negative impact on our client relationships
and cause harm to our reputation.
The terms of our agreements with content suppliers vary widely. The
services that we provide and the methods that we utilize to do so change
rapidly. Also, the law and legal practice for content supplier contracts are
unsettled and constantly developing. As a result, we must periodically modify
and renegotiate our vendor agreements. We attempt to operate our web site
customization and hosting services in accordance with our agreements and to
renegotiate them as necessary. However, we cannot assure you that our vendors
will not claim that we owe additional sums or must limit our activities.
IF OUR CLIENTS DO NOT BELIEVE OUR PRODUCT OFFERINGS PROVIDE THEM WITH A
COMPETITIVE BENEFIT, OUR ABILITY TO ATTRACT AND RETAIN CLIENTS COULD BE
ADVERSELY AFFECTED.
Most of our clients generate revenue through their web sites from
advertising revenue or transaction volume. To the extent that our clients
believe that they do not gain a competitive benefit, whether through increased
advertising revenue, transaction volume or otherwise, from the incorporation of
our financial content into their web sites, our ability to attract and retain
clients could be adversely affected.
WE HAVE LIMITED EXPERIENCE IN RENEWING OUR LICENSE CONTRACTS AND MAY NOT BE
ABLE TO RENEW A SIGNIFICANT PORTION OF THEM.
Only a relatively few of our license contracts, which typically have terms
that vary from one to two years, have come up for renewal. We have limited
experience with the renewal process. If we are unable to renew a significant
portion of our contracts with existing clients, our business and financial
performance could be materially adversely affected. In particular,
GlobalNetFinancial.com, Inc. represented 14% of our 1999 revenues.
GlobalNetFinancial.com has recently announced an agreement with Telescan Inc.,
one of our competitors, under which Telescan will increase an existing ownership
interest to give Telescan approximately 15% of GlobalNetFinancial.com's stock.
If GlobalNetFinancial.com or any other large client does not renew its license
contract with us, it could have a material adverse effect on our business and
financial performance.
OUR BUSINESS MAY SUFFER IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH.
We have experienced rapid growth in our operations. This rapid growth has
placed, and our anticipated future growth will continue to place, a significant
strain on our managerial, operational and financial resources. Our current
management does not have extensive experience in managing a large corporation.
To manage our growth, we must continue to implement and improve our managerial
controls and procedures and operational and financial systems on a timely basis.
If we are unable to manage our growth effectively, our business could be
materially adversely affected.
OUR INTERNATIONAL OPERATIONS ARE NEW AND MAY NOT BE SUCCESSFUL.
We have only recently commenced operations in a number of international
markets and a key component of our strategy is to continue to expand our
international operations. We have limited experience in developing and obtaining
financial information relating to foreign markets and in marketing, selling and
distributing our products and
8
<PAGE> 11
services internationally. We cannot assure you that we will be able to
successfully develop relationships with international content providers, or
successfully market, sell and distribute our products and services
internationally.
There are risks in doing business in international markets which could
adversely affect our business, including:
o difficulties in obtaining international quote and exchange data;
o regulatory requirements;
o export restrictions and controls, tariffs and other trade barriers;
o difficulties in staffing and managing international operations;
o fluctuations in currency exchange rates;
o reduced protection for intellectual property rights;
o seasonal reductions in business activity;
o potentially adverse tax consequences; and
o political and economic instability.
The growth of the Internet as a means of conducting international business
has raised many legal issues, including the circumstances under which countries
or other jurisdictions have the right to regulate Internet services available
from service providers located elsewhere. In many cases, there are no laws,
regulations, judicial decisions or governmental interpretations that clearly
resolve these issues. Our costs could increase and the growth of our
international operations could be harmed by any new laws or regulations, or the
application or interpretation of existing laws and regulations to the Internet.
INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE.
We compete with an increasing number of companies that offer charting,
stock quotation and business information web applications, development and
hosting services. We also compete with the in-house development staffs of many
of our clients. We expect both of these forms of competition to continue to
intensify. Some of our existing competitors, as well as a number of potential
new competitors, have longer operating histories, greater name recognition,
larger client bases and significantly greater financial, technical and marketing
resources than we do. These factors may provide them with significant advantages
over us. Competitive pressures could result in reduced market share, price
reductions, reduced margins and increased spending on marketing and product
development, any of which could adversely affect our business.
FAILURE TO MAINTAIN OUR REPUTATION FOR RELIABILITY AND QUALITY MAY REDUCE THE
NUMBER OF OUR CLIENTS, WHICH COULD HARM OUR BUSINESS.
It is very important that we maintain our reputation as a reliable
developer and host of financial content for web sites. Many events beyond our
control, including slower response times than usual, systems or operations
failures, errors in the transmission of quotation data or the misreporting of
financial news or analysis by one or more of our content contributors, could
harm our reputation. These events could result in a significant reduction in the
number of our clients, which could materially adversely affect our business.
UNEXPECTED INCREASES IN TRAFFIC MAY STRAIN OUR SYSTEMS.
In the past, we have experienced significant spikes in traffic on the web
sites that we host when there have been important financial news events. Our
client base has increased over time and we are seeking to increase it further.
Our web site hosting systems must accommodate a high volume of traffic, often at
unexpected times. Our hosted web
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<PAGE> 12
sites may experience slower response times than usual, temporary
interruption of service or other problems for these and other reasons. These
occurrences could cause our clients to perceive our services as not being
adequate and, therefore, terminate or not renew their contracts with us. This
could adversely affect our business.
SYSTEM FAILURES, TO WHICH WE ARE PARTICULARLY VULNERABLE BECAUSE WE
CURRENTLY OPERATE ONLY ONE COMPUTER DATA CENTER, COULD ADVERSELY AFFECT OUR
BUSINESS.
Our systems and operations are vulnerable to damage or interruption from a
variety of factors, including human error, natural disasters, power loss,
telecommunication failures, break-ins, sabotage (physical or electronic),
computer viruses, vandalism and similar unexpected adverse events. We currently
operate only one computer data center. We do not expect to begin operating an
additional facility until at least the second half of 2000. This increases our
vulnerability, since localized problems at our Iowa facility, such as storm
damage or localized telephone failure, could make us unable to provide our
services. Unanticipated problems have caused interruptions in delivery of our
services in the past and similar problems could occur in the future. Any system
failure, including network, software or hardware failure, that causes an
interruption in our services or a decrease in responsiveness of our hosted web
sites could result in canceled client contracts, reduced revenue and harm to our
reputation, brand and our relations with our providers and adversely affect our
business.
POTENTIAL FLUCTUATIONS IN OUR QUARTERLY FINANCIAL RESULTS MAKE FINANCIAL
FORECASTING DIFFICULT.
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside our control.
These factors include:
o the number, size and timing of new license contracts sold;
o the number, size and timing of license renewals and terminations;
o the character of any development services required by our clients;
o our ability to develop, market and introduce new and enhanced services
on a timely basis;
o actions taken by our competitors, including new product introduction
and enhancements; and
o adverse changes in the financial markets.
We believe that quarter-to-quarter comparisons of our operating results may
not be a good indication of our future performance. Investors should not rely on
our operating results for any particular quarter as an indication of our future
operating results.
DIFFICULTIES ASSOCIATED WITH OUR BRAND DEVELOPMENT MAY HARM OUR ABILITY TO
ATTRACT CLIENTS.
We believe that maintaining and increasing awareness of the Stockpoint
brand is an important aspect of our efforts to continue to attract clients. The
importance of brand recognition will increase in the future because of the
growing number of web sites providing financial content and information.
However, our efforts to build brand awareness may not be successful.
EVENTS RELATED TO OUR FORMER CHIEF EXECUTIVE OFFICER COULD AFFECT OUR
REPUTATION AND HARM OUR BUSINESS.
Robert Staib, our former Chief Executive Officer and a former director, was
arrested in December 1998 and indicted in April 1999 for bank fraud in
connection with the pledge of stock certificates he held in UAL, Inc. to secure
loans to an unrelated company. Robert Staib pleaded guilty to certain
allegations in March 2000 as part of an agreement settling the indictment. His
sentencing is currently set for June 2000. Robert Staib has not been an officer
or director of Stockpoint since his arrest in December 1998. Nevertheless,
publicity related to his sentencing or other events could include references to
us or to William Staib, our Chief Executive Officer and the son of Robert Staib.
Publicity of this type could cause harm to our reputation and business, and our
ability to obtain financing.
10
<PAGE> 13
COURT ACTION RELATING TO A SETTLEMENT AGREEMENT WITH ROBERT STAIB COULD
CHANGE THE NUMBER OF WARRANTS OUTSTANDING.
We settled a dispute in December 1999 regarding the number of warrants to
which Robert Staib was entitled by agreeing that some of his warrants were valid
in consideration of the surrender of warrants to purchase 912,500 shares that he
held. A creditor of Robert Staib is seeking to invalidate this settlement
agreement. If the creditor were successful, we might have to reissue these
warrants.
ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISRUPTIONS TO OUR
BUSINESS AND MANAGEMENT.
We may acquire products, technologies or businesses that we believe would
help expand our product and service offerings. Any future acquisitions would
present risks, including the difficulty of combining the technology, operations
or workforce of the acquired business with our own, disruption of our ongoing
operations and difficulty in realizing the anticipated financial or strategic
benefits of the transaction. Acquisitions may also divert management's attention
from day-to-day operations. These factors and our limited experience in
negotiating, consummating and integrating acquisitions could adversely affect
our business, earnings, financial condition and, ultimately, our stock price.
Acquisitions that use stock as payment also could result in dilution of our per
share earnings and of your voting rights.
FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR
BRAND-BUILDING EFFORTS AND ABILITY TO COMPETE EFFECTIVELY.
We rely on a combination of trademark and copyright law, trade secret
protection, confidentiality agreements and other contractual arrangements to
protect our intellectual property rights. We do not rely on patented processes
or technologies. The protective steps we have taken may be inadequate to deter
misappropriation of our proprietary information. We may be unable to detect the
unauthorized use of, or take appropriate steps to enforce, our intellectual
property rights. We have registered our trademarks in the United States and we
have pending U.S. applications for other trademarks. Effective trademark,
copyright and trade secret protection may not be available in every country in
which we offer or intend to offer our services. Failure to adequately protect
our intellectual property could harm our brand, devalue our proprietary content
and affect our ability to compete effectively. Defending our intellectual
property rights could also result in the expenditure of significant financial
and managerial resources, which could materially adversely affect our business.
WE MAY HAVE TO DEFEND AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS,
WHICH COULD CAUSE SIGNIFICANT EXPENDITURES.
Although we believe that our business activities do not infringe the
intellectual property rights of others, other parties may assert infringement
claims against us or claim that we have violated a patent or infringed a
copyright, trademark or other proprietary right belonging to them. The services
we provide make extensive use of licensed third- party content and some use of
licensed third-party technology. In the license agreements with respect to these
items, the licensors have generally agreed to defend, indemnify and hold us
harmless with respect to any claim by a third party that any licensed content or
software infringes any intellectual property right. These provisions may not be
adequate to protect us from infringement claims. In particular, increasing
attempts to patent software techniques and concepts may lead to an increase in
claims of infringement, particularly with respect to companies involved in the
Internet. We have received a claim that our use of some algorithms may require a
license. Infringement claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources, which could
materially adversely affect our business.
DIFFICULTIES IN DEVELOPING NEW AND ENHANCED SERVICES AND FEATURES COULD HARM
OUR BUSINESS.
We intend to introduce additional and enhanced products and services to
retain our current clients, expand the products and services our clients use and
attract new clients. If our services are not favorably received or a competitor
introduces a service that we are unable to provide, potential clients may choose
a competitor's products or services and current clients may decline to renew
their contracts with us. We may experience difficulties that could delay or
prevent our introduction of new services. These difficulties may include the
inability to obtain or maintain third-party technology license agreements. New
services could contain errors that are discovered after introduction. If so, we
may need to significantly modify the design or implementation of these services
to correct any errors. If we
11
<PAGE> 14
experience difficulties in introducing new services or if these new services
do not attract significant licensing interest, our business could be materially
adversely affected.
WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CLIENT DEMANDS EVOLVE.
To be successful, we must adapt to our rapidly changing market by
continually enhancing the technologies used in our products and services, and
introducing new technology to address the changing needs of our business and
consumers. If we are unable, for technical, legal, financial or other reasons,
to adapt in a timely manner to changing market conditions or business and client
requirements, our business could be materially adversely affected.
RISKS RELATED TO OUR INDUSTRY
IF THE MARKET FOR PRODUCTS AND SERVICES RELATED TO INTERNET-BASED FINANCIAL
INFORMATION DOES NOT DEVELOP AS WE ANTICIPATE, WE MIGHT NOT ACHIEVE OUR BUSINESS
OBJECTIVES.
The market for Internet-based financial information has only recently begun
to develop. Because the market for our services is new, it is difficult to
accurately predict the growth rate and ultimate size of this market. In
addition, the market is rapidly evolving and is characterized by an increasing
number of potential competitors. The market for our services may not continue to
develop, or may develop more slowly than we expect, and our product offerings
may never achieve significant market acceptance. A downturn in the financial
markets could result in a decline in interest in individual investing, which
could adversely affect the market for our services. In addition, U.S. financial
institutions are continuing to consolidate, which may increase our clients'
leverage to negotiate prices and decrease the overall potential market for some
of our services. These factors, as well as other changes occurring in the
financial services industry, could have a material adverse effect on our
business.
CONCERNS ABOUT THE SECURITY AND OPERATION OF OUR WEB SITE HOSTING SERVICES
COULD INCREASE OUR EXPENDITURES OR DECREASE OUR CLIENT BASE.
There have been several recent widely-publicized instances of "hackers"
compromising the integrity, security and operation of web sites. We may have to
incur significant costs to protect our web site or those of our clients or to
alleviate problems caused by "hacking" if there is any:
o perceived increase in "hacking" activity;
o perception that our web site or the web sites that we host are
particularly vulnerable to this kind of activity; or
o instance in which our web site or one of the web sites we host is
affected by this kind of activity.
In addition to increased costs, any of these occurrences may decrease our
ability to retain existing clients or attract new ones.
OUR ABILITY TO MAINTAIN AND INCREASE OUR CLIENT BASE DEPENDS ON THE
CONTINUED GROWTH IN USE AND EFFICIENT OPERATION OF THE INTERNET.
Our business would be materially adversely affected if Internet usage does
not continue to grow or grows slowly. Internet usage may be inhibited for a
number of reasons, such as:
o inadequate Internet infrastructure to support the demands placed on it
as usage grows;
o continued security and authentication concerns with respect to
transmission over the Internet of confidential information;
o privacy concerns, including those related to the placement by web
sites of information on a user's hard drive without the user's
knowledge or consent;
o any well-publicized compromise of web site or Internet transmission
security;
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<PAGE> 15
o inconsistent quality of Internet products and services;
o limited availability of cost-effective, high-speed access to the
Internet; and
o significant future Internet service provider delays or outages.
POTENTIAL LIABILITY FOR INFORMATION DISPLAYED ON OUR WEB SITE OR THE WEB
SITES OF OUR CLIENTS MAY REQUIRE US TO DEFEND AGAINST LEGAL CLAIMS, WHICH MAY
RESULT IN SIGNIFICANT EXPENSE.
If any information that we publish proves to be erroneous, we might face
lawsuits based on claims of losses resulting from actions taken on the basis of
that information. We may also be subject to claims for defamation, libel,
copyright or trademark infringement or claims based on other theories relating
to the information we publish on our web site and the web sites of our clients.
These types of claims have been brought, sometimes successfully, against online
services as well as other print publications in the past. We could also be
subject to claims based upon the content that is accessible from our web site or
our clients' web sites through links to other web sites. Our insurance and
contractual indemnification provisions may not adequately protect us against
many of these claims. Defending against any claims like this could result in the
expenditure of significant financial and managerial resources, whether our
insurance covers us or not.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET
COULD INCREASE OUR COSTS OF TRANSMITTING DATA AND LEGAL AND REGULATORY
EXPENDITURES AND DECREASE OUR CLIENT BASE.
Existing domestic and international laws or regulations specifically
regulate communications or commerce on the Internet. Laws and regulations that
address issues such as user privacy, pricing, online content regulation,
taxation and the characteristics and quality of online products and services are
under consideration by federal, state, local and foreign governments and
agencies. Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and online
services providers in a manner similar to the regulation of long distance
telephone carriers and to impose access fees on such companies. This regulation,
if imposed, could increase the cost of transmitting data over the Internet. It
may take years to determine the extent to which existing laws relating to issues
such as intellectual property ownership and infringement, libel, obscenity and
personal privacy are applicable to the Internet. The Federal Trade Commission
and government agencies in some states have been investigating Internet
companies regarding their use of personal information. We could incur additional
expenses if any new regulations regarding the use of personal information are
introduced or if these agencies chose to investigate our privacy practices.
Further, due to the global nature of the Internet, it is possible that some
states, the United States or foreign countries might attempt to levy taxes on
our activities. Any new laws or regulations relating to the Internet, or adverse
application or interpretation of existing laws, could decrease the rate of
growth in the use of the Internet and the demand for our products and services.
RISKS RELATED TO THE OFFERING
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND THE PRICE IN
THIS OFFERING MAY NOT BE INDICATIVE OF THE PRICE AFTER THE OFFERING, WHICH MAY
DECLINE BELOW THE INITIAL PUBLIC OFFERING PRICE.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiations
between us and the representatives of the underwriters with reference to the
general status of the securities market and other relevant factors. The offering
price for the common stock should not be considered an indication of the actual
value of the common stock and was not based on our net worth or prior earnings,
of which there are none. The offering price may not be indicative of the price
that will prevail in the public market after the offering. In particular, the
market price of our common stock may decline below the initial public offering
price. After this offering, an active trading market may not develop or be
sustained.
OUR STOCK PRICE MAY FLUCTUATE WIDELY.
The prices at which our common stock will trade could be subject to wide
fluctuations in response to changes in earnings estimates by analysts or other
events or factors, many of which are beyond our control. The stock market has
from time to time experienced extreme price and volume fluctuations which have
often been unrelated to the
13
<PAGE> 16
operating performance of the companies affected. These fluctuations have
particularly affected securities of Internet- related companies. Investors may
experience a material decline in the market price of our common stock,
regardless of our operating performance. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against that company. We may
become involved in this type of litigation in the future. Litigation of this
type is often expensive and diverts management's attention and resources.
SUBSTANTIAL SALES OF OUR COMMON STOCK, OR THE PERCEPTION THAT SUBSTANTIAL
SALES MAY OCCUR, COULD CAUSE OUR STOCK PRICE TO FALL AND MAKE IT DIFFICULT FOR
US TO SELL ADDITIONAL SECURITIES.
If our stockholders sell substantial amounts of our common stock, in the
public market following this offering, the market price of our common stock
could fall. These sales might also make it more difficult for us to sell equity
securities in the future at a time and price that we deem appropriate. After
this offering, we will have _____ outstanding shares of common stock, assuming
no exercise of the underwriters' over-allotment options and no exercise of
outstanding options or warrants. Of these shares, the ______ shares sold in this
offering will be freely tradeable, except for any shares purchased by our
"affiliates," as defined in Rule 144 under the Securities Act. Other than ______
shares subject to a 180-day lock-up period, 4,010,181 of the shares of common
stock outstanding prior to this offering will be freely tradeable immediately
after completion of this offering except for any shares held by our affiliates.
The remaining 4,750 shares will become eligible for resale 90 days after the
effective date of this offering. In addition, the holders of 897,063 shares of
common stock and the holders of warrants to purchase 1,598,639 shares of our
common stock will be entitled to have the resale of their shares registered
under the Securities Act, or to participate in subsequent registrations, or
both. After the date of this prospectus, we intend to register up to _______
shares issuable upon the exercise of outstanding stock options and reserved for
issuance under our stock option plans. Once we register these shares, they can
be sold in the public market immediately following issuance.
OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DISCOURAGE A TAKEOVER OF
STOCKPOINT.
Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders.
MANAGEMENT COULD SPEND OR INVEST THE PROCEEDS OF THIS OFFERING IN WAYS WITH
WHICH YOU MAY NOT AGREE.
Our management will have significant discretion in applying the net
proceeds of this offering, and may spend or invest the proceeds from this
offering ineffectively or in ways with which you may not agree.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
If you purchase shares of our common stock, you will incur immediate and
substantial dilution in net tangible book value per share. If the holders of
outstanding options or warrants exercise those options or warrants, you will
experience further dilution.
WE DO NOT INTEND TO PAY DIVIDENDS.
We currently intend to retain any earnings for use in the operation and
expansion of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
statements on our current expectations and projections about future events.
These forward-looking statements include statements about:
o our strategies;
o the future growth of the Internet;
o worldwide growth in use of Internet as a source of information for
personal financial planning and transactions;
o buying patterns of our clients;
o trends based on our perceptions of past activity; and
o other statements that are not historical facts.
When used in this prospectus, the words "anticipate," "believe," "expect,"
"estimate" and similar expressions are generally intended to identify
forward-looking statements. Our actual results may vary materially from those
anticipated or implied by these forward-looking statements as a result of a
number of risks and uncertainties, including the risks described in "risk
factors" or elsewhere in this prospectus.
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<PAGE> 17
USE OF PROCEEDS
We estimate our net proceeds from the sale of the shares of our common
stock offered in this offering to be approximately $ million, or
approximately $ million if the underwriters' over-allotment option is
exercised in full, based on an assumed initial public offering price of $
per share and after deducting the underwriting discount and estimated offering
expenses.
We intend to use $11,370,000 of the net proceeds from this offering to
repay most of our outstanding indebtedness. All repayments will include the
amount of interest accrued through the date of repayment. The remaining proceeds
will be used primarily to add sales and marketing personnel for our Internet
business, to continue development of our Internet products, to finance
additional hosting facilities and capacity and for working capital and other
general corporate purposes. The amounts we actually expend for such purposes
may vary and will depend on a number of factors, including the amount of our
future revenues. We expect that the proceeds from this offering will
be sufficient to meet our needs at least through 2001.
We intend to repay the following debt outstanding as of February 29, 2000:
o $4,145,000 of notes payable with two banks which bear interest at the
prime rate;
o $5,900,000 principal amount of debentures which bear interest at 8.75%
and mature September 30, 2002; and
o $1,325,000 outstanding under a line of credit with a commercial bank
which bears interest at the prime rate and is secured by substantially
all our assets.
In addition, we may acquire businesses, products and technologies that are
complementary to ours, and a portion of the net proceeds may be used for these
acquisitions. We have no agreements with respect to any material acquisitions as
of the date of this prospectus.
Pending these uses, we intend to invest the net proceeds from this offering
in short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
We currently intend to retain any earnings for use in the operation and
expansion of our business and therefore do not anticipate paying any other cash
dividends in the foreseeable future.
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<PAGE> 18
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. Pro forma net tangible book value dilution per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after completion of this offering.
Our pro forma net tangible book value as of December 31, 1999 was
$(11,858,203), or $(2.95) per share of common stock. Pro forma net tangible book
value per share is equal to our total tangible assets less total liabilities,
divided by the number of outstanding shares of common stock after giving effect
to the conversion of our outstanding preferred stock into common stock in
connection with this offering. After giving effect to our sale of the shares of
common stock offered by this prospectus at an assumed initial offering price of
$ per share and after deducting the underwriting discount and estimated
offering expenses payable by us, our as adjusted pro forma net tangible book
value as of December 31, 1999 would have been approximately $ , or $ per
share. This represents an immediate increase in pro forma net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors purchasing shares in this offering. If the
initial public offering price is higher or lower, the dilution will be greater
or less, respectively. The following table illustrates this per share dilution
to new investors:
<TABLE>
<S> <C>
Assumed initial public offering price per share.............................. $
Pro forma net tangible book value per share as of December 31, 1999.......... (2.95)
Increase in pro forma net tangible book value per share attributable to
this offering.............................................................
-----------
Pro forma net tangible book value per share after the offering..............
-----------
Dilution per share to new investors......................................... $
===========
</TABLE>
The following table summarizes, on the pro forma basis described above, as
of December 31, 1999, the differences between the number of shares of common
stock purchased from us, the total cash consideration paid to us and the average
price per share paid by existing stockholders and new investors:
<TABLE>
<CAPTION>
Total
Shares Purchased Consideration Average
--------------------------- ------------------------------ Price
Number Percent Amount Percent Per Share
------------ ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 4,014,931 % $10,325,133 % $ 2.57
New Investors
------------ ----------- --------------- -----------
Total 100% 100%
============ =========== =============== ===========
</TABLE>
The above discussion and tables exclude all options and warrants that will
remain outstanding upon completion of this offering. At December 31, 1999, there
were 1,652,300 shares of common stock reserved for issuance upon exercise of
outstanding options with a weighted average exercise price of $4.20 per share,
and 1,810,639 shares of common stock issuable upon exercise of outstanding
warrants with a weighted average exercise price of $5.86 per share. To the
extent that any of these options or warrants are exercised, there will be
further dilution to new investors.
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<PAGE> 19
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999
as follows:
o on an actual basis;
o on a pro forma basis to give effect to the conversion of all
outstanding shares of our preferred stock into 1,838,813 shares of
common stock; and
o on a pro forma, as adjusted basis to reflect both the conversion of
all outstanding shares of our preferred stock into common stock as
described above and the application of the estimated net proceeds from
this offering to repay most of our outstanding indebtedness, as
described in "Use of Proceeds."
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------------
Actual Pro forma As Adjusted
------------ ------------ -----------
<S> <C> <C> <C>
Long term debt, less current portion ...................................... $ 10,536,681 $ 10,536,681 $ --
------------ ------------ ----------
Stockholders' equity (deficiency):
Preferred Stock, no par value per share; 5,000,000 shares authorized:
Convertible Series A Voting Preferred Stock, 320,000 shares issued and
outstanding (convertible into 500,000 shares of common stock),
no shares outstanding pro forma and as adjusted .............. 1,965,991 -- --
Convertible Series B Voting Preferred Stock, 282,720 shares issued and
outstanding (convertible into 441,750 shares of common stock),
no shares outstanding pro forma and as adjusted .............. 1,733,639 -- --
Convertible Series C Voting Preferred Stock, 773,254 shares issued and
outstanding (convertible into 897,063 shares of common stock),
no shares outstanding pro forma and as adjusted .............. 5,455,319 -- --
Common stock, $.01 par value per share; 20,000,000 shares authorized;
2,176,118 shares issued and outstanding, 4,014,931 shares outstanding pro
forma, ____ shares outstanding as adjusted .............................. 21,761 40,149
Common stock warrants ................................................... 819,868 819,868
Additional paid-in capital .............................................. 3,875,620 13,012,181
Deferred stock-based compensation ....................................... (2,194,978) (2,194,978)
Accumulated deficit ..................................................... (23,104,083) (23,104,083)
------------ ------------
Total stockholders' equity (deficiency) ............................... (11,426,863) (11,426,863)
------------ ------------ ----------
Total capitalization ......................................... $ (890,182) $ (890,182) $
============ ============ ==========
</TABLE>
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes and
with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus. The consolidated
statement of operations data for 1995 through 1999 and the balance sheet data at
December 31 for each of 1995 through 1999 are derived from our audited
financial statements. We reclassified our audited financial statements to give
effect to sale of our process optimization software segment in May 1999.
Historical results are not necessarily indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data (1):
Revenues .......................................... $ 363,454 $ 862,488 $ 1,427,908 $ 2,177,946 $ 6,829,869
Cost of revenues .................................. 334,745 273,003 308,608 764,965 2,289,881
------------ ------------ ------------ ------------ ------------
Gross profit ...................................... 28,709 589,485 1,119,300 1,412,981 4,539,988
Research and development .......................... 285,483 579,548 1,057,071 1,101,471 1,637,150
Sales and marketing ............................... 297,654 254,273 752,675 1,566,030 1,590,899
General and administrative ........................ 1,499,340 1,845,637 2,556,730 3,523,006 3,588,977
Deferred compensation ............................. -- -- -- 666,270 612,302
------------ ------------ ------------ ------------ ------------
Total operating expenses ........................ 2,082,477 2,679,458 4,366,476 6,856,777 7,429,328
------------ ------------ ------------ ------------ ------------
Operating loss from continuing operations ......... (2,053,768) (2,089,973) (3,247,176) (5,443,796) (2,889,340)
Other expense, primarily interest ................. (206,570) (394,505) (688,525) (784,546) (1,058,545)
------------ ------------ ------------ ------------ ------------
Loss from continuing operations ................... (2,260,338) (2,484,478) (3,935,701) (6,228,342) (3,947,885)
Discontinued operations:
Income (loss) from discontinued operations ...... 726,808 (177,877) (405,722) (356,946) 347,675
Gain on disposition of discontinued operations .. -- -- -- -- 433,133
------------ ------------ ------------ ------------ ------------
Net loss .......................................... (1,533,530) (2,662,355) (4,341,423) (6,585,288) (3,167,077)
Cumulative dividends on preferred stock ........... -- -- (40,266) (409,418) (412,918)
------------ ------------ ------------ ------------ ------------
Net loss applicable to common stockholders ........ $ (1,533,530) $ (2,662,355) $ (4,381,689) $ (6,994,706) $ (3,579,995)
============ ============ ============ ============ ============
Basic and diluted income (loss) per common share (2):
Loss from continuing operations ................. $ (1.10) $ (1.21) $ (1.90) $ (3.15) $ (2.03)
Income (loss) from discontinued operation ....... $ 0.35 $ (0.08) $ (0.20) $ (0.17) $ 0.36
Net loss ........................................ $ (0.75) $ (1.29) $ (2.10) $ (3.32) $ (1.67)
Weighted average common shares outstanding ........ 2,056,087 2,056,087 2,089,701 2,106,906 2,141,404
Pro forma basic and diluted income (loss)
per common share (3):
Loss from continuing operations ................. $ (0.73)
Income (loss) from discontinued operations ...... $ 0.20
Net loss ........................................ $ (0.53)
Weighted average pro forma common shares
outstanding ....................................... 3,947,781
Other Operating Data:
Contracted revenue backlog at period end (4) ...... -- $ 84,265 $ 140,078 $ 1,458,447 $ 10,703,000
</TABLE>
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<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 AS ADJUSTED(5)
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ....... $ 612,242 $ 596,073 $ 242,609 $ 221,098 $ 2,203,623
Working capital (deficit) ....... 300,606 (186,491) (498,987) (5,350,171) (2,668,624)
Total assets .................... 2,589,959 2,343,636 2,588,254 3,794,347 6,089,138
Short term debt ................. -- 10,000 -- 4,395,000 1,755,821
Long term debt .................. 3,750,000 5,750,000 5,550,000 5,900,000 10,536,681
Stockholders' equity (deficiency) (2,464,310) (5,071,034) (4,627,141) (9,745,756) (11,426,863)
</TABLE>
(1) We have reclassified our statement of operations data for 1995 through
1999 to give effect to the sale in May 1999 of our process optimization
software segment for $750,000, plus potential royalties.
(2) We computed net loss per share information applicable to common
stockholders by including cumulative dividends on our preferred stock.
For additional information, see Note 1 to our consolidated financial
statements.
(3) We prepared the pro forma income (loss) per common share information
for 1999 by assuming that our preferred stock was converted into common
stock as of January 1, 1999, or as of the issuance date for shares of
Series C preferred stock issued during 1999 in lieu of dividends. These
conversions will occur automatically upon completion of this offering.
We also excluded interest expense for 1999 on the debt we expect to
repay with a portion of the proceeds from this offering.
(4) Represents contracted revenues at period end less amounts recognized as
revenue in our statement of operations.
(5) As adjusted to reflect the sale of ______shares of common stock in this
offering at an assumed offering price of $______ per share, after
deducting the underwriting discount and estimated offering expenses
payable by us, and the application of a portion of the estimated net
proceeds from this offering to repay most of our outstanding
indebtedness, as described in "Use of Proceeds."
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with the
"Selected Consolidated Financial Data" and our consolidated financial statements
and the related notes included elsewhere in this prospectus. The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ substantially from those discussed
below as the result of many factors, including those discussed below and
elsewhere in this prospectus, particularly in "Risk Factors."
OVERVIEW
We were incorporated in 1987 as Milltech HOH, Inc., an Illinois
corporation, and reincorporated in 1993 as Neural Applications Corporation, a
Delaware corporation. We originally developed, marketed and supported software
based solutions for industrial, financial and other data intensive markets. We
derived virtually all of our revenue through 1995, and a majority of our revenue
from 1996 through 1998, from sales of our process optimization software
solutions in the metals industry. We sold our process optimization software
business in May 1999 for $750,000 plus future royalties, resulting in a gain of
$450,000. We have classified our process optimization software business
operating results as "discontinued operations" in our consolidated statements of
operations and the related assets and liabilities as "net assets of discontinued
operations" in our balance sheets. The discussion below of our results of
operations relates solely to our continuing operations.
During 1997, we began to shift our primary focus to the development and
sale of online market analysis tools and financial information for the
Internet. In March 1997, we acquired Ethos Corporation, a California company
formed in July 1995 that had developed a web site featuring stock quotation
capability (then "www.investorsedge.com"). This web site is the predecessor of
our current Stockpoint.com web site. We accounted for the acquisition of Ethos
as a pooling of interests and restated our financial statements for periods
prior to the acquisition to include the combined financial information of both
companies for all periods presented.
Since 1997, we have placed increasing emphasis on the enhancement of our
Internet business. In July 1999, to better reflect our position as an Internet
applications and financial information services provider, we changed our name to
Stockpoint, Inc.
RESULTS OF OPERATIONS
Our revenues include license fees for hosting and custom software
application services for financial web sites and advertising revenues from
banner ads placed on our web site and those of our clients. In addition, we have
historically generated revenues from assorted data mining and financial services
consulting projects for our clients. We anticipate that licensing revenues will
represent the vast majority of our revenues in future periods.
Our Internet business model has evolved from an initial dependence on
advertising revenues from our web site to our current model, which emphasizes
licensing of web site products and services to business clients. During 1997,
our revenues began to shift from advertising revenues to licensing revenues.
Licensing of web site products and services to business clients comprised 48%
of our 1997 revenues. By 1998, 57% of our revenues were licensing revenues. In
1999, licensing revenues represented 84% of our revenues. Our license
agreements typically provide for a flat fee for the agreement's term. We base
this fee principally on the client's selection of site features. We also
generally charge a per-view fee if page views exceed the amount stated in
the contract.
Our average contract size has increased from $3,500 in 1997 to $60,000 in
1999. This increase has been primarily the result of the introduction of more
comprehensive product offerings and the expansion of our client base to include
companies interested in licensing more sophisticated product options. In
addition, beginning in 1999, we have been emphasizing two-year contracts, which
increases the average licensing revenues per contract.
Although we generally bill our clients up-front for a portion of our
services, we recognize revenues ratably over the period of the contract. We
reflect the obligation to provide the contracted services as "deferred revenue"
on our balance sheet. This means that we record a liability to balance our
accounts receivable or cash, depending on whether we have collected our
billings. We amortize deferred revenue as we provide the services. Our licensing
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<PAGE> 23
contracts typically have lengths of one or two years. We recognize revenues
for extensive custom development and for projects as we perform the services.
Our direct cost of revenues primarily includes fees for data feeds and
licenses, custom applications and development charges and maintenance of
infrastructure, programming and quality assurance. We show these costs in our
statement of operations as "cost of revenues." We expect that an increasing
percentage of cost of revenues will be variable cost components that will
increase as our volume rises. We also include the direct development and
related costs associated with our data mining applications and consulting
services for projects in the Internet and financial services markets in our
cost of revenues.
Operating expense includes research and development, sales and marketing,
general and administrative and deferred compensation expense. These costs
primarily include compensation and related benefits for personnel along with
professional fees, travel, employee recruiting expense and occupancy costs.
Deferred compensation expense results from the difference between the exercise
price of vested options and the fair value of our stock at the date of grant. We
expect deferred compensation costs to continue through the end of 2004 as the
result of vesting of employee options granted in 1998 and 1999 at an exercise
price less than the estimated fair value of our stock at that time.
The following table sets forth, for the periods indicated, selected
financial data expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues ................................ 100.0% 100.0% 100.0%
Cost of revenues ........................ 21.6 35.1 33.5
------- ------- -------
Gross profit ............................ 78.4 64.9 66.5
Operating expenses:
Research and development ............ 74.0 50.6 24.0
Sales and marketing ................. 52.7 71.9 23.3
General and administrative .......... 179.1 161.8 52.5
Deferred compensation ............... -- 30.6 9.0
------- ------- -------
Total operating expenses ........... 305.8 314.9 108.8
------- ------- -------
Operating loss from continuing operations (227.4) (250.0) (42.3)
Other expense, primarily interest ....... 48.2 36.0 15.5
------- ------- -------
Loss from continuing operations ......... (275.6)% (286.0)% (57.8)%
======= ======= =======
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998
REVENUES
Revenues increased 214% from $2,200,000 for 1998 to $6,800,000 for 1999.
The rapid increase in revenues was due principally to the increase in the
number of corporate licensing agreements for our financial services and the
increased average revenues per licensing agreement. Revenues from licenses
increased 364% from $1,200,000 for 1998 to $5,800,000 for 1999. One client,
GlobalNetFinancial.com, Inc., represented 10% and 14% of our total revenues for
1998 and 1999, respectively.
Advertising revenues decreased 53% from $750,000 for 1998 to $300,000 for
1999. This decrease somewhat offset our higher licensing revenues. We expect
that advertising revenues will account for a decreasing percentage of our future
revenues.
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<PAGE> 24
Although less significant, revenues from our data mining and financial
services consulting business increased 226% from $250,000 for 1998 to $700,000
for 1999. The increase was due to $500,000 in revenues recognized for work
performed on a consulting contract received in the first quarter of 1999. This
contract had a duration of one year and is now completed. We do not anticipate
substantial consulting revenues during 2000.
COST OF REVENUES
Cost of revenues increased 199% from $800,000 for 1998 to $2,300,000 for
1999. The increase was due primarily to an increase in costs associated with
higher licensing revenues, including fees and charges for data feeds from
various exchanges and Internet service providers along with costs incurred for
infrastructure, programming and quality assurance.
As a percentage of revenues, cost of revenues declined 5% from 35.1% for
1998 to 33.5% for 1999. This decrease resulted primarily from the relatively
fixed nature of some of our data costs and other fees while the number of
clients we host increased.
GROSS PROFIT
Gross profit as a percentage of revenues increased from 64.9% for 1998 to
66.5% for 1999. Our gross profit percentage did not significantly increase
because our cost of data and other fees associated with the additional license
revenues remained relatively fixed as a percentage of revenues. We expect our
content costs to increase as a percentage of revenues and reduce our gross
profit percentage in the future. On an absolute dollar basis, gross profit
increased 221% from $1,400,000 for 1998 to $4,500,000 for 1999 due primarily
to higher revenues.
OPERATING EXPENSES
Research and Development. Research and development expense consists
primarily of compensation and benefits for software programmers and developers.
Research and development costs increased 49% from $1,100,000 during 1998 to
$1,600,000 for 1999. The increase in these costs was due to greater client
volume and the increased level of personnel necessary to support this volume.
Higher wages for the computer programmers and developers necessary to expand our
product offerings also contributed to the increase. Research and development
costs decreased as a percentage of revenues from 50.6% for 1998 to 24.0% for
1999. We expect our research and development costs on an absolute dollar basis
to continue to increase in the future as we expand our infrastructure and
develop additional product offerings.
Sales and Marketing. Sales and marketing expense includes compensation and
benefits, commissions for our direct sales force and marketing staff,
advertising, travel expenses and fees paid to a public relations firm. Sales and
marketing expense remained relatively constant at $1,600,000 for 1998 and 1999.
Sales and marketing costs decreased as a percentage of revenues from 71.9% for
1998 to 23.3% for 1999. On an absolute dollar basis, we expect our sales and
marketing costs to rise in the future to accommodate our continued efforts to
increase contracted revenues.
General and Administrative. General and administrative expense consists of
compensation and benefits for finance and administrative personnel, occupancy
costs, professional and consulting fees, employee recruiting and relocation
and travel expenses. General and administrative expense increased 2% from
$3,500,000 for 1998 to $3,600,000 for 1999. This increase was due to a $600,000
increase in professional and consulting fees and a $300,000 increase in bad
debt expense, partially offset by a $300,000 reduction in travel expense and a
$500,000 reduction in compensation and benefit expenses. General and
administrative expense decreased as a percentage of revenues from 161.8% for
1998 to 52.5% for 1999. On an absolute dollar basis, we expect our general and
administrative costs to continue to increase in the future to support our
planned business growth.
Deferred Compensation. The deferred compensation charges we incurred in
1998 and 1999 resulted from the vesting of employee stock options granted at an
exercise price below the estimated fair value of the underlying common stock on
the date of grant. Deferred compensation expense decreased from $700,000 in 1998
to $600,000 for 1999 due to an accelerated vesting schedule of options in 1998.
Deferred compensation decreased as a percentage of revenues from 30.6% for 1998
to 9.0% for 1999. We expect to continue to incur deferred compensation expense
as these options vest in the future.
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<PAGE> 25
OTHER EXPENSE
Other expense consists primarily of interest on debt. Interest expense
increased 35% from $800,000 for 1998 to $1,100,000 for 1999 due to higher
borrowing on our bank lines of credit and, to a lesser extent, interest incurred
on the $5,900,000 of debentures we issued in 1998. These debentures were
outstanding for only a portion of 1998.
LOSS FROM CONTINUING OPERATIONS
Loss from continuing operations decreased 37% from $6,200,000 for 1998 to
$3,900,000 for 1999. Our total 1999 operating expense and other expense rose
11%, or $800,000 on a combined basis, over 1998. However, our $3,100,000
improvement in gross profit, primarily due to increased revenues, more than
offset these increased expenses. We expect our 2000 loss from continuing
operations to exceed the 1999 level due to increases in each component of our
operating expenses, especially sales and marketing expenses.
CONTRACTED REVENUE BACKLOG
Our contracted revenue backlog, which represents total revenues contracted
less revenues recognized, increased 634% from $1,500,000 at the end of 1998 to
$10,700,000 at the end of 1999. We attribute this increase to our larger number
of licenses under contract. Of the $10,700,000 in backlog at the end of 1999,
we estimate based on the duration of our contracts that we will recognize
$7,400,000 as revenue during 2000 and $2,500,000 in 2001. We expect to
recognize the balance of this backlog in 2002 and 2003.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1998
REVENUES
Revenues increased 53% from $1,400,000 for 1997 to $2,200,000 for 1998. The
increase in revenues was due primarily to an increase in license revenues as the
result of a larger number of corporate licensing agreements and also to an
increase in the average revenues per licensing agreement. Revenues from license
agreements increased 79% or $500,000 from $700,000 for 1997 to $1,200,000 for
1998.
Advertising revenues increased 25% from $600,000 for 1997 to $750,000 for
1998. In addition, revenues from projects related to our data mining and
financial services consulting was $100,000 in 1997 and $250,000 in 1998. During
1997, we began using our new licensing strategy and de-emphasizing online
advertisements and consulting services.
COST OF REVENUES
Our cost of revenues increased 148% from $300,000 for 1997 to $800,000 for
1998. Our cost of revenues increased as a percentage of revenues from 21.6% in
1997 to 35.1% in 1998. These increases resulted primarily from the fact that, as
the number of our corporate licensing agreements increased, our data feed and
Internet service provider charges increased as a percentage of revenues.
GROSS PROFIT
Gross profit as a percentage of revenues decreased from 78.4% in 1997 to
64.9% in 1998. This decline was due principally to an increase in data feed and
Internet service provider charges. On an absolute dollar basis, gross profit
increased 26% from $1,100,000 for 1997 to $1,400,000 for 1998. This increase
resulted from the increase in our revenues.
OPERATING EXPENSES
Research and Development. Research and development costs increased $50,000
or 4% from 1997 to 1998. The increase was due to the hiring of additional staff
to develop and enhance our services. Although research and development costs
increased in absolute dollars in 1998, they decreased as a percentage of
revenues from 74.0% in 1997 to 50.6% in 1998. This decrease as a percentage of
revenues was due to the substantial increase in our revenues.
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<PAGE> 26
Sales and Marketing. Sales and marketing expense increased 108% from
$800,000 in 1997 to $1,600,000 in 1998. We began increasing our sales and
marketing efforts in late 1997 and continued to do so through 1998. In
particular, we added to our direct sales force, expanded our public relations
programs and increased our attendance at trade shows.
General and Administrative. General and administrative expense increased
38% from $2,600,000 in 1997 to $3,500,000 in 1998. This increase was due to a
$500,000 increase in compensation and benefit expenses, a $300,000 increase in
travel expense and a $100,000 increase in recruiting expenses.
Deferred Compensation. The $700,000 deferred compensation expense we
incurred in 1998 resulted from the vesting of employee stock options granted in
July 1998 at an exercise price below the estimated fair value of our common
stock.
OTHER EXPENSE
Other expense consists primarily of interest on debt. Interest expense
increased 14% from $700,000 in 1997 to $800,000 in 1998. This increase resulted
from higher borrowing on our bank lines of credit and, to a lesser extent,
interest incurred on the $5,900,000 of debentures we issued in 1998. These
debentures were outstanding for only a portion of 1998.
LOSS FROM CONTINUING OPERATIONS
Loss from continuing operations increased 58% from $3,900,000 in 1997 to
$6,200,000 in 1998. Although our revenues and gross profit increased during
1998, our investment in operations and increase in interest payments on debt
resulted in increased losses from continuing operations.
CONTRACTED REVENUE BACKLOG
Contracted revenue backlog increased by 941% from $150,000 at the end of
1997 to $1,500,000 by the end of 1998. This increase was the result of growth in
the number of licenses we had under contract.
QUARTERLY OPERATING RESULTS FROM CONTINUING OPERATIONS
The following table sets forth, for the periods presented, quarterly
financial data from our statements of operations. We believe that the quarterly
information has been prepared on substantially the same basis as our audited
financial statements and includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
information for the periods presented. You should read this information in
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<PAGE> 27
conjunction with the audited financial statements and notes to those
statements included elsewhere in this prospectus. Our operating results in any
quarter are not necessarily indicative of our future operating results.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ...... $ 379,089 $ 477,227 $ 462,992 $ 858,638 $ 933,118 $ 1,505,491 $ 1,992,900 $ 2,398,360
Cost of revenues 80,493 86,170 253,640 344,662 401,897 511,985 593,283 782,716
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit .. 298,596 391,057 209,352 513,976 531,221 993,506 1,399,617 1,615,644
Total operating
expenses....... 1,219,925 1,387,946 2,216,778 2,032,128 1,724,191 1,518,891 1,865,800 2,320,446
Other expense . (152,030) (184,061) (215,354) (233,101) (229,585) (209,238) (323,397) (296,325)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from
continuing
operations..... $(1,073,359) $(1,180,950) $(2,222,780) $(1,751,253) $(1,422,555) $ (734,623) $ (789,580) $(1,001,127)
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
Revenues have consistently increased from quarter to quarter due almost
entirely to increases in licensing revenues. As our revenues have increased, the
costs associated with revenue generation have risen to accommodate our growth.
Gross profit on an absolute dollar basis has consistently risen due to continued
higher revenues and the relatively fixed percentage for data feed and other
direct costs of revenues. Although we expect this trend to continue, we expect
that our costs for data and content will increase as a percentage of revenues.
Gross profit as a percentage of revenues declined during the third quarter
of 1998 to 45% from the second quarter 1998 gross profit percentage of 82%. This
decline was due to an increase in cost of revenues associated with the
development and growth of our business generated from corporate licensing
agreements. The shift in our business model to corporate licensing agreements
resulted in a decline in our gross profit percentage from our prior quarterly
levels.
Operating expenses increased in the third quarter of 1998 due principally
to our repricing of employee stock options. This resulted in a deferred
compensation charge of $600,000. Operating expenses declined in the fourth
quarter of 1998 and succeeding first two quarters of 1999 due to a cost
containment program. Expenses increased in the third and fourth quarters of 1999
to accommodate our increased licensing level. Interest expense in the third
quarter of 1999 was higher due to a 200 basis point increase in the rate under
our credit line retroactive to the first quarter. Interest expense in the fourth
quarter of 1999 remained relatively high compared to prior quarters due to
borrowing costs associated with additional debt.
LIQUIDITY AND CAPITAL RESOURCES
We have generated losses in every year of our operations and have financed
those losses, as well as the growth of our business, through a series of private
placements and bank borrowing. During 1999, the $1,300,000 of cash consumed by
our continuing operating activities and $600,000 of cash consumed by our
continuing investing activities was offset by $2,300,000 of cash generated,
primarily from bank borrowing. We supplemented our cash flows with $1,600,000
of cash generated by our discontinued operations, including $750,000 of cash
on sale of the process optimization segment.
We used $1,300,000, $3,800,000 and $3,650,000 of cash in continuing
operating activities during 1999, 1998 and 1997, respectively. We used this cash
primarily to fund losses of $3,200,000,$6,600,000 and $4,300,000 in 1999, 1998
and 1997, respectively. We were unable to borrow under our credit agreements
during 1999 until the end of the fourth quarter, when we established an
additional $2,500,000 line of credit. For the first three quarters of 1999,
we managed cash primarily by a net increase in accounts payable and deferred
revenue.
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<PAGE> 28
We used cash in continuing investing activities of $600,000 (excluding
$750,000 generated from the sale of discontinued operations),$800,000 and
$500,000 for 1999, 1998 and 1997, respectively. We applied cash primarily to
finance the costs for computer hardware and software.
Financing activities, consisting primarily of the sale of securities and
increased borrowing under credit arrangements, generated $2,300,000, $5,300,000
and $4,200,000 in 1999, 1998 and 1997, respectively. Our primary source of
financing in 1999 was a $2,500,000 line of credit with a commercial bank
completed in December 1999. Our principal sources in 1998 were $1,100,000 in net
proceeds from the sale of Series C Preferred Stock and debentures and $4,150,000
net borrowing on our bank lines of credit. Our main source in 1997 was
$9,800,000 of net proceeds from the sale of Series C Preferred Stock and
debentures offset by $5,500,000 in repayments on our bank lines of credit.
Our $2,500,000 line of credit is secured by substantially all of our
assets. In addition, eight investors guaranteed this line of credit and secured
it with letters of credit or the pledge of deposit accounts. For doing this, we
issued 500,000 warrants to these investors. Our agreement with the investors
requires us to repay the line on the earlier of completion of this offering or
June 30, 2001. If we default, the investors may assume the bank's position. We
are currently amortizing over the credit line term a $540,000 debt discount that
represents the value of the warrants. We will incur an extraordinary charge for
the remaining unamortized balance of this debt discount when we repay the line.
We intend to repay these debentures in full with proceeds from this offering.
In December 1999, we also renegotiated the terms of our existing credit
agreements with two commercial banks. We had $4,145,000 plus $300,000 of accrued
interest outstanding under these agreements, $1,145,000 of which had matured in
September 1999. We negotiated an extension of these agreements to June 30, 2001
and obtained waivers of various covenant defaults. One of these commercial banks
issued a standby letter of credit supporting the $5,900,000 of subordinated
debentures we issued in 1997 and 1998. The renegotiated agreement requires us to
repay all sums outstanding under the credit agreements, and either repay the
full amount of the debentures or obtain a replacement letter of credit,
contemporaneously with the closing of this offering. We intend to use a portion
of the proceeds from this offering to repay these debentures. We will incur an
extraordinary charge for the remaining unamortized portion of the financing
costs related to our debentures when we repay them.
In March 2000, we entered into an additional $500,000 line of credit
secured by substantially all our assets. Three investors guaranteed this line
of credit and secured it with letters of credit or the pledge of deposit
accounts. For doing this, we issued 100,000 warrants to these investors. We are
required to repay this line of credit by June 30, 2001.
We intend to use the net proceeds of this offering to repay most of our
outstanding indebtedness, to add sales and marketing personnel for our Internet
business, to continue development of our Internet products, to finance
additional hosting facilities and capacity and for working capital and other
general corporate purposes. In addition, we will consider strategic alliances
and acquisitions that we deem appropriate to enhance our business and
operations. We estimate that, as a result of this public offering, we will have
sufficient capital to meet our needs through at least the year 2001.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No.133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as "derivatives"), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure these
instruments at fair value. Recognition of gains or losses resulting from changes
in the value of derivatives is based on the use of each derivative instrument
and whether it qualifies for hedge accounting. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. We have not yet
determined the effect of SFAS No. 133 on our consolidated financial statements.
DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposure relates to interest rates on our variable
rate debt. Our debt that bears this risk are our notes payable and line
of credit in the amount of $6,620,000 outstanding at December 31, 1999. This
debt bears interest at the prime rate. We expect to repay this debt with a
portion of the proceeds of this offering.
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<PAGE> 29
BUSINESS
GENERAL
Stockpoint is a leading business-to-business provider of global online
market analysis tools and financial information. We integrate sophisticated
financial applications to provide our clients customized financial web pages
that we host using our proprietary architecture. This enables our clients to
outsource their financial web page production and maintenance, and provide
robust financial content to their users. Our clients include traditional and
online brokerage firms, commercial banks, asset managers, web portals, media
companies, 401(k) sponsors, electronic communication networks and insurance
companies. As of February 29, 2000, we had over 200 clients, including companies
such as Barclays Global Investors, Looksmart Ltd., Quick & Reilly Group Inc. and
U.S. Bancorp Piper Jaffray Inc.
We offer comprehensive solutions for businesses seeking to add financial
content to their web sites. With the solutions we provide and host, our clients
are able to offer their users real-time stock quotes, charting capabilities,
portfolio management and analysis tools, currency utilities, company research
and business news. Our services create an online environment that allows our
clients' users to easily analyze and manage their holdings using detailed
financial information and advanced Internet technologies.
We generate revenue from technology licensing, development, content and
hosting fees. A substantial majority of our revenue is derived from agreements
under which we provide information directly from our computer data center over
the Internet to our clients' users. Most of our contracts have one or two year
minimum terms with automatic renewals. We also charge for development when
extensive custom development is required.
INDUSTRY OVERVIEW
TRENDS
In recent years, the proliferation of personal computers, the widespread
adoption of the Internet, and the advent of increasingly powerful and easy to
use Internet navigation tools has resulted in explosive growth in the use of the
Internet as a global communications tool, a source of fast and easy access to
unprecedented breadth of information and an international means of commerce. Nua
Ltd. estimates that the number of Internet users worldwide will grow from 304
million in 2000 to 500 million in 2003.
Coincident with this revolution in the use of information technology has
been a rapid trend toward individual money management. During the past ten
years, high returns generated by the longest sustained positive U.S. stock
market in post-war history, together with an increase in retirement assets and
the number of investment options available, have caused substantial growth in
the ownership of financial assets worldwide. According to the Board of
Governors of the Federal Reserve System, total financial assets of U.S.
households and nonprofit organizations was $21.8 trillion at the end of 1995.
By the end of 1999, that number increased to $34.9 trillion. Furthermore, the
Investment Company Institute estimates that in early 1999, 48.2% of all U.S.
households owned equity securities directly in the form of individual stocks
or indirectly through mutual funds.
Taken together, these two trends have resulted in a dramatic increase in
the use of online financial information services and trading. Investors are
increasingly looking to the Internet for information about their financial
assets. According to Forrester Research Inc., in 1999 there were 5.7 million
households using the Internet to execute financial transactions and obtain
financial information. Forrester Research predicts that this number will
increase to 21 million households by 2003, a number that would represent nearly
53% of U.S. households. In addition, both retail and institutional investors
increasingly demand up-to-the-minute information on security prices and business
trends, and the market analysis tools necessary to assimilate this information.
Many investors are using this information to manage their financial assets more
actively. Moreover, instead of resorting to a broker or other financial
intermediary, individual investors now have access to online trading services
that allow them to rapidly execute their own transactions at a lower cost than
that previously charged. Forrester Research has projected that online investing
accounts in the U.S. will grow from $374 billion of assets in 5.4 million
online accounts in 1999 to $3.1 trillion of assets in 20.4 million online
accounts by 2003. The growth in electronic and online financial services has
not been limited to equity trading. Commercial banks have increasingly
broadened both the breadth of financial services they provide and the means of
accessing those services electronically. Many banking clients now not only have
online access to
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account information, but also have the ability to transfer those assets
between insured accounts, fixed income investments and equity investments
online.
ISSUES
As a result of these developments, many companies that have an Internet
presence, including web portals and media companies, have developed or are
developing financial market content for their web sites in an effort to enhance
their attractiveness to Internet users and to assist in user retention. In
particular, many financial services companies such as commercial and investment
banks, mutual fund companies and 401(k) plan sponsors are concluding that the
availability of stock quotes, analysis and business information on their web
sites is a prerequisite to the generation of significant web traffic and
e-commerce transactions. The quality and breadth of financial information
offered is rapidly becoming a differentiator among financial services providers.
Unlike many other web page development projects, the financial information
components of an Internet site require multiple skills not commonly available
through a single provider. Companies must contract for not only the web graphics
and display development services offered by many web site developers, but must
also purchase specialized applications software to provide graphing and
analysis, specialized database software to manage quote and financial
information, and hardware and communications infrastructure to handle the
storage and transmission of this information. Many of the available applications
are inflexible, cannot be customized to the company's existing web site, or
require extensive programming and customization to integrate with the other
applications that will be used on the site. Even if the developer is capable of
creating these applications and infrastructure, the company must purchase
financial content from various suppliers to display through the system. This
requires not only the integration of disparate content data, but the negotiation
of individual provider contracts.
Even after this cost and delay, a company must constantly monitor and
revise the software and hardware tools that manage actively updated information
in order for the financial information components of a web site to be
competitive. As a result, any company that is considering internally adding and
maintaining financial information and analysis capabilities on its web site
faces a considerable and on-going expenditure of time, effort and expense.
THE STOCKPOINT SOLUTION
To address the demand for Internet-based financial information and
analysis, we offer our clients a menu of financial applications and content. We
seamlessly integrate these applications and content into our clients' sites to
provide a comprehensive solution for the financial component of their Internet
strategy. We host these sites on behalf of our clients, relieving them of the
cost and expense of monitoring actively updated web content. Our web
applications have been specifically developed to allow customization to the
"look and feel" of a client's web site. In addition, we provide custom services
to integrate the proprietary data maintained by our clients. All of these
features can be purchased as a complete package or as individual functions and
rapidly integrated into the existing features of a client's web site.
We enable our clients to provide a broad range of financial information and
analysis to their users. We offer delayed and real-time U.S. stock exchange
quotation capabilities, as well as information on trading in international
markets. We provide industry-leading charting capabilities in both traditional
static image formats, and interactive Java format. We provide portfolio tracking
tools that enable our clients to offer their consumers the means of actively
monitoring their own portfolios. We offer international currency translation
utilities that provide currency translation on a real-time basis. Through
reseller relationships, we also offer company profiles, analyst and research
information, live market commentary, mutual fund data and other financial news.
We have specifically designed our products for ease of customization. Our
software permits us to add a client's graphics and to alter the color and
display layout to duplicate the look and feel used by our clients while
retaining our robust product functions. Our products are modular in design to
permit a client to add additional features as they need more functionality. We
have also designed the products to facilitate custom extensions that can be
built to make use of proprietary data or content provided by a client.
As part of our comprehensive solution, we also offer web site hosting, data
center and content services. We maintain sophisticated communications,
processing and storage capacity and infrastructure for web pages at our
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facilities. By establishing content contracts for the financial information
that we host on our clients' behalf, we provide rapid access to a broad spectrum
of financial data that can be displayed and manipulated by our proprietary
software tools. As a result, we are able to reduce our clients' day-to-day
management requirements while at the same time providing them with the actively
updated financial content that they require.
We believe that our comprehensive capabilities in financial information
solutions for the Internet allow us to provide high quality financial
information and analysis web functionality. We believe that we have developed a
reputation for comprehensive, reliable and high quality financial web pages.
GROWTH STRATEGY
Our objective is to be the leading business-to-business provider of global
online market analysis tools and financial information. Key elements of our
strategy include:
o PENETRATING VERTICAL MARKETS. We intend to rapidly expand our sales
force to target businesses in industries that require robust online
market analysis tools and financial information on their web sites.
At February 29, 2000, we had contracts with over 200 companies in a
number of different industries. This broad client experience enables
us to intelligently recommend new products, content and services to
our clients to improve their web site functionality. For example,
our clients include seven of Gomez Advisors' ten top rated online
brokerage firms. We plan to focus our marketing efforts on
traditional and online brokerage firms, commercial banks, asset
managers, web portals, media companies, electronic communication
networks, 401(k) sponsors and insurance companies.
O CREATING A WORLDWIDE PRESENCE. We intend to expand our product
offerings and international presence to serve the global online
financial information needs of our clients and their users. For
example, Commonwealth Securities Limited, Australia's largest online
brokerage firm, recently engaged us to provide U.S. securities data
for their web site. We also supply select clients with online
financial market data from Belgium, Canada, Denmark, France, Italy,
the Netherlands and the United Kingdom. To further our international
objectives, we expect to open an office in London, England in the
next few months and intend to open an office in Asia during 2000.
O USING TECHNOLOGY TO LEVERAGE OUR GROWTH. We intend to develop and
market innovative products and services to attract and retain clients.
We design these new products and services to enhance the user
experience for our clients. For example, we recently introduced a
wireless technology that enables users to view financial charts on
their cell phones and some other portable devices. We also intend to
establish new facilities to maintain the scalability and availability
of our high quality web hosting services.
o PURSUING STRATEGIC ALLIANCES OR ACQUISITIONS. We intend to accelerate
our global sales and marketing efforts and technology development, and
gain access to compelling content, applications and functionality,
through strategic alliances and acquisitions. For example, our
strategic relationships with content providers allow us to cost
effectively deliver robust financial applications and content to our
clients' web sites. We intend to seek acquisitions of businesses to
complement our products or services or to give us access to new
markets.
STOCKPOINT TARGET MARKETS
We focus our sales and marketing efforts in eight key online financial
services markets. Depending on the scope of their current Internet financial
offering, clients will either license a full finance channel or license
individual tools or applications.
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WEB PORTAL AND MEDIA COMPANIES
Internet "portal" and media web sites either create proprietary
content or aggregate content from various sources to attract and retain
visitors. Most of these sites include financial content as one of the key
content elements included for this purpose. Financial content is
fundamentally different from other types of content because of the
technological challenge of distributing an increasingly complex analysis
of financial information. This complexity is attributed to an increasing
rate of transactions, the number of world markets and the number of users.
Many portal and media sites do not have the required technical
resources or expertise to build their own investment site. They prefer to
outsource this development and functionality to others, such as
Stockpoint. In our experience, a typical portal or media client will tend
to license a full-featured financial site as opposed to buying a la
carte. Examples of these clients served by us include LookSmart Ltd. and
MyWay.com, for both of whom we host a full financial channel.
ONLINE BROKERAGE FIRMS
We currently have contracts with seven of the online brokerages that
Gomez Advisors ranks as its top ten. Online brokerages must have an
established web-based investing presence and continue to offer innovative
products and applications to differentiate their offerings from those of
others. For example, they may license charts or stock screening
functionality to augment an existing site. Over time, we believe these
clients will retain outside contractors to provide additional functionality
to either reduce the number of their vendor relationships or buy new
products outside of their principal expertise. Examples of online brokerage
clients served by us include National Discount Brokers Group Inc. and Quick
& Reilly Group Inc.
TRADITIONAL BROKERAGE FIRMS
Traditional brokerage firms are also adding Internet functionality to
their service offerings. Many traditional brokerage firms have experienced
an erosion of their share of the online brokerage marketplace and perceive
a potential competitive threat from growing online brokerage firms. In our
experience, while online brokerage firms may license specific tools and
applications, traditional brokerage firms seek more of a full scope
solution which can be brought to market rapidly. Examples of online
investment banks served by us include Commonwealth Securities Ltd.,
Robertson Stephens and U.S. Bancorp Piper Jaffray Inc.
COMMERCIAL BANKS
Many commercial banks are beginning to offer full scope financial
portals and brokerage services. We believe that many of these banks intend
to develop a more comprehensive financial solution for their consumers and
will expand their offerings to include investment financial information and
analytical tools. Examples of commercial banks served by us include M&T
Bank Corp. and Union Bank of California N.A.
MUTUAL FUNDS/ASSET MANAGEMENT
These companies typically have an established web presence and license
specific applications and functionality. The business objective of these
clients is to differentiate themselves with a more compelling user
experience or by offering a more cost effective data solution for its
advisors. An example of one of these clients is Barclays Global Investors.
STOCK EXCHANGES AND ELECTRONIC COMMUNICATION NETWORKS (ECNs)
Although their primary focus is to facilitate trade execution, stock
exchanges and ECNs are also building web sites for users to track their
investments. Exchanges and ECNs have a diverse set of needs ranging from a
la carte applications to full web site offerings. An example of an ECN that
is our customer is MarketXT, Inc.
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CORPORATIONS
We provide quote information for corporate investor relations sites,
including the sites of several Fortune 500 companies. Typically, these
pages include the company's specific stock quote, fundamental data and
access to SEC reports. An example of a corporation we serve is Coca Cola
Co.
401(k) PLAN SPONSORS
We provide 401(k) online tracking tools to employers. This online
capability allows the employees to track the performance of their 401(k)
investments in real-time. An example of a client utilizing this
functionality is PricewaterhouseCoopers LLP.
STOCKPOINT PRODUCT OFFERINGS
Our broad menu of financial product offerings includes the following:
QUOTATION FEATURES
We license real-time and/or delayed stock and mutual fund quotes for
securities of the following countries: Canada, Denmark, France, Italy, the
Netherlands, the United Kingdom and the United States. For most of these
countries, our applications provide current price, open, change, high, low,
52-week high and low, earnings per share, volume, shares outstanding,
market capitalization, dividend, ex-dividend, and price/earnings ratio.
Stock quotes are available either on web sites that we host or over
wireless web-capable telephones.
CHARTING
Classic Quick Charts. We believe that our Classic Quick Charts provide
easy-to-read information that distinguishes them from many competitive
offerings. These fast, cleanly designed charts show price performance and
volume for securities in our database. The Classic Quick Charts allow users
to select time increments including, one minute, ten minutes, hourly and
daily. Classic Quick Charts also include interactive features such as
moving average, and the ability to plot against other stocks and indexes.
Technical indicators can be added for comparison, which include Bollinger
bands, moving averages convergence/divergence, on balance volume, price
rate of change, relative strength, standard deviation and stochastics.
Interactive Charts. This feature expands on Classic Quick Charts to
provide minute-by-minute updates of charted information. We offer intraday
price performance and volume on securities in our database. The intraday
interactive charts allow users to select time increments including
tick-by-tick, one minute, ten minutes, hourly and daily. Users have the
ability to zoom in on date and time ranges by clicking and dragging on the
chart, and technical indicators can be added for comparison without
refreshing the chart or web page.
We also provide charts containing interday information for United
States and international markets over wireless web-capable telephones and
other devices.
PORTFOLIO TRACKING AND MANAGEMENT
Our personal portfolio manager allows users to track the performance
of their portfolios from their PCs. Our web-based personal portfolio
manager lets users easily edit multiple portfolios and calculate current
profit and loss for individual and combined portfolios. The personal
portfolio manager includes a login screen, portfolio setup screen,
portfolio menu screen and a data export feature. Easily customized to
complement a client's web site, our personal portfolio manager serves as a
tool to generate return visits by users.
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We also offer the following products in this category: stock and
mutual fund screening applications, automatic portfolio alerting via email,
an interactive Java portfolio manager and a scrolling, personalized desktop
stock ticker.
INDEXES AND CURRENCY DATA
We provide the major market indexes for the United States as well as
for most international markets. We also permit the client to display prices
of international currencies in real time and display this information in a
currency table featuring cross-reference functionality. All of this data is
stored by our proprietary databases in both intraday and historical
formats, and can be plotted with our charting applications.
NEWS AND ANALYST INFORMATION
Through reseller relationships with numerous content sources, we
provide an extensive offering of news and analyst information.
Company Profiles. We offer company profiles from Market Guide, which
feature comprehensive fundamental information on U.S. and foreign companies
trading on the NYSE, NASDAQ and AMEX. Companies are continually added and
updated.
Analyst and Research Information. We offer this feature from Zacks
Investment Research, an industry leader for analyst information. Zacks
provides analyst summaries, analyst opinions, average recommendations,
earnings per share, surprise percentage, consensus estimates and industry
rank. Income statements and balance sheets are also available.
News Wire Services. Through a relationship with Comtex Scientific
Corporation, we offer full-text news stories from wire services such as
Business Wire, PR Newswire, AP Online and UPI. For international news, we
have a relationship with AFX News Limited. Our news service tracks news
stories by category and keyword, and can automatically display charts and
quotes for companies referenced in each story.
SEC Filings. In October 1999, we launched a test site for our IPO
Center. The IPO Center enables the user to track initial public offering
filings and new issue pricings, evaluate after-market performance and
review the filing history of specific investment banks. Through a service
provided by Edgar Online, users can read the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" excerpt from SEC
filings for publicly-traded companies. We have also contracted with TRW
Inc. to provide real time SEC filings, although this capability is not yet
available to our clients.
Live Market Commentary. This feature is offered through Briefing.com,
a top provider of live market commentary and analysis on the Internet,
focusing on important news affecting markets and providing insight on
possible trading implications. Briefing.com covers upgrades and downgrades,
earnings reports, economic releases, technical trading points, market
sectors and technology stocks.
Mutual Fund Data. We offer mutual fund data from Value Line. The Value
Line mutual fund offering contains comprehensive performance data on over
8,300 U.S. retail funds. Listing includes sector distribution, top 10
holdings, administration information, Value Line Rankings, performance
(one, three, five and ten years), fund distribution and management
overview.
STRATEGIC RELATIONSHIPS
We provide substantive content through our financial product offerings
in two broad categories: quote information and market/company information. All
content utilized on both Stockpoint.com and client web sites is obtained from
third-party content providers. We do not currently generate any original content
but instead rely on strategic contractual relationships with major vendors of
electronically available financial information for our content feeds.
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For pricing information, news and information, mutual fund data,
analyst information and other feeds, we maintain contractual arrangements with
S&P Comstock, Comtex Scientific Corporation, Briefing.com, MarketGuide, Zacks,
CDA/Wiesenberger, Commodity Systems, Inc., TRW and AFX News Limited. These
relationships vary in term from one month to several years, and include both
variable and fixed price payment provisions. We believe that we are not solely
reliant on any one content provider and that there are alternative sources for
any single type of content. However, the replacement of any key vendors could
render all or a portion of our services unavailable for a period of time,
resulting in a significant negative impact on our client relationships and harm
to our reputation.
SALES AND MARKETING
We currently have a sales staff of 15 employees. Our sales offices are
located in San Francisco and New York City. Our sales team is assigned to one
of three major domestic regions. We currently focus our sales efforts directly
on target-market clients. All sales people currently receive commissions on
license sales, upsells and renewals to existing clients. We expect to expand
our direct sales staff and number of domestic and foreign offices over the
next 12 months, including opening a London office within the next few months.
During the production phase, our client services representative manages
and addresses client concerns and verifies the progress of the client's project.
Our two-person marketing staff currently focuses on public-relations
programs. These programs have expanded our brand recognition. We have done only
a limited amount of web-based or other advertising. Substantially all of our
client web sites have the "Powered by Stockpoint" logo, which we believe has
enhanced our brand awareness as our client base has grown. We also derive
substantial name recognition and receive initial client contacts through our web
site, Stockpoint.com.
CUSTOMIZATION ACTIVITIES
We believe that our ability to customize our applications
differentiates us from our competitors. Our clients expect that their web sites
will be unique and will not look the same as sites we host for our other
clients. Our clients also require that the web applications we develop and host
mirror the appearance of their other web pages and integrate seamlessly into
their web sites.
We designed our proprietary server and application software to enable
us to create customized web sites without expending the enormous effort
typically associated with custom development. For example, we designed our
charting technology with approximately 80 configurable parameters that permit
our web designers to configure chart sizes, fonts, colors, time increments and
settings for moving averages, technical indicators and comparison stocks or
indexes. This design enables us to customize at a reduced cost and with a faster
turnaround time than would be possible by modifying the underlying program code.
In some instances, our clients require that we develop customized
extensions of our applications to assimilate and manipulate data that is
provided by the client. For example, we provide a charting solution to clients
of MarketXT Inc. that incorporates their ECN's quote and trade data. Also, we
have integrated proprietary industry group data from US Bancorp Piper Jaffray
Inc. to enable their clients to chart that data versus other securities.
In other cases, our customization activities have led to the creation
of new products. For example, through a contract with GlobalNetFinancial.com, we
have created product offerings for quotes, charts and portfolios that utilize
stock market data from Denmark, Italy, the Netherlands and the United Kingdom.
To customize the appearance of our hosted web pages to meet our
clients' needs, we maintain a staff of eight web site developers. These
developers perform the web site development for clients and also establish the
communications links and data transfers required to integrate clients' web sites
with the pages we host on their behalf. We also maintain a staff of applications
programmers who develop custom extensions of our applications to assimilate
client data or provide specialized functionality.
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PRODUCT DEVELOPMENT
We have a three-pronged approach to product development:
o CLIENT DRIVEN DEVELOPMENT. By maintaining close relationships with our
clients through our client services and sales groups, we stay attuned
to our clients' needs . This input, plus client directed development,
largely drives the priorities of our development group. Examples of
products created by customer driven development include our
international index data, currency conversion functionality and
expansion of our product offerings to include Great Britain and
Italian equity securities.
o DEVELOPMENT BASED UPON ANTICIPATED MARKET NEEDS. Since 1997, we have
retained Forrester Research to assist us in predicting market trends
for the Internet financial marketplace. We leverage our relationship
with Forrester Research and our internal research and development and
marketing groups to anticipate market needs. We then either develop or
acquire products to meet these needs. Examples of products created by
this type of development are our Classic Quick Charts, our Java- based
scrolling stock ticker and enhancements to our personal portfolio
manager application.
o INNOVATIVE TECHNOLOGY DEVELOPMENT. We formed our internal research and
development group to pursue innovative technology applications. We
have several products under development which we believe are future
upsell opportunities. These potential new products include Portfolio
2.0, E-Mail Alerts and our IPO Center.
We are developing a transaction-based portfolio product, known as
Portfolio 2.0. The current version of our portfolio product does not
allow online investors to track transaction activity. Portfolio 2.0
will feature the ability to track transaction details of an online
investor. By capturing the transaction details, it allows for (1)
charting of portfolio performance versus various indexes; (2) asset
allocation analysis and (3) tax lot accounting. In the future, we
intend to link our transaction based portfolio product to various
brokerage firms. This will enable these firms to provide electronic
portfolio updates from their data centers.
We are developing an alert engine for notifying users of stock
activity. The E-Mail alerts will notify users of changes, based on
present threshholds, in stock prices, volume and news.
We have been beta testing an IPO Center on our web site,
www.stockpoint.com. The IPO Center features the ability to monitor
current IPO filings. The IPO center lists current filings and
pricings, and enables an investor to access a summary of a company's
offering by clicking on a linked ticker symbol.
Within our product development and research and development groups, we
have a staff of engineers that focuses on new product development. We recently
transferred into this group from our consulting services division a group of
engineers with expertise in artificial intelligence.
STOCKPOINT.COM
In addition to our licensing business, we operate Stockpoint.com, a
free financial web site that serves both as a technology showcase to support our
licensing business and as a proving ground for new product offerings.
Stockpoint.com offers investors an online environment in which they can analyze
and manage their holdings using comprehensive financial information and advanced
web technologies.
Stockpoint.com currently averages approximately 7,000,000 page views
per month. We believe that this is enough traffic to enable the Stockpoint.com
user base to provide feedback from our new products to ensure that our products
meet end-user expectations and are field-tested prior to being licensed to our
clients.
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We do not intend to invest a significant amount of resources in
promoting Stockpoint.com as a consumer site. Instead, we intend to focus on the
business-to-business marketplace and to use Stockpoint.com as a complement to,
rather than a competitor with, the offerings of our business clients.
Although we receive some advertising-based revenues from
Stockpoint.com, it is not a significant portion of our total business. We do not
have any subscription-based revenues from Stockpoint.com end-users.
COMPETITION
We compete with a number of companies that offer charting, stock
quotation and business information web applications, development and hosting
services. The number of these competitors continues to grow as new entities
enter various Internet-related markets as a result of the recent growth in
Internet traffic and the Internet's perceived future opportunities. It is
possible that new competitors may rapidly acquire a significant market share.
Further, there are an increasing number of quotation, financial news and
information sources that compete for the attention of consumers and advertisers
that are sought by our clients. We expect both of these forms of competition to
continue to increase. We compete for web site clients with a number of other
providers of web-based quotation, charting and financial news applications, such
as MarketWatch.com, Inc., Telescan Inc., Reuters Group PLC, Thompson Financial
Services and S&P Personal Wealth. We also compete with client web site
development companies and the in-house development staff of large corporations.
Competitive pressures could result in reduced market share, price
reductions, reduced margins and increased spending on marketing and product
development, any of which could adversely affect our business, financial
condition and operating results.
Our ability to compete effectively depends on many factors, including
the originality, timeliness, comprehensiveness and trustworthiness of our
applications and hosting, the ease in use of services developed by us and the
effectiveness of our sales and marketing efforts. We believe the principal
competitive factors in the online services market include system performance,
product differentiation, quality and quantity of content, user friendliness,
price, client support, effectiveness of marketing techniques and consistency and
quality of services. We believe that we compete effectively in these areas. We
also believe that our strategy of focusing on business-to-business licensing of
products combined with ongoing services and continued expansion of the range of
our services offerings may serve to lessen the impact of future competitive
pressures. There is, however, no assurance that these marketing strategies will
be successful. Finally, we believe that once our online financial products are
embedded in a client's web site, that client will find the difficulties inherent
in replacing our products with those provided by another vendor to be a
disincentive to changing providers.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
client bases and significantly greater financial, technical and marketing
resources than us. This may allow them to devote greater resources than we can
to the development and promotion of their services. These competitors may also
engage in more extensive research and development, undertake more far- reaching
marketing campaigns, adopt more aggressive pricing policies and make more
attractive offers to existing and potential employees, outside contributors,
strategic partners and advertisers. Our competitors may develop relationships
with providers and develop or acquire content that is equal or superior to ours
or that achieves greater market acceptance than ours.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We rely on a combination of copyright, trademark and trade secret laws
and confidentiality procedures to protect our proprietary intellectual property
rights. We generally enter into agreements that govern the assignment of
inventions and the ownership and protection of proprietary information with
employees and agreements that govern nondisclosure of proprietary information
with clients. We also work to limit access to and distribution of our software,
documentation and other proprietary information. We seek to use copyright law to
protect our documentation and other written materials. We do not, however, rely
on patents or patented technology to protect our proprietary information.
"Stockpoint" is our federally registered trademark.
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We license virtually all of the financial data that is used to provide
the content at our web sites pursuant to agreements with content suppliers, the
terms of which vary widely. The services that we provide and the methods that
we utilize to do so change rapidly. Also, the law and legal practice for
content supplier contracts are unsettled and constantly developing. As a result,
we must periodically modify and renegotiate our vendor agreements. We attempt to
operate our web site customization and hosting services in accordance with our
agreements and to renegotiate them as necessary. However, although we do not
believe we are in violation of our agreements, we cannot assure you that our
vendors will not claim that we owe additional sums or must limit our activities.
Some of our applications incorporate technology widely available on the
Internet and from other sources. During the past two years, there has been a
renewed effort to obtain protection of techniques used in software products
through patent and other protections. As the number of software products and
delivery techniques proliferates on the Internet, we believe that we may become
subject to infringement claims. We have been notified by a patent holder that it
believes our use of GIF compression algorithms incorporated into our web hosting
applications may require a license. Although we do not believe that we derive
substantial revenue from the use of these algorithms and can obtain a license,
if one is required, without materially affecting our operations, we cannot be
certain that other parties will not allege that the our technology and services
violate their rights.
COMPUTER AND NETWORK OPERATIONS
We maintain a data center in Coralville, Iowa at which we host
virtually all of the financial content for our clients' web sites. We operate
multiple servers, mass storage devices and sophisticated routers and switching
systems to accommodate high capacity web traffic. We use Intel-based servers
with the Microsoft NT operating system that access high capacity database
storage devices using SQL Server as well as our own proprietary database
applications.
Our data center has separate air conditioning units. The power system
includes power conditioning and battery back-up. We also have a full "zero
downtime" emergency generator system capable of providing emergency power to our
entire Coralville facility. Data is regularly backed up and stored off-site and
certain data is duplicated on separate storage devices within the data center.
The building in which the data center is located is secured by 24- hour card key
access.
End-users access our data center through the Internet. We have two
connections to the Internet. Our principal connection is a DS3 (45 Mbit) through
NetINS with access through UUNET, Sprintlink and Cable & Wireless. We have
contracted with UUNET for an additional DS3 connection. We use a load balancing
solution for distributing client requests over our base of servers.
We have designed our data center with a high degree of redundancy and
interoperability. We have implemented a detailed, automated monitoring system
over the data center. The system pages and alerts data center technicians
immediately upon any system failures, even as traffic is switched automatically
to redundant systems. Except for scheduled maintenance, our data center is
available 24 hours a day, 365 days a year.
We believe that our computer and communications hardware systems are
adequate for existing operations. We purchase additional or upgraded hardware as
required to meet any significant increases in actual or anticipated traffic. We
are currently reviewing strategies for improving our disaster recovery
capabilities and the responsiveness of our services to users. We plan to use a
portion of the net proceeds from this offering to establish one or more
additional data centers or co-location arrangements.
EMPLOYEES
As of February 29, 2000, we had a total of 95 employees, consisting of
30 in production, 29 in research and development, 19 in general or
administrative roles and 17 in sales and marketing. All of these employees are
located in the United States. None of our employees is subject to a collective
bargaining agreement or represented by a labor union. We have experienced no
work stoppages and believe that our relationships with our employees are good.
We maintain key man life insurance on William Staib in the amount of
$4,000,000, payable to us.
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FACILITIES
Our principal administrative, support and research and development
facility, and our data center, is located in approximately 25,600 square feet of
leased office space in Coralville, Iowa. We pay an annual rent of approximately
$280,000 for this facility. Our lease on this facility runs through August 2004,
with an option to extend for an additional five-year period. We believe that our
current Iowa facilities are adequate to meet our needs for the foreseeable
future.
We also lease approximately 8,900 square feet of office space in San
Francisco for sales and marketing and web site development personnel at an
annual rent of approximately $365,000. Our lease in San Francisco runs through
April 1, 2001 with an option to extend for an additional eighteen month period.
In addition, we lease approximately 600 square feet of office space in New York
City. The lease expires on July 31, 2000.
We also plan to use a part of the proceeds from this offering to
establish sales offices internationally. We are currently seeking space for an
office we expect to open in London, England, in the next few months, and intend
to establish additional offices in Europe and Asia during the next 12 months.
LITIGATION
We are not currently party to any legal proceedings.
37
<PAGE> 40
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of Stockpoint are as follows:
Name Age Position
---- --- --------
William E. Staib................ 30 Chief Executive Officer and Director
Timothy S. Yamauchi............. 38 Chief Operating Officer
Scott D. Porter................. 52 Chief Financial Officer
Luan A. Cox..................... 29 Executive Vice President, Sales
L. Christopher Dominguez........ 32 Executive Vice President
Carolyn S. Mattimore............ 41 Vice President, Marketing
Santosh K. Ananthraman.......... 34 Vice President, Research
Naftaly J. Stramer.............. 44 Vice President, Development
Harry O. Hefter................. 69 Chairman of the Board of Directors
David G. Sengpiel............... 46 Director
William E. Staib has served as a director since May 1992 and as Chief
Executive Officer since December 1998. Mr. Staib has served as Stockpoint's
Chief Technology Officer since June 1998 and as its Vice President of Technology
from 1992 to 1998. In 1998, Mr. Staib was named as the "State of Iowa's Young
Entrepreneur of the Year" by the U.S. Small Business Administration. In 1996,
Mr. Staib led the team which developed Stockpoint's core technology for
distributing and displaying historical chart and quote data on the Internet. In
1992, he was recognized for creating "One of the Six Most Outstanding
Engineering Achievements in the United States" by the National Society of
Professional Engineers. Mr. Staib is the inventor of one international and two
U.S. patents and holds B.S. and M.S. degrees in electrical engineering from
Stanford University. Mr. Staib is the son of Robert Staib, our former Chief
Executive Officer.
Timothy S. Yamauchi has served as Stockpoint's Chief Operating Officer
since July 1998. From September 1995 to July 1998, he served as Chief Financial
Officer, Secretary and Treasurer of HealthDesk Corporation, an Internet
information provider in the healthcare industry. From May 1994 to June 1995, Mr.
Yamauchi was Chief Financial Officer of Innofusion Corporation, a private home
healthcare company. From May 1991 to May 1994, Mr. Yamauchi was Treasurer and
Director of Planning for Total Pharmaceutical Care, Inc., a public home
healthcare company. Mr. Yamauchi a has B.S. in business from California State
University of Los Angeles and an M.B.A. from Harvard Business School. He is
also a Certified Public Accountant.
Scott D. Porter has served as Stockpoint's Chief Financial Officer
since July 1999. From August 1998 to February 1999, Mr. Porter was the Chief
Financial Officer of RSPnet.com, a provider of Internet services that was
acquired by VirtualFund.com, Inc. during 1999. From April 1991 to July 1998, Mr.
Porter was the President (and previously Chief Financial Officer) of Parsons
Technology, which was acquired by Intuit Inc. in 1994 and by The Learning
Company in 1998. Mr. Porter has a B.S. in accounting and an M.B.A. degree from
the University of Colorado and is also a Certified Public Accountant.
Luan A. Cox has served as Executive Vice President, Sales since
November 1999. Ms. Cox joined Stockpoint in April 1998 as Director of
Technology Sales and served as its Senior Vice President of Sales from July
1999 to October 1999. From April 1997 to April 1998, Ms. Cox was the Director
of Business Development at Quote.com, an Internet financial services company.
From April 1996 to April 1997, Ms. Cox served as Internet Director
for 1-800-MUTUALS, Inc. a mutual fund company. From February 1995 to April
1996, she was an account manager for Independent Advantage Financial, an
investment planning and insurance company. Prior to that time, she was a
senior sales associate with Jefferson-Pilot Insurance Company. Ms. Cox
graduated from the University of North Texas in 1992 with a B.B.A. in
finance and has held Series 6, 7, 63 and 65 Security Licenses with
the National Association of Securities Dealers.
38
<PAGE> 41
L. Christopher Dominguez has served as an Executive Vice President
of Stockpoint since July 1999. From April 1995 to July 1999, he served as Vice
President of Sales of Ethos Corporation, which Stockpoint acquired in 1997. From
September 1993 to September 1994, he served as Advertising Director of BuySide
Magazine. Mr. Dominguez received a B.A. from Denison University.
Carolyn Mattimore joined Stockpoint in August 1999 and serves as its
Vice President, Marketing. From July 1996 to January 1999, Ms. Mattimore was a
strategic marketing consultant for venture-backed start-up companies in the
Boston, Massachusetts area. From August 1991 to July 1995, she was Vice
President of Marketing for First Call, a subsidiary of Thomson Financial. She
has also held a Series 7 Security License with the National Association of
Securities Dealers. Ms. Mattimore has an M.P.A. from Harvard University, John F.
Kennedy School of Government and a B.B.A. from St. Mary's College, Notre Dame.
Santosh K. Ananthraman, has been Vice President of Research at
Stockpoint since 1993. Mr. Ananthraman specializes in the areas of data mining
and personalization. He has successfully directed numerous consulting projects
with companies such as Nasdaq, Engineering Animation, Harley Davidson, John
Deere and Daimler-Chrysler. After he received his Ph.D. from Duke University in
1993, he also served as an Adjunct Assistant Professor of Electrical and
Computer Engineering at the University of Iowa from 1993 to 1998, where he
taught graduate classes and co- supervised M.S. and Ph.D. students.
Mr. Ananthraman served on grant review panels for the National Science
Foundation and has reviewed articles for numerous research publications. He
has also has published extensively in his area of expertise. He received his
B.S. in electrical engineering from Regional Engineering College in India.
Naftaly J. Stramer has been Vice President of Development of Stockpoint
since October 1999. Between 1994 and 1999, Mr. Stramer served as Software
Assurance Manager and as Manager of Development Services for Stockpoint. Prior
to joining Stockpoint, Mr. Stramer served as a senior SQA engineer at Intergraph
Corporation for five years. Prior to Intergraph, he was a Computer Engineer and
Group Leader for Rafael, the Armament Development Authority based in Israel. Mr.
Stramer holds a B.SC. in Computer Engineering from the Israel Institute of
Technology.
Harry O. Hefter has served as a director of Stockpoint since 1987, has
served as Chairman since December 1998 and from 1987 to February 1997, and was
Vice Chairman from February 1997 to December 1998. Mr. Hefter has for more than
the last thirty years also served as President of the HOH group of companies in
Chicago, Illinois, which provide specialized services relating to the
engineering, integration and optimization of process control systems,
architecture and construction management for industry and government. Mr. Hefter
is a Civil Engineer with over 40 years of experience in the engineering field.
David G. Sengpiel has served as a director of Stockpoint since January
1997. Since March 1999, Mr. Sengpiel has been the Chief Operating Officer of
Quester I.T., Inc., a software company that provides consulting, research and
training in the application of language analysis, addressing, marketing and
communications issues. From August 1997 to March 1999, Mr. Sengpiel was Chief
Operating Officer of CareMedic, Inc., which automates Medicare reimbursement
processes. From 1995 until August 1997, Mr. Sengpiel was a Vice President with
Equity Dynamics, Inc., a consulting firm, and with Pappajohn Capital Resources,
a venture capital firm. From 1993 to 1995, Mr. Sengpiel was Alternative
Investments Manager for Farm Bureau Life Insurance Company.
Stockpoint maintains an audit committee and a compensation committee.
Currently, Mr. Hefter and Mr. Sengpiel are the sole members of both committees.
We also maintain a management committee consisting of Mr. Staib, Ms. Cox and Mr.
Dominguez that meets regularly to coordinate operations between the Company's
two principal offices and to discuss and determine strategic matters.
All executive officers are chosen by the Board of Directors and serve
at the Board's discretion. Directors are divided into three classes, each of
which consists, as nearly as possible, of one-third of the board. In 1997, the
stockholders elected two Class I directors (Messrs. Staib and Sengpiel) to serve
for one-year terms, one Class II director (Mr. Hefter) to serve for a two-year
term and one Class III director (currently vacant) to serve for a three-year
term. At each succeeding annual meeting of stockholders thereafter, successors
to the class of directors whose terms expired at that annual meeting will be
elected for a three-year term and will hold office for three years.
39
<PAGE> 42
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth the compensation
earned by our Chief Executive Officer and by our other most highly compensated
executive officers during the year ended December 31, 1999. This prospectus
refers to these executives as the Named Executive Officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- ----------------
SECURITIES
NAME AND PRINCIPAL POSITION UNDERLYING ALL OTHER
YEAR SALARY BONUS(1) OPTIONS (#) COMPENSATION (2)
- ------------------------------- --------- ----------- ---------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
William E. Staib (3) ....... 1999 $130,000 -- 200,000 $ 2,600
Director & Chief
Executive Officer
Timothy S. Yamauchi ........ 1999 116,458 $ 38,739 95,000 2,337
Chief Operating Officer
Luan A. Cox ................ 1999 78,125 275,532 168,000 3,200
Executive Vice President,
Sales
L. Christopher Dominguez (4) 1999 82,916 126,660 85,000 --
Executive Vice President
</TABLE>
(1) For Ms. Cox and Mr. Dominguez, the amounts represent sales commissions.
(2) Represents 401(k) plan matching contributions by Stockpoint.
(3) Mr. Staib was appointed acting Chief Executive Officer in December 1998
and elected Chief Executive Officer in June 1999. Prior to that time, he
was Chief Technology Officer.
(4) Mr. Dominguez was appointed Executive Vice President in July 1999.
Options Granted. The following table sets forth information with
respect to stock option granted during the fiscal year ended December 31, 1999
to each of the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERMS(1)
--------------------------------------------------- ------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED YEAR PRICE PER DATE
SHARE 0% (2) 5% 10%
- ---------------------------- ------------ ------------- --------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
William E. Staib ....... 200,000 16.3% $ 7.20 9/15/09 $ -- $ 906,000 $2,294,000
Timothy S. Yamauchi .... 60,000 4.9 7.20 9/15/09 -- 271,800 688,200
35,000 2.9 1.50 1/1/09 157,500 289,450 492,100
Luan A. Cox ............ 130,000 10.6 7.20 9/15/09 -- 588,900 1,491,100
38,000 3.1 1.50 1/1/09 171,000 314,260 534,280
</TABLE>
40
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
L. Christopher Dominguez 40,000 3.3 7.20 9/15/09 -- 181,200 458,800
45,000 3.7 1.50 1/1/09 202,500 372,150 632,700
</TABLE>
(1) The potential realizable value amounts represent hypothetical gains
that could be achieved for the respective options if exercised at the
end of the option term. The assumed 0%, 5% and 10% annual rates of
stock appreciation from the date of grant to the end of the option term
are provided in accordance with rules of the SEC and do not represent
our estimate or projection of the future common stock price. Actual
gains, if any, on stock option exercises are dependent on the future
performance of our common stock, overall market conditions and the
option holder's continued employment through the vesting period.
(2) Represents value at date of grant of options granted with exercise
prices that were below estimated fair value.
Option Values. The following table summarizes the value of options held
at December 31, 1999 by the Named Executive Officers. No options were exercised
by the Named Executive Officers during 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION VALUES AT DECEMBER 31, 1999
-------------------------------------------------------------------
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1999 AT DECEMBER 31, 1999 (1)
-------------------------------- --------------------------------
Name EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
William E. Staib........................... 64,750 163,250 $ $
Timothy S. Yamauchi........................ 21,067 98,933
Luan Cox................................... 31,867 138,133
L. Christopher Dominguez................... 17,850 82,150
</TABLE>
(1) Value is based on the difference between the per share exercise price of
such options and the initial public offering price per share.
EMPLOYMENT AGREEMENTS
We have employment agreements with Mr. Staib, Mr. Yamauchi, Mr. Porter,
Ms. Cox and Mr. Dominguez our Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, Executive Vice President, Sales and Executive Vice
President, respectively, which provide for annual base salaries of $130,000,
$150,000, $105,000, $150,000 and $150,000, respectively, and additional annual
incentive compensation. The agreements also provide that, upon completion of
this offering, Mr. Staib, Mr. Yamauchi, Mr. Porter, Ms. Cox and Mr. Dominguez
will receive cash bonus payments of $60,000, $45,000, $35,000, $30,000 and
$30,000, respectively, and that Mr. Staib's and Mr. Porter's salaries will be
increased to $180,000 and $122,500, respectively. The agreements with Mr. Staib,
Mr. Yamauchi, Ms. Cox and Mr. Dominguez expire in December 2000, subject to
automatic annual renewals absent a 90-day notice of nonrenewal by either party.
The agreement with Mr. Porter expires in March 2001, subject to automatic annual
renewal absent a 90- day notice of nonrenewal by either party. In the event the
employment of Messrs. Staib, Yamauchi or Dominguez is terminated "without cause"
or as a result of a "constructive termination," the officer will continue to
receive annual salary and health benefits for a period of nine months after
termination and 40% of those options granted in September 1999 which remain
unvested will vest. In the event the employment of Mr. Porter is terminated
without cause or as a result of a constructive termination, Mr. Porter will
continue to receive annual salary and health benefits for a period of nine
months after termination. In the event of the termination of Ms. Cox's
employment without cause or as a result of constructive termination, she
receives $450,000 plus nine months of benefits. In addition, if termination
occurs within 12 months following a change in control, the annual salary and
health benefits of each of Messrs. Staib, Yamauchi and Dominguez will continue
for a period of 18 months. The employment agreements with Mr. Staib,
Mr. Yamauchi, Ms. Cox and Mr. Dominguez also provide that all unvested stock
options held by these individuals will immediately vest upon a change in
control.
41
<PAGE> 44
STOCK OPTION PLANS
In December 1995, the Board of Directors approved the 1995 Long-Term
Incentive and Stock Option Plan (as amended, the "1995 Plan") and the 1995
Nonemployee Director Stock Option Plan (the "Directors' Plan"). The 1995 Plan
authorizes the issuance of up to 2,000,000 shares of common stock, subject to an
annual increase equal to 1 1/2 % of the outstanding shares of common stock as of
the December 31 of the immediately preceding year. As of December 31, 1999, the
Directors' Plan authorizes the issuance of up to 75,000 shares of common stock.
Under the 1995 Plan, options that are intended to qualify as incentive
stock options, options that are not intended to so qualify, stock appreciation
rights, restricted stock or performance awards may be granted to full or part-
time employees, officers, consultants, directors (other than nonemployee
directors) or independent contractors. Under the Director's Plan, in which only
nonemployee directors are eligible to participate, non-qualified stock options
to purchase 5,000 shares of common stock, vesting in three equal annual
installments, are automatically granted to each director eligible to participate
on the date such person first becomes a director and an additional 5,000 shares,
vesting one year following the date of grant, is automatically granted on the
date of each annual meeting of stockholders. All options under the Directors
Plan have terms of ten years and a per share exercise price equal to the fair
market value of a share of common stock on the date of the grant.
In July 1998, the Board of Directors exchanged all outstanding options
for non-qualified options under the 1995 Plan in an identical number, at an
exercise price of $1.50 per share, and on a vesting schedule identical to that
of the exchanged options.
At December 31, 1999, non-qualified options to purchase an aggregate of
1,612,300 shares of common stock were outstanding under the 1995 Plan with a
weighted average exercise price of $4.19 per share. At December 31, 1999,
options to purchase 15,000 shares of common stock were outstanding under the
Directors' Plan with a weighted average exercise price of $5.33 per share.
COMPENSATION OF DIRECTORS
Directors are not currently paid fees for attending meetings. Harry O.
Hefter receives a $20,000 consulting fee annually for management services he
performs.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
As permitted by Section 145 of the Delaware General Corporation Law,
our Amended and Restated Bylaws provide that we shall indemnify such persons for
such liabilities in such manner under such circumstances and to such extent as
permitted by Section 145. Our Board of Directors may authorize the purchase and
maintenance of insurance and the execution of individual agreements for the
purpose of such indemnification. We are required to advance all reasonable costs
and expenses (including attorneys' fees) incurred in defending any action, suit
or proceeding to all persons entitled to indemnification under the Bylaws, all
in the manner, under the circumstances and to the extent permitted by Section
145.
At present, there is no pending litigation or proceeding involving a
director, officer or employee of Stockpoint for which indemnification has been
sought. We are not aware of any threatened litigation that may result in claims
for indemnification.
As permitted by the Delaware General Corporation Law, our Amended and
Restated Certificate of Incorporation includes a provision that eliminates the
personal liability of directors for monetary damages for breach of fiduciary
duty as a director except liability for (a) any breach of the director's duty of
loyalty to the corporation or its stockholders, (b) acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(c) under Section 174 of the Delaware General Corporation Law or (d) any
transaction from which the director derived an improper personal benefit.
We maintain Directors and Officers Insurance which covers all directors
and officers. The total amount of coverage is $3,000,000, including the costs of
defense.
42
<PAGE> 45
================================================================================
CERTAIN TRANSACTIONS
CONSULTING AGREEMENT
In August 1999, Stockpoint and Equity Dynamics entered into a
Consulting Agreement. John Pappajohn, a principal of Equity Dynamics, is one of
our significant stockholders. Under the agreement, Equity Dynamics agreed to
provide a minimum of 20 days per year of management, financial and other
advisory services in exchange for which it is to be paid $50,000 per year and
receive warrants to purchase an aggregate of 125,000 shares of common stock at
an exercise price of $6.00 per share. The warrants are to expire five years from
the date of the Consulting Agreement.
BANK GUARANTEES
We have, in large part, financed our operations through bank lines of
credit and other debt facilities guaranteed by John Pappajohn and Robert Staib,
our former Chief Executive Officer. We issued to Mr. Pappajohn warrants to
purchase an aggregate of 537,500 shares of common stock at $4.00 per share in
consideration of his guarantee of three lines of credit from April 1993 through
June 1996.
Robert Staib, our former Chief Executive Officer, also guaranteed a
series of our credit agreements in seven transactions or renewals from November
1994 through June 1996. He also purported to pledge marketable securities as
collateral for these guarantees. For these guarantees, we issued warrants to
Robert Staib to purchase an aggregate of 806,250 shares of common stock at $4.00
per share, expiring at various times from January 1998 through January 2004, as
well as guarantee fees aggregating $25,000. Included among these guarantees was
the guarantee of two unsecured lines of credit aggregating $4,145,000 which
remain outstanding and on which Robert Staib remains a guarantor.
Robert Staib also guaranteed a commercial bank's obligations under
several irrevocable standby letters of credit that secure $5,900,000 of our
outstanding debentures and agreed to pledge marketable securities as collateral.
We paid Robert Staib $50,000 in November 1997 for the guarantee and pledge,
issued to Robert Staib warrants to purchase 500,000 shares of common stock at
$8.00 per share and agreed to issue to Robert Staib warrants for an additional
100,000 shares during each year Robert Staib's guarantee of our line of credit
remained outstanding. At the same time, we and Robert Staib entered into an
Indemnification and Hold Harmless Agreement and a Reimbursement and
Subordination Agreement pursuant to which we agreed to indemnify Robert Staib
for losses he incurred because of his guarantees.
In connection with loans he had guaranteed for an unrelated company,
Robert Staib was arrested in December 1998, indicted in April 1999 for bank
fraud and pled guilty to certain allegations in March 2000 as part of an
agreement settling the indictment. At our request, Robert Staib ceased any
involvement in our business in December 1998. Robert Staib formally resigned as
our Chairman and CEO in April 1999. At the time of his arrest in December 1999,
we were informed by our principal commercial lenders that they believed the
collateral pledged by Robert Staib to secure our outstanding credit lines, as
well as the letter of credit on the debentures, was not authentic. The lenders
ceased making any further advances under our credit arrangements. We eventually
restructured these credit arrangements in December 1999 under agreements that
require, among other things, that they be repaid upon completion of this
offering. A description of the restructured agreements is contained above under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources." The banks have
reserved any rights to proceed against Robert Staib under his guarantees.
In September 1999, warrants to purchase 93,750 shares held by Robert
Staib expired unexercised. In December 1999, we entered into an agreement with
Robert Staib to settle any claims related to his employment and disputes
relating to the validity of his guarantees and the warrants he had received. We
agreed not to pursue any action to invalidate Robert Staib's warrants to
purchase 500,000 shares of common stock at $4.00 per share in exchange for his
cancellation and return of all 700,000 warrants previously issued at $8.00 per
share and the remaining 212,500 warrants issued at $4.00 warrant per share. We
also agreed to pay Robert Staib $60,000 upon completion of this offering in
settlement of all other claims, including claims for reimbursement of expenses
incurred during his employment.
Under an order in connection with involuntary bankruptcy proceedings
instituted against him, Robert Staib was required to notify the federal
bankruptcy court for the District of Iowa of the settlement agreement. Robert
Staib's
43
<PAGE> 46
counsel formally requested that the bankruptcy court approve the settlement
agreement in mid-December. One of Robert Staib's creditors, however, has filed
two motions to set aside the settlement. There currently is a hearing scheduled
before the bankruptcy court to be held on or about May 1, 2000 regarding these
motions and the validity of the agreement. If the bankruptcy court determined
that the settlement was invalid, and although we would continue to contest the
validity of all the warrants, it is possible that the 912,500 warrants that
Robert Staib has surrendered for cancellation will have to be reissued.
BRIDGE LOAN FINANCING
We entered into a $2,500,000 line of credit with a commercial bank in
December 1999. This line of credit is secured by substantially all of our
assets, as well as guaranteed, and secured by letters of credit or deposit
accounts pledged by, eight investors, including John Pappajohn. In consideration
of the guarantees and pledges, we issued to the investors warrants to purchase
20 shares of common stock for each $100 of the credit line that the investors
guaranteed (or warrants to purchase a total of 500,000 shares of common stock).
The warrants expire in December 2004 and may be exercised at any time prior to
then at a price of $7.50 per share. The exercise price, however, is subject to
adjustment to the price, if lower, (1) at which we issue shares of our common
stock in a private transaction (excluding shares issued under employee options,
outstanding warrants and certain other instruments), (2) equal to 50% of the
price at which we conduct a bona fide public offering or (3) equal to 50% of the
consideration received per share in any business combination in which we engage
while the warrants are outstanding. If the exercise price is adjusted the number
of shares covered by each warrant will also be adjusted to the number obtained
by multiplying the number of shares initially issuable by the initial exercise
price and dividing the result by the adjusted exercise price. If we complete a
public offering of our common stock pursuant to a firm commitment underwriting
at a price less than $15 per share, then the exercise price will be adjusted
to 50% of the public offering price and the number of shares which can be
purchased will be equal to $3,750,000 divided by the new exercise price. The
Agreement pursuant to which the investor guarantees were received requires
that the line be repaid by June 30, 2001 and provides that the investors may
purchase, and may assume the bank's position under, the credit agreement in
the event of certain defaults. Mr. Pappajohn received warrants to purchase
250,000 shares in consideration of the guarantee of $1,250,000 of the line
of credit.
We entered into a $500,000 line of credit with a commercial bank on
March 30, 2000. This line of credit is secured by substantially all of our
assets, as well as guaranteed, and secured by letters of credit or deposit
accounts pledged by, three investors. In consideration of the guarantees and
pledges, we issued to the investors warrants to purchase 20 shares of common
stock for each $100 of the credit line that the investors guaranteed (or
warrants to purchase a total of 100,000 shares of common stock). The warrants
expire in March 2005 and may be exercised at any time prior to that date at a
price of $10.00 per share. The exercise price, however, is subject to
adjustment to the price, if lower, (1) at which we issue shares of our common
stock in a private transaction (excluding shares issued under employee
options, outstanding warrants and certain other instruments), (2) equal to
50% of the price at which we conduct a bona fide public offering or (3) equal
to 50% of the consideration received per share in any business combination
(excluding a pooling of interest transaction) in which we engage while the
warrants are outstanding. If the exercise price is adjusted the number of
shares covered by each warrant will also be adjusted to the number obtained
by multiplying the number of shares initially issuable by the initial exercise
price and dividing the result by the adjusted exercise price. If we complete a
public offering of our common stock pursuant to a firm commitment underwriting
at a price less than $20 per share, then the exercise price will be adjusted
to 50% of the public offering price and the number of shares which can be
purchased will be equal to $1,000,000 divided by the new exercise price. The
Agreement pursuant to which the investor guarantees were received requires
that the line be repaid by June 30, 2001 and provides that the investors may
purchase, and may assume the bank's position under, the credit agreement in
the event of certain defaults.
44
<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 2, 2000 by (a) each person known
by us to beneficially own more than 5% of our outstanding common stock, (b) each
director, (c) each Named Executive Officer and (d) all directors and executive
officers as a group. Except as otherwise noted, each stockholder has sole voting
and investment power with respect to the shares set forth opposite that
stockholder's name.
This table lists applicable percentage ownership based on 4,014,931
shares of common stock outstanding as of March 2, 2000, after giving effect
to the conversion of all outstanding shares of preferred stock, and also lists
applicable percentage ownership based on _______ shares outstanding immediately
following the completion of this offering.
<TABLE>
<CAPTION>
PERCENT OF OUTSTANDING SHARES
NUMBER -----------------------------------
NAME OF BENEFICIAL OWNER OF SHARES ACTUAL AFTER OFFERING
- ------------------------------------------ ----------------- -------------- -----------------
<S> <C> <C> <C>
Harry O. Hefter........................... 1,000,000 24.9%
180 North Wabash Avenue
Chicago, Illinois 60601
John Pappajohn (1)........................ 874,967 19.0%
2116 Financial Center
Des Moines, Iowa 50309
U.S. Bank National Association as
trustee (2)............................ 748,500 16.6%
601 Second Avenue South
Minneapolis, MN 55402
William E. Staib (3)...................... 377,084 9.2%
Edgewater Private Equity Fund............. 250,000 6.2%
900 Michigan Avenue, 14th Floor
Chicago, Illinois 60601
L. Christopher Dominguez (4).............. 62,555 1.5%
Luan A. Cox (5)........................... 49,066 1.2%
Timothy S. Yamauchi (6)................... 35,683 *
David Sengpiel (7)........................ 31,000 *
512 58th Street
West Des Moines, Iowa 50266
All directors and officers as a group
(10 persons)(8)........................ 1,584,705 36.9%
</TABLE>
- ------------
* Less than 1%.
(1) Includes 592,500 shares of common stock issuable on exercise of outstanding
warrants; 37,500 shares of common stock and 13,700 shares of Series A
Preferred Stock owned by Halkis Ltd., an entity of which Mr. Pappajohn is
the sole proprietor; 37,500 shares of common stock and 13,700 shares of
Series A Preferred Stock owned by Thebes Ltd., an entity of which Mr.
Pappajohn's wife is the sole proprietor; and 37,500 shares of common stock
and 13,700 shares of Series A Preferred Stock owned by Mr. Pappajohn's
wife. Mr. Pappajohn disclaims any beneficial ownership in any shares owned
by Thebes and his wife.
(2) Includes 248,500 shares held by U.S. Bank National Association, trustee of
the Robert B. Staib Voting Trust dated December 3, 1999, established for
the benefit of Robert Staib. Also includes 500,000 shares of common stock
issuable upon the exercise of outstanding warrants held by Robert Staib.
Upon exercise of these warrants, the shares will be automatically deposited
into the Trust. In December 1999, under the terms of an agreement between
Robert Staib and us, Robert Staib agreed to cancel and return 912,500
shares of common stock issuable upon the exercise of warrants. A creditor
of Robert Staib is seeking to invalidate the settlement agreement that
underlies these arrangements in a bankruptcy court. If the court did so, we
might have to reissue these warrants. See "Certain Transactions."
(3) Includes 77,084 shares of common stock subject to stock options exercisable
within 60 days of March 2, 2000.
(4) Includes 32,983 shares of common stock subject to stock options exercisable
within 60 days of March 2, 2000 and 16,421 shares issuable upon the
exercise of warrants.
(5) Includes 49,066 shares of common stock subject to stock options exercisable
within 60 days of March 2, 2000.
(6) Includes 35,683 shares of common stock subject to stock options exercisable
within 60 days of March 2, 2000.
(7) Includes 21,000 shares of common stock subject to stock options exercisable
within 60 days of March 2, 2000 and 10,000 shares of common stock
issuable upon the exercise of outstanding warrants.
(8) Includes 193,466 shares of common stock subject to stock options
exercisable within 60 days of March 2, 2000 and 26,421 shares of common
stock issuable upon the exercise of outstanding warrants.
45
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 25,000,000 shares of capital
stock, of which 20,000,000 shares are common stock, $.01 par value per share,
and 5,000,000 shares are shares of preferred stock, no par value, undesignated
as to rights and preferences. As of February 29, 2000, 2,176,118 shares of
common stock were issued and outstanding and held by approximately 189
stockholders of record, and 1,375,974 shares of preferred stock were issued and
outstanding and held by approximately 164 stockholders. Upon the closing of this
offering, all outstanding shares of preferred stock will convert into an
aggregate of 1,838,813 shares of common stock.
COMMON STOCK
The holders of our common stock are entitled to one vote per share on
all matters to be voted upon by our stockholders. If Stockpoint is liquidated or
dissolved, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to any prior distribution
rights of any preferred stock then outstanding. The common stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. Subject to
the prior rights and preferences of any outstanding preferred stock, the holders
of the common stock are entitled to receive ratably any dividends by the Board
of Directors out of funds legally available for dividends. See "Dividend
Policy."
PREFERRED STOCK
The Board of Directors is authorized, without further stockholder
approval, to issue the undesignated shares of preferred stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares. The Board of Directors has authority to issue preferred
stock in one or more series and to fix voting power (full or limited, or no
voting power), and the designations, preferences and relative, participating,
optional or other special rights and qualifications or restrictions of the
undesignated preferred stock as the Board of Directors shall determine, without
further vote or action by the stockholders. These rights include the dividend
rights, conversion rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series. Issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of Stockpoint without further action
by the stockholders and may adversely affect voting and other rights of holders
of our common stock.
WARRANTS
At February 29, 2000, we had outstanding warrants to purchase
1,810,639 shares of common stock with an average weighted exercise price of
$5.86 per share. These warrants expire between March 2000 and December 2004.
REGISTRATION RIGHTS
After this offering, the holders of 897,063 shares of common stock
will be entitled to rights with respect to the registration of those shares
under the Securities Act as follows:
o Demand Registration Rights: At any time one year or more after the
effective date of an initial public offering of our common stock,
the holders of at least 51% of the eligible securities then
outstanding may, on one occasion only, demand in writing that we,
at our expense and subject to certain limitations, file a
registration statement covering the sale of those securities. At
the request of the holders of a majority of the securities to be
registered, the method of disposition of the securities will be an
underwritten public offering. We will select the managing
underwriter of any public offering.
o Piggyback Registration Rights: From and after the date on which
one year has elapsed from the date we first consummate a public
offering of our common stock, each time we determine to proceed
with the actual preparation and filing of a registration statement
other than certain limited purpose registration statements, we
will give written notice of our determination to all record
holders of eligible securities, who will have the right to include
those securities in the registration statement, subject to certain
conditions and restrictions.
46
<PAGE> 49
o S-3 Registration Rights: At any time one year or more after the
effective date of an initial public offering, and provided that we
qualify for use of the relevant form, holders of a majority of the
outstanding eligible securities may request, on one occasion only,
that we file at our expense subject to certain limitations, a
registration statement on Form S-3 covering the sale of the
eligible securities.
The holders of warrants to purchase a total of 1,598,639 shares of
our common stock have rights to require us to include those shares in any
registration statement, other than a registration statement filed in connection
with an initial public offering, that we file prior to the expiration date of
the relevant warrant. These rights include the right to require us to use our
best efforts to qualify the warrant shares for sale in the states any
warrantholder designates. We will bear the entire cost and expense of any
registration like this other than the fees of counsel for the warrantholders and
any registration fees, transfer taxes or underwriting discounts or commissions
applicable to the warrant shares.
DELAWARE LAW PROVISIONS WITH POTENTIAL ANTI-TAKEOVER EFFECTS
As a Delaware corporation, we are subject to the provisions of Section
203 of the Delaware General Corporation Law. Section 203, subject to certain
exemptions, prohibits a Delaware corporation from engaging in any of a broad
range of "business combinations" and "control share acquisitions" involving an
"interested" stockholder, or any affiliate or associate of such interested
stockholder, for a period of three years following the date that such
stockholder became an interested stockholder, unless:
o prior to such date, the Board of Directors of the corporation
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
o upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced
excluding, for purposes of determining the number of shares
outstanding, those shares owned (i) by persons who are directors
and also officers and (ii) by employee stock plans in which
employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or
o on or subsequent to such date, the business combination is
approved by the Board of Directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by
the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the stockholder. For purposes of
Section 203, an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock. These provisions may have the effect of
discouraging, delaying, deferring or preventing a change in control of
Stockpoint.
LISTING
We have applied for quotation of our common stock on the Nasdaq
National Market under the symbol "STKP."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock will be Norwest
Bank Minnesota, National Association.
47
<PAGE> 50
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot make any predictions regarding the effect, if any, that future
sales of substantial amounts of our common stock, or the perception that those
sales might occur, could have on the market price for our common stock.
Nevertheless, sales of substantial amounts of our common stock in the public
market could adversely affect the prevailing market price. These factors could
also make it more difficult for us to raise additional equity capital in the
future.
Upon completion of this offering, we will have outstanding a total of
shares of our common stock, assuming no exercise of the underwriters'
option to purchase additional shares and no exercise of outstanding options. All
of the shares sold in this offering will be freely tradable without restriction
or further registration under the Securities Act unless the shares are purchased
by "affiliates" as that term is defined in Rule 144 under the Securities Act.
The remaining 4,014,931 shares of common stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, rules that are summarized below. 4,010,181 of the shares held by
existing stockholders were acquired more than two years ago. All of those
shares, except shares held by persons who are "affliates" of Stockpoint under
SEC rules and the ______ shares subject to lockup agreements with the
underwriters, will be eligible for immediate sale in the public markets under
Rule 144(k). The remaining 4,750 shares will become eligible for resale 90 days
after the effective date of this offering under Rule 701.
LOCK-UP AGREEMENTS
Our directors, executive officers, five percent stockholders and
certain other holders of our common stock have entered into "lock-up" agreements
providing that they will not sell, offer to sell, contract to sell, hypothecate,
pledge, grant any option to sell or otherwise dispose of, directly or
indirectly, any shares of common stock or securities convertible into or
exerciseable or exchangeable for common stock for a period of 180 days after the
date of this prospectus without the prior written consent of Roth Capital
Partners, Inc., the lead managing underwriter. Although Roth Capital Partners,
Inc. may release the shares subject to the lock-up agreements in whole or in
part at any time it has no current plan to do so.
RULE 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year would be
entitled to sell, within any three-month period beginning 90 days after the date
of this prospectus, a number of shares that does not exceed the greater of:
o 1% of the number of shares of common stock then outstanding, which
will equal approximately shares immediately after this offering;
or
o the average weekly trading volume of the common stock on the
Nasdaq National Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about us.
RULE 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, including the
holding period of any prior owner other than an affiliate, is entitled to sell
those shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
RULE 701
In general, under Rule 701 as currently in effect, each of our
employees, consultants or advisors who purchases shares from us in connection
with a compensatory stock plan or other written agreement is eligible to resell
48
<PAGE> 51
those shares 90 days after the effective date of this offering in reliance on
Rule 144, but without compliance with certain restrictions, including the
holding period, contained in Rule 144.
REGISTRATION RIGHTS
The holders of 897,063 shares of our common stock and holders of
warrants to purchase an aggregate of 1,598,639 shares of our common stock have
various rights with respect to the registration of their shares under the
Securities Act. Registration of these shares would result in their becoming
freely tradeable without restriction, except for shares purchased by
affiliates. See "Description of Capital Stock--Registration Rights."
STOCK OPTIONS
After the completion of this offering, we intend to file a
registration statement on Form S-8 under the Securities Act to register all
shares of common stock issuable under our stock option plans. See "Management --
Stock Option Plans." This Form S-8 registration statement is expected to be
become effective immediately upon filing and shares covered by that registration
statement will then be eligible for sale in the public markets, subject to Rule
144 limitations applicable to affiliates.
49
<PAGE> 52
UNDERWRITING
Stockpoint has entered into an underwriting agreement with the
underwriters named below. Roth Capital Partners, Inc. is acting as the
representative of the underwriters.
The underwriting agreement provides for the purchase of a specific
number of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Roth Capital Partners, Inc. ...............................
-----------------
Total .................................................... =================
</TABLE>
This is a firm commitment underwriting. This means that the
underwriters have agreed to purchase all of the shares offered by this
prospectus, other than those covered by the over-allotment option described
below, if any are purchased. Under the underwriting agreement, if an underwriter
defaults in its commitment to purchase shares, the commitments of non-defaulting
underwriters may be increased or the underwriting agreement may be terminated,
depending on the circumstances.
The representative has advised us that the underwriters propose to
offer the shares directly to the public at the public offering price that
appears on the cover of this prospectus. In addition, the representative may
offer some of the shares to securities dealers at that price less a concession
of $ per share. The underwriters may also allow to dealers, and those
dealers may reallow, a concession not in excess of $ per share to other
dealers. After the shares are released for sale to the public, the
representative may change the offering price and other selling terms at various
times. The underwriters have informed us that they do not intend to confirm
sales to accounts over which they exercise discretionary authority.
We have granted to the underwriters an over-allotment option. This
option, which is exercisable for up to 30 days after the date of this
prospectus, permits the underwriters to purchase a maximum of additional
shares of our common stock to cover over-allotments. If the underwriters
exercise all or part of this option, they will purchase the shares covered by
the option at the public offering price that appears on the cover page of this
prospectus, less the underwriting discount. If this option is exercised in full,
the total price to public will be $ million and the total proceeds to
Stockpoint will be approximately $ million. The underwriters have
severally agreed that, to the extent they exercise the over-allotment option,
each of the underwriters will purchase a number of shares proportionate to its
initial amount reflected in the table above.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us:
<TABLE>
<CAPTION>
----------------------------------------------------
No Exercise of Full Exercise of
Over-Allotment Option Over-Allotment Option
----------------------- ------------------------
<S> <C> <C>
Per Share............
Total................
</TABLE>
We estimate that the total expenses of the offering, excluding the
underwriting discount, will be approximately $______________.
We have agreed to indemnify the underwriters against specified
liabilities, including liabilities under the Securities Act of 1933.
50
<PAGE> 53
We, each of our directors, executive officers, five percent
stockholders and certain other holders of our common stock have agreed pursuant
to "lock-up" agreements not to sell, offer to sell, contract to sell,
hypothecate, pledge, grant any option to sell or otherwise dispose of, directly
or indirectly, any shares of common stock or securities convertible into or
exerciseable or exchangeable for common stock for a period of 180 days after the
date of this prospectus without the prior written consent of Roth Capital
Partners, Inc. Although Roth Capital Partners, Inc. may release the shares
subject to the lock-up agreements in whole or in part at any time, it has no
current plan to do so.
Prior to this offering, there has been no public market for the common
stock. Consequently, the offering price for the common stock will be determined
by negotiations between us and the representative of the underwriters and is not
necessarily related to our asset value, net worth or other established criteria
of value. The factors to be considered in these negotiations, in addition to
prevailing market conditions, will include the history of and prospects for the
industry in which we compete, an assessment of our management, our prospects,
our capital structure and other factors as are deemed relevant.
Rules of the Securities and Exchange Commission may limit the ability
of the underwriters to bid for or purchase shares before the distribution of
shares is completed. However, the underwriters may engage in the following
activities in accordance with those rules:
o Stabilizing transactions - The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the
price of the shares, so long as stabilizing bids do not exceed a
specified maximum.
o Over-allotments and syndicate covering transactions - The
underwriters may create a short position in the shares by selling
more shares than are set forth on the cover page of this
prospectus. If a short position is created in connection with this
offering, the representative may engage in syndicate covering
transactions by purchasing shares in the open market. The
representative may also elect to reduce any short position by
exercising all or part of the over-allotment option.
o Penalty bids - If the representative purchases shares in the open
market in a stabilizing transaction or syndicate covering
transaction, they may reclaim a selling concession from the
underwriters and selling group members who sold those shares as
part of this offering.
Stabilization and syndicate covering transactions may cause the price
of the shares to be higher than it would be in the absence of these
transactions. The imposition of a penalty bid might also have an effect on the
price of the shares if it discourages resales of the shares.
Neither we nor the underwriters make any representation or prediction
as to the effect that the transactions described above may have on the price of
the shares. These transactions may occur on the Nasdaq National Market or
otherwise. If transactions of this kind are commenced, they may be discontinued
without notice at any time.
LEGAL MATTERS
Dorsey & Whitney LLP, Minneapolis, Minnesota, will pass upon the
validity of the issuance of shares of common stock offered by this prospectus
for Stockpoint. Messerli & Kramer P.A. will pass upon certain legal matters in
connection with the offering for the underwriters.
51
<PAGE> 54
EXPERTS
The consolidated financial statements of Stockpoint as of December 31,
1998 and 1999 and for the years ended December 31, 1997, 1998 and 1999 included
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 with
respect to the shares of common stock offered by this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information contained in the registration statement and the
exhibits and schedules that are another part of the registration statement. In
particular, statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
case we refer you to the copy of that contract or other document to the extent
filed as an exhibit to the registration statement for a more complete
description. For further information on Stockpoint and our common stock, you
should review the registration statement, including exhibits and schedules.
You may read and copy all or any portion of the registration statement
or any reports, statements or other information we file at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington,
DC, 20549 and at the regional offices of the SEC located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can request copies of these documents upon
payment of a duplicating fee by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
on the SEC's web site at http://www.sec.gov.
Upon completion of this offering, we will be required to file periodic
reports, proxy statements and other information with the SEC. These documents
will be available for inspection and copying as described above. In addition,
upon approval of our application for quotation of our common on the Nasdaq
National Market, those reports, proxy statements and other information will also
be available for inspection at the offices of Nasdaq Operations, 1735 K Street,
NW, Washington, DC 20006.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent auditors and to make available
to our stockholders quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.
52
<PAGE> 55
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-5
Consolidated Statements of Stockholders' (Deficiency) for
the Years Ended December 31, 1997, 1998 and 1999.......... F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Stockpoint, Inc.:
We have audited the accompanying consolidated balance sheets of Stockpoint,
Inc. (formerly Neural Applications Corporation) and subsidiary as of December
31, 1998 and 1999, and the related consolidated statements of operations,
stockholders' (deficiency), and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Stockpoint, Inc. and subsidiary
at December 31, 1998 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
As discussed in Note 13 to the consolidated financial statements, the
Company discontinued the operations of its metals segment on May 28, 1999, when
it sold the technology and operational assets of the metals segment. The gain on
sale and results prior to the sale are included in discontinued operations in
the accompanying consolidated financial statements.
/s/ Deloitte & Touche LLP
Cedar Rapids, Iowa
February 8, 2000
F-2
<PAGE> 57
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
ASSETS (NOTES 2 AND 9)
CURRENT ASSETS:
Cash and cash equivalents............................. $ 221,098 $2,203,623
Accounts receivable, less allowance for doubtful
accounts of $58,208 for 1998 and $150,000 for
1999............................................... 1,118,310 1,859,852
Prepaid expenses and other assets..................... 146,323 247,201
Net current assets of discontinued operations (Note
13)................................................ 804,201 --
---------- ----------
Total current assets............................... 2,289,932 4,310,676
---------- ----------
SOFTWARE, EQUIPMENT AND FURNITURE:
Purchased software.................................... 214,473 322,665
Equipment............................................. 1,388,863 1,886,301
Furniture and fixtures................................ 56,360 67,227
---------- ----------
Total.............................................. 1,659,696 2,276,193
Less accumulated depreciation......................... (571,133) (929,071)
---------- ----------
Software, equipment and furniture, net........... 1,088,563 1,347,122
---------- ----------
OTHER ASSETS:
Software development costs, less accumulated
amortization of $191,654 for 1998 and $204,519 for
1999 (Note 1)...................................... 28,645 15,780
Deferred financing costs, less accumulated
amortization of $108,865 for 1998 and $215,512 for
1999............................................... 387,207 415,560
---------- ----------
Total other assets................................. 415,852 431,340
---------- ----------
Total.............................................. $3,794,347 $6,089,138
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 58
<TABLE>
<CAPTION>
PRO FORMA
(NOTE 14)
1998 1999 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
CURRENT LIABILITIES:
Lines of credit (Note 2)............. $ 4,145,000 $ 1,750,000
Forgivable loan (Note 2)............. 250,000 --
Accounts payable..................... 796,370 1,566,781
Deferred revenue..................... 1,498,181 2,808,181
Accrued installation and warranty
costs............................. 46,282 296,086
Other accrued liabilities............ 833,956 552,451
Customer deposits.................... 70,314 --
Current portion of capital lease
(Note 8).......................... -- 5,821
------------ ------------
Total current liabilities......... 7,640,103 6,979,320
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of debt discount
and less current portion (Note
2)................................ 5,900,000 10,508,421
Capital lease, less current portion
(Note 8).......................... -- 28,260
------------ ------------
Total long-term liabilities....... 5,900,000 10,536,681
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Notes 2, 7, 8 and 9)
STOCKHOLDERS' (DEFICIENCY) (Note 11):
Preferred stock, no par value;
5,000,000 shares authorized:
Convertible Series A Preferred Stock,
320,000 shares issued at December
31, 1998 and 1999 ($2,000,000
liquidation value, convertible
into 500,000 shares of common
stock) (Note 4), no pro forma
shares outstanding................ 1,965,991 1,965,991 $ --
Convertible Series B Preferred Stock,
282,720 shares issued at December
31, 1998 and 1999 ($1,767,000
liquidation value, convertible
into 441,750 shares of common
stock) (Note 4), no pro forma
shares outstanding................ 1,733,639 1,733,639 --
Convertible Series C Preferred Stock,
773,254 shares issued at December
31, 1998 and 1999 ($6,762,602
liquidation value, convertible
into 897,063 shares of common
stock) (Note 4), no pro forma
shares outstanding................ 5,455,319 5,455,319 --
Common stock, $.01 par value per share;
20,000,000 shares authorized;
2,129,701 and 2,176,118 shares issued
at December 31, 1998 and 1999,
respectively (Note 5), 4,014,931 pro
forma shares outstanding............. 21,297 21,761 40,149
Common stock warrants (Note 7)......... -- 819,868 819,868
Additional paid-in capital............. 2,609,759 3,875,620 13,012,181
Deferred compensation (Note 6)......... (1,594,755) (2,194,978) (2,194,978)
Accumulated deficit.................... (19,937,006) (23,104,083) (23,104,083)
------------ ------------ ------------
Total stockholders'
(deficiency).................... (9,745,756) (11,426,863) $(11,426,863)
------------ ------------ ============
Total.................................. $ 3,794,347 $ 6,089,138
============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 59
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
REVENUES (Note 10)....................... $ 1,427,908 $ 2,177,946 $ 6,829,869
COST OF REVENUES (excluding deferred
compensation of $86,257 for 1998 and
$124,337 for 1999).................. 308,608 764,965 2,289,881
----------- ----------- -----------
GROSS PROFIT............................. 1,119,300 1,412,981 4,539,988
----------- ----------- -----------
OPERATING EXPENSES:
Research and development (excluding
deferred compensation of $61,176 for
1998 and $114,005 for 1999)......... 1,057,071 1,101,471 1,637,150
Sales and marketing (excluding deferred
compensation of $58,229 for 1998 and
$137,552 for 1999).................. 752,675 1,566,030 1,590,899
General and administrative (excluding
deferred compensation of $460,608
for 1998 and $236,408 for 1999)..... 2,556,730 3,523,006 3,588,977
Deferred compensation (Note 6)......... -- 666,270 612,302
----------- ----------- -----------
Total operating expenses............ 4,366,476 6,856,777 7,429,328
----------- ----------- -----------
OPERATING LOSS FROM CONTINUING
OPERATIONS............................. (3,247,176) (5,443,796) (2,889,340)
OTHER EXPENSE, PRIMARILY INTEREST........ (688,525) (784,546) (1,058,545)
----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS.......... (3,935,701) (6,228,342) (3,947,885)
DISCONTINUED OPERATIONS (Note 13):
Income (loss) from operations.......... (405,722) (356,946) 347,675
Gain on disposition.................... -- -- 433,133
----------- ----------- -----------
NET LOSS................................. (4,341,423) (6,585,288) (3,167,077)
CUMULATIVE DIVIDENDS ON PREFERRED
STOCK.................................. (40,266) (409,418) (412,918)
----------- ----------- -----------
NET LOSS APPLICABLE TO COMMON
STOCKHOLDERS........................... $(4,381,689) $(6,994,706) $(3,579,995)
=========== =========== ===========
BASIC AND DILUTED INCOME (LOSS) PER
COMMON SHARE -- HISTORICAL:
Loss from continuing operations..... $ (1.90) $ (3.15) $ (2.03)
Income (loss) from discontinued
operations........................ (0.20) (0.17) 0.36
----------- ----------- -----------
Net loss............................ $ (2.10) $ (3.32) $ (1.67)
=========== =========== ===========
BASIC AND DILUTED INCOME (LOSS) PER
COMMON SHARE -- PRO FORMA (UNAUDITED)
(Note 14):
Loss from continuing operations..... $ (.73)
Income from discontinued
operations........................ .20
-----------
Net loss............................ $ (.53)
===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 60
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
SUBSIDIARY CONVERTIBLE CONVERTIBLE CONVERTIBLE
SERIES A SERIES A SERIES B SERIES C COMMON ADDITIONAL
PREFERRED PREFERRED PREFERRED PREFERRED COMMON STOCK PAID-IN
STOCK STOCK STOCK STOCK STOCK WARRANTS CAPITAL
---------- ----------- ----------- ----------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996....... $ 100,000 $1,965,991 $1,733,639 $ -- $20,897 $ -- $ 118,734
Issuance of 694,618 shares of
Convertible Series C Preferred
Stock, net of issue costs of
$414,684......................... -- -- -- 4,885,316 -- -- --
Redemption of subsidiary Series A
Preferred Stock................ (100,000) -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- --
--------- ---------- ---------- ---------- ------- -------- ----------
BALANCE AT DECEMBER 31, 1997....... -- 1,965,991 1,733,639 4,885,316 20,897 -- 118,734
Issuance of 78,636 shares of
Convertible Series C Preferred
Stock, net of issue costs of
$29,997.......................... -- -- -- 570,003 -- -- --
Deferred compensation.............. -- -- -- -- -- -- 2,491,425
Amortization of deferred
compensation (including $230,400
allocated to discontinued
operations)...................... -- -- -- -- -- -- --
Cashless exercise of warrants for
40,000 shares of common stock.... -- -- -- -- 400 -- (400)
Net loss..................... -- -- -- -- -- -- --
--------- ---------- ---------- ---------- ------- -------- ----------
BALANCE AT DECEMBER 31, 1998....... -- 1,965,991 1,733,639 5,455,319 21,297 -- 2,609,759
Issuance of 4,750 shares of common
stock............................ -- -- -- -- 47 -- 4,703
Deferred compensation.............. -- -- -- -- -- -- 1,261,575
Amortization of deferred
compensation (including $49,050
allocated to discontinued
operations)...................... -- -- -- -- -- -- --
Issuance of common stock
warrants......................... -- -- -- -- -- 819,868 --
Cashless exercise of warrants for
41,667 shares of common stock.... -- -- -- -- 417 -- (417)
Net loss..................... -- -- -- -- -- -- --
--------- ---------- ---------- ---------- ------- -------- ----------
BALANCE AT DECEMBER 31, 1999....... $ -- $1,965,991 $1,733,639 $5,455,319 $21,761 $819,868 $3,875,620
========= ========== ========== ========== ======= ======== ==========
<CAPTION>
DEFERRED ACCUMULATED
COMPENSATION DEFICIT
------------ -----------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1996....... $ -- $ (9,010,295)
Issuance of 694,618 shares of
Convertible Series C Preferred
Stock, net of issue costs of
$414,684......................... -- --
Redemption of subsidiary Series A
Preferred Stock................ -- --
Net loss......................... -- (4,341,423)
----------- ------------
BALANCE AT DECEMBER 31, 1997....... -- (13,351,718)
Issuance of 78,636 shares of
Convertible Series C Preferred
Stock, net of issue costs of
$29,997.......................... -- --
Deferred compensation.............. (2,491,425) --
Amortization of deferred
compensation (including $230,400
allocated to discontinued
operations)...................... 896,670 --
Cashless exercise of warrants for
40,000 shares of common stock.... -- --
Net loss..................... -- (6,585,288)
----------- ------------
BALANCE AT DECEMBER 31, 1998....... (1,594,755) (19,937,006)
Issuance of 4,750 shares of common
stock............................ -- --
Deferred compensation.............. (1,261,575) --
Amortization of deferred
compensation (including $49,050
allocated to discontinued
operations)...................... 661,352 --
Issuance of common stock
warrants......................... -- --
Cashless exercise of warrants for
41,667 shares of common stock.... -- --
Net loss..................... -- (3,167,077)
----------- ------------
BALANCE AT DECEMBER 31, 1999....... $(2,194,978) $(23,104,083)
=========== ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 61
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(4,341,423) $(6,585,288) $(3,167,077)
Adjustments to reconcile net loss to net cash flows
from operating activities of continuing
operations:
(Income) loss from discontinued operations....... 405,722 356,946 (347,675)
Gain on disposition of discontinued operations... -- -- (433,133)
Depreciation and amortization.................... 243,187 361,495 521,015
Noncash expense related to stock options and
warrants....................................... -- 896,670 858,810
Net changes in assets and liabilities:
Accounts receivable.............................. (66,648) (508,159) (741,542)
Prepaid expenses and other assets................ (81,581) (6,477) 9,953
Accounts payable................................. 136,874 404,099 770,411
Deferred revenue................................. 133,137 900,954 1,310,000
Accrued liabilities and customer deposits........ (60,808) 388,846 (102,015)
----------- ----------- -----------
Net cash flows from operating activities of
continuing operations....................... (3,631,540) (3,790,914) (1,321,253)
Net cash flows from discontinued operations.... (407,746) (727,083) 835,009
----------- ----------- -----------
Net cash flows from operating activities....... (4,039,286) (4,517,997) (486,244)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for software, equipment and
furniture........................................ (477,919) (749,923) (623,487)
Expenditures for software development costs........ -- (38,597) --
Proceeds from sale of discontinued operations...... -- -- 750,000
----------- ----------- -----------
Net cash flows from investing activities....... (477,919) (788,520) 126,513
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under bank lines of
credit........................................... -- 5,055,000 2,475,000
Payments on borrowings under bank lines of
credit........................................... (5,510,000) (910,000) --
Payments on capital lease.......................... -- -- (2,494)
Payments for bank line of credit fees.............. -- -- (135,000)
Payments for issuance costs of debentures.......... (411,575) (29,997) --
Payments for issuance costs of preferred stock..... (414,684) (29,997) --
Proceeds from issuance of Convertible Series C
Preferred Stock.................................. 5,300,000 600,000 --
Proceeds from issuance of debentures............... 5,300,000 600,000 --
Proceeds from issuance of common stock............. -- -- 4,750
Redemption of subsidiary Series A Preferred
Stock............................................ (100,000) -- --
----------- ----------- -----------
Net cash flows from financing activities....... 4,163,741 5,285,006 2,342,256
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ $ (353,464) $ (21,511) $ 1,982,525
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....... 596,073 242,609 221,098
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR............. $ 242,609 $ 221,098 $ 2,203,623
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for interest............. $ 699,021 $ 663,110 $ 936,018
=========== =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchased by capital lease............... $ -- $ -- $ 36,575
Issuance of common stock warrants for consulting
services......................................... -- -- 279,868
Issuance of common stock warrants in connection
with bank line of credit......................... -- -- 540,000
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 62
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS -- In July 1999, Neural Applications Corporation amended its
certificate of incorporation to change its name to Stockpoint, Inc. (which
individually or collectively with its wholly-owned subsidiary discussed below is
referred to herein as the "Company"). The Company operates in a single business
segment. The Company is a provider of financial information and market analysis
components for Internet web sites. The Company integrates sophisticated
financial content and applications to provide its clients customized web sites
that the Company hosts using its proprietary data base architecture. In doing
so, the Company enables organizations such as brokerages, commercial and
investment banks, mutual funds, 401(k) plans, portals and media companies to
outsource essential web site functionality. The Company also engages in projects
to provide data mining applications and financial services consulting to
businesses related to their Internet web sites.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Stockpoint, Inc. and its wholly-owned subsidiary. Prior
to June 1999, such subsidiary was Ethos Corporation, which was acquired by the
Company on March 6, 1997 (see Note 11). In June 1999, Ethos Corporation was
merged into the Company. Simultaneously, certain assets were contributed to a
newly formed subsidiary named Neural, Inc. Intercompany accounts and
transactions have been eliminated.
BASIS OF PRESENTATION -- The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
The Company has had recurring operating losses since inception, which has
resulted in an accumulated deficit of $23,104,083 at December 31, 1999.
Management is continuing its efforts to market the Company's existing products
and services and develop new products and services to enable the Company to
achieve a revenue base that can support its operations. Management believes that
existing capital resources and financing available under the Company's line of
credit will be adequate to satisfy minimum capital requirements for at least
twelve months.
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.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the allowance for doubtful accounts and accrued
installation and warranty costs.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The fair value of accounts
receivable, accounts payable, customer deposits, and notes payable approximate
the carrying values of the instruments due to the short-term maturities of such
instruments or, for long-term notes payable, due to no significant change in
interest rates since their issuance.
CONCENTRATION OF CREDIT RISK -- The Company's financial instruments that
are subject to concentration of credit risk consist primarily of cash and cash
equivalents and trade
F-8
<PAGE> 63
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
accounts receivable which are generally not collateralized. The Company's policy
is to place its cash and cash equivalents with high credit quality financial
institutions in order to limit the amount of credit exposure. The Company's
trade accounts receivable are primarily with customers in the financial services
industry. The Company maintains allowances for probable credit losses.
CONCENTRATION OF SOURCES OF CONTENT -- The Company obtains financial data
and information, such as stock pricing information, financial news, and research
information, from a limited number of content providers through nonexclusive
contractual relationships with terms that usually range from one to two years.
The Company may not be able to renew these contracts on favorable terms or a
change in content providers could cause significant service disruptions which
would adversely affect the business.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include interest
earning deposits with original maturities of ninety days or less.
PURCHASED SOFTWARE, EQUIPMENT, AND FURNITURE -- Purchased software,
equipment, and furniture are recorded at cost. Depreciation is provided using
the straight-line method over the estimated useful lives (three to five years)
of the related assets. The Company reviews such assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
SOFTWARE DEVELOPMENT COSTS -- Software development costs for products and
significant product enhancements incurred subsequent to the establishment of
their technological feasibility and prior to their general release to customers
are capitalized. The ultimate recovery of the costs is dependent on the
Company's ability to successfully complete the products or enhancements under
development and to achieve a level of market acceptance, which will generate
revenues and profits in amounts sufficient to permit such recovery. The Company
evaluates the recoverability of capitalized software development costs by
project on a periodic basis.
The Company begins amortizing software development costs when the products
and product enhancements are released to customers. Amortization expense was
$55,064, $29,948 and $12,865 for the years ended December 31, 1997, 1998 and
1999, respectively. Capitalized software development costs are amortized pro
rata based upon revenue earned over total anticipated revenue from the related
products or product enhancement or straight-line over three years, whichever
method results in the greatest amortization expense.
DEFERRED FINANCING COSTS -- Incremental costs directly attributable to the
Company's line of credit agreement and private placement offering of debentures
have been deferred and are being amortized as interest expense over the life of
the line of credit agreement and debentures, respectively.
PRODUCT SUPPORT AND WARRANTY COSTS -- Estimated costs anticipated to be
incurred during the product support and warranty period related to the Company's
discontinued metals segment (see Note 13) was accrued when revenue from the
system sale was
F-9
<PAGE> 64
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
recognized. The Company remains liable for such costs for systems sold prior to
the sale of the metals segment.
REVENUE RECOGNITION AND DEFERRED REVENUE -- Revenues from Internet
advertising, license, and maintenance and support agreements are recognized
ratably over the periods of the agreements. Revenues from services for projects
and Internet development agreements are recognized as project or development
time is incurred. Deferred revenue represents amounts billed to customers as
permitted by the agreements which have not yet been recognized as revenue.
DEBT DISCOUNT -- Original issue debt discount associated with the value
assigned to detachable common stock warrants issued in connection with the
Company's line of credit is being amortized as interest expense over the life of
the line of credit agreement.
INCOME TAXES -- Deferred income taxes are provided to recognize the tax
effect of temporary differences between the basis of assets and liabilities for
tax and financial statement purposes. A valuation allowance is provided to
reduce deferred tax assets to the amount considered realizable.
STOCK-BASED COMPENSATION -- The Company measures stock-based compensation
cost with employees as the excess of the fair value of the Company's common
stock at date of grant over the amount the employee must pay for the stock. The
Company measures stock-based compensation with other than employees as the fair
value of the goods or services received or the fair value of the equity
instrument issued, whichever is more reliably measurable.
If compensation cost for stock option grants to employees had been
determined based on fair value at the grant dates consistent with the method
prescribed by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation," the Company's net loss applicable to common
stockholders and net loss per share would have been the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss applicable to common
stockholders:
As reported............................ $(4,381,689) $(6,994,706) $(3,579,995)
Pro forma.............................. (4,442,009) (7,018,879) (3,651,326)
Net loss per common share:
As reported............................ $ (2.10) $ (3.32) $ (1.67)
Pro forma.............................. (2.13) (3.33) (1.71)
</TABLE>
The Company's calculations were made using the Black-Scholes option pricing
model with the following weighted average assumptions: seven year expected life
of option; stock volatility of zero; risk-free interest rates of 6.25%, 5.5% and
6.0% in 1997, 1998 and 1999, respectively; and no dividends during the expected
term. The pro forma amounts for
F-10
<PAGE> 65
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
compensation cost may not be indicative of the effects on net loss applicable to
common stockholders and net loss per common share for future years.
NET LOSS PER COMMON SHARE INFORMATION -- The Company's net loss per common
share is based upon the weighted average number of common shares outstanding
during the years presented. Equivalent shares in the form of convertible
preferred stock, stock options and warrants are excluded from the calculation
since they are antidilutive. The Company's net loss per common share is
calculated as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Loss from continuing operations.......... $(3,935,701) $(6,228,342) $(3,947,885)
Cumulative dividends on preferred
stock.................................. (40,266) (409,418) (412,918)
----------- ----------- -----------
Loss from continuing operations
applicable to common stockholders...... (3,975,967) (6,637,760) (4,360,803)
Income (loss) from discontinued
operations............................. (405,722) (356,946) 780,808
----------- ----------- -----------
Net loss applicable to common
stockholders........................... $(4,381,689) $(6,994,706) $(3,579,995)
=========== =========== ===========
Basic and diluted loss per common share:
Loss from continuing operations........ $ (1.90) $ (3.15) $ (2.03)
Income (loss) from discontinued
operations.......................... (0.20) (0.17) 0.36
----------- ----------- -----------
Net loss............................... $ (2.10) $ (3.32) $ (1.67)
----------- ----------- -----------
Weighted average common shares
outstanding............................ 2,089,701 2,106,906 2,141,404
=========== =========== ===========
Potential common shares excluded from per
share computation because they were
antidilutive:
Convertible preferred stock......... 1,636,368 1,773,940 1,838,813
Options............................. 422,150 588,650 1,652,300
Warrants............................ 1,686,750 2,186,889 1,810,639
----------- ----------- -----------
Total............................... 3,745,268 4,549,479 5,301,752
=========== =========== ===========
</TABLE>
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The recognition of gains or losses resulting from changes in the
values of derivatives is based on the use of each derivative instrument and
whether it qualifies for hedge accounting. SFAS No. 137 deferred the effective
date of SFAS No. 133 to fiscal years beginning after
F-11
<PAGE> 66
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
June 15, 2000. The Company has not yet determined the effect of SFAS No. 133 on
the consolidated financial statements.
SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits" is not applicable to the Company's operations.
RECLASSIFICATION -- Certain reclassifications have been made to prior years
amounts to conform with the current period presentation.
2. NOTES PAYABLE
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Debentures, 8.75%, due September 30, 2002,
collateralized by irrevocable letters of credit to
pay principal and accrued interest in an amount
equal to 107% of the principal amount of the
debentures, waiver of collateral violation with bank
providing the irrevocable letters of credit only
exists through June 30, 2001 as discussed below..... $ 5,900,000 $ 5,900,000
Prior lines of credit, 8.25%, restructured to notes
payable in December 1999............................ 4,145,000 --
Notes payable to banks, interest rate at prime (8.5%
at December 31, 1999), $1,145,000 due June 30, 2001
and $3,000,000 due November 2, 2002, waiver of
collateral violation with banks only exists through
June 30, 2001 as discussed below.................... -- 4,145,000
Line of credit, interest rate at prime (8.5% at
December 31, 1999), due June 30, 2001,
collateralized by substantially all of the Company's
assets.............................................. -- 2,475,000
Note payable to the Iowa Department of Economic
Development, forgivable loan, 6%, see repayment
terms below, collateralized by certain software,
equipment and furnishings, and accounts
receivable.......................................... 250,000 250,000
Unamortized debt discount............................. -- (511,579)
----------- -----------
Total notes payable, net of discount.................. 10,295,000 12,258,421
Less current portion.................................. 4,395,000 1,750,000
----------- -----------
Long-term debt, net of discount....................... $ 5,900,000 $10,508,421
=========== ===========
</TABLE>
The Company's debentures are due earlier, at the Company's option, if the
Company completes a public offering of its common stock at a price of at least
$8.00 per share and generates net proceeds of at least $15,000,000. The
debentures also prohibit the Company from pledging any of its existing assets to
collateralize any indebtedness without the consent of a majority of the holders
of the debentures. During 1999, the Company
F-12
<PAGE> 67
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
obtained a waiver from the debenture holders which allows the Company to pledge
up to $3,000,000 of Company assets.
The irrevocable letters of credit related to the debentures and the prior
lines of credit, which were restructured to notes payable as discussed below,
are collateralized by a pledge of marketable securities held by the Company's
former chairman of the Board of Directors and chief executive officer. The
lenders alleged that the marketable securities were counterfeit and in December
1998 informed the Company that the Company would not be able to borrow any
additional amounts available under the lines of credit. Due to the uncertainty
regarding the validity of the pledge, the Company classified the borrowings
under the lines of credit as current at December 31, 1998.
On December 3, 1999, the lines of credit were terminated and the balances
outstanding were restructured to notes payable. Under the terms of the
restructuring agreement, the lenders agreed to waive any events of default
existing on December 3, 1999 under the lines of credit and the irrevocable
letters of credit related to the debentures through June 30, 2001. Accordingly,
these amounts have been classified as long-term at December 31, 1999.
The notes payable require repayment and either (a) the debentures must be
repaid, (b) a replacement letter of credit must be obtained or (c) cash
collateral equal to 120% of the letters of credit must be provided if before
June 30, 2001 the Company completes a strategic transaction. A strategic
transaction is defined as an initial public offering of an equity security by
the Company, a sale of substantially all of the Company's assets, or any other
strategic transaction including a merger or joint venture involving a major
component of the Company's business.
Covenants under the notes payable require, among others, that the Company
will not incur any other debt or liens except for the new bank line of credit
discussed below; not declare or pay any dividends; not redeem any capital stock;
and limit annually its capital leases, capital expenditures, and salaries of
certain employees to specified levels. The Company was in compliance with these
covenants as of December 31, 1999.
In December 1999, the Company obtained from a bank a new $2,500,000 line of
credit, which expires on June 30, 2001. A group of guarantors entered into
credit support agreements with the bank as additional collateral for the line of
credit. The Company granted to the guarantors warrants for the purchase of
500,000 shares of the Company's common stock at an exercise price of $7.50 per
share as consideration for their credit support. The value assigned to the
warrants, shown as debt discount, has been based on the estimated rate of
interest that would have been required for the line of credit if the credit
support had not been obtained. The warrants expire in December 2004. The
warrants also provide for an adjustment to the exercise price, and the number of
common shares which can be purchased, if the Company completes a public offering
of its common stock pursuant to a firm commitment at a price less than $15 per
share. The exercise price in such event will be adjusted to 50% of the public
offering price and the number of shares of common stock which can be purchased
will be equal to $3,750,000 divided by the new
F-13
<PAGE> 68
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
exercise price. The Company also granted to the guarantors the right to name one
representative to the Company's Board of Directors. Covenants under the line of
credit and guaranty agreements require, among others, that the Company will
prepay the obligation to the extent of the proceeds from any sale of the
Company's assets or any equity or debt issuance; prepay the obligation upon any
consolidation, merger, or transfer of substantially all assets of the Company;
obtain approval before entering into capital leases above annual specified
levels; and make draws under the line of credit only in accordance with the
Company's cash flow budget. The Company was in compliance with these covenants
as of December 31, 1999.
In January 2000, the Company repaid $1,750,000 of the balance outstanding
under the line of credit as required by the cash flow budget provision of the
agreement. Accordingly, this amount has been classified as a current liability
at December 31, 1999.
During February 2000, the Company obtained final approval of the terms for
repayment of its forgivable loan with the Iowa Department of Economic
Development ("Department"). Prior to such approval, the loan was due and payable
as of June 30, 1999. The Department agreed to forgive $170,000 of principal and
$63,600 of accrued interest on the loan. Such amounts will be recorded as other
income in the first quarter of the Company's 2000 calendar year. The remaining
principal balance will be repaid, with interest at 6%, in approximately equal
monthly installments during 2002 through 2004. The forgivable loan has been
reclassified to long-term at December 31, 1999.
3. INCOME TAXES
Due to the Company's history of operating losses, a valuation allowance was
provided for the Company's net deferred tax asset at December 31, 1998 and 1999
and no tax benefit was recognized for the years ended December 31, 1997, 1998
and 1999.
F-14
<PAGE> 69
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
The tax effects of significant items comprising the Company's net deferred
tax asset and the related valuation allowance are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, net of allowance................. $ 23,200 $ 64,500
Inventories........................................... 568,100
Accrued vacation pay.................................. 41,100 64,000
Accrued warranties.................................... 12,000 107,000
Nonqualified stock options............................ 358,100 660,700
Stock warrants........................................ 69,500
Other accrued liabilities............................. 15,700
Accrual to cost method adjustment..................... 296,700
Net operating loss carryforward....................... 6,429,000 7,011,000
----------- -----------
Total deferred tax assets............................. 7,743,900 7,976,700
----------- -----------
Deferred tax liabilities:
Software development costs............................ (16,700) (7,300)
Fixed assets and other intangibles.................... (36,000) (111,200)
----------- -----------
Total deferred tax liabilities........................ (52,700) (118,500)
----------- -----------
Net deferred tax asset................................ 7,691,200 7,858,200
Valuation allowance................................... (7,691,200) (7,858,200)
----------- -----------
Net deferred tax asset recognized..................... $ -- $ --
=========== ===========
</TABLE>
As of December 31, 1999, the Company has a net operating loss carryforward
for federal and state income tax purposes of approximately $20,623,000. The net
operating loss carryforward will expire from 2008 to 2014.
4. PREFERRED STOCK
The Board of Directors has the authority to issue preferred stock in one or
more series and to determine the price, voting powers, preferences, dividend
rights, conversion rights, and other rights or restrictions without further
stockholder approval.
The Company sold 320,000 shares of Series A preferred stock in April 1993
and 282,720 shares of Series B preferred stock in June 1994 at a price of $6.25
per share. The Series A and Series B preferred stockholders are entitled
to vote with the common stock stockholders as a single class with each share of
Series A and Series B preferred stock being entitled to the number of votes
equal to the number of shares of common stock into which it is convertible. Each
share of Series A and Series B preferred stock is convertible, at the holder's
option, into 1.5625 shares of common stock. Antidilution rights also exist for
the Series A and Series B preferred stockholders.
F-15
<PAGE> 70
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
The Series A or Series B preferred stock will also automatically convert
into common stock (a) immediately upon the closing of an initial public offering
of common stock if the aggregate proceeds are greater than or equal to
$5,000,000 or (b) upon approval of the holders of two-thirds or more of the
outstanding Series A or Series B preferred stock. No dividends are payable on
the Series A and Series B preferred stock unless the Company, in its sole
discretion, declares a dividend with respect to its common stock, or on any
series of preferred stock ranking equal to or junior to the Series A and Series
B preferred stock. Upon liquidation, dissolution, or winding up, after the
payment of any amounts in respect of any series of preferred stock entitled to a
liquidation preference over the Series A and Series B preferred stock, the
holders of the Series A and Series B preferred stock are entitled to receive an
amount per share equal to $6.25 plus any declared but unpaid dividends on such
shares, prior to any payment to the holders of the common stock. If assets
available for distribution are insufficient to pay holders of Series A and B
stock, then such holders shall share ratably in any distribution of assets of
the Company in proportion to amounts that would have been payable with respect
to their shares if all amounts were paid.
The Company sold 694,618 and 78,636 shares of Series C preferred stock
during 1997 and 1998, respectively, at a price of $7.63 per share. The holders
of the Series C preferred stock are entitled to vote, on the basis of one vote
for each share of common stock issuable upon conversion, with the holders of the
common stock, Series A preferred stock, and Series B preferred stock, on all
matters upon which shareholders have the right to vote. In addition, the
approval of the holders of at least a majority of the Series C preferred stock
will be required (i) to authorize or issue any shares of any class or series of
the Company's capital stock (or securities convertible into shares of the
Company's capital stock) having a preference as to dividends or liquidation
senior to the Series C preferred stock, (ii) to merge or consolidate with any
corporation where the surviving corporation has any class of stock that would
rank prior to the Series C preferred stock, (iii) to amend, alter or repeal any
provisions of the certificate of designation governing the Series C preferred
stock, so as to adversely affect the rights or preferences of Series C preferred
stock, (iv) to declare or pay any dividend or make any other distribution on any
class of capital stock of the Company other than a dividend paid on the Series C
preferred stock and (v) to issue any convertible debt security that provides for
the payment of interest or other distributions.
In the event of the dissolution, liquidation or winding up of the Company,
holders of the Series C preferred stock will be entitled to receive $7.63 per
share plus all accumulated and unpaid dividends, before any distribution is made
to holders of the common stock or preferred stock ranking junior to the Series C
preferred stock. The Series C preferred stock will rank on a par with the Series
A preferred stock and Series B preferred stock in the event of liquidation,
however, the Series C preferred stock is senior to the Series A and B preferred
stock with respect to dividends.
The Series C preferred stock bears dividends, cumulative whether or not
earned, at the rate of $0.534 per share per annum. Such dividends will be
payable, if and when
F-16
<PAGE> 71
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
declared out of funds legally available, on March 31 and September 30 of each
year. Dividends not paid on the date when due will not thereafter be payable in
cash, subject to optional redemption, as described below, but shall thereafter
only be convertible into shares of common stock, as described below. The
aggregate cumulative unpaid dividends at December 31, 1999 were $862,602.
The Series C preferred stock, with an initial conversion value of $7.63 per
share, and all accumulated but unpaid dividends on the Series C preferred stock,
will be convertible, at the option of the holder at any time after issuance,
into common stock at the rate of $7.63 per common share. The conversion rate for
the Series C preferred stock is subject to adjustment from time to time in the
event of certain stock dividends, stock divisions and combinations of the common
stock, and the issuance of any common stock at a price, or of any other
securities convertible into or exercisable to purchase common stock at a price,
less than the conversion price then in effect. If the Company issues securities
at a price less than the conversion price then in effect, the conversion price
adjusts based on a weighted average of the stock outstanding. In the case of a
consolidation or merger of the Company with or into any other corporation, or in
case of any sale or transfer of all or substantially all of the assets of the
Company, a holder of Series C preferred stock is entitled, thereafter, to
receive upon conversion the consideration which the holder would have received
had he or she converted immediately prior to the occurrence of the event. The
conversion price of the Series C preferred stock at December 31, 1999 is $7.54.
The Series C preferred stock, and any dividends accumulated thereon, will
be automatically converted into common stock at the then current conversion rate
in the event of (i) the closing of an underwritten public offering of the common
stock at a price of not less than $8.00 per share that generates net proceeds to
the Company of not less than $15,000,000, or (ii) the vote of holders of at
least two-thirds of the outstanding shares of Series C preferred stock.
On or after September 30, 2004, the Company may, at its option, redeem all
or any portion of the Series C preferred stock at a cash redemption price equal
to $7.63 per share plus all accumulated but unpaid dividends to the date fixed
for redemption. In case of the redemption of less than all of the then
outstanding shares of Series C preferred stock, the Company shall effect such
redemption pro rata. Any holder of Series C preferred stock may elect to convert
such shares into common stock up to the date fixed for redemption.
Each holder of the Series A, Series B and Series C preferred stock is also
a party to a Registration Rights Agreement granting to such holder the right to
require the Company to register the common stock issuable upon conversion of the
Series A, Series B and Series C preferred stock upon completion of an initial
public offering of the Company's common stock. All expenses of the registration,
other than underwriting discounts and commissions, incurred in connection with
such registration shall be borne by the Company.
F-17
<PAGE> 72
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
5. COMMON STOCK
Holders of common stock are entitled to one vote per share on all matters
submitted to a vote by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably any dividends, as may be declared from time to time
by the Board of Directors out of funds legally available therefor, and will be
entitled to receive pro rata all assets of the Company available for
distribution, after payment of liabilities and any prior distribution rights of
preferred stock, upon liquidation.
6. STOCK OPTIONS
During April 1993, the Board of Directors adopted the 1993 Stock Incentive
Plan (the "1993 Plan"). Under the 1993 Plan, options or other awards may be
granted to purchase up to an aggregate of 500,000 shares of the Company's common
stock. During December 1995, the Company's stockholders approved the 1995 Long
Term Incentive and Stock Option Plan (the "1995 Plan"). Under the 1995 Plan,
options or other awards may be granted to purchase up to 585,345 shares of the
Company's common stock. Awards granted under the 1993 and 1995 Plans may be
options that are intended to qualify as incentive stock options, options that
are not intended to so qualify, stock appreciation rights ("SARs"), restricted
stock or performance awards. Incentive stock options may only be granted to
full-time or part-time employees; other awards may be granted to full-time or
part-time employees, officers, consultants, directors (other than nonemployee
directors) or independent contractors. A committee appointed by the Board of
Directors determines the exercise price (subject to the restriction that the
exercise price of incentive stock options must be not less than 100% of fair
market value on the date of grant), term (provided that the term of options may
not exceed ten years) and other conditions of all awards under the 1993 and 1995
Plans.
On July 20, 1998, the 1993 Stock Incentive Plan was rescinded, upon the
exchange of all outstanding options granted under the 1993 Plan for options in
an identical number, at an exercise price of $1.50 per share, and on a vesting
schedule identical to that of the options previously granted under the 1993
Plan. At the same time, the Board of Directors amended the 1995 Plan to increase
the number of shares of common stock on which options or other awards may be
exercised from 585,345 to 1,000,000. Also, on July 20, 1998, the Company
cancelled all outstanding options granted under the 1995 Plan and issued options
in an identical number, and on a vesting schedule identical to that of the
options previously granted, at an exercise price of $1.50 per share.
In September 1999, the Board of Directors amended the 1995 Plan to change
the authorized number of shares of common stock on which options or other awards
may be exercised to 2,000,000 plus shares equal to one and one-half percent of
the number of shares of common stock outstanding as of the December 31
immediately preceding the year in which such options may be granted and to
change the vesting schedule for all outstanding options and future awards of
options with 20% of the total grant to vest on the
F-18
<PAGE> 73
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
first anniversary of the award and 1.67% of the total grant to vest each month
thereafter until fully vested.
The fair value of the Company's common stock for 1997, as determined in
good faith by the Company's Board of Directors, was equal to or below the
exercise price of options granted in 1997 and, therefore, no compensation
expense was recognized related to stock options. The fair value of the Company's
common stock as of July 20, 1998 and as of the date of other options granted
during the remainder of 1998 and through August 31, 1999, as determined in good
faith by the Company's Board of Directors, was $6.00 per share. The fair value
of the Company's common stock as of September 15, 1999, as determined by an
independent appraisal, was $7.20 per share which the Company has used to value
stock options granted from September 1, 1999 through December 31, 1999. The
Company has recognized compensation expense of $896,670 and $661,352 during 1998
and 1999 (including amounts allocated to discontinued operations of $230,400 and
$49,050), respectively, based on the vesting period of the options and the
difference between the exercise price of the options and the fair value of the
Company's common stock.
Options outstanding and exercisable at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ---------------------------------------------------------------------
WEIGHTED
AVERAGE
REMAINING OPTIONS EXERCISABLE
CONTRACTUAL -------------------
EXERCISE PRICE SHARES LIFE (IN YEARS) SHARES
-------------- --------- --------------- -------------------
<S> <C> <C> <C>
$1.50................................ 826,300 8.18 272,892
$6.00................................ 113,500 9.59 --
$7.20................................ 672,500 9.71 103,200
--------- ---- -------
1,612,300 8.91 376,092
========= ==== =======
</TABLE>
F-19
<PAGE> 74
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
A summary of stock option activity under the 1993 and 1995 Plans is as
follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
FAIR OPTION OPTION
OPTIONS OPTION PRICE VALUE PRICE OPTIONS PRICE
OUTSTANDING PER SHARE PER SHARE PER SHARE EXERCISABLE PER SHARE
----------- ------------ ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1996........... 303,645 $ 4.00 $4.00 89,900 $ 4.00
Granted at
premium......... 165,000 8.00 $ 6.00 8.00
Cancelled.......... (76,495) 4.00-8.00 5.05
---------
Balance at December
31, 1997........... 392,150 4.00-8.00 5.48 114,200 4.63
Cancelled.......... (392,150) 4.00-8.00 5.48
Reissued at
discount........ 392,150 1.50 6.00 1.50
Granted at
discount........ 210,000 1.50 6.00 1.50
Cancelled.......... (48,500) 1.50 1.50
---------
Balance at December
31, 1998........... 553,650 1.50 1.50 199,260 1.50
Granted at
discount........ 440,050 1.50 6.00 1.50
Granted at
market.......... 98,500 6.00 6.00 6.00
Granted at
discount........ 15,000 6.00 7.20 6.00
Granted at
market.......... 672,500 7.20 7.20 7.20
Exercised.......... (4,750) 1.50 1.50
Cancelled.......... (162,650) 1.50 1.50
---------
Balance at December
31, 1999........... 1,612,300 1.50-7.20 4.19 376,092 3.07
=========
</TABLE>
At December 31, 1999, an additional 419,646 are available for future grants
under the 1995 Plan.
F-20
<PAGE> 75
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
The Board of Directors also granted to the members of the Company's former
Scientific Advisory Board options to purchase a total of 25,000 shares of the
Company's common stock at a purchase price of $4.00 per share which expire in
August 2000.
During December 1996, the Company's stockholders approved the Nonemployee
Director Stock Option Plan (the "Directors' Plan"). The Company has reserved
75,000 shares of common stock for issuance upon exercise of options granted
under the Directors' Plan. Only nonemployee directors of the Company are
eligible to participate in the Directors' Plan and only non-qualified stock
options may be granted. Each director eligible to participate in the Directors'
Plan is automatically granted an option to purchase 5,000 shares of common stock
on the date such person first becomes a director; this option vests in three
equal installments beginning on the first anniversary of grant. Each director
eligible to participate in the Directors' Plan who has served since the date of
the last annual meeting of stockholders and will continue to serve is
automatically granted an option to purchase 5,000 shares of common stock on the
date of each annual meeting of stockholders; this option vests in its entirety
on the date one year after the date of grant. All options granted under the
Directors' Plan have terms of ten years and a per share exercise price equal to
the fair market value of a share of common stock on the date of grant. At
December 31, 1999, options to purchase 15,000 shares of common stock have been
granted under the Directors' Plan at an exercise price of $4.00-$6.00, with
8,333 shares exercisable at December 31, 1999.
F-21
<PAGE> 76
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
7. COMMON STOCK WARRANTS
A summary of common stock warrant activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WARRANT WARRANT
WARRANT PRICE PRICE
SHARES PER SHARE PER SHARE
------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1996................... 1,374,750 $ 4.00 $4.00
Warrants granted to six employees and
consultants in connection with the merger
with Ethos Corporation (see Note 11)...... 312,000 8.00 8.00
---------
Balance at December 31, 1997................... 1,686,750 4.00-8.00 4.74
Warrants granted to the Company's former
chief executive officer in consideration
of his pledge of marketable securities as
security for the irrevocable letter of
credit, which serves as collateral for the
debentures (Note 2)....................... 500,000 8.00 8.00
Warrants granted to the Company's former
chief executive officer in consideration
of his pledge of marketable securities as
collateral for prior bank lines of credit
(Note 2).................................. 100,000 8.00 8.00
Warrants granted to placement agent in
consideration of services provided related
to the debenture/preferred stock private
placement................................. 30,139 8.00 8.00
Warrants expired............................. (10,000) 4.00 4.00
Warrants exercised........................... (120,000) 4.00 4.00
---------
Balance at December 31, 1998................... 2,186,889 4.00-8.00 5.72
Warrants granted to the Company's former
chief executive officer in consideration
of his pledge of marketable securities as
collateral for prior bank lines of credit
(Note 2).................................. 100,000 8.00 8.00
Warrants granted to financial consultant for
services rendered......................... 30,000 4.00 4.00
Warrants granted to consultant for consulting
contract.................................. 125,000 6.00 6.00
Warrants granted for guarantee on new line of
credit (Note 2)........................... 500,000 7.50 7.50
Warrants expired............................. (93,750) 4.00 4.00
Warrants exercised........................... (125,000) 4.00 4.00
Warrants to the Company's former chief
executive officer cancelled............... (912,500) 4.00-8.00 7.07
---------
Balance at December 31, 1999................... 1,810,639 4.00-8.00 5.86
=========
</TABLE>
F-22
<PAGE> 77
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
At December 31, 1999, the weighted average remaining life of the warrants
is 3.9 years and 1,810,639 warrants were exercisable at a weighted average price
of $5.86 per share. The warrants also provide for registration rights similar to
those granted the preferred stockholders (see Note 4) and antidilution rights.
The Company has valued warrants issued to consultants during 1999 at
approximately $280,000 and has recognized expense over the term of the
consulting agreements of $197,458 for the year ended December 31, 1999 for the
difference between the exercise price of the warrants and the fair value of
warrants granted.
The warrants exercised during 1998 and 1999 provided for a cashless
exercise under which the warrant holder received 40,000 and 41,667 shares of
common stock, respectively, based on the $6.00 per share fair value of the
Company's common stock.
In December 1999, the Company entered into a settlement and general release
agreement with its former chairman of the board and chief executive officer
("executive"). The agreement cancels warrants held by the executive to purchase
700,000 and 212,500 shares of the Company's stock at $8.00 and $4.00 per share,
respectively (the executive retained 500,000 warrants at $4.00 per share);
cancels the executive's right to receive 300,000 of additional warrants at an
exercise price of $8.00 per share (100,000 of which would have been granted on
January 1, 2000); requires the Company to pay the executive $60,000 at the
earliest of an initial public offering or June 30, 2001 in consideration of the
executive entering into the agreement; and provides both the Company and the
executive a general release from all claims between the parties. The executive
is also required to place all common stock and Series B preferred stock of the
Company owned by the executive, and any shares of stock in the Company acquired
by the executive upon exercise of warrants, into a voting trust controlled by an
independent third party. The agreement has been filed with the bankruptcy court
as the executive is in involuntary bankruptcy, however, a creditor of the
executive has filed a motion in the bankruptcy proceedings to set aside the
settlement agreement.
8. LEASES
The Company leases its offices and certain equipment under operating
leases. Rental expense incurred under operating leases was $390,534, $398,500
and $401,769 for the years ended December 31, 1997, 1998, and 1999,
respectively.
In October 1993, the Company entered into an operating lease with Liberty
Growth, L.C., ("Liberty") for the lease of a 25,600 square foot building (the
"Facility") which was completed in July 1994. Liberty erected the Facility in
accordance with plans and specifications agreed upon between Liberty and the
Company and provided furniture, fixtures, and equipment in the Facility as
specified in the lease. The lease was for an initial term of five years,
beginning September 1994, with options given to the Company to extend for two
additional terms of five years each. The Company exercised the first renewal
option in September 1998. The monthly rental upon renewal will be adjusted to
reflect Liberty's actual mortgage interest cost as discussed below. The lease
provides that the Company will pay for all taxes, insurance, utilities,
alterations and improvements, and
F-23
<PAGE> 78
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
repair and maintenance on or with respect to the Facility, furniture, fixtures
and equipment. The monthly rental of $23,248 effective March 1999 ($23,840
previously) is the sum of the following:
a. payments of principal (based on a 20 year loan amortization period)
and interest on Liberty's mortgage loan on the Facility (the "Mortgage
Loan"); the interest rate under the mortgage loan is 8% for the first
five years and on the fifth and tenth anniversaries of the loan is
subject to adjustment by the bank based on comparable interest rates
with a 7% minimum and 12% maximum rate;
b. the amount of the annual land lease rental on the underlying real
estate; and
c. an amount equal to 14% times the difference between (i) the cost to
Liberty of all improvements constructed or purchased by Liberty and
the furniture, fixtures and equipment, and (ii) the original
principal amount of the Mortgage Loan.
Under the terms of the lease, the Company has an option, exercisable
effective January 1, 1998 and continuing through the termination or expiration
of the lease, to purchase the Facility and furniture, fixtures and equipment at
a purchase price to be determined by appraisal, but in no event less than
Liberty's cost as established for purposes of calculating the rent payable under
the lease.
In May 1999, the Company subleased part of the building rented from
Liberty. The sublease is for an eighteen month term, terminating October 31,
2000. Sublease receipts were $50,400 the year ended December 31, 1999.
The Company's capital lease, its estimated aggregate minimum annual
payments under all operating leases with initial noncancellable lease terms in
excess of one year and its noncancellable sublease receipts are as follows as of
December 31, 1999:
<TABLE>
<CAPTION>
NONCANCELLABLE NONCANCELLABLE
CAPITAL OPERATING SUBLEASE
YEAR ENDED DECEMBER 31, LEASES LEASES RECEIPTS
----------------------- ------- -------------- --------------
<S> <C> <C> <C>
2000....................................... $ 9,529 $ 687,003 $72,000
2001....................................... 9,529 390,639 --
2002....................................... 9,529 282,435 --
2003....................................... 9,529 278,976 --
2004....................................... 6,353 185,984 --
------- ---------- -------
Minimum lease payments..................... 44,469 $1,825,037 $72,000
========== =======
Less amounts representing interest......... 10,388
-------
Present value of minimum lease payments.... 34,081
Current portion of capital lease
obligations.............................. 5,821
-------
Capital lease obligations due after one
year..................................... $28,260
=======
</TABLE>
F-24
<PAGE> 79
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
9. CONTINGENT LIABILITIES
On June 10, 1994, the Company entered into an Agreement For Private
Development with the City of Coralville, Iowa (the "City"). The Company and
Liberty jointly received a $175,000 Economic Development Grant from the City
during 1994. According to the agreement, these proceeds were used by Liberty to
reduce the costs of the building (see Note 8). The Company pays property taxes
to the City based on the assessed value of the property and the City will use
such property taxes to pay debt service on the bonds which were issued by the
City for this grant. The Company has guaranteed that commencing January 1, 1998
to January 1, 2004, it will make every effort to maintain an employment level of
at least 100 full time jobs. The Company at December 31, 1999 maintained an
employment level of 79 full time jobs. If the Company is in default of any terms
of the agreement, the City may take action to recover the grant paid to the
Company. As of December 31, 1999, management believes that the Company was in
compliance with the terms of the agreement. The Company anticipates that its
property tax payments will be sufficient to pay the debt service costs on the
bonds.
On June 30, 1994, the Company entered into an Industrial New Jobs Training
Agreement with Kirkwood Community College ("Kirkwood"). The term of the
agreement is ten years. Based on an estimate of new jobs that the Company would
create ("New Employees"), Kirkwood issued bonds in the amount of $200,000 and
the proceeds were to be used to reimburse approximately $150,000 of the
Company's training costs incurred between June 30, 1994 and August 1, 1997 with
the remaining $50,000 to be used by Kirkwood to cover administrative costs of
the agreement. Any amounts received by the Company under this agreement are to
be repaid using a portion of the New Employees' state income taxes which have
been withheld by the Company ("New Jobs Withholding Credits"). The New Jobs
Withholding Credits are credits available under the New Jobs Training Act of the
State of Iowa and are not the result of any additional costs incurred by the
Company, but are a defined portion of the Company's current tax withholding
obligation. The Company will make repayments by paying New Jobs Withholding
Credits to Kirkwood for ten years and Kirkwood will use the New Jobs Withholding
Credits to pay the debt service on the bonds. As of December 31, 1999, the
Company has received $77,224 from Kirkwood. Kirkwood has incurred $47,353 of
administrative costs, and the Company has repaid $145,455 through New Jobs
Withholding Credits.
If the Company is in default of any terms of the agreement, Kirkwood may
take action to collect any payments due under the agreement. Kirkwood has a lien
on certain Company assets including accounts receivable, equipment, patents and
contract rights. The lien is subordinated to the security interests granted
under the notes payable to the Department.
F-25
<PAGE> 80
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
10. MAJOR CUSTOMER SALES
Sales to major customers from continuing operations, comprising 10% or more
of total revenue for the year were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Customer A............................................... -- 10% 14%
Customer B............................................... -- 10 --
Customer C............................................... 25% 16 --
</TABLE>
11. MERGER WITH ETHOS CORPORATION
On March 6, 1997 the Company negotiated an agreement and plan of merger
with Ethos Corporation ("Ethos"), a California corporation engaged in Internet
publication and interactive financial services, to acquire all of the
outstanding shares of common stock of Ethos in exchange for 289,701 shares of
the Company's common stock. Also, the holders of Ethos' redeemable preferred
stock were paid $100,000 for the redemption of such preferred stock. The Company
also entered into certain employment/consulting agreements and noncompetition
agreements with Ethos' employees and consultants which involved the issuance of
312,000 warrants to purchase the Company's common stock exercisable at $8.00 per
share, and the issuance of 65,000 options to purchase the Company's common stock
exercisable at $8.00 per share, all of which will vest over one to five year
periods depending on the agreement. The transaction was accounted for as a
pooling of interests. The financial statements for periods prior to the merger
have been restated to include the combined financial information of the
companies for all periods presented. The following data summarizes the separate
results of operations of the Company and Ethos for the period before the
combination was consummated.
<TABLE>
<CAPTION>
REVENUES LOSS
FROM FROM
CONTINUING CONTINUING
OPERATIONS OPERATIONS
---------- ----------
<S> <C> <C>
Period from January 1, 1997 to March 6, 1997:
Stockpoint, Inc........................................ $28,620 $(544,717)
Ethos Corporation...................................... $74,442 $ (6,554)
</TABLE>
12. 401(k) PLAN
The Company maintains a 401(k) retirement plan covering substantially all
of its employees. The Company will match an employee's contribution to the plan
up to 2% of the employee's salary. The Company contributed $49,156 and $47,428
to the plan under the matching program for the years ended December 31, 1998 and
1999, respectively. There were no Company contributions to the plan for the year
ended December 31, 1997.
F-26
<PAGE> 81
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
13. DISCONTINUED OPERATIONS
On May 28, 1999, the Company sold the technology and operational assets
related to products sold to the steelmaking industry (metals segment) for
$750,000. The Company also entered into a royalty agreement with the buyer
whereby royalties, ranging from 6% to 10%, will be paid on sales or licenses of
the software only portions of certain products. Royalties will be paid for 10
years or until $3,000,000 is paid. The asset purchase agreement was retroactive
to April 2, 1999.
The accompanying statements of operations have been reclassified so that
the results for the metals segment's operations are classified as discontinued
operations for all periods presented. The assets and liabilities of the
discontinued operations have been reclassified in the balance sheet as "net
assets of discontinued operations." As the sale closed less than a year
subsequent to December 31, 1998, the net assets of the discontinued operations
have been classified as current assets as of December 31, 1998. The statements
of cash flows and related notes to the consolidated financial statements have
also been reclassified to conform to the discontinued operations presentation.
Summary operating results of the discontinued operations are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................... $1,708,427 $2,160,104 $1,747,809
Operating expenses.......................... 2,114,149 2,517,050 1,400,134
---------- ---------- ----------
Income (loss) from discontinued
operations................................ $ (405,722) $ (356,946) $ 347,675
========== ========== ==========
</TABLE>
A summary of the net assets of the discontinued operations are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Current assets:
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. $126,831
Inventories............................................... 395,908
Prepaid expenses.......................................... 1,000
--------
Net current assets..................................... 523,739
--------
Software and equipment, net................................. 198,895
Patents, net................................................ 68,400
Software development costs, net............................. 13,167
--------
Net noncurrent assets.................................. 280,462
--------
Net assets............................................. $804,201
========
</TABLE>
F-27
<PAGE> 82
STOCKPOINT, INC.
(FORMERLY NEURAL APPLICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
14. PRO FORMA INFORMATION (UNAUDITED)
The pro forma stockholders' deficiency information presented as of December
31, 1999 has been prepared assuming that the Company's preferred stock had been
converted into common stock as of December 31, 1999 which conversion will occur
automatically upon completion of the initial public offering contemplated in
this prospectus. The pro forma income (loss) per common share information
presented for the year ended December 31, 1999 has been prepared assuming that
1) the Company's preferred stock had been converted into common stock as of
January 1, 1999 or as of their issuance date for shares of Series C preferred
stock issued in lieu of dividends resulting in the elimination of dividends and
2) debt outstanding during 1999 that is expected to be repaid with a portion of
the proceeds from this offering had been repaid as of January 1, 1999 resulting
in reduced interest expense. The Company's pro forma net loss per share is
calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
1999
-----------
<S> <C>
Pro forma net loss:
Historical loss from continuing operations................ $(3,947,885)
Exclude interest on debt to be repaid..................... 1,064,420
-----------
Loss from continuing operations........................... (2,883,465)
Income from discontinued operations....................... 780,808
-----------
Net loss.................................................. $(2,102,657)
===========
Pro forma basic and diluted income (loss) per common share:
Loss from continuing operations........................... $ (0.73)
Income from discontinued operations....................... 0.20
-----------
Net loss.................................................. $ (0.53)
===========
Weighted average common shares outstanding -- historical.... 2,141,404
Preferred stock converted into common shares -- pro forma... 1,806,377
-----------
Weighted average common shares outstanding -- pro forma..... 3,947,781
===========
</TABLE>
15. SUBSEQUENT EVENT (UNAUDITED)
The Company entered into an additional $500,000 line of credit with a bank
on March 30, 2000. The line of credit is collateralized by substantially all of
the Company's assets. The line of credit bears interest at the prime rate and
expires on June 30, 2001. A group of guarantors entered into credit support
agreements with the bank as additional collateral for the line of credit. The
Company granted to the guarantors warrants to purchase 100,000 shares of the
Company's common stock at an exercise price of $10.00 per share as consideration
for their credit support.
* * * * *
F-28
<PAGE> 83
- -------------------------------------------------------------------------------
________ SHARES
[LOGO] STOCKPOINT
COMMON STOCK
----------------
PROSPECTUS
----------------
ROTH CAPITAL PARTNERS, INC.
__________________, 2000
UNTIL ________, 2000, THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS, ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
<PAGE> 84
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by
Stockpoint in connection with the registration of the common stock hereunder.
All amounts are estimated, except for the SEC registration fee and the NASD
filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 11,880
NASD filing fee.................................................. 5,000
Nasdaq National Market listing fee............................... 70,000
Legal fees and expenses.......................................... 150,000
Accountants' fees and expenses................................... 70,000
Printing expenses................................................ 150,000
Blue sky fees and expenses....................................... 5,000
Transfer Agent and Registrar fees and expenses................... 5,000
Miscellaneous.................................................... 33,120
--------
Total...................................................... $500,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our Amended and Restated Bylaws provide for indemnification of
such persons for such liabilities in such manner under such circumstances and to
such extent as permitted by the Delaware General Corporation Law. We have also
purchased directors and officers liability insurance, which covers matters
arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1997, we have issued and sold the following securities
that were not registered under the Securities Act:
(1) From January 1997 through March 2000, we granted options to
purchase an aggregate of 1,513,849 shares of common stock under
our stock option plans to executive officers, directors and
employees.
(2) In March 1997, in connection with the acquisition of Ethos
Corporation, we issued an aggregate of 289,701 shares of common
stock to 12 shareholders of Ethos and warrants to purchase an
aggregate of 312,000 shares of common stock to six employees and
consultants.
(3) Between November 1997 and January 1998, we sold to accredited
investors an aggregate of 773,255 shares of Series C convertible
preferred stock for an aggregate purchase price of $5,900,000 and
senior secured debentures in an aggregate principal amount of
$5,900,000. Upon the closing of this offering, all of the
outstanding shares of Series C convertible preferred stock will
convert into an aggregate of 897,063 shares of common stock.
(4) In April 1998, we issued warrants to purchase an aggregate of
30,139 shares of common stock at an exercise price of $8.00 per
share to Donald Muller and Securities Corporation of Iowa for
services provided in connection with the sale of the Series C
convertible preferred stock.
II-1
<PAGE> 85
(5) In April 1998, we issued warrants to purchase an aggregate of
500,000 shares of common stock at an exercise price of $8.00 per
share to Robert Staib in consideration of his personal guarantee
of a letter of credit supporting our senior secured debentures and
pledge of marketable securities as collateral.
(6) We issued warrants to purchase an aggregate of 312,500 shares of
common stock to John Pappajohn in consideration of his personal
guarantee of our credit agreements from May 1995 through June
1996. In June and September 1998, we sold 40,000 shares of common
stock to John Pappajohn upon the cashless exercise of his
outstanding warrants.
(7) In November 1998 and November 1999, we issued to Robert Staib
warrants to purchase an aggregate of 200,000 shares of common
stock at an exercise price of $8.00 per share in consideration of
his guarantee and pledge relating to the letter of credit
supporting our outstanding debentures. The warrants were
subsequently canceled under the terms of a settlement agreement in
December 1999.
(8) In March 1999, we issued warrants to purchase an aggregate of
30,000 shares of common stock at an exercise price of $4.00 per
share to Dominion & Co. for consulting services provided.
(9) In August 1999, we issued warrants to purchase an aggregate of
125,000 shares of common stock at an exercise price of $6.00 per
share to Equity Dynamics, Inc. under the terms of a consulting
agreement. John Pappajohn is a principal of Equity Dynamics, Inc.
(10) In September 1999, we sold an aggregate of 41,667 shares of common
stock to John Pappajohn upon the cashless exercise of his
outstanding warrants.
(11) In connection with a bridge financing completed in December 1999,
we issued warrants to purchase an aggregate of 500,000 shares of
common stock at an exercise price of $7.50 per share, subject to
adjustment, to eight investors in consideration of their
guarantees and pledges.
(12) In connection with a bridge financing completed in March 2000, we
issued warrants to purchase an aggregate of 100,000 shares of
common stock at an exercise price of $10.00 per share, subject to
adjustment, to 3 investors in consideration of their guarantees
and pledges.
The sale and issuance of securities described above were deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2) of
the Securities Act, Regulation D promulgated thereunder or Rule 701 promulgated
under Section 3(b) of the Securities Act, as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under Rule 701. The
recipients of securities in each transaction represented their intentions to
acquire the securities for investment purposes only and not with a view to or
for sale in connection with any distribution thereof. All recipients either
received or had access to, through employment or other relationships with
Stockpoint, adequate information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
NUMBER DESCRIPTION
------ -----------
1.1 Form of Underwriting Agreement.
2.1 Asset Purchase Agreement dated as of April 2, 1999 among
Systems Alternatives, Inc., Registrant and The David J. Joseph
Company.
2.2 Amendment dated as of May 25, 1999 to the Asset Purchase
Agreement dated as of April 2, 1999 among Systems
Alternatives, Inc., Registrant and The David J. Joseph
Company.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
II-2
<PAGE> 86
3.2 Certificate of Amendment of Certificate of Incorporation of
the Registrant.
3.3 Amended and Restated Bylaws of the Registrant.
4.1 Specimen of Common Stock Certificate.
4.2 Registration Rights Agreement dated as of August 15, 1997
among Registrant and the Purchasers named therein.
4.3 Trust Indenture dated as of August 1, 1997 between Registrant
and First Trust & Savings Bank.
4.4 Robert B. Staib Voting Trust dated December 3, 1999.
4.5 Master Agreement dated as of December 3, 1999 among Registrant
and John Pappajohn, Gerald M. Kirke, Iowa Farm Bureau
Federation, Derace Schaffer, Matthew P. Kinley, Dominion
Securities Inc., Michael J. Richards, Joseph Dunhan as the
Guarantors, and Equity Dynamics, Inc., as the Agent for the
Guarantors.
4.6 Form of Stock Purchase Warrant issued December 3, 1999.
4.7 Registration Rights Agreement dated as of December 3, 1999 by
and among the Registrant and the Purchasers listed therein.
4.8 Master Agreement dated as of March 30, 2000 among Registrant
and Zeke Investment Partners, Matthew P. Kinley, Joseph Dunham
as the Guarantors, and Equity Dynamics, Inc., as the Agent for
the Guarantors.
4.9 Form of Stock Purchase Warrant issued December 3, 1999.
4.10 Registration Rights Agreement dated as March 30, 2000 by and
among the Registrant and the Purchasers listed therein.
4.11 Form of Lock-up Agreement.
5.1* Opinion of Dorsey & Whitney LLP.
10.1 1995 Long-Term Incentive and Stock Option Plan.
10.2 1995 Nonemployee Director Stock Option Plan.
10.3 Employment Agreement, dated December 20, 1999, between
Registrant and William E. Staib.
10.4 Employment Agreement, dated December 20, 1999, between
Registrant and Timothy S. Yamauchi.
10.5 Employment Agreement, dated December 20, 1999, between
Registrant and Luan Cox.
10.6 Employment Agreement, dated December 20, 1999, between
Registrant and L. Christopher Dominguez.
10.7 Sublease dated May 24, 1999 between Registrant and Systems
Alternatives International LLC for office space located at
2600 Crosspark Road, Coralville, Iowa.
10.8 Lease dated September 30, 1999 between The Robert Dollar
Building Associates, Ltd. and Registrant for office space
located at 311 California Street, San Francisco, California.
10.9 Consulting Agreement dated August 24, 1999 between Registrant
and Equity Dynamics, Inc.
10.10 Master Note dated as of November 28, 1997 of Registrant in
favor of The Northern Trust Company.
10.11 Master Note dated as of September 14, 1998 of Registrant in
favor of The Northern Trust Company.
10.12 Reimbursement and Subordination Agreement dated as of August
1, 1997 between Robert B. Staib and Registrant.
II-3
<PAGE> 87
10.13 Indemnification and Hold Harmless Agreement dated February 27,
1996 between Robert B. Staib and Registrant.
10.14 Amendment dated August 1, 1997 to Indemnification and Hold
Harmless Agreement dated February 27, 1996 between Robert B.
Staib and Registrant.
10.15 Restructuring Agreement dated as of December 3, 1999 among
Registrant, The Northern Trust Company and Iowa State Bank &
Trust.
10.16 S&P ComStock Information Distribution License Agreement dated
September 23, 1999 between S&P ComStock, Inc. and Registrant.
10.17 Employment Agreement dated March 1, 2000 between Registrant
and Scott D. Porter.
10.18 First Amendment to Restructuring Agreement dated as of March
29, 2000 among the Registrant, The Northern Trust Company and
Iowa State Bank & Trust.
10.19 Settlement Agreement and General Release dated December 3,
1999, by and between Robert B. Staib and the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24.1 Power of Attorney.
27.1 Financial Data Schedule.
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in those denominations and registered in those names as required by the
underwriters to permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Coralville,
State of Iowa, on March 30, 2000.
Stockpoint, Inc.
By: /s/ William E. Staib
____________________________________
William E. Staib
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on March 30, 2000 by the following
persons in the capacities indicated:
SIGNATURE TITLE
--------- -----
/s/ William E. Staib
_____________________________________ Chief Executive Officer and Director
William E. Staib (principal executive director)
/s/ Scott D. Porter
_____________________________________ Chief Financial Officer (principal
Scott D. Porter financial and accounting officer)
*
_____________________________________ Chairman of the Board of Directors
Harry O. Heffer
*
_____________________________________ Director
David G. Sengpiel
/s/ William E. Staib
*By ___________________________________
Attorney-in-Fact
II-5
<PAGE> 89
EXHIBIT INDEX
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Form of Underwriting Agreement.
2.1 Asset Purchase Agreement dated as of April 2, 1999 among
Systems Alternatives, Inc., Registrant and The David J. Joseph
Company.
2.2 Amendment dated as of May 25, 1999 to the Asset Purchase
Agreement dated as of April 2, 1999 among Systems Alternatives,
Inc., Registrant and The David J. Joseph Company.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Certificate of Amendment of Certificate of Incorporation of the
Registrant.
3.3 Amended and Restated Bylaws of the Registrant.
4.1 Specimen of Common Stock Certificate.
4.2 Registration Rights Agreement dated as of August 15, 1997 among
Registrant and the Purchasers named therein.
4.3 Trust Indenture dated as of August 1, 1997 between Registrant
and First Trust & Savings Bank.
4.4 Robert B. Staib Voting Trust dated December 3, 1999.
4.5 Master Agreement dated as of December 3, 1999 among Registrant
and John Pappajohn, Gerald M. Kirke, Iowa Farm Bureau
Federation, Derace Schaffer, Matthew P. Kinley, Dominion
Securities Inc., Michael J. Richards, Joseph Dunham as the
Guarantors, and Equity Dynamics, Inc., as the Agent for the
Guarantors.
4.6 Form of Stock Purchase Warrant issued December 3, 1999.
4.7 Registration Rights Agreement dated as of December 3, 1999 by
and among the Registrant and the Purchasers listed therein.
4.8 Master Agreement dated as of March 30, 2000 among Registrant and
Zeke Investment Partners, Matthew P. Kinley, Joseph Dunham as the
Guarantors, and Equity Dynamics, Inc., as the Agent for the
Guarantors.
4.9 Form of Stock Purchase Warrant issued March 30, 2000.
4.10 Registration Rights Agreement dated as March 30, 2000 by end among
the Registrant and the Purchasers listed therein.
4.11 Form of Lock-up Agreement.
5.1* Opinion of Dorsey & Whitney LLP.
10.1 1995 Long-Term Incentive and Stock Option Plan.
10.2 1995 Nonemployee Director Stock Option Plan.
10.3 Employment Agreement, dated December 20, 1999, between
Registrant and William E. Staib.
10.4 Employment Agreement, dated December 20, 1999, between
Registrant and Timothy S. Yamauchi.
10.5 Employment Agreement, dated December 20, 1999, between
Registrant and Luan Cox.
10.6 Employment Agreement, dated December 20, 1999, between
Registrant and L. Christopher Dominguez.
II-6
<PAGE> 90
10.7 Sublease dated May 24, 1999 between Registrant and Systems
Alternatives International LLC for office space located at 2600
Crosspark Road, Coralville, Iowa.
10.8 Lease dated September 30, 1999 between The Robert Dollar
Building Associates, Ltd. and Registrant for office space
located at 311 California Street, San Francisco, California.
10.9 Consulting Agreement dated August 24, 1999 between Registrant
and Equity Dynamics, Inc.
10.10 Master Note dated as of November 28, 1997 of Registrant in
favor of The Northern Trust Company.
10.11 Master Note dated as of September 14, 1998 of Registrant in
favor of The Northern Trust Company.
10.12 Reimbursement and Subordination Agreement dated as of August 1,
1997 between Robert B. Staib and Registrant.
10.13 Indemnification and Hold Harmless Agreement dated February 27,
1996 between Robert B. Staib and Registrant.
10.14 Amendment dated August 1, 1997 to Indemnification and Hold
Harmless Agreement dated February 27, 1996 between Robert B.
Staib and Registrant.
10.15 Restructuring Agreement dated as of December 3, 1999 among
Registrant, The Northern Trust Company and Iowa State Bank &
Trust.
10.16 S&P ComStock Information Distribution License Agreement dated
September 23, 1999 between S&P ComStock, Inc. and Registrant.
10.17 Employment Agreement dated March 1, 2000 between Registrant and
Scott D. Porter.
10.18 First Amendment to Restructuring Agreement dated as of March
29, 2000 among the Registrant, The Northern Trust Company and
Iowa State Bank & Trust.
10.19 Settlement Agreement and General Release dated December 3,
1999, by and between Robert B. Staib and the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24.1 Power of Attorney.
27.1 Financial Data Schedule.
- ------------------
* To be filed by amendment.
II-7
<PAGE> 1
Exhibit 1.1
__________ SHARES*
STOCKPOINT, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_____________, 2000
ROTH CAPITAL PARTNERS, INCORPORATED
As Representative of the several Underwriters
c/o Roth Capital Partners, Incorporated
24 Corporate Plaza, Suite 200
Newport Beach, California 92660
Ladies and Gentlemen:
Stockpoint, Inc., a Delaware corporation (the "Company"), proposes to issue and
sell ___________ shares (the "Firm Shares") of the Company's Common Stock, $.01
par value per share (the "Common Stock"), to you and to the several other
Underwriters named in Schedule I hereto (collectively, the "Underwriters"), for
whom you are acting as representative (the "Representative"). The Company has
also agreed to grant to you and the other Underwriters an option (the "Option")
to purchase up to an additional ________ shares of Common Stock (the "Option
Shares") on the terms and for the purposes set forth in Section 1(b). The
Company has also agreed to sell to Roth Capital Partners, Incorporated a Warrant
(the "Warrant") to purchase ________ of Common Stock (the "Warrant Shares") on
the terms and for the purposes set forth in Section 1(c) hereof. The Firm
Shares, the Option Shares and the Warrant Shares are hereinafter collectively
referred to as the "Shares."
The Company confirms as follows its agreements with the Representative and the
several other Underwriters.
_______________________
*Plus an option to purchase up to an additional ___________ shares to cover
over-allotments.
<PAGE> 2
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and conditions of this
Agreement, (i) the Company agrees to issue and sell the Firm Shares to the
several Underwriters and (ii) each of the Underwriters, severally and not
jointly, agrees to purchase from the Company the respective number of Firm
Shares set forth opposite that Underwriter's name in Schedule I hereto, at the
purchase price of $______ for each Company Share.
(b) Subject to all the terms and conditions of this Agreement, the Company
grants the Option to the several Underwriters to purchase, severally and not
jointly, up to the maximum number of Option Shares hereto at the same price per
share as the Underwriters shall pay for the Firm Shares. The Option may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time (but not more
than once) on or before the 30th day after the date of this Agreement upon
written or telegraphic notice (the "Option Shares Notice") by the Representative
to the Company no later than 12:00 noon, California time, at least two and no
more than five business days before the date specified for closing in the Option
Shares Notice (the "Option Closing Date"), setting forth the aggregate number of
Option Shares to be purchased and the time and date for such purchase. On the
Option Closing Date, the Company will issue and sell to the Underwriters the
number of Option Shares set forth in the Option Shares Notice and each
Underwriter will purchase such percentage of the Option Shares as is equal to
the percentage of Firm Shares that such Underwriter is purchasing, as adjusted
by the Representative in such manner as they deem advisable to avoid fractional
shares.
(c) Subject to all the terms and conditions of this Agreement, the Company
agrees on the Closing Date (as defined in Section 2 below) to sell, for $100.00,
the Warrant to Roth Capital Partners, Incorporated to purchase, severally and
not jointly, the Warrant Shares from the Company at a price per share equal to
120% of the initial public offering price per share. On the Closing Date, the
Company shall issue the Warrant, in such denominations as shall be designated by
Roth Capital Partners, Incorporated, in the form attached hereto as Schedule II.
2. Delivery and Payment. Delivery of the Firm Shares shall be made to the
Representative for the accounts of the Underwriters against payment of the
purchase price by certified or official bank checks or by wire transfers payable
in same-day funds to the order of the Company for the Firm Shares to be sold by
it at the office of Roth Capital Partners, Incorporated, 24 Corporate Plaza,
Suite 200, Newport Beach, California 92660, at 10:00 a.m., California time, on
the third (or, if the purchase price set forth in Section 1(b) hereof is
determined after 4:30 p.m., Washington D.C. time, the fourth) business day
following the commencement of the offering contemplated by this Agreement, or at
such time on such other date, not later than seven business days after the date
of this Agreement, as may be agreed upon by the Company and the Representative
(such date is hereinafter referred to as the "Closing Date").
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<PAGE> 3
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above for the
Company) will take place at the offices specified above for the Closing Date at
the time and date (which may be the Closing Date) specified in the Option Shares
Notice.
Certificates evidencing the Shares shall be in definitive form and shall be
registered in such names and in such denominations as the Representative shall
request at least two business days prior to the Closing Date or the Option
Closing Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date or the Option Closing Date, as the case may
be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and Option Shares by the Company to the
respective Underwriters shall be borne by the Company. The Company will pay and
save each Underwriter and any subsequent holder of the Shares harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such Underwriter of the Shares.
3. Representations and Warranties of the Company. The Company represents,
warrants and covenants to each Underwriter that:
(a) A registration statement (Registration No. 333-________) on Form S-1
relating to the Shares, including a preliminary prospectus and such amendments
to such registration statement as may have been required to the date of this
Agreement, has been prepared by the Company under the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(collectively referred to as the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The term "preliminary prospectus" as used herein means a preliminary
prospectus as contemplated by Rule 430 or Rule 430A of the Rules and Regulations
included at any time as part of the registration statement. Copies of such
registration statement and amendments and of each related preliminary prospectus
have been delivered to the Representative. If such registration statement has
not become effective, a further amendment to such registration statement,
including a form of final prospectus, necessary to permit such registration
statement to become effective will be filed promptly by the Company with the
Commission. If such registration statement has become effective, a final
prospectus containing information permitted to be omitted at the time of
effectiveness by Rule 430A of the Rules and Regulations will be filed promptly
by the Company with the Commission in accordance with Rule 424(b) of the Rules
and Regulations. The term "Registration Statement" means the registration
statement as amended at the time it becomes or became effective (the "Effective
Date"), including financial statements and all exhibits and any information
deemed to be included by Rule 430A and includes any registration statement
relating to the offering contemplated by this Agreement and filed pursuant to
Rule 462(b) of the Rules and Regulations. The term "Prospectus" means the
prospectus as first filed with the Commission
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<PAGE> 4
pursuant to Rule 424(b) of the Rules and Regulations or, if no such filing is
required, the form of final prospectus included in the Registration Statement at
the Effective Date. Any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to refer to and include the filing
of any document under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") after the Effective Date, the date of any preliminary prospectus
or the date of the Prospectus, as the case may be, and deemed to be incorporated
therein by reference.
(b) No order preventing or suspending the use of any preliminary prospectus
has been issued by the Commission. On the Effective Date, the date the
Prospectus is first filed with the Commission pursuant to Rule 424(b) (if
required), at all times subsequent to and including the Closing Date and, if
later, the Option Closing Date and when any post-effective amendment to the
Registration Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, the Registration Statement and the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement thereto), including the financial
statements included in the Prospectus, did and will comply with all applicable
provisions of the Act and the Rules and Regulations and will contain all
statements required to be stated therein in accordance with the Act and the
Rules and Regulations. On the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, no part of the
Registration Statement, the Prospectus or any such amendment or supplement did
or will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at the Closing Date and, if later, the Option Closing Date, the
Prospectus did not and will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing representations and warranties in this Section 3(b) do not apply to
any statements or omissions made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representative specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto.
(c) The Company does not own, and at the Closing Date and, if later, the
Option Closing Date, will not own, directly or indirectly, any shares of stock
or any other equity or long-term debt securities of any corporation or have any
equity interest in any corporation, firm, partnership, joint venture,
association or other entity. The Company is, and at the Closing Date and, if
later, the Option Closing Date, will be, a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has, and at the Closing Date and, if later, the
Option Closing Date, will have, full power and authority to conduct all the
activities conducted by it, to own or lease all the assets owned or leased by it
and to conduct its business as described in the Registration Statement and the
Prospectus. The Company is, and at the Closing Date and, if later, the Option
Closing Date, will be, duly licensed or qualified to do business and in good
standing as a foreign corporation in all jurisdictions in which the nature of
the activities conducted by it or the character of the assets owned or leased by
it makes such license or
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<PAGE> 5
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not materially and adversely affect the
Company or its business, properties, business prospects, condition (financial or
other) or results of operations. The Company is not, and at the Closing Date
and, if later, the Option Closing Date, will not be, engaged in any discussions
or a party to any agreement or understanding, written or oral, regarding the
acquisition of an interest in any corporation, firm, partnership, joint venture,
association or other entity where such discussions, agreements or understandings
would require amendment to the Registration Statement pursuant to applicable
securities laws other than as described in the Prospectus. Complete and correct
copies of the articles of incorporation and of the by-laws of the Company and
all amendments thereto have been delivered to the Representative, and no changes
therein will be made subsequent to the date hereof and prior to the Closing Date
or, if later, the Option Closing Date.
(d) All of the outstanding shares of capital stock of the Company have been
duly authorized, validly issued and are fully paid and nonassessable and were
issued in compliance with all applicable state and federal securities laws; the
Firm Shares and the Option Shares issued by the Company (if any) have been duly
authorized and when issued and paid for as contemplated herein will be validly
issued, fully paid and nonassessable; and no preemptive or similar rights exist
with respect to any of the Shares or the issue and sale thereof. The description
of the capital stock of the Company in the Registration Statement and the
Prospectus is, and at the Closing Date and, if later, the Option Closing Date,
will be, complete and accurate in all respects. Except as set forth in the
Prospectus, the Company does not have outstanding, and at the Closing Date and,
if later, the Option Closing Date, will not have outstanding, any options to
purchase, or any rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
any shares of capital stock, or any such warrants, convertible securities or
obligations. No further approval or authority of stockholders or the Board of
Directors of the Company will be required for the transfer and sale of the Firm
Shares and the Option Shares as contemplated herein.
(e) The financial statements and schedules included in the Registration
Statement or the Prospectus present fairly the financial condition of the
Company as of the respective dates thereof and the results of operations and
cash flows of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the entire period involved, except as otherwise disclosed in
the Prospectus. No other financial statements or schedules of the Company are
required by the Act or the Rules and Regulations to be included in the
Registration Statement or the Prospectus. Deloitte & Touche LLP (the
"Accountants"), who have reported on such financial statements and schedules,
are independent accountants with respect to the Company as required by the Act
and the Rules and Regulations. The summary financial and statistical data
included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the financial
statements presented therein.
(f) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus and prior to the Closing Date and,
if later, the Option
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<PAGE> 6
Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) there has not been and will not have been any
change in the capitalization of the Company (other than in connection with the
exercise of options to purchase the Company's Common Stock granted pursuant to
the Company's stock option plans from the shares reserved therefor as described
in the Registration Statement), or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company, arising for any reason whatsoever, (ii)
the Company has not incurred nor will it incur, except in the ordinary course of
business as described in the Prospectus, any material liabilities or
obligations, direct or contingent, nor has the Company entered into nor will it
enter into, except in the ordinary course of business as described in the
Prospectus, any material transactions other than pursuant to this Agreement and
the transactions referred to herein, (iii) the Company has not sustained any
material loss or interference with the business or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by insurance, (iv)
the Company has not and will not have paid or declared any dividends or other
distributions of any kind on any class of its capital stock and (v) there has
not been any issuance of warrants, options, convertible securities or other
rights to purchase or acquire capital stock of the Company.
(g) The Company is not, will not become as a result of the transactions
contemplated hereby, and does not intend to conduct its business in a manner
that would cause it to become, an "investment company" or an "affiliated person"
of; or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
(h) Except as set forth in the Registration Statement and the Prospectus,
there are no actions, suits or proceedings pending or, to the knowledge of the
Company, threatened or contemplated against or affecting the Company or any of
its officers in their capacity as such, nor any basis therefor, before or by any
Federal or state court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, wherein an unfavorable ruling,
decision or finding might, individually or in the aggregate, materially and
adversely affect the Company or the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company.
(i) The Company has, and at the Closing Date and, if later, the Option
Closing Date, will have, performed all the obligations required to be performed
by it, and is not, and at the Closing Date, and, if later, the Option Closing
Date, will not be, in default, under any contract or other instrument to which
it is a party or by which its property is bound or affected, which default might
materially and adversely affect the Company or the business, properties,
business prospects, condition (financial or other) or results of operations of
the Company. To the best knowledge of the Company, no other party under any
contract or other instrument to which it is a party is in default in any respect
thereunder, which default might materially and adversely affect the Company or
the business, properties, business prospects, condition (financial or other) or
results of operations of the Company. The Company is not and at the Closing Date
and, if later, the Option
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<PAGE> 7
Closing Date, will not be, in violation of any provision of its
articles of incorporation or by-laws or other organizational documents.
(j) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
execution and delivery by the Company of this Agreement and consummation by the
Company of the transactions on its part contemplated herein, except such as have
been obtained under the Act or the Rules and Regulations and such as may be
required under state securities or Blue Sky laws or the by-laws and rules of the
National Association of Securities Dealers, Inc. (the "NASD") in connection with
the purchase and distribution by the Underwriters of the Shares.
(k) The Company has full corporate power and authority to enter into this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid, legal and binding agreement of the Company,
enforceable against the Company in accordance with the terms hereof. The
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of any of the terms
or provisions of; or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, the articles of incorporation or by-laws of the Company, any
indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which the Company is a party or by
which the Company or any of its properties is bound or affected, or violate or
conflict with any judgment, ruling, decree, order, statute, rule or regulation
of any court or other governmental agency or body applicable to the business or
properties of the Company.
(l) The Company has good and marketable title to all properties and assets
described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are not material to the business of the Company. The Company has
valid, subsisting and enforceable leases for the properties described in the
Prospectus as leased by it. The Company owns or leases all such properties as
are necessary to its operations as now conducted or as proposed to be conducted,
except where the failure to so own or lease would not materially and adversely
affect the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company.
(m) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required. All such contracts to which the Company is a party have been duly
authorized, executed and delivered by the Company, constitute valid and binding
agreements of the Company and are enforceable against and by the Company in
accordance with the terms thereof.
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<PAGE> 8
(n) No statement, representation, warranty or covenant made by the Company
in this Agreement or made in any certificate or document required by Section 5
of this Agreement to be delivered to the Representative was or will be, when
made, inaccurate, untrue or incorrect in any material respect.
(o) Neither the Company nor any of its directors, officers or controlling
persons has taken, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result, under the Act or otherwise, in, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(p) No holder of securities of the Company has rights to the registration
of any securities of the Company because of the filing of the Registration
Statement, which rights have not been waived by the holder thereof as of the
date hereof.
(q) The Company has filed a registration statement pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
to register the Common Stock, and has filed an application to list the Shares to
be sold by the Company hereunder on the Nasdaq National Market ("NNM"), and has
received notification that the listing has been approved, subject to notice of
issuance of such Shares.
(r) Except as disclosed in or specifically contemplated by the Prospectus
(i) the Company has sufficient trademarks, trade names, patent rights, mask
works, copyrights, licenses, approvals and governmental authorizations to
conduct its business as now conducted, (ii) the Company has no knowledge of any
infringement by it of trademarks, trade name rights, patent rights, mask work
rights, copyrights, licenses, inventions, trade secrets or other similar rights
of others, where such infringement could have a material and adverse effect on
the Company or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company, (iii) the
Company has no knowledge of any infringement by any third party of the
trademarks, trade name rights, patent rights, mask work rights, copyrights,
licenses, inventions, trade secrets or other similar rights of the Company,
where such infringement could have a material and adverse effect on the Company
or the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company and (iv) there is no claim
being made against the Company, or to the best of the Company's knowledge, any
employee of the Company, regarding trademark, trade name, patent, mask work,
copyright, license, inventions, trade secret or other infringement which could
have a material and adverse effect on the Company or the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company.
(s) The Company has filed all federal, state, local and foreign income tax
returns which have been required to be filed and has paid all taxes and
assessments received by it to the extent that such taxes or assessments have
become due. The Company has no tax deficiency which has been or, to the best
knowledge of the Company, might be asserted or threatened against it which could
have a material and adverse effect on the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company.
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<PAGE> 9
(t) The Company owns or possesses all authorizations, approvals, orders,
licenses, registrations, other certificates and permits of and from all
governmental regulatory officials and bodies, foreign and domestic necessary to
conduct its business as contemplated in the Prospectus, except where the failure
to own or possess all such authorizations, approvals, orders, licenses,
registrations, other certificates and permits would not materially and adversely
affect the Company or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company. There is no
proceeding pending or threatened (or any basis there for known to the Company)
which may cause any such authorization, approval, order, license, registration,
certificate or permit to be revoked, withdrawn, canceled, suspended or not
renewed; and the Company is conducting its business in compliance with all laws,
rules and regulations applicable thereto (including, without limitation, all
applicable federal, state and local environmental laws and regulations) except
where such noncompliance would not materially and adversely affect the Company
or the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company.
(u) The Company maintains insurance of the types and in the amounts
generally deemed adequate for its business, and consistent with insurance
coverage maintained by similar companies and businesses, and as required by the
rules and regulations of all governmental agencies having jurisdiction over the
Company, including, but not limited to, insurance covering real and personal
property owned or leased by the Company against theft, damage, destruction, acts
of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(v) Neither the Company has nor, to the best of the Company's knowledge,
any of its employees or agents at any time during the last five years (i) made
any unlawful contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(w) The Company has obtained and delivered to the Representative written
agreements, in form and substance satisfactory to the Representative, of each of
its directors, executive officers and such other stockholders as requested by
the Representative that no offer, sale, assignment, transfer, encumbrance,
contract to sell, grant of an option to purchase or other disposition of any
Common Stock or other capital stock of the Company will be made for a period of
180 days after the date of the Prospectus (the "Lock-Up Period"), directly or
indirectly, by such holder otherwise than hereunder or with the prior written
consent of Roth Capital Partners, Incorporated, and that each such shareholder
will conduct all offers and sales of the Company's capital stock through Roth
Capital Partners, Incorporated during the Lock-Up Period and for 180 additional
days thereafter.
(x) The Company has not distributed and will not distribute any prospectus
or other offering material in connection with the offering and sale of the
Shares other than any preliminary
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<PAGE> 10
prospectus or the Prospectus or other materials permitted by the Act to be
distributed by the Company.
(y) The Company is in compliance with all provisions of Florida Statutes
Section 517.075 (Chapter 92-198, laws of Florida). The Company does not do any
business, directly or indirectly, with the government of Cuba or with any person
or entity located in Cuba.
(z) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are executed
in accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to records is permitted only in
accordance with management's general or specific authorization; and (D) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(aa) Other than as contemplated by this Agreement, the Company has not
incurred any liability for any finder's or broker's fee or agent's commission in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(bb) There has been no unlawful storage, treatment or disposal of waste by
the Company (or any of its predecessors-in-interest) at any of the facilities
owned or leased thereby, except for such violations which would not have a
material adverse effect on the condition, financial or otherwise, or the
earnings, affairs or business prospects of the Company; there has been no
material spill, discharge, leak, emission, ejection, escape, dumping or release
of any kind onto the properties owned or leased by the Company, or into the
environment surrounding those properties, of any toxic or hazardous substances,
as defined under any federal, state or local regulations, laws or statutes,
except for those releases permissible under such regulations, laws or statutes
or otherwise allowable under applicable permits and except for such releases
which would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, affairs or business prospects of the Company.
(cc) No material labor dispute with the employees of the Company exists or
is imminent.
(dd) Each employee benefit plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) ("Employee Benefit
Plan"), and each bonus, retirement, pension, profit sharing, stock bonus,
thrift, stock option, stock purchase, incentive, severance, deferred or other
compensation or welfare benefit plan, program, agreement or arrangement of, or
applicable to employees or former employees of, the Company or with respect to
which the Company could have any liability ("Benefit Plans"), was or has been
established, maintained and operated in all material respects in compliance with
all applicable federal, state, and local statutes, orders, governmental rules
and regulations, including, but not limited to, ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"). No Benefit
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<PAGE> 11
Plan is or was subject to Title IV of ERISA or Section 302 of ERISA or Section
412 of the Code. The Company does not, either directly or indirectly as a member
of a controlled group within the meaning of Sections 414(b), (c), (rn) and (o)
of the Code ("Controlled Group"), have any material liability that remains
unsatisfied or arising under Section 502 of ERISA, Subchapter D of Chapter 1 of
Subtitle A of the Code or under Chapter 43 of Subtitle D of the Code. No action,
suit, grievance, arbitration or other matter of litigation or claim with respect
to any Benefit Plan (other than routine claims for benefits made in the ordinary
course of plan administration for which plan administrative procedures have not
been exhausted) is pending or, to the Company's knowledge, threatened or
imminent against or with respect to any Benefit Plan, any member of a Controlled
Group that includes the Company, or any fiduciary within the meaning of Section
3(21) of ERISA with respect to a Benefit Plan which, if determined adversely to
the Company, would have a material adverse effect on the condition, financial or
otherwise, or the earnings, affairs or business prospects of the Company.
Neither the Company nor any member of a Controlled Group that includes the
Company, has any knowledge of any facts that could give rise to any action,
suit, grievance, arbitration or any other manner of litigation or claim with
respect to any Benefit Plan.
(ee) The Company implemented a comprehensive, detailed program to analyze
and address the risk that its computer hardware and software might be unable to
recognize and properly execute date-sensitive functions involving any dates
after December 31, 1999 (the "Year 2000 Problem") and determined that its
computer hardware and software is, and will continue to be, able to process all
date information without any errors, aborts, delays or other interruptions in
operations associated with the Year 2000 Problem; and the Company believes,
after due inquiry, that each supplier, vendor, customer or financial service
organization used or serviced by the Company remedied the Year 2000 Problem,
except to the extent that a failure to remedy by any such supplier, vendor,
customer or financial service organization would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, affairs or
business prospects of the Company.
(ff) Neither the Company nor any of its or their properties or assets has
any immunity from the jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) under the laws of the State of Delaware.
4. Agreements of the Company. The Company covenants and agrees with the
several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or thereafter
during such period as the Prospectus is required by law to be delivered in
connection with sales of the Shares by an Underwriter or dealer, file any
amendment or supplement to the Registration Statement or the Prospectus, unless
a copy thereof shall first have been submitted to the Representative within a
reasonable period of time prior to the filing thereof and the Representative
shall not have objected thereto in good faith.
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<PAGE> 12
(b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representative promptly, and
will confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, (ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose or the threat thereof; (iv) of the happening of any event
during the period that the Prospectus is required by law to be delivered in
connection with the offering or sale of the Shares that in the judgment of the
Company makes any statement made in the Registration Statement or the Prospectus
untrue or that requires the making of any changes in the Registration Statement
or the Prospectus in order to make the statements therein, in the light of the
circumstances in which they are made, not misleading and (v) of receipt by the
Company or any representative or attorney of the Company of any other
communication from the Commission relating to the Company, the Registration
Statement, any preliminary prospectus or the Prospectus. If at any time the
Commission shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. If the Company has
omitted any information from the Registration Statement pursuant to Rule 430A of
the Rules and Regulations, the Company will comply with the provisions of and
make all requisite filings with the Commission pursuant to said Rule 430A and
notify the Representative promptly of all such filings.
(c) The Company will furnish to each Representative, without charge, one
signed copy of each of the Registration Statement and of any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits thereto and will furnish to the Representative, without charge, for
transmittal to each of the other Underwriters, a copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any undertakings
contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the Company
will deliver to each of the Underwriters, without charge, as many copies of any
preliminary prospectus and the Prospectus or any amendment or supplement thereto
as the Representative may reasonably request. The Company consents to the use of
the Prospectus or any amendment or supplement thereto by the several
Underwriters and by all dealers to whom the Shares may be sold, both in
connection with the offering or sale of the Shares and for any period of time
thereafter during which the Prospectus is required by law to be delivered in
connection therewith. During the period in which a prospectus is required by law
to be delivered by an Underwriter or dealer, the Company will comply with all
requirements imposed upon it by the Act and the Rules and Regulations, as from
time to time in force, so far as necessary to permit the continuance of sales of
or dealings in the Shares as contemplated by the provisions hereof or the
Prospectus. If during such period of time any event shall occur which in the
judgment of the Company or counsel to the Underwriters should be set forth in
the Prospectus in order to make any statement therein, in the light of the
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<PAGE> 13
circumstances under which it was made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with law, the Company will
forthwith prepare and duly file with the Commission an appropriate supplement or
amendment thereto, and will deliver to each of the Underwriters, without charge,
such number of copies of such supplement or amendment to the Prospectus as the
Representative may reasonably request. The Company will not file any document
under the Exchange Act or the Exchange Act Rules and Regulations before the
termination of the offering of the Shares by the Underwriters, if such document
would be deemed to be incorporated by reference into the Prospectus, that is not
approved by the Representative after reasonable notice thereof. In case any
Underwriter is required to deliver a prospectus in connection with sales of any
Shares at any time nine months or more after the effective date of the
Registration Statement, upon the request of the Representative but at the
expense of such Underwriter, the Company will prepare and deliver to such
Underwriter as many copies as the Representative may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act.
(f) Prior to any public offering of the Shares, the Company will cooperate
with the Representative and counsel to the Underwriters in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representative may
request; provided, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) The Company will, so long as required under the Rules and Regulations,
furnish to its stockholders as soon as practicable after the end of each fiscal
year an annual report (including a balance sheet and statements of income,
stockholders' equity and cash flow of the Company and its consolidated
Subsidiaries, if any, certified by independent public accountants) and, as soon
as practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its Subsidiaries, if any, for such quarter in reasonable detail.
(h) During the period of five years commencing on the Effective Date, the
Company will furnish to the Representative and each other Underwriter who may so
request copies of such financial statements and other periodic and special
reports as the Company may from time to time distribute generally to the holders
of any class of its capital stock, and will furnish to the Representative and
each other Underwriter who may so request a copy of each annual or other report
it shall be required to file with the NASD or any securities exchange pursuant
to the requirements of the NASD or with the Commission pursuant to the Act or
the Exchange Act.
(i) The Company will make generally available to holders of its securities
as soon as may be practicable but in no event later than the last day of the
fifteenth full calendar month following the calendar quarter in which the
Effective Date falls, an earnings statement (which need not be audited but shall
be in reasonable detail) for a period of 12 months ended commencing after
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<PAGE> 14
the Effective Date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations).
(j) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay or reimburse
if paid by the Representative, in such proportions as they may agree upon
themselves, all costs and expenses incident to the performance of the
obligations of the Company under this Agreement and in connection with the
transactions contemplated hereby, including but not limited to costs and
expenses of or relating to (i) the preparation, printing and filing of the
Registration Statement and exhibits to it, each preliminary prospectus,
Prospectus and any amendment or supplement to the Registration Statement or
Prospectus, (ii) the preparation and delivery of certificates representing the
Shares, (iii) the printing of this Agreement, the Agreement Among Underwriters,
any Selected Dealer Agreements, any Underwriters' Questionnaires, any
Underwriters' Powers of Attorney and any invitation letters to prospective
Underwriters, (iv) furnishing (including costs of shipping and mailing) such
copies of the Registration Statement, the Prospectus and any preliminary
prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold, (v) the listing of the Shares on the
NNM, (vi) any filings required to be made by the Underwriters with the NASD, and
the fees, disbursements and other charges of counsel for the Underwriters in
connection therewith, (vii) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 5(f), including the fees, disbursements and other
charges of counsel to the Underwriters in connection therewith, and the
preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (viii) fees, disbursements and other charges of counsel to the
Company (but not those of counsel for the Underwriters, except as otherwise
provided herein), (ix) accounting fees of the Company and (x) the transfer agent
for the Shares. In addition, the Company will pay all travel and lodging
expenses incurred by management of the Company in connection with any
informational "road show" meetings held in connection with the offering and will
also pay for the preparation of all materials used in connection with such
meetings. The Company shall not, however, be required to pay for any of the
Underwriters' expenses (other than those related to qualification of the Shares
under state securities or Blue Sky laws and those incident to securing any
required review by the NASD of the terms of the sale of the Shares) except that,
if this Agreement shall not be consummated because the conditions in Section 5
hereof are not satisfied, or because this Agreement is terminated by the
Representative pursuant to Section 8 hereof; or by reason of any failure,
refusal or inability on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement or to comply with any of the terms
hereof on its part to be performed, unless such failure to satisfy said
condition or to comply with said terms shall be due to the default or omission
of any Underwriter, then the Company shall promptly upon request by the
Representative reimburse the several Underwriters for all out-of-pocket
accountable expenses, including fees and disbursements of counsel, incurred in
connection with investigating, marketing and proposing to market the Shares or
in contemplation of performing their obligations hereunder up to a maximum of
$100,000; but the Company shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
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<PAGE> 15
(k) If prior to closing on the initial public offering that is the subject
of this Agreement, the Company agrees to be acquired, merges, sells all or
substantially all of its assets or otherwise effects a corporate reorganization
or consolidation with any other entity, or enters into a financing agreement
and, as a result, the offering as contemplated hereby is abandoned by the
Company, Roth Capital Partners, Incorporated shall be entitled to receive from
the Company a cash fee of one percent (1.0%) of the total consideration or
commitment received by the Company and its stockholders for such merger, sale,
reorganization, consolidation, or financing, to be payable at closing of such a
transaction and receipt of consideration. In the event that the Company engages
the Roth Capital Partners, Incorporated in a formal advisory assignment, this
advisory fee will apply against fees that would be incurred as part of that
formal advisory assignment. The expenses and fees reimbursed to the Underwriters
under section (j) above shall be deducted from the fee otherwise payable to Roth
Capital Partners, Incorporated in this section.
(l) The Company will not at any time, directly or indirectly, take any
action designed or which might reasonably be expected to cause or result in, or
which will constitute, stabilization of the price of the shares of Common Stock
to facilitate the sale or resale of any of the Shares.
(m) The Company will apply the net proceeds from the offering and sale of
the Shares to be sold by the Company substantially in the manner set forth in
the Prospectus under "Use of Proceeds" and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(n) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, without the prior
written consent of Roth Capital Partners, Incorporated, the Company will not
offer, sell, contract to sell, grant options to purchase or otherwise dispose of
any of the Company's equity securities of the Company or any other securities
convertible into or exchangeable with its Common Stock or other equity security
(other than pursuant to employee stock option plans or the conversion of
convertible securities or the exercise of warrants outstanding on the date of
this Agreement).
(o) During the period of 180 days after the date of the Prospectus, the
Company will not, without the prior written consent of Roth Capital Partners,
Incorporated, grant options to purchase shares of Common Stock that will vest in
such period at a price less than the initial public offering price. During the
period of 180 days after the date of the Prospectus, the Company will not file
with the Commission or cause to become effective any registration statement
(including a registration statement on Form S-8) relating to any securities of
the Company without the prior written consent of Roth Capital Partners,
Incorporated.
(p) The Company will cause each of its officers, directors and certain
stockholders designated by the Representative to enter into lock-up agreements
with the Representative in substantially the form of Schedule III hereto to the
effect that they will not for a period of 180 days after the date of the
Prospectus, without the prior written consent of Roth Capital Partners,
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<PAGE> 16
Incorporated, sell, contract to sell or otherwise dispose of any shares of
Common Stock or rights to acquire such shares.
5. Conditions of the Obligations of the Underwriters. The obligations of
each Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become effective shall
be received by the Representative not later than 5:00 p.m., California time, on
the date of this Agreement or at such later date and time as shall be consented
to in writing by the Representative and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the Commission or the authorities of any such
jurisdiction, (iii) any request for additional information on the part of the
staff of the Commission or any such authorities shall have been complied with to
the satisfaction of the staff of the Commission or such authorities and (iv)
after the date hereof no amendment or supplement to the Registration Statement
or the Prospectus shall have been filed unless a copy thereof was first
submitted to the Representative and the Representative do not object thereto in
good faith, and the Representative shall have received certificates, dated the
Closing Date and, if later, the Option Closing Date and signed by the Chief
Executive Officer and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and belief), to
the effect of clauses (i), (ii) and (iii) of this paragraph.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as described in or
contemplated by the Registration Statement and the Prospectus, and (ii) the
Company shall not have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not described in the
Registration Statement and the Prospectus, if in the judgment of the
Representative any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares by the Underwriters at the
initial public offering price.
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of its officers or
directors in their capacities as such, before or by any Federal, state or local
court, commission, regulatory body, administrative agency or other
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<PAGE> 17
governmental body, domestic or foreign, in which litigation or proceeding an
unfavorable ruling, decision or finding would, in the judgment of the
Representative, materially and adversely affect the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company.
(e) Each of the representations and warranties of the Company contained
herein shall be true and correct in all material respects at the Closing Date
and, with respect to the Option Shares, at the Option Closing Date, and all
covenants and agreements contained herein to be performed on the part of the
Company and all conditions contained herein to be fulfilled or complied with by
the Company at or prior to the Closing Date and, with respect to the Option
Shares, at or prior to the Option Closing Date, shall have been duly performed,
fulfilled or complied with.
(f) The Representative shall have received an opinion, dated the Closing
Date and, with respect to the Option Shares, the Option Closing Date,
satisfactory in form and substance to the Representative and counsel for the
Underwriters from Dorsey & Whitney LLP, counsel to the Company, with respect to
the following matters:
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation; has
full corporate power and authority to conduct all the activities conducted
by it, to own or lease all the assets owed or leased by it and to conduct
its business as described in the Registration Statement and Prospectus; and
is duly licensed or qualified to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of the
activities conducted by it or the character of the assets owned or leased
by it makes such license or qualification necessary and where the failure
to be licensed or qualified would have a material and adverse effect on the
business or financial condition of the Company.
(ii) All of the outstanding shares of capital stock of the Company
have been duly authorized, validly issued and are fully paid and
nonassessable, to such counsel's knowledge, were issued pursuant to
exemptions from the registration and qualification requirements of federal
and applicable state securities laws, and were not issued in violation of
or subject to any preemptive or, to such counsel's knowledge, similar
rights;
(iii) The specimen certificate evidencing the Common Stock filed as an
exhibit to the Registration Statement is in due and proper form under
Delaware law, the Shares to be sold by the Company hereunder have been duly
authorized and, when issued and paid for as contemplated by this Agreement,
will be validly issued, fully paid and nonassessable; and no preemptive or
similar rights exist with respect to any of the Shares or the issue and
sale thereof.
(iv) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any shares of stock or any other equity or
long-term debt securities of
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<PAGE> 18
any corporation or have any equity interest in any corporation, firm,
partnership, joint venture, association or other entity.
(v) The number of shares of authorized and outstanding capital stock
of the Company is as set forth in the Registration Statement and the
Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to this
Agreement or pursuant to reservations, agreements, employee benefit plans
or the exercise of convertible securities, options or warrants referred to
in the Prospectus). To such counsel's knowledge, except as disclosed in or
specifically contemplated by the Prospectus, there are no outstanding
options, warrants of other rights calling for the issuance of; and no
commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable or exercisable
for capital stock of the Company. The description of the capital stock of
the Company in the Registration Statement and the Prospectus conforms in
all material respects to the terms thereof.
(vi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened to which the Company is a party or to
which any of its properties is subject that are required to be described in
the Registration Statement or the Prospectus but are not so described.
(vii) No consent, approval, authorization or order of; or any filing
or declaration with, any court or governmental agency or body is required
for the consummation by the Company of the transactions on its part
contemplated under this Agreement, except such as have been obtained or
made under the Act or the Rules and Regulations and such as may be required
under state securities or Blue Sky laws or the by-laws and rules of the
NASD in connection with the purchase and distribution by the Underwriters
of the Shares.
(viii) The Company has full corporate power and authority to enter
into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The execution and delivery of this Agreement, the compliance by
the Company with all of the terms hereof and the consummation of the
transactions contemplated hereby does not contravene any provision of
applicable law or the Articles of Incorporation or By-Laws of the Company,
and will not result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of the Company pursuant to the terms and
provisions of; result in a breach or violation of any of the terms or
provisions of; or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of
any obligation under, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or instrument
known to such counsel to which the Company is a party or by which the
Company or any of its properties is bound or affected, or violate or
conflict with (i) any judgment, ruling, decree or order
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<PAGE> 19
known to such counsel or (ii) any statute, rule or regulation of any court
or other governmental agency or body, applicable to the business or
properties of the Company except for such liens, charges, encumbrances,
breaches, violations or terminations as would not reasonably be expected to
have a material and adverse effect on business, properties or results of
operations of the Company.
(x) To such counsel's knowledge, there is no document or contract of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement which
is not described or filed or incorporated by reference as required, and
each description of such contracts and documents that is contained in the
Registration Statement and Prospectus fairly presents in all material
respects the information required under the Act and the Rules and
Regulations.
(xi) The statements under the captions "Risk Factors - Substantial
sales of our common stock, or the perception that substantial sales may
occur, could cause our stock price to fall and make it difficult for us to
sell additional securities," "Management - Employment Agreements,"
"Management - Stock Option Plans," "Management - Indemnification of
Directors and Executive Officers and Limitation of Liability," "Certain
Transactions," "Description of Capital Stock" and "Shares Eligible for
Future Sale" in the Prospectus, insofar as the statements constitute a
summary of documents referred to therein or matters of law, are accurate
summaries and fairly and correctly present, in all material respects, the
information called for with respect to such documents and matters
(provided, however, that such counsel may rely on representations of the
Company with respect to the factual matters contained in such statements,
and provided further that such counsel shall state that nothing has come to
the attention of such counsel which leads them to believe that such
representations are not true and correct in all material respects).
(xii) The Company is not an "investment company or an affiliated
person" of, or "promoter" or "principal underwriter" for, and immediately
upon completion of the sale of Shares contemplated hereby will not be, an
"investment company," as such terms are defined in the Investment Company
Act of 1940, as amended.
(xiii) The Shares have been duly authorized for listing on the NNM,
subject to notice of issuance.
(xiv) To such counsel's knowledge, no holder of securities of the
Company has rights, which have not been waived, to require the Company to
register with the Commission shares of Common Stock or other securities, as
part of the offering contemplated hereby.
(xv) The Registration Statement has become effective under the Act,
and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or is pending, threatened
or contemplated.
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<PAGE> 20
(xvi) The Registration Statement and the Prospectus comply as to form
in all material respects with the requirement of the Act and the Rules and
Regulations (other than the financial statements, schedules and other
financial and statistical data contained in the Registration Statement or
the Prospectus, as to which such counsel need express no opinion).
(xvii) Such counsel has participated in the preparation of the
Registration Statement and Prospectus and has no reason to believe that, as
of the Effective Date, the Registration Statement, or any amendment or
supplement thereto, (other than the financial statements, schedules and
other financial and statistical data contained therein, as to which such
counsel need express no opinion) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that the
Prospectus, or any amendment or supplement thereto, as of its date and the
Closing Date and, if later, the Option Closing Date, contained or contains
any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (other than the
financial statements, schedules and other financial and statistical data
contained therein, as to which such counsel need express no opinion). Such
counsel may express the statements set forth in this clause (xvii) in a
letter separate from its opinion.
(xviii) To the knowledge of such counsel, the Company holds and is
operating in compliance with all licenses, approvals, certificates and
permits from governmental and regulatory authorities, foreign and domestic,
which are necessary to the conduct of its business as currently being
conducted and as described in the Prospectus. To the knowledge of such
counsel, the Company has not received notice of or has knowledge of any
basis for any proceeding or action relating specifically to the Company for
the revocation or suspension of any such consent, authorization, approval,
order, license, certificate, permit or any other action or proposed action
by any regulatory authority having jurisdiction over the Company that would
have a material adverse effect on the Company.
(xix) To the knowledge of such counsel, the Company owns or licenses
all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and other similar rights necessary for the
conduct of its business as currently being conducted and as described in
the Prospectus. To the knowledge of such counsel, no aspect of the business
of the Company involves or gives rise to any infringement of or license or
similar fees for any patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses, inventions, trade secrets or other similar rights of
others, and the Company has not received any notice or claim of conflict
with the asserted rights of others with respect to any of the foregoing.
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<PAGE> 21
In rendering the opinions as to matters of fact, such counsel may rely upon
certificates of officers of the Company and governmental officials and the
representations and warranties of the Company contained in this Agreement,
provided that the opinion of counsel to the Company shall state that they are
doing so, that they have no reason to believe that they and the Underwriters are
not entitled to rely on such opinions or certificates and that copies of such
certificates are attached to the opinion.
In rendering such opinion, such counsel may rely upon as to matters of
local law on opinions of counsel satisfactory in form and substance to the
Representative and counsel for the Underwriters, provided that the opinion of
counsel to the Company shall state that they are doing so, that they have no
reason to believe that they and the Underwriters are not entitled to rely on
such opinions and that copies of such opinions are attached to the opinion.
(g) The Representative shall have received an opinion, dated the Closing
Date and the Option Closing Date, from Messerli & Kramer P.A., counsel to the
Underwriters, with respect to the Registration Statement, the Prospectus and
this Agreement, which opinion shall be satisfactory in all respects to the
Representative.
(h) Concurrently with the execution and delivery of this Agreement, the
Accountants shall have furnished to the Representative a letter, dated the date
of its delivery, addressed to the Representative and in form and substance
satisfactory to the Representative, confirming that they are independent
accountants with respect to the Company as required by the Act and the Rules and
Regulations and with respect to certain financial and statistical information
contained in the Registration Statement. At the Closing Date and, as to the
Option Shares, the Option Closing Date, the Accountants shall have furnished to
the Representative a letter, dated the date of its delivery, which shall
confirm, on the basis of a review in accordance with the procedures set forth in
the letter from the Accountants, that nothing has come to their attention during
the period from the date of the letter referred to in the prior sentence to a
date (specified in the letter) not more than five days prior to the Closing Date
and the Option Closing Date, as the case may be, which would require any change
in their letter dated the date hereof if it were required to be dated and
delivered at the Closing Date and the Option Closing Date.
(i) Concurrently with the execution and delivery of this Agreement and at
the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representative a certificate, dated the date of its
delivery, signed by each of the Chief Executive Officer and the Chief Financial
Officer of the Company, in form and substance satisfactory to the
Representative, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus and (A) as of the date of such
certificate, such documents are true and correct in all material respects
and do not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not untrue or misleading, (B) in
the case of the certificate delivered at the Closing Date and the Option
Closing Date, since the Effective
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<PAGE> 22
Date no event has occurred as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein, in light
of the circumstances under which they were made, not untrue or misleading,
(C) subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, the Company has not incurred
any material liabilities or obligations, direct or contingent, or entered
into any material transactions, not in the ordinary course of business, or
declared or paid any dividends or made any distribution of any kind with
respect to its capital stock, and except as disclosed in the Prospectus,
there has not been any change in the capital stock (other than a change in
the number of outstanding shares of Common Stock due to the issuance of
shares upon the exercise of outstanding options or warrants), or any
material change in the short-term or long-term debt, or any issuance of
options, warrants, convertible securities or other rights to purchase the
capital stock, of the Company, or any material adverse change or any
development involving a prospective material adverse change (whether or not
arising in the ordinary course of business), in the general affairs,
condition (financial or otherwise), business, key personnel, property,
prospects, net worth or results of operations of the Company, and (D)
except as stated in the Registration Statement and the Prospectus, there is
not pending, or, to the knowledge of the Company, threatened or
contemplated, any action, suit or proceeding to which the Company is a
party before or by any court or governmental agency, authority or body, or
any arbitrator, which might result in any material adverse change in the
condition (financial or otherwise), business, prospects or results of
operations of the Company.
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the
time such certificate is delivered, true and correct.
(iii) Each of the covenants required to be performed by the Company
herein on or prior to the date of such certificate has been duly, timely
and fully performed and each condition herein required to be satisfied or
fulfilled on or prior to the date of such certificate has been duly, timely
and fully satisfied or fulfilled.
(j) The Shares shall be qualified for sale in such jurisdictions as the
Representative may reasonably request and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
or the Option Closing Date.
(k) Prior to the Closing Date, the Shares shall have been duly authorized
for listing on the NNM upon official notice of issuance.
(l) The Company shall have furnished to the Representative such
certificates, in addition to those specifically mentioned herein, as the
Representative may have reasonably requested as to the accuracy and completeness
at the Closing Date and the Option Closing Date of any statement in the
Registration Statement or the Prospectus, as to the accuracy at the Closing Date
and the Option Closing Date of the representations and warranties of the Company
herein, as
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to the performance by the Company of its obligations hereunder, or as to the
fulfillment of the conditions concurrent and precedent to the obligations
hereunder of the Representative.
If any of the conditions hereinabove provided for in this Section 5 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be. In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Section 6 hereof).
6. Indemnification.
(a) The Company will indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, liabilities, expenses and damages (including any and all investigative,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of; any action, suit or proceeding or any claim asserted), to
which they, or any of them, may become subject under the Act, the Exchange Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on (i) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or the omission or alleged omission to
state in such document a material fact required to be stated in it or necessary
to make the statements in it not misleading in the light of the circumstances in
which they were made, or (ii) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Common Stock or the offering contemplated hereby, and which is included
as part of or referred to in any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arising out of or based upon matters
covered by clause (i) above, and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such action or claim as such expenses are incurred; or arise out
of or are based in whole or in part on any inaccuracy in the representations and
warranties of the Company contained herein or any failure of the Company to
perform its obligations hereunder or under law in connection with the
transactions contemplated hereby; provided, however, that (i) the Company will
not be liable to the extent that such loss, claim, liability, expense or damage
arises from the sale of the Shares in the public offering to any person by an
Underwriter and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representative, on behalf of any Underwriter, expressly for inclusion in the
Registration Statement, the preliminary prospectus or the Prospectus; and (ii)
the Company will not be liable to any Underwriter, the directors, officers,
employees or agents of such Underwriter or any person controlling such
Underwriter with respect to any loss, claim, liability, expense, or damage
arising out of or based on any untrue statement or omission or alleged untrue
statement or omission or
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<PAGE> 24
alleged omission to state a material fact in the preliminary prospectus which is
corrected in the Prospectus if the person asserting any such loss, claim,
liability, charge or damage purchased Shares from such Underwriter but was not
sent or given a copy of the Prospectus at or prior to the written confirmation
of the sale of such Shares to such person. This indemnity agreement will be in
addition to any liability that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who signs the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, but only insofar as
losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representative, on behalf of such
Underwriter, expressly for use in the Registration Statement, the preliminary
prospectus or the Prospectus. The Company acknowledges that the only information
relating to any Underwriter furnished in writing to the Company by the
Representative on behalf of the Underwriters expressly for inclusion in the
Registration Statement, the preliminary prospectus or the Prospectus is as set
forth in Section 10 below. This indemnity will be in addition to any liability
that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified under
this Section 6 shall, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 6, notify each such
indemnifying party in writing of the commencement of such action, enclosing with
such notice a copy of all papers served, but the omission so to notify such
indemnifying party will not relieve it from any liability that it may have to
any indemnified party under the foregoing provisions of this Section 6 unless,
and only to the extent that, such omission results in the loss of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses except as
provided below and except for the reasonable costs of investigation subsequently
incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (ii)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the
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<PAGE> 25
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (iv) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. Any indemnifying party
will not be liable for any settlement of any action or claim effected without
its written consent (which consent will not be unreasonably withheld).
(d) If the indemnification provided for in this Section 6 is applicable in
accordance with its terms but for any reason is held to be unavailable to or
insufficient to hold harmless an indemnified party under paragraphs (a), (b) and
(c) of this Section 6 in respect of any losses, claims, liabilities, expenses
and damages referred to therein, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of; any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than the Underwriters, such as
persons who control the Company within the meaning of the Act, officers of the
Company who signed the Registration Statement and directors of the Company, who
also may be liable for contribution) by such indemnified party as a result of
such losses, claims, liabilities, expenses and damages in such proportion as
shall be appropriate to reflect the relative benefits received by the Company,
on the one hand, and the Underwriters, on the other hand. The relative benefits
received by the Company, on the one hand, and the Underwriters, on the other
hand, shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. If,
but only if, the allocation provided by the foregoing sentence is not permitted
by applicable law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative benefits referred
to in the foregoing sentence but also the relative fault of the Company, on the
one hand, and the Underwriters, on the other hand, with respect to the
statements or omissions which resulted in such loss, claim, liability, expense
or damage, or action in respect thereof; as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Representative on behalf of the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable
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<PAGE> 26
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof referred to above in this Section 6(d) shall be deemed to
include, for purposes of this Section 6(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts received by it and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 6(d) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 6(d), any
person who controls a party to this Agreement within the meaning of the Act will
have the same rights to contribution as that party, and each officer of the
Company who signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions hereof. Any
party entitled to contribution, promptly after receipt of notice of commencement
of any action against any such party in respect of which a claim for
contribution may be made under this Section 6(d), will notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 7(d). No party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this Section 6
and the representations and warranties of the Company contained in this
Agreement shall remain operative and in full force and effect regardless of (i)
any investigation made by or on behalf of the Underwriters, (ii) acceptance of
any of the Shares and payment therefor or (iii) any termination of this
Agreement.
7. Reimbursement of Certain Expenses. In addition to its other obligations
under Section 6(a) of this Agreement, the Company hereby agrees to reimburse on
a quarterly basis the Underwriters for all reasonable legal and other expenses
incurred in connection with investigating or defending any claim, action,
investigation, inquiry or other proceeding arising out of or based upon, in
whole or in part, any statement or omission or alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company contained
herein or failure of the Company to perform its or his respective obligations
hereunder or under law, all as described in Section 6(a), notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the obligations under this Section 7 and the possibility that such payment might
later be held to be improper; provided, however, that, to the extent any such
payment is ultimately held to be improper, the persons receiving such payments
shall promptly refund them.
8. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Shares, on or prior to the Option Closing Date), by
notice to the Company from the Representative, without liability on the part of
any Underwriter to the Company if; prior to delivery and payment for the Firm
Shares or Option Shares, as the case may be, in the sole
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<PAGE> 27
judgment of the Representative, (i) trading in any of the equity securities of
the Company shall have been suspended by the Commission or by The Nasdaq Stock
Market, (ii) trading in securities generally on the New York Stock Exchange
and/or The Nasdaq Stock Market shall have been suspended or limited or minimum
or maximum prices shall have been generally established on such exchange or
market, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange, by order of the Commission or any court or other
governmental authority, or by the New York Stock Exchange, (iii) a general
banking moratorium shall have been declared by either Federal or Delaware state
authorities or (iv) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or any outbreak or material escalation of hostilities or
other calamity or crisis shall have occurred, the effect of which is such as to
make it, in the sole judgment of the Representative, impracticable or
inadvisable to proceed with completion of the public offering or the delivery of
and payment for the Shares.
If this Agreement is terminated pursuant to Section 8 hereof, the Company
shall not be under any liability to any Underwriter except as provided in
Sections 4(j) and (k), 6 and 7 hereof.
9. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Shares which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares, the other
Underwriters shall be obligated, severally, to purchase the Firm Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase, in the proportions which the number of Firm Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Shares which all such non-defaulting Underwriters have so agreed
to purchase, or in such other proportions as the Representative may specify;
provided that in no event shall the maximum number of Firm Shares which any
Underwriter has become obligated to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by more than one-ninth of such number of Firm Shares
without the prior written consent of such Underwriter. If any Underwriter or
Underwriters shall fail or refuse to purchase any Firm Shares and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase exceeds one-tenth of the aggregate number of
the Firm Shares and arrangements satisfactory to the Representative and the
Company for the purchase of such Firm Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company for the purchase or sale of any Shares
under this Agreement. In any such case either the Representative or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or in any other documents or arrangements may be
effected. The term "Underwriter" includes any person substituted for a
defaulting Underwriter. Any action taken pursuant to this Section 9 shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
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<PAGE> 28
10. Written Information. For all purposes under this Agreement, the Company
understands and agrees with each of the Underwriters that the following
constitutes the only written information furnished to the Company by or through
the Representative specifically for use in preparation of the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto: (i) the per share "Public offering price" and per share
"Underwriting discount" set forth on the cover page of the Prospectus and (ii)
the information set forth under the caption "Underwriting" in the preliminary
prospectus and the Prospectus.
11. Miscellaneous. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 2600 Crosspark
Road, Coralville, Iowa 52241, Attention: William E. Staib, Chief Executive
Officer, with a copy to Dorsey & Whitney LLP, Pillsbury Center South, 220 South
Sixth Street, Minneapolis, Minnesota 55402, Attention: Thomas Martin, Esq., or
(b) if to the Underwriters, to the Representative at the offices of Roth Capital
Partners, Incorporated, 24 Corporate Plaza, Suite 200, Newport Beach, California
92660, Attention: Corporate Finance Department, with a copy to Messerli & Kramer
P.A., 150 South Fifth Street, Suite 1800, Minneapolis, Minnesota 55402,
Attention: Jeffrey C. Robbins, Esq. Any such notice shall be effective only upon
receipt. Any notice under such Section 8 or 9 may be made by telex or telephone,
but if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, and the controlling persons, directors and officers
referred to in Section 6, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall not
include a purchaser, as such purchaser, of Shares from any of the several
Underwriters.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota applicable to contracts made and to be performed
entirely within such State.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and the Underwriters each hereby waive any right they may have
to a trial by jury in respect of any claim based upon or arising out of this
Agreement or the transactions contemplated hereby.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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<PAGE> 29
The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof; or by or on behalf of the Company or
its directors and officers and (c) delivery of and payment for the Shares under
this Agreement.
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the several Underwriters.
Very truly yours,
STOCKPOINT, INC.
By:_________________________________________
William E. Staib,
Chief Executive Officer
Confirmed as of the date first above mentioned:
ROTH CAPITAL PARTNERS, INCORPORATED
Acting on behalf of itself and as the Representative of the other
several Underwriters named in Schedule I hereto.
By: ROTH CAPITAL PARTNERS, INCORPORATED
By:________________________________________
Title: Managing Director
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<PAGE> 30
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriters to be Purchased
- ------------ ----------------
<S> <C>
Roth Capital Partners, Incorporated.................................................... _________
TOTAL................................................
=========
</TABLE>
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<PAGE> 31
SCHEDULE II
WARRANT
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED, EXCEPT UPON SUCH REGISTRATION OR
UPON DELIVERY TO MAKER OF AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.
STOCKPOINT, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
NO. [ ] [_______] SHARES
FOR VALUE RECEIVED, STOCKPOINT, INC., a Delaware corporation (the
"Company"), hereby certifies that ______________________ _______________ or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on [ , 2001] and prior to 5:00 P.M., California time, on
[ , 2005], ___________________ (_________) fully paid and non-assessable shares
of the common stock, $.01 par value per share, of the Company for an aggregate
purchase price of $[ ] (computed on the basis of $___ per share). Hereinafter,
(i) said common stock, together with any other equity securities which may be
issued by the Company with respect thereto or in substitution therefor, is
referred to as the "Common Stock," (ii) the shares of the Common Stock
purchasable hereunder or under any other Warrant (as hereinafter defined) are
referred to individually as a "Warrant Share" and collectively as the "Warrant
Shares," (iii) the aggregate purchase price payable for the Warrant Shares
hereunder is referred to as the "Aggregate Warrant Price," (iv) the price
payable for each of the Warrant Shares hereunder is referred to as the "Per
Share Warrant Price," (v) this Warrant, all similar Warrants issued on the date
hereof and all Warrants hereafter issued in exchange or substitution for this
Warrant or such similar Warrants are referred to as the "Warrants" and (vi) the
holder of this Warrant is referred to as the "Holder" and the holder of this
Warrant and all other Warrants or Warrant Shares issued upon the exercise of any
Warrant are referred to as the "Holders." The Aggregate Warrant Price is not
subject to adjustment. The Per Share Warrant Price is subject to adjustment as
hereinafter provided, and in the event of any such adjustment, the number of
Warrant Shares shall be adjusted to equal the number determined by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. Exercise of Warrant.
(a) This Warrant may be exercised in whole at any time or in part from time
to time, during the period commencing on [ , 2001] and ending prior to 5:00
P.M., California time, on [
- 31 -
<PAGE> 32
, 2005] (such period, the "Exercise Period"), by the Holder by the surrender of
this Warrant (with the subscription form at the end of this Warrant duly
executed) at the address set forth in Section 10(a) hereof, together with proper
payment of the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part. Payment for Warrant Shares shall be made by
certified or official bank check payable to the order of the Company. If this
Warrant is exercised in part, this Warrant must be exercised for a number of
whole shares of the Common Stock, and the Holder is entitled to receive a new
Warrant covering the Warrant Shares in respect of which this Warrant has not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such exercise and surrender of
this Warrant, the Company will (i) issue a certificate or certificates in the
name of the Holder for the largest number of whole shares of the Common Stock to
which the Holder shall be entitled and, if this Warrant is exercised in whole,
in lieu of any fractional share of the Common Stock to which the Holder shall be
entitled, pay to the Holder cash in an amount equal to the fair value of such
fractional share (determined in such reasonable manner as the Board of Directors
of the Company shall determine) and (ii) deliver the other securities and
properties receivable upon the exercise of this Warrant, or the proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
this Warrant.
(b) In lieu of exercising this Warrant in the manner set forth in Section
1(a) above, this Warrant may be exercised in whole at any time or in part from
time to time during the Exercise Period, by the Holder by surrendering the
Warrant at the address set forth in Section 10(a) hereof, without payment of any
other consideration, commission or remuneration, together with the subscription
form at the end of this Warrant, duly executed. The number of shares of the
Common Stock to be issued by the Company shall be calculated using the following
formula:
X= (Y (A - B)) /A
Where X= the number of shares of the Common
Stock to be issued to the Holder
Y= the number of shares of the Common
Stock purchasable under this
Warrant or, if this Warrant is
being exercised in part, under the
portion of the Warrant being
exercised (at the date of the
surrender of this Warrant and the
subscription form)
A= the Market Price (at the date of
the surrender of this Warrant and
the subscription form)
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<PAGE> 33
B= the Per Share Warrant Price (as
adjusted to the date of the
surrender of this Warrant and the
subscription form)
If this Warrant is exercised in part pursuant to this Section 1(b), this Warrant
must be exercised for a number of whole shares of the Common Stock, and the
Holder is entitled to receive a new Warrant covering the Warrant Shares in
respect of which this Warrant has not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such exercise and surrender of this Warrant, the Company will (i)
issue a certificate or certificates in the name of the Holder for the largest
number of whole shares of the Common Stock to which the Holder shall be entitled
and, if this Warrant is exercised in whole, in lieu of any fractional share of
the Common Stock to which the Holder shall be entitled, pay cash equal to the
fair value of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine) and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant.
(c) The market price of a share of the Common Stock (the "Market Price") on
any date of determination shall be (i) the last reported sale price per share of
the Common Stock on the business day immediately preceding the date of
determination as reported on the Nasdaq National Market (the "Nasdaq National
Market"), or (ii) if there is no such reported sale on the date in question, the
average of the closing bid and asked quotations as so reported on the Nasdaq
National Market, or (iii) if the Common Stock is not then listed on the Nasdaq
National Market, the last reported sale price per share of the Common Stock on
such national securities exchange upon which the Common Stock is then listed or
(iv) if the Common Stock is not then listed on any national securities exchange,
the average of the closing bid and asked quotations in the over-the-counter
market as reported by Nasdaq, or if not so reported, as reported by the National
Quotations Bureau or a similar organization. In the absence of such quotations,
the Board of Directors of the Company shall determine in good faith the fair
market value per share of the Common Stock, which shall for these purposes be
deemed to be the Market Price, which determination shall be set forth in a
certificate executed by an officer of the Company showing the facts upon which
the Market Price is based.
2. Reservation of Warrant Shares; Listing.
The Company agrees that, prior to the expiration of this Warrant, the
Company will at all times (a) have authorized and in reserve, and will keep
available, solely for issuance or delivery upon the exercise of this Warrant,
the shares of the Common Stock and other securities and properties as from time
to time shall be receivable upon the exercise of this Warrant, free and clear of
all restrictions on sale or transfer and free and clear of all preemptive rights
and rights of first refusal and (b) if the Company has listed or hereafter lists
the Common Stock on the Nasdaq Stock Market or any national securities exchange,
use its best efforts to keep the shares of the Common
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<PAGE> 34
Stock receivable upon the exercise of this Warrant authorized for listing on
such market or exchange upon notice of issuance.
3. Protection Against Dilution.
(a) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of the Common
Stock (i) securities, other than shares of the Common Stock, or (ii) property,
other than cash, without payment therefor, with respect to the Common Stock,
then, and in each such case, the Holder, upon the exercise of this Warrant,
shall be entitled to receive the securities and property which the Holder would
hold on the date of such exercise if, on the date of this Warrant, the Holder
had been the holder of record of the number of shares of the Common Stock
subscribed for upon such exercise and, during the period from the date of this
Warrant to and including the date of such exercise, had retained such shares and
the securities and properties receivable by the Holder during such period.
Notice of each such distribution shall be forthwith mailed to the Holder.
(b) If, at any time or from time to time after the date of this Warrant,
the Company shall (i) pay a dividend or make a distribution on its capital stock
in shares of the Common Stock, (ii) subdivide its outstanding shares of the
Common Stock into a greater number of shares, (iii) combine its outstanding
shares of the Common Stock into a smaller number of shares or (iv) issue by
reclassification of the Common Stock any shares of capital stock of the Company,
the Per Share Warrant Price shall be adjusted so that the Holder upon the
exercise hereof shall be entitled to receive the number of shares of the Common
Stock or other capital stock of the Company which the Holder would have owned
immediately following such action had such Warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Section 3(b) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
(c) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another entity (including
any exchange effected in connection with a merger of another corporation with
the Company), the Holder of this Warrant shall have the right thereafter to
receive on the exercise of this Warrant the kind and amount of securities, cash
or other property which the Holder would have owned or have been entitled to
receive immediately after such consolidation, merger, statutory exchange, sale
or conveyance had this Warrant been exercised immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale or conveyance and,
in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Section 3(c) shall
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<PAGE> 35
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances. The issuer of any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant shall be
responsible for all of the agreements and obligations of the Company hereunder.
Notice of any such consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(d) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of the Common Stock; provided, however, that any adjustments which by
reason of this Section 3(d) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment; and provided further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Section 3(d)) not later than such
time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or the Common Stock issuable upon
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(e) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly prepare a notice (the
"Adjustment Notice"), which shall be certified by the Company's Chief Executive
Officer to be true and correct. The Adjustment Notice shall set forth the Per
Share Warrant Price and the number of Warrant Shares after such adjustment or
the effect of such modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same, and copies of
such notice shall be mailed to the Holders of the Warrants not later than thirty
(30) days following the occurrence of the event giving rise to the adjustment.
(f) If the Board of Directors of the Company shall (i) declare any dividend
or other distribution with respect to the Common Stock, other than a cash
dividend payable otherwise than out of earnings or earned surplus, (ii) offer to
the holders of shares of the Common Stock any additional shares of the Common
Stock, any securities convertible into or exercisable for shares of the Common
Stock or any rights to subscribe thereto or (iii) propose a dissolution,
liquidation or winding up of the Company, the Company shall mail notice thereof
to the Holders of the Warrants not less than 15 days prior to the record date
fixed for determining stockholders entitled to participate in such dividend,
distribution, offer or subscription right or to vote on such dissolution,
liquidation or winding up.
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<PAGE> 36
(g) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of the
Common Stock and other capital stock of the Company, the Board of Directors of
the Company (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of the Common Stock
and other capital stock and any subsequent adjustments made pursuant to this
Section 3 shall apply equally to each such resulting class of capital stock.
4. Fully Paid Stock; Taxes.
The Company agrees that the shares of the Common Stock represented by each
and every certificate for Warrant Shares delivered on the exercise of this
Warrant shall, at the time of such delivery, be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights, rights of
first refusal or other contractual rights to purchase securities of the Company,
and the Company will take all such actions as may be necessary to assure that
the par value or stated value, if any, per share of the Common Stock is at all
times equal to or less than the then Per Share Warrant Price. The Company
further covenants and agrees that it will pay, when due and payable, any and all
federal and state stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or certificate therefor.
5. Registration Rights.
(a) The Company agrees that if, at any time during the period commencing on
[_________, 2000] and ending on [_________, 2005], (i) the Holder and/or the
Holders of any other Warrants and/or Warrant Shares who or which shall hold,
collectively, not less than 50% of the Warrants and/or Warrant Shares
outstanding at such time and not previously sold pursuant to this Section 5
shall request that the Company file a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering not less
than 50% of the Warrant Shares issued or issuable upon the exercise of the
Warrants, and not so previously sold, the Company will (i) promptly notify each
Holder of the Warrants and each holder of Warrant Shares not so previously sold
that such registration statement will be filed and that the Warrant Shares which
are then held, and/or may be acquired upon exercise of the Warrants by the
Holder and such Holders, will be included in such registration statement at the
Holder's and such Holders' request, (ii) cause such registration statement to
cover all Warrant Shares which it has been so requested to include, (iii) use
its best efforts to cause such registration statement to become effective as
soon as practicable and (iv) take all other action necessary under any federal
or state law or regulation of any governmental authority to permit all Warrant
Shares which it has been so requested to include in such registration statement
to be sold or otherwise disposed of, and will maintain such compliance with each
such federal and state law and regulation of any governmental authority for the
period necessary for such Holders to effect the proposed sale or other
disposition. The Company shall be required to effect a registration or
qualification pursuant to this Section 5(a) on one occasion only and shall be
required to effect such registration only at such time as the
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<PAGE> 37
Company is eligible to use Form S-3 (or any successor form) for the resale of
shares by persons other than the Company. The Company agrees to exercise its
best efforts to obtain eligibility to use Form S-3 at the earliest possible
time, and to maintain such eligibility through the term of this Warrant.
(b) The Company agrees that if, at any time and from time to time during
the period commencing [__________, 2000] and ending on [___________, 2007], the
Board of Directors of the Company shall authorize the filing of a registration
statement (any such registration statement being hereinafter called a
"Subsequent Registration Statement") under the Securities Act (otherwise than
pursuant to Section 5(a) hereof, and other than a registration statement on Form
S-8, Form S-4 or other form which does not permit secondary sales or include
substantially the same information as would be required in a form for the
general registration of securities) in connection with the proposed offer of any
of its securities by it or any of its stockholders, the Company will (i)
promptly notify the Holder and each of the Holders, if any, of other Warrants
and/or Warrant Shares not previously sold pursuant to this Section 5 that such
Subsequent Registration Statement will be filed and that the Warrant Shares
which are then held, and/or which may be acquired upon the exercise of the
Warrants, by the Holder and such Holders, will, at the Holder's and such
Holders' request, be included in such Subsequent Registration Statement, (ii)
upon the written request of a Holder made within 20 days after the giving of
such notice by the Company, include in the securities covered by such Subsequent
Registration Statement all Warrant Shares which it has been so requested to
include, (iii) use its best efforts to cause such Subsequent Registration
Statement to become effective as soon as practicable and (iv) take all other
action necessary under any federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such Subsequent Registration Statement to be sold or
otherwise disposed of, and will maintain such compliance with each such federal
and state law and regulation of any governmental authority for the period
necessary for the Holder and such Holders to effect the proposed sale or other
disposition.
(c) Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement or a
post-effective amendment to a registration statement, the Company shall (i)
furnish each Holder of any such Warrant Shares and each underwriter of such
Warrant Shares with such copies of the prospectus, including the preliminary
prospectus, conforming to the Securities Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
effort to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold, provided that the Company shall not be required to execute a general
consent to service of process or qualify to do business as a foreign corporation
in any jurisdiction where it is not so qualified.
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<PAGE> 38
(d) The Company shall have the right to defer the filing of any
registration statement pursuant to Section 5(a) hereof and to suspend the
ability of Holders to sell Warrant Shares pursuant to any registration statement
declared effective under Section 5(a) or 5(b) hereof, in either case for up to
60 days, if (i) in the opinion of counsel for the Company, the Company would
thereby be required to disclose nonpublic information relating to pending
corporate developments or business transactions involving the Company or its
subsidiaries not otherwise then required by law to be publicly disclosed and
(ii) in the good faith judgment of the Company's Board of Directors, such
disclosure at such time would adversely affect the Company or such corporate
development or business transaction contemplated by the Company or its
subsidiaries. Such period shall be referred to herein as the "Black-Out Period,"
and the Company shall not be entitled to implement more than two such Black-Out
Periods during any 12-month period. In the event that notice of a Black-Out
Period is given, each Holder shall keep the fact and subject matter of such
notice confidential and refrain from any further sales or other transfers of
Warrant Shares pursuant to the registration statement until the Holder receives
either copies of a supplemented or amended prospectus or a notice from the
Company advising the Holder that the use of the existing prospectus may be
resumed.
(e) Notwithstanding any provision in this Section 5 to the contrary, the
Company shall not be required to include in any registration requested pursuant
to this Section 5 any Warrant Shares issued or issuable upon exercise of a
Warrant and then held by any Holder who is able at such time to sell all such
Warrant Shares in one three-month period pursuant to Rule 144 under the
Securities Act.
(f) The Company shall pay all expenses incurred in connection with any
registration or other action pursuant to the provisions of this Section, other
than underwriting discounts and applicable transfer taxes relating to the
Warrant Shares and fees and disbursements of counsel and accountants for the
Holders.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each selling holder
(including, for purposes of this Section 6, any Holder) of Warrant Shares and
each person who controls any such selling holder within the meaning of Section
15 of the Securities Act, and each and all of them, from and against any and all
losses, claims, damages, liabilities or actions, joint or several, to which any
selling holder of Warrant Shares or they or any of them may become subject under
the Securities Act or otherwise and to reimburse the persons indemnified above
for any legal or other expenses (including the cost of any investigation and
preparation) reasonably incurred by them in connection with any litigation or
threatened litigation, whether or not resulting in any liability, but only
insofar as such losses, claims, damages, liabilities or actions arise out of, or
are based upon, any untrue statement or alleged untrue statement of a material
fact contained in any registration statement pursuant to which Warrant Shares
were registered under the Securities Act (hereinafter called a "Registration
Statement"), any preliminary prospectus, the final prospectus or any amendment
or supplement thereto (or in any application or document filed in connection
therewith) or the omission or alleged omission to state therein a material fact
required to be stated
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<PAGE> 39
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that (i) the indemnity agreement contained in this Section 6(a) shall not extend
to any selling holder of Warrant Shares in respect of any such losses, claims,
damages, liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged omission,
if such statement or omission was based upon and made in conformity with
information furnished in writing to the Company by a selling holder of Warrant
Shares specifically for use in connection with the preparation of such
Registration Statement, any final prospectus, any preliminary prospectus or any
such amendment or supplement thereto. The Company agrees to pay any legal and
other expenses for which it is liable under this Section 6(a) from time to time
(but not more frequently than monthly) within 30 days after its receipt of a
bill therefor.
(b) Each selling holder of Warrant Shares, severally and not jointly, will
indemnify and hold harmless the Company, its directors, its officers who shall
have signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act to the same
extent as the foregoing indemnity from the Company, but in each case to the
extent, and only to the extent, that any statement in or omission from or
alleged omission from such Registration Statement, any final prospects, any
preliminary prospectus or any amendment or supplement thereto was made in
reliance upon information furnished in writing to the Company by such selling
holder specifically for use in connection with the preparation of the
Registration Statement, any final prospectus or the preliminary prospectus or
any such amendment or supplement thereto; provided, however, that the obligation
of any holder of Warrant Shares to indemnify the Company under the provisions of
this Section 6(b) shall be limited to the Market Price of the Warrant Shares
being sold by the selling holder minus the Aggregate Warrant Price for such
Warrant Shares. Each selling holder of Warrant Shares agrees to pay any legal
and other expenses for which its liable under this Section 6(b) from time to
time (but not more frequently than monthly) within 30 days after receipt of a
bill therefor.
(c) If any action is brought against a person entitled to indemnification
pursuant to the foregoing Section 6(a) or Section 6(b) (an "indemnified party")
in respect of which indemnity may by sought against a person granting
indemnification (an "indemnifying party") pursuant to such section, such
indemnified party shall promptly notify such indemnifying party in writing of
the commencement thereof; but the omission so to notify the indemnifying party
of any such action shall not release the indemnifying party from any liability
it may have to such indemnified party otherwise than on account of the indemnity
agreement contained in Section 6(a) or Section 6(b) hereof to the extent it is
not prejudiced as a proximate result of such failure. In case any such action is
brought against an indemnified party and it notifies an indemnifying party of
the commencement thereof, the indemnifying party against which a claim is to be
made will be entitled to participate therein at its own expense and, to the
extent that it may wish, to assume at its own expense the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the indemnified party shall have reasonably concluded based upon advice
of counsel that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party shall have the right to select
separate counsel to assume such legal defenses and otherwise to
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<PAGE> 40
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel), (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. An indemnifying
party shall not be liable for any settlement of any action or proceeding
effected without its written consent (which consent shall not be unreasonably
withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section 6(a) or
(b) hereof is unavailable in accordance with its terms, the Company and the
selling holder of Warrant Shares shall contribute to the aggregate losses,
claims, damages and liabilities, of the nature contemplated by said indemnity
agreement, incurred by the Company and the selling holder of Warrant Shares, in
such proportions as is appropriate to reflect the relative benefits received by
the Company, on the one hand, and the selling holder of Warrant Shares, on the
other hand, from any offering of the Warrant Shares; provided, however, that if
such allocation is not permitted by applicable law or if the indemnified party
failed to give the notice required under Section 6(c), then the relative fault
of the Company and the selling holder of Warrant Shares in connection with the
statements or omissions which result in such losses, claims, damages and
liabilities and other relevant equitable considerations will be considered
together with such relative benefits.
(e) The respective indemnity and contribution agreements by the Company and
the selling holder of Warrant Shares in Sections 6(a), (b), (c) and (d) hereof
shall remain operative and in full force and effect regardless of (i) any
investigation made by any selling holder of Warrant Shares or by or on behalf of
any person who controls such selling holder or by the Company or any controlling
person of the Company or any director or any officer of the Company, (ii) the
exercise of this Warrant or (iii) payment for any of the Warrant Shares, and
shall survive the delivery of the Warrant Shares, and any successor of the
Company, or of any selling holder of Warrant Shares, or of any person who
controls the Company, or of any selling holder of Warrant Shares, as the case
may be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The respective indemnity and contribution agreements by
the Company and the selling holders of Warrant Shares contained in Sections
6(a), (b), (c) and (d) hereof shall be in addition to any liability which the
Company and the selling holders of Warrant Shares may otherwise have.
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<PAGE> 41
7. Limited Transferability.
This Warrant may not be sold, transferred, assigned or hypothecated by the
Holder (a) except in compliance with the provisions of the Securities Act and
any applicable state securities laws and (b) until the first anniversary of the
date hereof except (i) to Roth Capital Partners, Incorporated or any successor
firm or corporation of Roth Capital Partners, Incorporated, (ii) to any of the
officers of Roth Capital Partners, Incorporated, or of any such successor firm
or corporation or (iii) in the case of an individual, pursuant to such
individual's last will and testament or the laws of descent and distribution,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for the purpose. The Company may treat the registered Holder of
this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
or its duly authorized attorney, upon written request during ordinary business
hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and all
rights of the Holder thereof shall be identical to those of the Holder of this
Warrant.
8. Loss or Destruction of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and denomination.
9. Warrant Holder Not Stockholder.
Except as otherwise provided herein, this Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.
10. Communication.
No notice or other communication under this Warrant shall be effective
unless, but any notice or other communication shall be effective and shall be
deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
(a) the Company at 2600 Crosspark Road, Coralville, Iowa 52241, or such
other address as the Company has designated in writing to the Holder, or
(b) the Holder at Roth Capital Partners, Incorporated, 24 Corporate Plaza,
Suite 200, Newport Beach, California 92660, Attention: Corporate Finance
Department, or such other address as the Holder has designated in writing to the
Company.
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<PAGE> 42
11. Headings.
The headings of this Warrant have been inserted as a matter of convenience
and shall not affect the construction hereof.
12. Applicable Law.
This Warrant shall be governed by and construed in accordance with the law
of the State of Minnesota without giving effect to the principles of conflicts
of law thereof.
IN WITNESS WHEREOF, Stockpoint, Inc. has caused this Warrant to be signed
by its [ ] and attested by its Secretary this ____ day of ____________, 2000.
STOCKPOINT, INC.
By:_____________________________________
Its:_________________________________
ATTEST:
Name:
Title:
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<PAGE> 43
ASSIGNMENT
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto _______________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________________, attorney, to transfer said Warrant on the books
of Stockpoint, Inc.
Dated: ________________ Signature: ____________________________________
Address: ___________________________
___________________________
___________________________
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<PAGE> 44
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto __________________________ the right to purchase _____________
shares of the Common Stock of Stockpoint, Inc. covered by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced thereby, and
does irrevocably constitute and appoint __________________________, attorney, to
transfer that part of said Warrant on the books of Stockpoint, Inc.
Dated: ________________ Signature: ____________________________________
Address: ___________________________
___________________________
___________________________
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<PAGE> 45
SUBSCRIPTION FORM
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase thereunder,
_____________ shares of the Common Stock of Stockpoint, Inc., as provided for in
Section 1 thereof.
The undersigned herewith makes payment for such shares in full at the price per
share provided by such Warrant in the following manner (please check the type or
types of payment and indicate the portion of the aggregate payment to be paid by
each type of payment):
____ exercise for cash as provided in Section 1(a) of such
Warrant.
____ exercise by surrender of such Warrant (or a portion
thereof) in accordance with Section 1(b) of such
Warrant.
Please issue a certificate or certificates for such shares in the name of, and
pay any cash for any fractional share to:
Name ___________________________________________________
(Please Print Name, Address and
Social Security No. or Taxpayer Identification No.)
Address ________________________________________________
________________________________________________
________________________________________________
Social Security No. or
Taxpayer Identification
No.___________________________
Signature__________________________________________
NOTE: The above signature should correspond exactly
with the name on the first page of such
Warrant or with the name of the assignee
appearing in the assignment form attached to
the Warrant.
And if such number of shares shall not be all the shares purchasable under the
attached Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder and delivered to
the address set forth above.
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<PAGE> 46
SCHEDULE III
FORM OF LOCK-UP AGREEMENTS
Roth Capital Partners Incorporated Individual Lock-Up
24 Corporate Plaza, Suite 200
Newport Beach, California 92660
Ladies and Gentlemen:
In connection with a proposed initial public offering (the "Offering")
by Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the
"Common Stock"), the Company has filed a registration statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). To induce you to enter into an underwriting agreement for the
Offering (the "Underwriting Agreement"), I agree that for the 180 day period
following the day on which the Registration Statement becomes effective under
the Securities Act (the "Lock Up Period"), I will not, without the prior written
consent of Roth Capital Partners Incorporated, directly or indirectly:
o issue,
o offer,
o sell (including any short sale),
o grant any option for the sale of,
o acquire any option to dispose of,
o assign,
o transfer,
o pledge or
o otherwise encumber or dispose of
any shares of Common Stock, or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock or any beneficial interest therein (collectively, "Convertible
Securities"), that, as of the date the Registration Statement was filed with the
U.S. Securities and Exchange Commission or becomes effective, I own of record or
beneficially.
I also agree that if I offer or sell any shares of Common Stock or
Convertible Securities (including securities I acquire after the Offering
commences) during the Lock Up Period (with the prior written consent of Roth
Capital Partners Incorporated) or during the 180 days following the end of Lock
Up Period, I will offer and sell these securities through Roth Capital Partners
Incorporated.
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<PAGE> 47
I understand that, notwithstanding the above, I may transfer my Common
Stock or Convertible Securities to:
o my spouse,
o my parents,
o my siblings,
o my children or other lineal descendants,
o any trust for the benefit of the above persons,
o any of my distributees, legatees or devisees who acquire my Common
Stock or Convertible Securities by will or operation of law upon my
death, or
o any other recipient of a bona fide gift or a charitable contribution
of Common Stock or Convertible Securities by me,
but only if my transferees agree in writing to be bound by the terms of this
letter to the same extent as me.
Notwithstanding the above, if the Underwriting Agreement is not executed on
or before July 1, 2000, this agreement shall terminate and be of no effect.
Very truly yours,
________________________________________________
Dated: __________________, 2000
Accepted as of the date set forth immediately above:
ROTH CAPITAL PARTNERS INCORPORATED
By______________________________
Name:___________________________
Title:__________________________
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<PAGE> 48
Roth Capital Partners Incorporated Entity Lock-Up
24 Corporate Plaza, Suite 200
Newport Beach, California 92660
Ladies and Gentlemen:
In connection with a proposed initial public offering (the "Offering") by
Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the
"Common Stock"), the Company has filed a registration statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). To induce you to enter into an underwriting agreement for the
Offering (the "Underwriting Agreement"), the undersigned agrees that for the 180
day period following the day on which the Registration Statement becomes
effective under the Securities Act (the "Lock Up Period"), the undersigned will
not, without the prior written consent of Roth Capital Partners Incorporated,
directly or indirectly:
o issue,
o offer,
o sell (including any short sale),
o grant any option for the sale of,
o acquire any option to dispose of,
o assign,
o transfer,
o pledge or
o otherwise encumber or dispose of
any shares of Common Stock, or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock or any beneficial interest therein (collectively, "Convertible
Securities"), that, as of the date the Registration Statement was filed with the
U.S. Securities and Exchange Commission or becomes effective, the undersigned
owns of record or beneficially.
[continued on next page]
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<PAGE> 49
The undersigned also agrees that if the undersigned offers or sells any
shares of Common Stock or Convertible Securities (including securities the
undersigned acquires after the Offering commences) during the Lock Up Period
(with the prior written consent of Roth Capital Partners Incorporated) or during
the 180 days following the end of Lock Up Period, the undersigned will offer and
sell these securities through Roth Capital Partners Incorporated.
Very truly yours,
By______________________________________________
Name:___________________________________________
Title:__________________________________________
Dated: _______________, 2000
Accepted as of the date set forth above:
ROTH CAPITAL PARTNERS INCORPORATED
By_____________________________________
Name:__________________________________
Title:_________________________________
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<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
SYSTEMS ALTERNATIVES, INC.
AND
NEURAL APPLICATIONS CORPORATION
AND
THE DAVID J. JOSEPH COMPANY
DATED TO BE EFFECTIVE APRIL 2, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. The Acquisition..........................................................................................1
1.1 Purchase and Sale...........................................................................1
1.2 The Assets..................................................................................1
1.3 Excluded Assets.............................................................................3
1.4 Assets to be Transferred by Robert B. Staib.................................................4
1.5 Purchase Price..............................................................................4
1.6 Royalties and Payment of Royalties..........................................................4
1.7 Assumed Liabilities and Latent Claims.......................................................7
1.8 Royalties, Discounts and Other Obligations..................................................8
2. Execution of Other Agreements............................................................................9
3. The Closing..............................................................................................9
3.1 Place and Time..............................................................................9
3.2 Deliveries by Seller.......................................................................10
3.3 Deliveries by Buyer........................................................................10
3.4 Proration..................................................................................11
4. Representations and Warranties of Seller................................................................11
4.1 Organization of Seller; Authorization......................................................11
4.2 No Conflict as to Seller...................................................................11
4.3 Consents and Approvals of Governmental Bodies..............................................12
4.4 Other Consents.............................................................................12
4.5 Financial Information......................................................................12
4.6 Title to Properties; Encumbrances..........................................................12
4.7 Inventory..................................................................................13
4.8 Buildings, Plants and Equipment............................................................13
4.9 No Condemnation or Expropriation...........................................................14
4.10 Litigation.................................................................................14
4.11 Books and Records..........................................................................14
4.12 Absence of Certain Changes.................................................................15
4.13 No Material Adverse Change.................................................................16
4.14 Intellectual Property and Y2K Compliance...................................................16
4.15 Contracts and Commitments..................................................................19
4.16 Status of Agreements.......................................................................20
4.17 Customers and Suppliers....................................................................20
4.18 Labor Relations............................................................................20
4.19 Employee Benefit Plans.....................................................................21
4.20 Compliance with Law; Taxes.................................................................21
4.21 Environmental Protection...................................................................22
4.22 No Brokers or Finders......................................................................23
4.23 Absence of Certain Commercial Practices....................................................23
4.24 Solvency...................................................................................23
4.25 No Other Agreement to Sell the Assets or Capital Stock of Seller...........................23
</TABLE>
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<TABLE>
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4.26 Key Employees..............................................................................24
4.27 Warranty Claims............................................................................24
4.28 Representations Respecting The Northern Trust Company......................................24
4.29 Disclosure.................................................................................24
5. Representations and Warranties of Buyer.................................................................24
5.1 Organization of Buyer; Authorization.......................................................24
5.2 No Conflict as to Buyer....................................................................25
5.3 No Brokers or Finders......................................................................25
6. Conduct of Business by Seller...........................................................................25
7. Additional Agreements...................................................................................26
7.1 Publicity..................................................................................26
7.2 Access to Information......................................................................27
7.3 Cooperation................................................................................27
7.4 Obtaining Consents.........................................................................27
7.5 Employees of Sellers; Employee Benefits....................................................27
7.6 Accounts Payable...........................................................................28
7.7 Supplemental Information...................................................................29
7.8 Encumbrances...............................................................................29
7.9 Noncompetition, Etc........................................................................29
8. Conditions Precedent....................................................................................32
8.1 Conditions to Each Party's Obligation......................................................32
8.2 Conditions to the Obligations of Buyer.....................................................32
8.3 Conditions to the Obligations of Seller....................................................33
9. Termination and Waiver..................................................................................34
9.1 Termination................................................................................34
9.2 Effect of Termination......................................................................34
9.3 Waiver.....................................................................................34
10. Survival of Representations and Warranties; Indemnification.............................................35
10.1 Survival...................................................................................35
10.2 Indemnification by Seller..................................................................35
10.3 Limitation on Seller's Obligations.........................................................36
10.4 Indemnification by Buyer...................................................................36
10.5 Procedure for Indemnification..............................................................36
10.6 Insurance..................................................................................37
10.7 Exclusion..................................................................................37
11. Definitions.............................................................................................37
12. Notices.................................................................................................40
13. Miscellaneous...........................................................................................41
13.1 Expenses...................................................................................41
13.2 Specific Performance.......................................................................41
</TABLE>
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13.3 Captions...................................................................................41
13.4 Attorney's Fees............................................................................42
13.5 No Waiver..................................................................................42
13.6 Exclusive Agreement; Amendment.............................................................42
13.7 Counterparts...............................................................................42
13.8 Governing Law..............................................................................42
13.9 Further Assurances.........................................................................42
13.10 Assignment.................................................................................43
13.11 Records....................................................................................43
13.12 Agreements Affecting DJJ...................................................................43
13.13 No Third Party Rights......................................................................44
</TABLE>
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EXHIBITS
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Exhibit 1.2(a) - Inventory 1
Exhibit 1.2(b) - Tangible Personal Property 1
Exhibit 1.2(c) - Software 1
Exhibit 1.2(e) - Warranties 2
Exhibit 1.2(f) - Intellectual Property 2
Exhibit 2(a)(i) - License Agreement 7
Exhibit 2(a)(ii) - Maintenance Agreement 7
Exhibit 2(a)(iii) - Source Code Escrow Agreement 7
Exhibit 2(b) - Lease 7
Exhibit 2(c) - Noncompetition Agreement 7
Exhibit 3.2(a) - Bill of Sale and General Assignment 7
Exhibit 3.2(c) - Opinion of William E. McNally 8
Exhibit 3.3(b) - Assumption of Assumed Liabilities 8
Exhibit 3.3(c) - Opinion of Vorys, Sater, Seymour
and Pease LLP 8
Exhibit 4.2 - No Conflict 9
Exhibit 4.3 - Consents and Approvals of Governmental
Bodies 10
Exhibit 4.4 - Other Consents 10
Exhibit 4.6(a) - Title to Properties; Encumbrances 10
Exhibit 4.6(b) - Good and Marketable Title 10
Exhibit 4.6(c) - Title to Assets 10
Exhibit 4.7 - Inventory 11
Exhibit 4.8 - Buildings, Plants and Equipment 11
Exhibit 4.10 - Litigation 12
</TABLE>
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Exhibit 4.12 - Absence of Certain Changes 12
Exhibit 4.13 - No Material Adverse Change 14
Exhibit 4.14 - Intellectual Property and Y2K Compliance 14
Exhibit 4.15 - Contracts and Commitments 17
Exhibit 4.16 - Status of Agreements 18
Exhibit 4.17 - Customers and Suppliers 18
Exhibit 4.18 - Labor Relations 19
Exhibit 4.19 - Employee Benefit Plans 19
Exhibit 4.20 - Compliance with Law; Taxes 19
Exhibit 4.21 - Environmental Protection 20
Exhibit 4.27 - Key Employees 22
Exhibit 4.28 - Warranty Claims 22
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This Agreement, dated to be effective as of April 2, 1999 between
SYSTEMS ALTERNATIVES, INC., an Ohio corporation or a limited liability company
established by Buyer ("Buyer"), and NEURAL APPLICATIONS CORPORATION, a Delaware
corporation ("Seller").
Buyer desires to purchase, and Seller desires to sell, certain of
Seller's operating assets relating to the business (the "Business") of its
Metals Industry Products Group (the "Group") on the terms and conditions of this
Agreement.
The parties agree as follows:
1. The Acquisition
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell the Assets to Buyer, free and clear
of all Encumbrances, and Buyer shall purchase the Assets from Seller.
1.2 The Assets. As used herein, the "Assets" shall consist of and
include all of the following except as set forth in Section 1.3:
(a) All of Seller's inventories relating to the Group (the
"Inventory") including without limitation the items listed on Exhibit 1.2(a);
(b) All of Seller's tangible personal property consisting of fixed
assets relating to the Group, including without limitation the furniture,
fixtures and equipment listed on Exhibit 1.2(b) hereto and all spare parts and
supplies;
(c) All software relating to the Group which is resident on
computer equipment and is used to build or maintain products, including without
limitation the software listed on Exhibit 1.2(c), but excluding the Aegis
software to be licensed to Buyer pursuant to Section 1.2(g) hereof;
(d) All rights of Seller in and to the products of the Group
(software and hardware system designs and research and development projects
including source code and software tool sets), including but not limited to,
Intelligent Arc Furnace Controller (IAF) all models, ControlTech 2000,
LoadMaster, OptiMaster, CheMaster, StockMaster, LadleTech (all models),
ControlTech II Arc Furnace Controller, LabTech, Laboratory Management Systems,
VD Tech (Vacuum Degassing System), all products in development including but not
limited to IFOS and
<PAGE> 8
ICC, and Milltech Scrap Management System (aka MeltTech)(the "Products");
(e) All warranties, if any, with respect to the Assets, and all
licenses, permits, claims and other intangible assets listed on Exhibit 1.2(e)
hereto (the "Assigned Permits"), if and to the extent assignable, all of which
shall be transferred and assigned to Buyer;
(f) All rights of Seller in and to its name, trade names,
trademarks, logos, copyrights, patents (including patents 5204872 and 5406581),
other intellectual property, and similar assets relating to the Business,
including, but not limited to any of those items, if any, owned by Robert B.
Staib, Jr.("Staib") listed on Exhibit 1.2(f) hereto (the "Intellectual
Property");
(g) A non-exclusive license from Seller to Buyer to permit Buyer
to use the Mathematics and Neural Network Libraries of the Aegis Technology
software in object code (and source code, upon the occurrence of certain
conditions set forth in the Software License Agreement, dated as of the Closing
Date, by and between Seller and Buyer) and other tool sets necessary to market,
manufacture, develop and modify the Assets for use in the Business and the
metals industry;
(h) All of Staib's rights in and to the Assets, if any, including
but not limited to patent, copyright or other intellectual property rights;
(i) Such of Seller's business records relating to the Business as
Buyer may require for the operation of the Business after the Closing, other
than records which Seller is required by law to retain in its possession, copies
of which will be delivered to Buyer and subject to the agreement that the
corporate minute books and stock books of Seller shall remain Seller's property;
(j) All of Seller's rights under employment and confidentiality
agreements between Seller and its employees offered employment by Buyer pursuant
to Section 7.5 hereof; and
(k) All of Seller's goodwill relating to the Business.
(l) Seller shall assign to Buyer all of its right, title and
interest in proposal number 606003 by and between Seller and The David J. Joseph
Company ("DJJ") dated September 18, 1996, the Software License Agreement by and
between Seller and DJJ dated September 18, 1996 and the Software
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Maintenance and Services Agreement by and between Seller and DJJ dated September
18, 1996 (collectively, the "DJJ/Seller Agreements").
(m) Seller shall prepare, at its own cost, individual country
assignments for all patents, trademarks and copyrights to be transferred
pursuant to (f) above and related powers of attorney and
notarization/legalization/consularization in the U.S. and will deliver such
documents and instruments to Buyer in form required to place record title in the
name of Buyer.
(n) Seller agrees to pay all invoices and legal bills for legal or
legally related work ordered or authorized by Seller or performed by Seller
prior to Closing.
1.3 Excluded Assets.
A. Notwithstanding Section 1.2 hereof, the Assets shall not
include the Excluded Assets. For purposes hereof, the term "Excluded Assets"
means:
(1) All cash, cash equivalents and accounts receivable
(including deposits);
(2) All of Seller's assets not listed or described in Section
1.2 hereof.
(3) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 1.7 HEREOF,
BUYER SHALL NOT ASSUME, AND SHALL NOT FOR ANY PURPOSES BE DEEMED TO HAVE
ASSUMED, ANY CONTRACTS, LIABILITIES OR OBLIGATIONS OF ANY NATURE WHATSOEVER OF,
OR CLAIMS AGAINST, SELLER OR ITS AFFILIATES OR ANY LIABILITIES OR OBLIGATIONS OF
ANY NATURE WHATSOEVER ARISING OR BASED ON EVENTS OCCURRING PRIOR TO THE CLOSING
DATE WITH RESPECT TO THE ASSETS OR THE BUSINESS, INCLUDING WITHOUT LIMITATION
ANY LIABILITY FOR TAXES, EMPLOYEE BENEFITS OR WORKERS COMPENSATION CLAIMS,
WARRANTY CLAIMS, IMPLIED OR EXPRESSED, YEAR 2000 CLAIMS, OR CLAIMS ARISING PRIOR
TO OR ON OR AFTER THE CLOSING DATE WITH RESPECT TO ANY EXCLUDED ASSETS
(COLLECTIVELY, THE "RETAINED LIABILITIES"). SELLER AGREES TO TIMELY PERFORM, PAY
OR DISCHARGE ANY AND ALL OF THE RETAINED LIABILITIES AS THEY BECOME DUE.
B. Seller shall be responsible for resolving any claims relating
to the Excluded Assets. Seller shall also not sell any of the Excluded Assets
related to the Business to any third party, nor shall Seller use the Excluded
Assets in any way, except to resolve any claims of third parties for violations
of contracts or other agreements related to the Excluded Assets.
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C. Seller acknowledges and agrees that Buyer is purchasing all of
the Assets related to the Business, except the Excluded Assets, and Seller has
no right to continue the Business after the Closing, except to resolve any
claims of third parties involving the Excluded Assets or claims against the
Assets which Seller has an obligation to resolve pursuant to this Agreement.
1.4 Assets to be Transferred by Robert B. Staib. Subject to the terms
and conditions of this Agreement, at the Closing, Seller shall cause Staib to
sell, transfer and deliver to Buyer, free and clear of all Encumbrances, in
return for the consideration paid to Seller as provided herein, all of his
rights, in and to the Assets, if any, including but not limited to any patent,
copyright or other intellectual property rights in the Assets. Immediately prior
to the closing, and as a condition of Buyer to close, Buyer shall confirm that
no order for relief has been issued in Bankruptcy Case No. 98-5541-DH,
Bankruptcy Court, Southern District of Iowa, or if an order for relief has been
issued, that the Bankruptcy Court approves the transfers, assignments and other
agreements of Robert B. Staib described in this Agreement.
1.5 Purchase Price. (a) As payment in full for the Assets, Buyer shall
pay the purchase price therefor (the "Price"), plus the royalties (the
"Royalties") described in Section 1.6, by wire transfer to an account of Seller
designated by Seller. The purchase price for the Assets shall be Seven Hundred
Fifty Thousand Dollars ($750,000.00) plus the Royalties described in Section 1.6
hereof. Five Hundred Thousand Dollars ($500,000.00) shall be paid at the
Closing. Two Hundred Fifty Thousand Dollars ($250,000.00) shall be paid thirty
(30) days after the Closing.
(b) The Price shall be allocated among the Assets as set forth in
a schedule signed by Buyer and Seller at the Closing. Neither of the parties
shall take any tax position inconsistent with such allocation and each of the
parties shall reflect such allocation where relevant in all tax filings made by
it.
1.6 Royalties and Payment of Royalties . The Royalties shall be paid on
sales or licenses of the software portion only of the following products of
Seller (the "Seller Products"):
(1) ControlTech 2000
(2) LadleTech (all Models)
(3) Intelligent Arc Furnace Controller (all Models)
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(4) LoadMaster
(5) OptiMaster
(6) CheMaster (as currently developed)
(7) StockMaster
(8) IFOS
(9) ICC
The specific royalties to be paid on the software portion only of these
Seller Products follow:
(a) On ControlTech 2000, LadleTech and Intelligent Arc Furnace
Controller, a Royalty of 10% of the software portion only of these Seller
Products at the sale price to be established by Buyer.
(b) On LoadMaster and OptiMaster, a Royalty of 10% of the sales
price of the software portion only of LoadMaster and OptiMaster; provided,
however, one-half of the Royalties (5% of the sales price of LoadMaster and
OptiMaster) will be paid directly by Buyer to DJJ and Seller will be paid the
remaining 5% of the sales price of LoadMaster and OptiMaster until such time as
DJJ has received an amount equal to $360,000 from the Royalties described in
subparagraphs (b), (c) and (d) of Section 1.6.
(c) On CheMaster, Seller shall be entitled to a Royalty of 7% of
the sales price of the software portion only of CheMaster; provided, however, 5%
of the sales price of the software portion only of CheMaster will be paid
directly by Buyer to DJJ and Seller will be paid the remaining 2% of the sales
price of the software portion of CheMaster until such time as DJJ has received
an amount equal to $360,000 from the Royalties described in subparagraphs (b),
(c) and (d) of Section 1.6.
(d) On StockMaster, this product has limited utility and is part
of a larger product. Consequently, the sales price for this product shall be
established by Seller and Buyer and Seller shall receive a Royalty of 10% of the
established sales price; provided, however, one-half of the Royalties (5% of the
established sales price of StockMaster) will be paid by Buyer directly to DJJ
and Seller will be paid the remaining 5% of the established sales price of
StockMaster until such time as DJJ has received an amount equal to $360,000 from
the Royalties described in subparagraphs (b), (c) and (d) of Section 1.6. Seller
acknowledges that Buyer has a current product similar to StockMaster and will
sell or license this product and Seller is not entitled to Royalties on this
Buyer product.
(e) On IFOS, a Royalty of 6% of the sales price of the software
portion only.
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(f) On ICC, the Seller and Buyer acknowledge and agree that this
product is not complete and commercially viable. If it is ever completed and
becomes commercially viable, the parties agree to negotiate and establish the
Royalty on the following basis. The number of man hours performed by Seller
prior to the Closing on the ICC product shall be determined. The man hours spent
by Buyer or its assigns after the Closing shall be determined. These two numbers
shall be added together and the Royalty for Seller shall be established by
multiplying 10% times a fraction, the numerator of which is the man hours
performed by Seller prior to the Closing, and the denominator shall be the total
man hours spent by Seller and Buyer with respect to the ICC product before and
after the Closing.
All Royalties paid to DJJ under subsections (b) through (d) above and
the approximately $45,000 paid to DJJ as described below shall be paid by Buyer
to DJJ until the total is $360,000 collectively.
As stated above, the Royalties shall be paid only on the software
portion of the Products. When sales are made of software, and the software price
is not listed as an item on the sales invoice, such as is the case with IAF, the
software portion only of the product will be defined as the total sales price
for the product, less the cost of hardware, assembly, engineering,
transportation and installation. The cost of hardware shall be the price paid by
Buyer for the hardware and the cost of the engineering, assembly and
installation shall be determined by multiplying the normal billable rate of
Buyer for the person providing these services times the hours spent to
accomplish the various tasks.
Buyer is willing to discuss a Royalty payment other than a Royalty
based on the sale price of the Product, including a price per ton arrangement
where Buyer licenses the Seller Products to a customer on a per-ton basis. If
Seller and Buyer are able to agree on an alternative royalty arrangement, and
neither party is under a compulsion to do so, the alternative royalty
arrangement shall be paid in lieu of the Royalties described in this Section
1.6. If this alternative arrangement relates to a royalty on any product
described in subsections (b) through (d) above, DJJ shall receive fifty percent
(50%) of this alternative royalty until it has received, including Royalties
paid on the sales price, an amount equal to $360,000 and Seller shall receive
the remaining fifty percent (50%) of the Royalty.
No Royalties will be paid on non-Seller Products, including, but not
limited to: (i) service and maintenance revenues; (ii) research and development
services; (iii) hardware; (iv) new products developed by SAI; or (v) anything
other than
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the software portion of the Seller Products described in Section 1.6(a) through
(d) above.
The Royalties shall be paid for ten (10) years or until Three Million
Dollars ($3,000,000.00) shall have been paid to Seller, excluding the $360,000
paid to DJJ. Thereafter, the Royalty payments shall cease. An advance against
future Royalties of Two Hundred Fifty Thousand Dollars ($250,000.00) shall be
paid on the six month anniversary of the Closing less the approximately Forty
Five Thousand Dollars ($45,000.00) due DJJ and less any Royalties paid to Seller
between the Closing and the six month anniversary of the Closing by Buyer.
1.7 Assumed Liabilities and Latent Claims. (a) Prior to the Closing,
the parties shall mutually agree upon and set forth in a writing to be executed
by the parties those Seller works in progress, prepaid commitments, maintenance
and service contracts, and other contractual obligations and liabilities
relating to the Business that the parties deem necessary to the integration of
the Business into Buyer (the "Assumed Liabilities"). After the Closing, Buyer
agrees to assume the Assumed Liabilities and Seller agrees to pay for all of the
costs and expenses associated with the Assumed Liabilities by permitting Buyer
to deduct the costs of these services as provided in Section 1.7(d) hereof from
future Royalties due Seller as provided in Section 1.6 hereof.
Seller acknowledges and agrees that it has not been able to provide to
Buyer a complete list of all works in progress, prepaid commitments, maintenance
and service contracts, and other contractual obligations and liabilities of
Seller relating to the Business. Consequently, Buyer may discover after the
Closing additional items in these categories which it wishes to assume and add
to the Assumed Liabilities. If any such items are discovered by Buyer or
disclosed to Buyer by Seller after the Closing, Buyer shall be able to add these
items to the Assumed Liabilities and deduct the costs and expenses associated
with these additional Assumed Liabilities by permitting Buyer to deduct the
costs of these services as provided in Section 1.7(d) hereof from future
Royalties due Seller as provided in Section 1.6 hereof.
(b) Notwithstanding anything to the contrary in this Section 1.7,
Buyer shall not be responsible for any warranty claims, "year 2000" claims,
claims for defective products or any other claims, which arise out of, or are
based upon, any products produced by Seller or services provided by Seller prior
to the Closing Date (each a "Latent Claim"); provided, however, that if Buyer
determines in good faith and on any reasonable basis that it is in its best
interests to satisfy a Latent Claim, it
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reserves the right to satisfy such Latent Claim, at Seller's sole cost and
expense, in accordance with the procedures set forth in this Section 1.7(b).
Upon determining in good faith and on a reasonable basis that it is in its best
interest to satisfy a Latent Claim, Buyer shall satisfy the Latent Claim and
give written notice of its determination to Seller. Upon receipt of such notice,
Seller shall have thirty (30) days to notify Buyer that it challenges Buyer's
determination. If Seller does not challenge Buyer's determination in such 30 day
period, there shall be no further opportunity to challenge Buyer's right to
deduct the cost from the Royalties. If Seller so contests Buyer's determination,
the parties agree to attempt in good faith to resolve the dispute within thirty
(30) days of Seller's determination to reject Buyer's election to satisfy the
Latent Claim. In the event the parties cannot resolve the dispute within such
thirty (30) day period, either party shall have the right to pursue all
available legal remedies.
(c) Except for the Assumed Liabilities and any Latent Claims Buyer
elects to satisfy, Buyer will not assume, or be liable for, any of the
liabilities or obligations of Seller, whether existing on the date hereof or
arising hereafter.
(d) The costs of assuming the Assumed Liabilities and Latent
Claims described in subsections 1.7(a) and (b) above shall be charged and
deducted from the Royalties on the following basis. The hours required to
provide these services shall be multiplied times the normal hourly charge for
such services as provided on Buyer's annual rate sheet and the product plus any
out-of-pocket expenses for materials shall be the costs of these services and
deducted from the Royalties. The parties acknowledge and agree that Buyer will
publish a new rate sheet each year.
1.8 Royalties, Discounts and Other Obligations. Without limiting the
other provisions of this Agreement (including the provisions in Section 1.7),
Seller hereby expressly acknowledges the existence of certain contractual
obligations, agreements and liabilities of Seller relating to the Business,
including, without limitation, royalties, discounts and other liabilities and
obligations (including those of which Buyer does not have actual knowledge
because there are no written agreements or Seller has not been able to provide
to Buyer a complete list or copies of all license agreements, proposals,
purchase orders, confirmations, and other contracts and agreements between
Seller and its customers) (collectively, the "Seller Obligations"). Examples of
the Seller Obligations are the royalties that accrue to or for the benefit of,
and discounts granted to (i) DJJ pursuant to (a) Proposal 606003, (b) the
Software License Agreement and (c) the Software Maintenance and
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Services Agreement, all dated as of September 18, 1996, (ii) North Star Steel
Company pursuant to (a) Proposal 606004C dated June 26, 1996 (b) Proposal 708004
dated November 14, 1997, as such proposal was amended to, among other things,
modify the provisions of Section 7.7, and (iii) Keystone Steel & Wire Company
pursuant to Proposal 607002-C dated May 14, 1997, all as may have been amended
from time to time (whether orally or in writing). Because of this lack of
information and the unknown liabilities, Buyer shall be able to deduct any
Seller Obligations paid or incurred by Buyer and/or which result in an offset or
credit to the applicable customer from future Royalties due Seller as provided
in Section 1.6 hereof. With respect to any Royalties payable to the applicable
customer or which can be used to offset payments due from the applicable
customer pursuant to the applicable customer's agreement, and with respect to
any other sums payable to the applicable customer or which can be used to offset
amounts due from the applicable customer, Buyer shall be able to deduct on a
dollar for dollar basis the amount of the Seller Obligations. With respect to
discounts, Buyer shall be able to deduct such Seller Obligations from future
Royalties due Seller as provided in Section 1.6 hereof by deducting the amount
of the discount as measured against the list price stated in the applicable
contract or, if none is stated, then the list price of the applicable product as
was in effect.
2. Execution of Other Agreements. Simultaneously with the Closing:
(a) If Buyer so elects, Seller and Buyer will enter into a License
Agreement, a Maintenance Agreement and a Source Code Escrow Agreement in the
forms of Exhibits 2(a)(i), 2(a)(ii) and 2(a)(iii) hereto, respectively.
(b) Buyer and Seller will enter into a Lease in the form of
Exhibit 2(b) hereto.
(c) Buyer and Seller and Seller's Principal Shareholders,
significant officers and employees will enter into a Noncompetition Agreement in
the form of Exhibit 2(c) hereto.
3. The Closing.
3.1 Place and Time. The closing of the sale and purchase of the Assets
(the "Closing") shall take place at 10:00 a.m. at the offices of Vorys, Sater,
Seymour and Pease LLP on or before May 28, 1999 (the "Closing Date") unless
another date or place is agreed to in writing by the parties hereto.
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3.2 Deliveries by Seller. At the Closing, Seller, and with respect to
3.2(b) below, Staib, if necessary, shall deliver the following to Buyer:
(a) A bill of sale and general assignment with respect to the
Assets in the form of Exhibit 3.2(a) hereto.
(b) Such other documents of assignment and transfer (including
lease assignments, assignments of trademarks, copyrights and patents included in
the Assets) as, and in such form as, Buyer has reasonably requested with respect
to the Assets.
(c) The opinion of William E. McNally, counsel for Seller, dated
the Closing Date and in substantially the form of Exhibit 3.2(c) hereto.
(d) Certified copies of the Certificate of Incorporation and
By-laws of Seller and of the resolutions of its board of directors and
shareholders approving this Agreement and the transactions contemplated hereby.
(e) A certificate signed by the chief executive officer of Seller
to the effect that, to his knowledge and except as may be set forth in such
certificate, all representations and warranties of Seller set forth in this
Agreement were true and complete when made and are true and complete in all
material respects at the Closing Date as if then made and Seller has performed
in all material respects all obligations to be performed by it pursuant to this
Agreement at or before the Closing.
(f) Executed releases of all Encumbrances, except Permitted
Exceptions, on the Assets in form recordable with appropriate Governmental
Bodies.
(g) The original or copies of all of the books of account and
other records of Seller relating to the Business.
(h) All other documents, instruments and writings required by this
Agreement or as Buyer may reasonably request to be delivered by Seller at the
Closing in order to more fully carry out and effectuate the intent of this
Agreement.
3.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the
following to Seller:
(a) A wire transfer in the amount of Five Hundred Thousand Dollars
($500,000.00).
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(b) An assumption of the Assumed Liabilities in the form of
Exhibit 3.3(b) hereto.
(c) The opinion of Vorys, Sater, Seymour and Pease LLP dated the
Closing Date and in substantially the form of Exhibit 3.3(c) hereto.
(d) Certified copies of the Articles of Incorporation and By-laws
of Buyer and of the resolutions of its board of directors approving this
Agreement and the transactions contemplated hereby.
(e) A certificate of the chief executive officer of Buyer to the
effect that (except as may be set forth in such certificate) all representations
and warranties of Buyer set forth in this Agreement were true and complete when
made and are true and complete in all material respects at the Closing Date as
if then made and Buyer has performed in all material respects all obligations to
be performed by it pursuant to this Agreement at or before the Closing.
3.4 Proration. At the Closing, accrued personal property Taxes, utility
bills, patent payments and deposits with respect to the Assets or the Business
shall be prorated to the Closing Date and Buyer shall pay to Seller, or vice
versa as the case may be, an appropriate net amount in respect thereof.
4. Representations and Warranties of Seller.
Seller represents and warrants to, and agrees with, Buyer as follows:
4.1 Organization of Seller; Authorization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
with full corporate power and authority to execute and deliver this Agreement
and the Ancillary Agreements and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Ancillary Agreements have been duly authorized by Seller's Board of Directors
and shareholders and each of this Agreement and the Ancillary Agreements
constitutes a valid and binding obligation of Seller, enforceable against it in
accordance with its terms.
4.2 No Conflict as to Seller. Except as set forth in Exhibit 4.2
hereto, neither the execution and delivery of this Agreement and the Ancillary
Agreements nor the consummation of any or all of the Contemplated Transactions
will (a) violate any provision of the Certificate of Incorporation or By-Laws
(or other governing instrument) of Seller or (b) violate, be in
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conflict with, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under any agreement or commitment
to which Seller is party or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other Governmental Body
applicable to Seller.
4.3 Consents and Approvals of Governmental Bodies. Except for the
consents set forth in Exhibit 4.3 hereto, no consent, approval or authorization
of, or declaration, filing or registration with, any Governmental Body is
required to be obtained or made by Seller in connection with the execution,
delivery and performance of this Agreement and the Ancillary Agreements or the
consummation of the Contemplated Transactions.
4.4 Other Consents. Except for the consents set forth on Exhibit 4.4
hereto, no consent of any Person is required to be obtained by Seller for the
execution, delivery and performance of this Agreement and the Ancillary
Agreements or the consummation of the Contemplated Transactions.
4.5 Financial Information. Seller has delivered to Buyer true and
complete copies of its balance sheets as of December 31, 1996, 1997 and 1998 and
March 31, 1999 and the related statements of income and cash flows for the
twelve (12) month periods then ended and the three (3) month period then ended,
respectively. The foregoing financial statements have been based upon the
information contained in Seller's books and records (which are accurate and
complete in all material respects) and fairly present the financial condition
and results of operations of Seller as of the times and for the periods referred
to therein, and such financial statements contain proper accruals and adequate
reserves and have been prepared in accordance with generally accepted accounting
principles ("GAAP"), consistently applied by Seller throughout the periods
indicated, except as otherwise noted therein.
4.6 Title to Properties; Encumbrances.
(a) Exhibit 4.6(a) hereto describes all real property or interests
therein owned or leased by Seller and used in the Business. Seller has delivered
to Buyer copies of all deeds, leases, title insurance policies, title reports
and other instruments (as recorded) related to Seller's acquisition of such real
property and interests.
(b) Except as set forth in Exhibit 4.6(b) hereto, Seller has good,
valid and marketable title to all of the Assets, subject to any Permitted
Exceptions, any landlord rights with respect to any fixtures located on leased
property which cannot
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be removed pursuant to terms of a lease and to the mortgages and security
agreements listed on Exhibit 4.6(b) hereto, which Seller will discharge at
Closing. The instruments of transfer described in Section 3.2 are sufficient to
vest in Buyer all of Seller's right, title and interest in and to the Assets.
The assignment of Seller's rights in any lease will be subject to receipt of the
consents relating thereto set forth in Exhibits 4.3 and 4.4.
(c) Except as set forth in Exhibit 4.6(c) hereto, all of the
Assets are held by Seller and will be acquired by Buyer free and clear of all
Encumbrances (and are not, except for Permitted Exceptions, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature whatsoever) except, with
respect to all such properties and assets, liens for current taxes not yet due
and payable. Except as set forth in Exhibit 4.6(c) hereto, no financing
statement under the Uniform Commercial Code which has not expired or been
terminated and which names Seller as the debtor is on file in any jurisdiction
with respect to any of the Assets, and Seller has not signed any such financing
statement or any security agreement authorizing any secured party thereunder to
file any such financing statement with respect to any of the Assets.
(d) The Assets include all rights, properties and other assets
necessary to permit Buyer to conduct the Business after the Closing in all
material respects in the same manner as it is conducted on, and has been
conducted prior to, the date of this Agreement by Seller.
4.7 Inventory. Except as set forth in Exhibit 4.7 hereto, at the
Closing all of the Inventory will consist of a quality and quantity usable or
salable in the ordinary course of the Business.
4.8 Buildings, Plants and Equipment. The parties agree that Seller is
not making any representation or warranty as to the condition of the property,
plant and equipment, express or implied, except as set forth herein. Except as
set forth in the following sentence and Exhibit 4.8 hereto, and subject to
equipment which is out of service from time to time for maintenance or repairs,
Seller maintains in good operating order, ordinary wear and tear excepted, all
of its equipment which is material to the conduct of the business. Except as set
forth in Exhibit 4.8 hereto, Seller has not received written notification that
it is in violation of any applicable building, zoning, health, safety or other
law, ordinance or regulation in respect of such buildings, plants or structures
or their operations, and, to Seller's knowledge, no such material violation
exists. Seller leases the real and personal property listed on Exhibit 4.8
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hereto and the leases with respect thereto are included in the Assumed
Liabilities. All of such leases are valid, binding and enforceable in accordance
with their terms and are in full force and effect; there are no existing
defaults (or events which, with notice or lapse of time or both, would
constitute an event of default) by Seller or, to the best knowledge of Seller,
any other party thereunder; and, except as set forth in Exhibit 4.8, all lessors
under such leases have consented (where such consent is necessary) to the
consummation of the Contemplated Transactions.
4.9 No Condemnation or Expropriation. Neither the whole nor any portion
of the property or leaseholds owned or held by Seller and included in the Assets
is subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental Body or other Person with or
without payment of compensation therefor, nor, to the best knowledge of Seller,
has any such condemnation, expropriation or taking been proposed.
4.10 Litigation. Except as set forth in Exhibit 4.10 hereto, there is
no action, suit, inquiry, proceeding or investigation (including any
investigation required by the filing of a charge or complaint by, or on behalf
of, any employee, former employee or job applicant), by or before any court or
Governmental Body pending or, to the best knowledge of Seller, threatened (a)
against or involving Seller and relating to or affecting the Assets or the
Business or (b) which questions or challenges the validity of this Agreement or
any action taken or to be taken by Seller pursuant to this Agreement or in
connection with the Contemplated Transactions, nor is there any valid basis for
any such action, proceeding or investigation. Except as set forth in such
Exhibit 4.10, Seller is not in default under or in violation of any agreement,
commitment or restriction to which Seller is a party or by which it is bound
which relates to or affects the Assets or the Business. Except as set forth in
such Exhibit 4.10, Seller is not subject to any judgment, order or decree that
may have an adverse effect on its business practices or on its ability to
acquire any property or conduct any business in any part of the world and that
relates to or affects the Assets or the Business.
4.11 Books and Records. All of the books of account and other records
of Seller relating to the Business, all of which have been or will be made
available to Buyer and are included in the Assets, are complete and correct in
all material respects and have been maintained in accordance with generally
accepted business practices.
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4.12 Absence of Certain Changes. Except as set forth in
Exhibit 4.12 hereto, since December 31, 1998, Seller has not, with respect to
any of the Assets or the Business:
(a) permitted the waste of any properties or assets,
suffered the damage or destruction of any material properties or assets (unless
covered by insurance and repaired or replaced prior to the date hereof or the
Closing Date, as the case may be) or made any disposition of any properties or
assets other than the sale of inventory in the ordinary course of business;
(b) disposed of any records except in the ordinary
course of business;
(c) permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
Encumbrance;
(d) granted any general increase in the compensation
of employees;
(e) purchased or entered into any contract or
commitment to purchase any raw materials or supplies, or sold or entered into
any contract or commitment to sell any property or assets, except (i) contracts
or commitments for the purchase of, and purchases of, raw materials or supplies,
made in the ordinary course of business and consistent with past practice, (ii)
contracts or commitments for the sale of, and sales of, inventory in the
ordinary course of business and consistent with past practice, and (iii) other
contracts, commitments, purchases or sales in the ordinary course of business
and consistent with past practice;
(f) done any act or omitted to do any act, or
permitted any act or omission to act, which has caused or will cause a breach of
any contract or commitment or which could cause the breach of any representation
or warranty contained in this Agreement;
(g) sold, transferred, leased, assigned or conveyed
any property or asset to, or purchased, leased or acquired any property or
assets from, any Related Party, or otherwise not in the ordinary course of
business and consistent with past practice;
(h) written down or been required to write down any
inventory (other than monthly adjustments to market value in the ordinary course
of business);
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<PAGE> 22
(i) entered into any collective bargaining or union
contract or agreement, including the settlement of any grievance; or
(j) agreed or otherwise committed, whether in writing
or otherwise, to do any of the foregoing.
4.13 No Material Adverse Change. Since December 31, 1998,
except as set forth on Exhibit 4.13 hereto, there has not been any material
adverse change in the business, operations, properties, assets, prospects or
condition of Seller relating to or affecting the Assets or the Business or any
event, condition or contingency that could result in such a material adverse
change.
4.14 Intellectual Property and Y2K Compliance.
(a) Attached as Exhibit 4.14 hereto is (i) a
description of all intellectual property owned by, licensed to or used in the
Business by, the Group, excluding commercially available software including, but
not limited to, United States and foreign patents, trademarks (whether
registered or unregistered), trade names (whether registered or unregistered),
registered copyrights, and applications for any of the foregoing, and all trade
secrets, know-how, and similar rights owned by, licensed to or used by Seller in
the Business (collectively, the "Intellectual Property") together with a
designation of ownership, and (ii) a list of all licenses, agreements or other
arrangements which affect the ownership or use of any item of Intellectual
Property.
(b) Except as set forth in Exhibit 4.14:
(i) Seller is the owner of all rights, title
and interest in and to each item of Intellectual Property, free and clear of all
liens, security interests, charges, encumbrances, equities or other adverse
claims;
(ii) Seller has the right to use, free and
clear of any claims or rights of others, all Intellectual Property required for
or incident to the development, production, marketing, licensing or sale of all
products presently produced, developed, licensed, marketed or sold or being
developed by Seller in the conduct of the Business, and Buyer will have all such
rights exclusively after the Closing;
(iii) Seller has not licensed any third
party to use any of the Intellectual Property;
(iv) No proceedings have been instituted or
are pending or, to the knowledge of Seller, threatened which
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challenge the rights of Seller in any respect in or to any of the Intellectual
Property or any license thereof;
(v) Neither the use by Seller of any of the
Intellectual Property nor any software product produced, licensed or sold by
Seller infringes, or to the best knowledge of Seller, is infringed by, any
patent, trademark, trade name, trade secret, know-how or copyright owned or used
by another, nor is it subject to any outstanding order, decree, judgment or
stipulation;
(vi) Seller has no claim, demand or
proceeding charging any party with violation of any of Seller's rights with
respect to the Intellectual Property or any license thereof;
(vii) There is no unexpired valid patent or
copyright on software or other products that Seller uses or has used in
developing its software products that Seller is not entitled to use, or to
license to others for use;
(viii) No shareholder, officer, director or
employee of Seller or, to the knowledge of Seller, any other Person, has an
interest in or is authorized to use any of the Intellectual Property;
(ix) All trademark, copyright and trade name
registrations listed on Exhibit 4.14 are valid and in full force and effect, and
title is in the name of Seller in the respective trademark, patent and copyright
offices;
(x) There is no governmental restriction or
limitation, domestic or foreign, on the manner in which any of the Intellectual
Property may be used and there are no agreements with any third party
restricting how Seller may use any of the Intellectual Property except as
described on Exhibit 4.14;
(xi) Seller has taken all steps necessary to
maintain the Intellectual Property which it owns ("Owned Intellectual Property")
as a trade secret or as trademarked, copyrighted or patented material. No Person
has had access to the source code, object code, flowcharts, programmers' notes
and annotations thereto (the "Development Materials") relating to any of the
Owned Intellectual Property except as described on Exhibit 4.14.
(xii) Current and complete documentation and
source code exists with respect to all software included in the Owned
Intellectual Property.
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(xiii) None of the software included in the
Owned Intellectual Property has manifested any significant operating problem,
other than any such problems that have been corrected or are correctable in the
ordinary course of business.
(c) Seller has provided to Buyer complete and correct
copies of all licenses or other agreements pursuant to which Seller licenses any
of the Intellectual Property to any person or has the right to utilize
Intellectual Property not owned by it. All such licenses or other agreements are
valid and binding, are enforceable in accordance with their respective terms,
and are in full force and effect. Seller has performed all material obligations
required to be performed by it under each such license or other agreement, and
there are not any existing defaults or circumstances which, with the passage of
time, might constitute a default under such licenses or other agreements.
(d) Except as set forth in Exhibit 4.14, Seller has
taken all steps necessary to prevent any Year 2000 caused failures that could
have a material adverse effect on the business, operations, property or
financial condition of the Group. Without limitation of the foregoing, except as
described in Exhibit 4.14, all software and hardware used in the Business is
"Year 2000 Compliant", which means that such software and hardware (i) processes
all dates in and after the Year 2000 in a correct and consistent manner in all
applicable operations, including, but not limited to, input, output, comparisons
(branching) and arithmetic operations (such as the difference between two
dates), (ii) uses fields providing at least four decimal digits for the year
portion of all stored dates without (a) reliance on use of program logic to
determine which century most likely applies to a 2-digit year field or (b) use
of other symbolic representations for the Year 2000 and thereafter (such as 101
for the Year 2001), (iii) calculates and handles leap year dates correctly, (iv)
will otherwise generally manipulate data and generate output and reports in a
fault-free manner during and after the Year 2000. Seller further represents and
warrants that Seller has taken adequate steps to verify that all hardware and
software of Seller's suppliers, customers and any other Persons whose internal
Year 2000 failures might reasonably be expected to have a material adverse
effect upon the business, operations, property or financial condition of the
Group, is Year 2000 Compliant, or if not, that the timely conversion,
replacement or retirement of noncompliant software and hardware will be managed
by such suppliers and other Persons in a manner sufficient to prevent Year 2000
failures that could have a material adverse effect on the business, operations,
property or financial condition of the Group. Seller has no claim, demand or
pending proceeding against any Person alleging that such Person licensed
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or sold to Seller any software or hardware that is not Year 2000 Compliant.
(e) Seller has evaluated and has adequately tested
all software and hardware of Seller licensed or sold to any licensee or customer
of Seller. Except as noted on Exhibit 4.14, all such software is Year 2000
Compliant (as defined above). Seller has delivered to Buyer true and correct
copies of all correspondence, website material, warranties, disclaimers,
certifications or other documentation relating to the Year 2000 compliance of
any software licensed or sold by the Group. No claims, demands or proceedings
have been made or instituted or, to the knowledge of Seller, threatened, which
allege that the software licensed or sold by the Group is not Year 2000
Compliant.
4.15 Contracts and Commitments. Exhibit 4.15 hereto lists each
of the following which relate to the Assets or the Business:
(a) agreements, commitments or restrictions which are
material to the Business or the Assets or which require the making of any
charitable contribution;
(b) purchase agreements or commitments of Seller
which continue for a period of more than 30 days or are in excess of the normal,
ordinary and usual requirements of the Business or at any excessive price;
(c) outstanding sales agreements, licenses,
maintenance agreements, commitments or proposals that continue for a period of
more than 30 days;
(d) agreements or commitments with officers,
employees, agents, consultants, advisors, salesmen, sales representatives,
distributors or dealers that are not cancelable by Seller on notice of not
longer than 30 days and without liability, penalty or premium, or any agreement
or arrangement providing for the payment of any bonus or commission based on
sales or earnings;
(e) employment agreement or commitment, or any other
agreement or commitment that contains any severance or termination pay
liabilities or obligations;
(f) employee of Seller to whom it is paying
compensation at the annual rate of more than $30,000;
(g) agreement or commitment restricting Seller (or
its successor) from carrying on any business anywhere in the world;
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(h) liability or obligation with respect to the
return of goods rejected by customers;
(i) security agreement, mortgage or other agreement
or commitment that creates or may create any Encumbrance on any of the Assets;
(j) agreement or commitment to make any capital
expenditures or to acquire any property or assets other than raw materials and
supplies;
(k) distribution, sales agency or similar agreement;
or
(l) agreement or commitment having a remaining term
in excess of one year.
Seller has delivered to Buyer complete copies of all agreements listed on
Exhibit 4.15 as currently in effect.
4.16 Status of Agreements. Except as set forth in Exhibit
4.16, all contracts, agreements, commitments, plans, leases, policies and
licenses included in the Assumed Liabilities are valid and in full force and
effect; there are no existing defaults (or events which, with notice or lapse of
time or both, would constitute a default) by Seller, or to the best knowledge of
Seller, any other party, thereunder; and copies thereof have been delivered to
Buyer.
4.17 Customers and Suppliers. Exhibit 4.17 hereto sets forth a
list of (a) the 10 largest (by dollar value) customers of Seller in the conduct
of the Business in terms of sales during the twelve-month period ended March 31,
1999 and (b) the 10 largest (by dollar value) suppliers of Seller in the conduct
of the Business in terms of purchases during the twelve-month period ended March
31, 1999. Except as set forth in such Exhibit 4.17, to Seller's knowledge, there
has not been any material adverse change in the business relationships of Seller
with any such customer, other than that which has occurred or may occur as a
result of the intense local competition. Except as set forth in such Exhibit
4.17, no Related Party has been a supplier to or a customer of Seller in its
conduct of the Business since April 1, 1998.
4.18 Labor Relations. Except as set forth in Exhibit 4.18
hereto, (i) Seller has no obligations under any collective bargaining agreement;
(ii) Seller, in the conduct of the Business, is in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours and equal pay; (iii) Seller is not
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and has not been engaged in any unfair labor practice; (iv) there is no unfair
labor practice complaint against Seller pending before the National Labor
Relations Board; (v) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or affecting Seller; (vi) no
representation question exists and, to the best of Seller's knowledge, since
March 31, 1998, no union organizational activity has occurred respecting
Seller's employees; (vii) Seller has not experienced in the conduct of the
Business any strike, work stoppage or other labor difficulty since March 31,
1998; and (viii) no collective bargaining agreement relating to employees of
Seller is currently being negotiated and no labor organization has been
recognized as agent or representative for any group of employees in a unit
appropriate for collective bargaining purposes.
4.19 Employee Benefit Plans. Except as set forth in Exhibit
4.19 hereto, Seller does not have, and none of its employees are covered by, any
bonus, deferred compensation, pension, profit-sharing, retirement, insurance,
stock purchase, stock option or other fringe benefit plan, arrangement or
practice, or any other employee benefit plan (as defined in section 3(3) of
ERISA), whether formal or informal. Any employee benefit plan of Seller or to
which it contributes which is subject to the provisions of the Employee
Retirement Income Security Act is in compliance in all material respects with
the provisions thereof and there is no unfunded liability with respect thereto.
4.20 Compliance with Law; Taxes. (a) Except as set forth in
Exhibit 4.20 hereto, (i) in its conduct of the Business, Seller has operated in
accordance with all applicable laws, regulations and other requirements of all
Governmental Bodies having jurisdiction over it, including, without limitation,
all such laws, regulations, directives, requirements, executive orders,
interpretive bulletins and health and safety standards relating to antitrust,
consumer protection, currency exchange, equal employment opportunity,
nondiscrimination in employment, health, occupational health and safety,
pension, immigration and securities matters; (ii) Seller has not since March 31,
1998 received any notification of any asserted present or past failure by Seller
in its conduct of the Business to comply with any such law, rule, regulation or
directive; (iii) Seller has all licenses, permits, orders or approvals from
Governmental Bodies required for the conduct of the Business and is not in
violation of any such license, permit, order or approval; and (iv) all such
licenses, permits, orders and approvals are current, valid and in full force and
effect, and no suspension or cancellation thereof has been threatened. Exhibit
4.20 hereto lists all such licenses, permits, orders and approvals which are
material to the conduct of the Business.
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(b) Seller has filed on a timely basis all Tax
Returns required pursuant to all applicable laws or regulations of each
Governmental Body. Seller has paid all Taxes due pursuant to those Tax Returns,
or pursuant to any assessment received by it. To the best of Seller's knowledge,
(i) there exists no existing or proposed tax assessment or tax audit against or
affecting Seller; (ii) all Taxes that Seller has been required by law to
withhold, deposit, or collect have been duly withheld, deposited, or collected
and paid or will be paid to the proper Governmental Body; and (iii) all Tax
Returns filed by Seller are true, correct and complete in all material respects.
Seller has not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
taxes. There are not tax liens (other than any lien for current taxes not yet
due and payable) on any of the Assets.
4.21 Environmental Protection. Exhibit 4.21 hereto lists all
permits, licenses and other authorizations which Seller has obtained to conduct
the Business under all applicable laws, regulations and other requirements of
Governmental Bodies relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
material or wastes (collectively, "Environmental Laws"). Except as set forth on
such Exhibit 4.21, Seller is in compliance in all material respects with all
terms and conditions of such required permits, licenses and authorizations, and
in the conduct of the Business Seller is also, in compliance in all material
respects with all other requirements, limitations, restrictions, conditions,
standards, prohibitions, obligations, schedules and timetables of or contained
in Environmental Laws or contained in any regulations, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. Except as set forth on such Exhibit 4.21, Seller has not
received written notice from any Governmental Body of any past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent continued compliance, or
which may give rise to any common law or legal liability, or otherwise form the
basis of any claim, action, suit, proceedings, hearing or investigation, based
on or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
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contaminant, or hazardous or toxic material or waste at or from the Real
Property.
4.22 No Brokers or Finders. Neither Seller, nor any of its
officers, directors or employees, has employed any broker or finder or incurred
any liability for any brokerage or finder's fees or commissions or similar
payments in connection with any of the Contemplated Transactions.
4.23 Absence of Certain Commercial Practices. Seller in its
conduct of the Business has not, and no director, officer, agent, employee or
other Person acting on its behalf in its conduct of the Business has, (a) given
or agreed to give any gift or similar benefit of more than nominal value to any
customer, supplier or governmental employee or official or any other Person who
is or may be in a position to help or hinder Seller or assist Seller in
connection with any proposed transaction, which gift or similar benefit, if not
given in the past, might have materially and adversely affected the business or
prospects of Seller, or which, if not continued in the future, might materially
and adversely affect the business or prospects of Seller, or (b) used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds. Neither Seller nor any director, officer, agent, employee or
other Person acting on its behalf in the conduct of the Business has accepted or
received any unlawful contributions, payments, gifts or expenditures.
4.24 Solvency. (a) Seller has not (i) made a general
assignment for the benefit of its creditors, (ii) filed any voluntary petition
in bankruptcy or suffered the filing of any involuntary petition in bankruptcy
by its creditors, (iii) suffered the appointment of a receiver to take
possession of all or substantially all of its assets or properties or (iv)
suffered the attachment or other judicial seizure of all or substantially all of
its assets.
(b) Seller is Solvent.
4.25 No Other Agreement to Sell the Assets or Capital Stock of
Seller. Other than as set forth in this Agreement, Seller has no legal
obligation, absolute or contingent, to any Person to (a) sell any capital stock
of Seller or, outside of the ordinary course of business, assets, or effect any
merger, consolidation or other reorganization of Seller or (b) enter into any
agreement with respect to any of the foregoing.
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4.26 Key Employees. Exhibit 4.27 hereto lists each employee of
Seller whose services are necessary to conduct the Business in all material
respects as previously conducted. The performance by each of such employees of
their duties will not violate any provision of any agreement to which any of
such persons or Seller is a party or give use to any obligation or liability of
Seller to any third party or limit in any way Seller's ability to conduct the
Business. None of such key employees is engaged, directly or indirectly, or has
any interest in any entity which competes with Seller.
4.27 Warranty Claims. Exhibit 4.28 hereto lists all open
Warranty Claims of which Seller has received notice and the terms of any
warranties and limitations thereon given by Seller with respect to the Products
prior to the date hereof.
4.28 Representations Respecting The Northern Trust Company. In
addition to the representations made elsewhere in this Agreement, including,
without limitation, in Section 4 hereof, (i) all of the Assets will be acquired
by Buyer free and clear of all Encumbrances of The Northern Trust Company
("Northern Trust"), (ii) Northern Trust has not demanded any security pursuant
to any Application and Agreement for Irrevocable Letter of Credit and has not
otherwise made any claim, orally or in writing, in any way respecting the
Assets, or any portion thereof, (iii) Seller has not granted and will not grant
at any time to Northern Trust any security interest or assignment in and to the
Assets, or any portion thereof, and no financing statement under the Uniform
Commercial Code which names Seller as the debtor and Northern Trust as secured
party is or at any time will be on file in any jurisdiction with respect to any
of the Assets, or any portion thereof, and (iv) Northern Trust does not and will
not at any time have any security interests, liens, assignments in and to,
and/or rights or claims in, the Assets, or any portion thereof.
4.29 Disclosure. Neither this Agreement nor in any Exhibit
attached to this Agreement contains or will contain any untrue statement of a
material fact omits to state any material fact necessary in order to make the
statements made in the light of the circumstances under which they were made,
when taken as a whole, not misleading.
5. Representations and Warranties of Buyer.
Buyer represents and warrants to, and agrees with, Seller as
follows:
5.1 Organization of Buyer; Authorization. Buyer is a
corporation duly organized, validly existing and in good standing
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under the laws of Ohio, with full corporate power and authority to execute and
deliver this Agreement and the Ancillary Agreements and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the Ancillary Agreements have been duly authorized by all
necessary corporate action (including, but not limited to, approval by the Board
of Directors) of Buyer and this Agreement constitutes a valid and binding
obligation of Buyer, enforceable against it in accordance with its terms.
5.2 No Conflict as to Buyer. Neither the execution and
delivery of this Agreement and the Ancillary Agreements nor the performance of
Buyer's obligations hereunder or thereunder will (a) violate any provision of
the articles of incorporation or Code of Regulations of Buyer, (b) violate, be
in conflict with, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under any agreement or
commitment to which Buyer is party or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or other Governmental
Body applicable to Buyer.
5.3 No Brokers or Finders. Neither Buyer nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage or finder's fees or commissions or similar
payments in connection with any of the Contemplated Transactions.
6. Conduct of Business by Seller. Prior to the Closing or termination
of this Agreement, unless Buyer shall otherwise agree in writing or as otherwise
contemplated by this Agreement, in the conduct of the Business and with respect
to the Assets:
(a) Seller shall conduct its business only in the
ordinary and usual course consistent with past practices;
(b) Seller shall not (i) acquire any assets, other
than inventory and supplies in the ordinary course of business, (ii) dispose of
any assets other than sales of inventory in the ordinary course of business,
(iii) enter into any other transaction other than in the ordinary course of
business, or (iv) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(c) Seller shall endeavor in good faith to preserve
intact the business organization of Seller, to keep available the services of
its present employees, and to preserve the good will of those having business
relationships with it;
(d) Seller shall not, directly or indirectly,
encourage, initiate or engage in discussions or negotiations
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with, or provide any information to, any Person or other entity or group, other
than to Buyer or pursuant to Section 7.4 hereof, concerning any merger, sale or
lease of substantial assets, equity investment in Seller or similar transaction
involving Seller; and Seller shall promptly notify Buyer of any proposal or
offer to enter into any such transaction, or any inquiry or contact with any
person with respect thereto and shall promptly furnish to Buyer any written
material received by Seller relating to any of the foregoing;
(e) Seller shall not enter into any employment
agreement with any director, officer or employee of Seller or, otherwise than
pursuant to policies of Seller in effect on the date hereof, grant any severance
or termination pay to, or increase the compensation (including deferred
compensation) of, any such person;
(f) Seller shall not, other than in the ordinary
course of business and consistent with past practices, adopt or amend to
increase compensation or benefits payable under any collective bargaining,
employment, bonus, incentive, compensation, profit-sharing, pension, retirement,
severance, stock purchase, stock option, deferred compensation, hospitalization,
group insurance, death benefit, disability, other fringe benefit or other plan,
agreement, trust, fund or arrangement for the benefit of employees;
(g) Seller shall not amend or terminate any
employment or noncompetition agreement;
(h) Seller shall not enter into any sales or
maintenance contract or license (or group of contracts for the same customer),
with a sales price in excess of $10,000 without Buyer's written consent, which
shall not be unreasonably withheld or delayed; and
(i) Seller shall not, with the intent to breach
Sections 8 or 4 of this Agreement, or reckless disregard for the provisions
thereof, take any action or agree, in writing or otherwise, to take any of the
foregoing actions or any action which would cause any conditions precedent set
forth in Section 8 hereof not to be met or make any representation or warranty
set forth in Section 4 hereof untrue or incomplete in any material respect.
7. Additional Agreements.
7.1 Publicity. Prior to any public filing or announcement
concerning any of the Contemplated Transactions,
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Seller and Buyer shall discuss and coordinate with respect thereto.
7.2 Access to Information. Between the date of this Agreement
and the Closing, Seller shall give Buyer and its respective authorized
representatives reasonable access to all personnel, plants, offices, warehouses
and other facilities and to all books and records of Seller and will permit
Buyer to make such inspections as it may reasonably request and will cause its
officers to furnish Seller with such financial and operating data and other
information with respect to the business and properties of Buyer as Buyer may
from time to time reasonably request.
7.3 Cooperation. Upon the terms and subject to the conditions
hereof, each of the parties hereto agrees to use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the Contemplated
Transactions and shall use all reasonable efforts to obtain all waivers,
permits, consents and approvals and to effect all registrations, filings and
notices with or to third parties or governmental or public bodies or authorities
which are in the opinion of Buyer or Seller necessary or desirable in connection
with the Contemplated Transactions. Nothing in this Section 7.3 or Section 7.4
shall be deemed to require Buyer or Seller to make any payment to any third
party (other than its accountants, counsel or other professional advisors) to
obtain any consent from or action of any third party, except for payments
required by contracts as in effect on the date hereof or incidental payments
(such as the third party's legal and filing fees) to facilitate such consent or
action. If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers or
directors of each of the parties hereto shall take such action.
7.4 Obtaining Consents. Subject to Section 7.3 hereof, Seller
shall use its best efforts to obtain the consents and approvals set forth in
Exhibits 4.3 and 4.4 hereto on terms acceptable to Buyer. Until any consent
listed in such Exhibits is obtained, at Buyer's request and direction, Seller
shall act as Buyer's agent in order to obtain for Buyer the benefits under the
contract, agreement, license or other obligation or instrument relating thereto
as if such consent had been obtained.
7.5 Employees of Sellers; Employee Benefits.
(a) Buyer is under no legal obligation to employ any
personnel presently employed by Seller. Prior to the Closing Date, Buyer may
offer employment to such persons currently employed by Seller as Buyer in it
sole discretion shall
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determine. Buyer shall have the absolute right to establish all terms and
conditions of employment, including wages, benefits and benefit plans, for any
employees of Seller to whom it chooses to make an offer of employment to be
employed by Buyer. All such offers of employment shall be on the terms and
conditions established by Buyer and shall be contingent upon employment
commencing with Buyer only following the Closing Date. Seller agrees not to
discourage any individuals who are offered employment by Buyer from accepting
employment with Buyer.
(b) After the Closing Date, Seller shall pay directly
to each of its employees that is offered employment by Buyer and accepts such
employment with Buyer, that portion of all benefits which has been accrued on
behalf of that employee (or is attributable to expenses properly incurred by
that employee) as of the Closing Date, and Buyer shall assume no liability
therefor. No portion of the assets of any plan, fund, program or arrangement,
written or unwritten, heretofore sponsored or maintained by Seller (and no
amount attributable to any such plan, fund, program or arrangement) shall be
transferred to Buyer, and Buyer shall not be required to continue any such plan,
fund, program or arrangement after the Closing Date. The amounts payable on
account of all benefit arrangements shall be determined with reference to the
date of the event by reason of which such amounts become payable, without regard
to conditions subsequent, and Buyer shall not be liable for any claim for
insurance, reimbursement or other benefits payable by reason of any event which
occurs prior to the Closing Date. All amounts payable directly to employees of
Seller, or to any fund, shall be paid by Seller within thirty (30) days after
the Closing Date to the extent that such payment is not inconsistent with the
terms of such fund, program, arrangement or plan. All employees of Seller who
are employed by Buyer on or after the Closing Date shall be new employees of
Buyer and any prior employment by Seller of such employees shall not affect
entitlement to, or the amount of, salary or other compensation or benefits,
current or deferred, which Buyer may make available to its employees.
(c) Three employees which Buyer may employ must
remain in the employ of Seller until they receive their visas. If Buyer decides
to hire these employees, it will reimburse Seller for their costs to Seller
while they are employed by Seller. If Buyer decides to hire them, it will employ
them as soon as permitted by the immigration laws.
7.6 Accounts Payable. Seller shall promptly pay when due in
accordance with their terms any accounts payable incurred by it prior to the
Closing relating to the Business, unless it disputes in good faith any such
payment.
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7.7 Supplemental Information. From time to time prior to the
Closing, each party hereto shall promptly disclose in writing to the other party
any matter hereafter arising which, if existing, occurring or known at the date
of this Agreement, would have been required to be disclosed to such other party.
7.8 Encumbrances. Seller shall obtain executed releases of all
Encumbrances on the Assets, except Permitted Exceptions, in form to be recorded
with all appropriate Governmental Bodies.
7.9 Noncompetition, Etc. Subject to the provisions of 7.9(f)
below, Seller shall, and shall cause Robert B. Staib, William E. Staib, Robert
___. Squires and Harry O. Hefter (collectively the "Covenanting Person") to
agree not to, directly or indirectly, for the benefit of Seller or any other
person, either as principal, agent, manager, consultant, partner, owner,
employee, distributor, dealer, representative, joint venturer, creditor or
otherwise, do any of the following:
(a) For a period of three (3) years from the Closing,
Seller and the Covenanting Person shall not, directly or indirectly, for the
benefit of Seller, the Covenanting Person or others, either as principal, agent,
manager, consultant, partner, owner, employee, distributor, dealer,
representative, joint venturer, creditor or otherwise, (i) engage in any work
involving the acquisition, development, marketing, distribution, sale,
licensing, maintenance or support of software products, services and related
hardware that are competitive with the Assets sold under this Agreement within
the continuous process material handling, melting, forming and processing
industries, including but not limited to the ferrous, non-ferrous and glass
production industries (the "Business"), in any geographic area where Buyer or
its successor in interest conducts Business now or in the future; or (ii) the
promotion, solicitation, attempt to solicit, license or sale in any geographic
area where Buyer or its successor in interest conducts Business of any product
or service in competition with the products or services of Buyer related to the
Business.
(b) Solicitation of Customers. For a period of three
(3) years from the Closing, Covenanting Person shall not solicit, attempt to
solicit, manage, maintain, sell or license software products, services and
related hardware that are competitive with the software sold under this
Agreement related to the Business to any Customer. For the purposes of this
Agreement, "Customer" shall mean any person who is a Customer of Buyer or the
Group as of the date of this Agreement, any person who has been a Customer of
the Group or Buyer within two (2) years of the execution of this Agreement or
becomes a Customer of
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Buyer during the three (3) year period from the date of this Agreement.
(c) Non-Solicitation of Employees, etc. For a period
of three (3) years from the date of this Agreement, the Covenanting Person shall
not, either directly or indirectly, solicit to hire or hire any current or past
employees of the Group or Buyer, or any person who is or was in any way
affiliated with the Group or Buyer.
(d) Restrictions, etc. The Covenanting Person
acknowledges that the Business of the Group and Buyer is international in scope,
and the international scope is the reason for the geographic scope and/or
duration of the restrictions on competition and solicitation provided in this
Section. Satisfaction of the three (3) year period described in this Section
shall be suspended during the time of any activity of the Covenanting Person
prohibited by this Section. In the event a court grants injunctive relief to
Buyer for a failure of the Covenanting Person to comply with the provisions
contained in this Section, the non-competition period shall commence anew with
the date such relief is granted.
The restrictions provided in this Section may be
enforced by Buyer, by an action at law, or in equity, including but not limited
to, an action for injunction and/or an action for damages. It being expressly
agreed that, in view of the general impracticability and impossibility of
determining by compilation or legal proof, the exact amount of damages resulting
to Buyer from a violation by the Covenanting Person of the provisions of this
Section, liquidated damages are hereby fixed at Ten Thousand Dollars
($10,000.00) for violation of this Section, unless actual damages in excess of
Ten Thousand Dollars ($10,000.00) are proved, in which case, the amount actually
proved shall be assessed as damages.
The provisions of this Section constitute an
essential element of this Agreement, without which this Agreement would not have
been effected by Buyer. The provisions of this Section shall survive the
termination of any other obligation of the Covenanting Person under this
Agreement for a period necessary to enforce its provisions. If the scope of any
restriction contained in this Section is too broad to permit enforcement of such
restriction to its fullest extent permitted by law, the Covenanting Person
hereby consents and agrees that such scope may be judicially modified in any
proceeding brought to enforce such restriction.
(e) Proprietary Rights and Protection of Buyer's
Confidential Information. As used throughout this Agreement, the
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term "Proprietary Information" means any information acquired by the Covenanting
Person during or as a result of past, present or future affiliation with or
employment by Seller, which is not in the public domain and which relates to
software products, services and related hardware that are competitive with the
Assets sold under this Agreement for use in the Business, whether such
information is patentable or unpatentable, copyrightable or uncopyrightable.
Proprietary Information shall include but is not limited to: inventions,
information of a technical nature such as trade secrets, "know-how",
innovations, discoveries, formulae, research projects, software, source codes,
object codes, software architecture, flow charts, software documentation,
decision tables, test data, conversion programs, technical writings and
confidential information of other parties which it provides to the Group or
Buyer by any agreement by which the Group or Buyer has obligations to protect
the confidentiality of same, matters of a business nature such as customer
lists, customer and supplier marketing representatives requirements and
preferences, costs, prices or license fees or maintenance fees or other
financial information such as sale, profit, expenses, financial projections,
financial goals, local, state and federal tax returns, litigation and
compensation, personnel data, business plans and market research. All
information disclosed to the Covenanting Person or to which the Covenanting
Person obtains access during affiliation with or employment with the Group or
Buyer shall be presumed to be Proprietary Information. The Covenanting Person
acknowledges that he or it has had or will have access to and become familiar
with this Proprietary Information and it is very valuable to Buyer. The
Covenanting Person agrees not to disclose any of the Proprietary Information
directly or indirectly to any person nor use it in any way, at any time, except
as required in the course of his employment or affiliation with the Group or
Buyer. All the Proprietary Information shall remain the exclusive property of
Buyer and any Proprietary Information in the possession of the Covenanting
Person at the end of his employment or affiliation with the Group or Buyer shall
be returned to Buyer. Provided, however, information shall not be deemed to be
Proprietary Information if it: (i) is or becomes known through no fault of the
Covenanting Person to a third party; (ii) is learned by the Covenanting Person
following his termination of employment or affiliation with the Group or Buyer;
or (iii) is in the public domain.
The restrictions of this Section 7.9(e) shall be
a perpetual obligation of the Covenanting Person to keep the Proprietary
Information confidential and the ownership of Proprietary Information inures
solely to Buyer.
(f) The Covenant Not to Compete described in Section
7.9(a) hereof shall not prevent the Harry O. Hefter Group
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from manufacturing, selling or leasing its product known as CLERQ 2000.
8. Conditions Precedent.
8.1 Conditions to Each Party's Obligation. The respective
obligations of each party to this Agreement to consummate the Contemplated
Transactions shall be subject to the following conditions:
(a) There is no suit, action or proceeding pending
or, to the knowledge of Buyer or Seller, threatened against either Buyer or
Seller that seeks to prevent the consummation of any of Contemplated
Transactions or to obtain substantial monetary payment as a result thereof nor
shall any order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction have been enacted, entered, issued, promulgated or
enforced by any court or governmental authority of competent jurisdiction which
prohibits or restricts the consummation of the Contemplated Transactions.
(b) All material consents, approvals or
authorizations of, or declarations, filings or registrations with, any
Governmental Body, including without limitation those referred to in Section 4.3
hereof, required in connection with the execution, delivery and performance of
this Agreement or the consummation of the Contemplated Transactions shall have
been obtained.
(c) The Contemplated Transactions shall have been
approved by the holders of a majority of the outstanding shares of common stock,
Convertible Series A Preferred Stock, Convertible Series B Preferred Stock and
Convertible Series C Preferred Stock voting together as a single class on an as
converted basis (excluding the stock held by the Staib family), and the holders
of a majority in principal amount of Seller's 8.75% Senior Secured Debentures.
(d) All other material consents of any Person,
including without limitation those referred to in Section 4.4 hereof, necessary
to the execution, delivery and performance of this Agreement or the consummation
of the Contemplated Transactions, including but not limited to, consents from
parties to the Assumed Liabilities shall have been obtained.
8.2 Conditions to the Obligations of Buyer. The obligations of
Buyer to effect the Contemplated Transactions shall be further subject to the
fulfillment at or prior to the Closing of the following conditions, any one or
more of which may be waived by Buyer:
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(a) Seller shall have performed and complied in all
material respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by it at or prior to the
Closing.
(b) The representations and warranties of the Seller
contained in this Agreement were true and complete when made and are true and
complete in all material respects at the Closing Date as if then made and Seller
has performed in all material respects all obligations to be performed by it
pursuant to this Agreement at or before the Closing.
(c) From the date hereof to Closing, Seller shall
have maintained its fixed assets consistent with its past practices and there
shall have been no known material adverse change in the condition of such fixed
assets, and Buyer shall have received a certificate from an officer of Seller to
such effect.
(d) Seller shall have obtained executed releases of
all Encumbrances on the Assets in form suitable for recording with all of the
appropriate Government Bodies.
(e) Seller has delivered all of the documents
described in Section 3.2 hereof, duly executed by duly authorized officers or
persons.
(f) Buyer has consummated a transaction with DJJ for
an investment in Buyer or an entity controlled by Buyer and which has provided
Buyer or such entity with enough money to make the Five Hundred Thousand Dollar
($500,000.00) payment at the Closing, the Two Hundred Fifty Thousand Dollar
payment ($250,000.00) thirty (30) days after the Closing, and to fulfill Buyer's
other obligations pursuant to this Agreement.
(g) Buyer has been able to employ all of the
employees of Seller it wishes to employ and to allow Buyer to operate the
Business after the Closing.
(h) Buyer shall have completed its due diligence of
Seller and decided, in its sole discretion, to proceed with the Transaction.
8.3 Conditions to the Obligations of Seller. The obligations
of the Seller to effect the Contemplated Transactions shall be further subject
to the fulfillment at or prior to the Closing of the following conditions, any
one or more of which may be waived by the Seller:
(a) Buyer shall have performed and complied in all
material respects with the agreements and obligations
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contained in this Agreement required to be performed and complied with by it at
or prior to the Closing.
(b) The representations and warranties of Buyer
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and shall be true and correct in all material respects as
of the Closing, with the same force and effect as though made on and as of the
Closing, except for changes permitted or contemplated by this Agreement.
9. Termination and Waiver.
9.1 Termination. This Agreement may be terminated at any time
prior to the Closing, whether before or after approval by the stockholders of
Seller:
(a) by mutual consent of the Boards of Directors of
Seller and Buyer;
(b) by either Seller or Buyer if the Contemplated
Transactions shall not have been consummated by May 28, 1999 (the "Mandatory
Termination Date") and such terminating party is not then in material breach of
any provision of this Agreement; or
(c) by Buyer if it cannot consummate the transaction
with DJJ described in Section 8.2(f) hereof.
9.2 Effect of Termination. In the event of termination of this
Agreement by either Seller or Buyer, as provided above, this Agreement (other
than Section 13.1 hereof, which shall remain in effect) shall forthwith become
void and there shall be no further liability on the part of any of Seller, Buyer
or their respective directors or officers, unless and to the extent such party
is in breach of any provision of this Agreement at the time of such termination.
The Confidentiality Agreement among the parties dated of even date herewith
shall survive any such termination.
9.3 Waiver. At any time prior to the Mandatory Termination
Date, Seller or Buyer, by action taken by their respective Boards of Directors,
may (i) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
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10. Survival of Representations and Warranties; Indemnification.
10.1 Survival. All representations and warranties contained in
this Agreement or in the certificate delivered pursuant to Section 3.2(f)
hereof, except for any representations and warranties which Seller has
identified to Buyer in writing prior to Closing as being untrue as of the
Closing Date and Buyer has waived the existence thereof pursuant to Section 9.3
hereof, shall survive the Closing notwithstanding any investigation conducted,
or knowledge acquired, with respect thereto, for a period of five years from the
Closing Date, except that the representations and warranties set forth in
Section 4.20(b) (pertaining to taxes) shall survive the Closing Date for a
period which terminates upon the lapse of the last statute of limitations that
is applicable to the matters covered by such representations and warranties. All
agreements contained in this Agreement shall survive the Closing without
limitation.
10.2 Indemnification by Seller. Seller shall indemnify and
hold harmless Buyer, and shall reimburse Buyer for, any loss, liability, claim,
cost, damage, expense (including, but not limited to, costs of investigation and
defense and reasonable attorneys' fees) or diminution of value (collectively,
"Damages") arising from or in connection with (a) any inaccuracy in any of the
representations and warranties of Seller in this Agreement or in any certificate
delivered by Seller pursuant to this Agreement as referenced in Section 10.1
hereof, or any actions, omissions or state of facts inconsistent with any such
representation or warranty, if notice thereof is given by Buyer to Seller prior
to the second anniversary of the Closing Date, (b) any failure by Seller to
perform or comply with any agreement in this Agreement, (c) any Environmental
Remediation, (d) Buyer's assumption of any liability pursuant to Section 1.7
hereof, (e) any other liability incurred by Seller prior to the Closing and not
specifically assumed by Buyer hereunder, (f) any cost or expenses or liability
incurred by Buyer to defend against claims of third persons related to the
Assets, the Assumed Liabilities or its operation of the Business resulting from
or arising out of the acts or omissions of Seller prior to or after the Closing,
(g) any costs and expenses incurred by Buyer resulting from or arising out of
the Seller Obligations pursuant to Section 1.8 hereof, including, without
limitation, any costs and expenses arising from contracts or agreements of
Seller that are not being assumed by Buyer pursuant to the provisions hereof,
and (h) any claim by any person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with Seller (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions. Buyer shall have the right
to deduct any Damages
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due to Seller from the Royalties due Seller pursuant to Section 1.6 hereof.
10.3 Limitation on Seller's Obligations. Seller shall be
required to indemnify Buyer if and only to the extent Damages from the breach of
the representations and warranties contained in Article 4 exceed Twenty Five
Thousand Dollars ($25,000.00); provided, however, breaches of the
representations and warranties contained in Section 4.28 are not subject to this
limitation.
10.4 Indemnification by Buyer. Buyer shall indemnify and hold
harmless Seller, and shall reimburse Seller for, any Damages arising from or in
connection with (a) any inaccuracy in any of the representations and warranties
of Buyer in this Agreement or in any certificate delivered by Buyer pursuant to
this Agreement, or any actions, omissions or state of facts inconsistent with
any such representation or warranty, if notice thereof is given by Seller to
Buyer prior to the second anniversary of the Closing Date, (b) any failure by
Buyer to perform or comply with any agreement in this Agreement, (c) any
liability arising from Buyer's conduct of the Business after the Closing, (d)
any claim arising from Seller's actions as Buyer's agent pursuant to Section 7.4
hereof, or (e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.5 Procedure for Indemnification. Promptly after receipt by
an indemnified party under Section 10.2 or 10.4 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, to assume
the defense thereof with counsel satisfactory to such indemnified party and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such Section for any fees of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party in
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connection with the defense thereof, other than reasonable costs of
investigation. If an indemnifying party assumes the defense of such an action,
(a) no compromise or settlement thereof may be effected by the indemnifying
party without the indemnified party's consent (which shall not be unreasonably
withheld) unless (i) there is no finding or admission of any violation of law or
any violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified party and (ii) the sole relief provided is
monetary damages that are paid in full by the indemnifying party and (b) the
indemnified party shall have no liability with respect to any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld). If notice is given to an indemnifying party of the commencement of
any action and it does not, within ten days after the indemnified party's notice
is given, give notice to the indemnified party of its election to assume the
defense thereof, the indemnifying party shall be bound by any determination made
in such action or any compromise or settlement thereof effected by the
indemnified party. Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that an action
may adversely affect it or its affiliates other than as a result of monetary
damages, such indemnified party may, by notice to the indemnifying party, assume
the exclusive right to defend, compromise or settle such action, but the
indemnifying party shall not be bound by any determination of an action so
defended or any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld).
10.6 Insurance. Neither Buyer nor Seller shall be deemed to have
incurred Damages under this Article 10 if and to the extent that it receives any
insurance proceeds with respect thereto.
10.7 Exclusion. Nothing contained herein shall limit any Person's
liability for fraud or for willful or intentional breach of a representation,
warranty or covenant.
11. Definitions.
As used in this agreement, the following terms have the meanings
specified or referred to in this Section 11.
11.1 "Ancillary Agreements" -- The agreements described in Section 2.
11.2 "Assets" -- See Section 1.2.
11.3 "Assumed Liabilities" -- See Section 1.7.
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11.4 "Business" -- See the second paragraph of this Agreement.
11.5 "Business Day" -- Any day that is not a Saturday or Sunday or a
day on which banks located in the Cities of Toledo, Ohio or Cedar Rapids, Iowa
are authorized or required to be closed.
11.6 "Buyer" -- See the first paragraph of this Agreement.
11.7 "Closing" -- See Section 3.1.
11.8 "Closing Date" -- The date and time of the Closing.
11.9 "Contemplated Transactions" -- The sale of the Assets by Seller to
Buyer, the purchase of the Assets by Buyer from Seller, the assignment to, and
the assumption of the Assumed Liabilities by, Buyer, performance of and
compliance with all agreements contained in this Agreement and the Ancillary
Agreements, and Buyer's exercise of control over the Assets.
11.10 "Damages" -- See Section 10.2.
11.11 "Encumbrance" -- Any security interest, mortgage, lien, charge,
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership which is not a Permitted Exception.
11.12 "Excluded Assets" -- See Section 1.3.
11.13 "Governmental Body" -- Any domestic or foreign national, state or
municipal or other local government or multi-national body (including, but not
limited to, the European Economic Community), any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
11.14 "Inventory" -- See Section 1.2(b).
11.15 "Mandatory Termination Date" -- See Section 9.1(b).
11.16 "Permitted Exception" -- All of the following: (i) liens for
current taxes not yet due and payable or which in good faith are being contested
or litigated and which are not material to the particular Asset they encumber or
to the Business; (ii) mechanics', carriers', workers', or other like liens which
arose in the ordinary course of business securing
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<PAGE> 45
obligations which are not material to the particular Asset such lien encumbers
or to the Business (provided that Seller shall remain responsible for promptly
discharging any obligations pertaining to any such liens and shall defend,
indemnify and hold harmless Buyer from and against any Damages incurred by Buyer
as a result thereof), (iii) matters that would be disclosed by an accurate
survey on the ground of any tract of property relevant to the Assets; (iv) as of
the Closing, restrictions or limitations on the use of any Asset imposed by any
state, federal or local Governmental Body, restrictive covenants, rights-of-way
and easements, other minor title defects, objections, and irregularities in
title, none of which items individually or in the aggregate, have more than an
immaterial effect on the value of such Asset or its present use by Seller.
11.17 "Person" -- Any individual, corporation, limited liability
company, partnership, joint venture, trust, association, unincorporated
organization, other entity, or Governmental Body.
11.18 "Price" -- See Section 1.5(a).
11.19 "Related Party" -- (a) any individual who is a director or
officer of Seller or who is an employee of Seller with aggregate compensation
from it at an annual rate in excess of $50,000, (b) any Person that owns 10
percent or more of the outstanding equity securities of any class of Seller, (c)
any member of the family (as defined in section 267(c)(4) of the Internal
Revenue Code) of, or any individual who has the same home as, any individual (or
the spouse of any such individual) described in clause (a) or (b) of this
section, (d) any trust, estate or partnership of which an individual described
in clause (a), (b) or (c) of this Section is a grantor, fiduciary, beneficiary
or partner or (e) any Person (and any subsidiary of such a Person) of which one
or more Persons described in clause (a), (b), (c) or (d) of this Section have
either (i) aggregate record or beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of at least 10 percent of the
outstanding equity securities or at least 10 percent of the outstanding voting
securities or (ii) the power to direct or to cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
11.20 "Seller" -- See the first paragraph of this Agreement.
11.21 "Solvent" -- (a) the assets and the property of Seller exceeds
its liabilities (including contingent and unliquidated liabilities), (b) after
giving effect to the
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Contemplated Transactions, Seller will not be left with unreasonably small
capital and (c) after giving effect to the Contemplated Transactions, Seller is
able both to service and to pay its liabilities as they mature. In computing the
amount of contingent or unliquidated liabilities at any time, such liabilities
will be computed as the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that is likely to become an actual
or matured liability.
11.22 "Taxes" -- All taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property, sales, use, value added and franchise taxes and customs
duties, imposed by any Governmental Body and any payments with respect thereto
required under any tax-sharing agreement.
11.23 "Tax Returns" -- Any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
12. Notices.
All notices, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by Express Mail, Federal Express or
other express delivery service (receipt requested), in each case to the
appropriate addresses, telex numbers and telecopier numbers set forth below (or
to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties).
(a) If to Buyer:
Systems Alternatives, Inc.
1705 Indian Wood Circle, Suite #100
Maumee, Ohio 43537
Telecopier No.: (419) 891-1045
Attention: John W. Underwood
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<PAGE> 47
with a copy to:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P.O. Box 1008
Columbus, Ohio 43216-1008
Telecopier No.: (614) 464-6350
Attention: George L. Jenkins, Esq.
(b) If to Seller:
Oakdale Research Park
2600 Crosspark Road
Coralsville, Iowa 52241
Telecopier No.: (319) 626-5001
Attention: Robert Squires
with a copy to:
Oakdale Research Park
2600 Crosspark Road
Coralsville, Iowa 52241
Telecopier No.: (319) 626-5001
Attention: William E. McNally
13. Miscellaneous.
13.1 Expenses. Each party shall bear its own expenses incident to the
preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder.
13.2 Specific Performance. The parties acknowledge that the subject
matter of this Agreement (i.e., the Business and the Assets) is unique and that
no adequate remedy at law would be available for breach of this Agreement.
Accordingly, each party agrees that the other party will be entitled to an
appropriate decree of specific performance or other equitable remedies to
enforce this Agreement (without any bond or other security being required) and
each party waives the defense in any action or proceeding brought to enforce
this Agreement that there exists an adequate remedy at law; provided that
specific performance will not be available against a party which is entitled to
terminate this Agreement pursuant to Section 9.1 hereof.
13.3 Captions. The captions in this Agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this
agreement.
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<PAGE> 48
13.4 Attorney's Fees. In any action or proceeding brought by a party to
enforce any provision of this agreement, the prevailing party shall be entitled
to recover the reasonable costs and expenses incurred by it in connection with
that action or proceeding (including, but not limited to, attorneys' fees).
13.5 No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
13.6 Exclusive Agreement; Amendment. This Agreement, plus the
Confidentiality Agreement and the Agreement Regarding Assumed Liabilities,
supersedes all prior agreements among the parties, with respect to their subject
matter, is intended (with the documents referred to herein) to be a complete and
exclusive statement of the terms of the agreement among the parties with respect
thereto and cannot be changed or terminated except by a written instrument
executed by Seller and Buyer.
13.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
13.8 Governing Law. This Agreement and (unless otherwise provided) all
amendments hereof and waivers and consents hereunder shall be governed by the
internal law of the State of Ohio, without regard to the conflicts of law
principles thereof.
13.9 Further Assurances. (a) From and after the Closing, each of the
parties shall, without further consideration, execute and deliver to the other
such other instruments of transfer and assumption, and take such other action,
as the other may request, to carry out the Contemplated Transactions.
(b) Without limiting any provision hereof, Seller hereby effective
as at the Closing constitutes and appoints Buyer, its successors and assigns,
the true and lawful attorney for Seller, with full power of substitution, in the
name of Buyer or in the name of Seller, but for the benefit of Buyer, (i) to
institute and prosecute all proceedings which Buyer may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to the
Assets, properties and Business to be sold and transferred or intended to be
sold and transferred to Buyer as provided in this Agreement, to defend or
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<PAGE> 49
compromise any and all actions, suits or proceedings in respect of any of the
assets, properties and business to be so sold and transferred or intended so to
be, and to do all such acts and things in relation thereto as Buyer shall deem
advisable and (ii) to take all actions which reasonably may deem proper in order
to provide for Buyer the benefits under any claims, contracts, licenses, leases,
commitments, sales orders or purchase orders where any required consent of
another party to the assignment thereof to Buyer pursuant to this Agreement
shall not have been obtained. Seller acknowledges that the foregoing powers are
coupled with an interest and shall be irrevocable by it or by its subsequent
dissolution or in any manner or for any reason. Buyer shall be entitled to
retain for its own account any amounts collected pursuant to foregoing powers,
including any amounts payable as interest in respect thereof.
13.10 Assignment. Buyer may assign its rights, but not its obligations,
under this Agreement to an affiliate. Buyer's obligations hereunder shall not be
terminated or limited by its sale after the Closing Date of any or all of the
Assets or Business or any merger, recapitalization or other reorganization of
Buyer.
13.11 Records. After the Closing, Seller and Buyer shall make available
to the other on reasonable request and provide the other with reasonable access
to personnel previously employed by Seller and to such books, records and
computer data for that party as may be appropriate for use in connection with
their respective tax returns, investigating and/or defending third-party claims
and any claim relating to pre-existing Environmental Conditions and for all
other reasonable uses. Subject to the provisions of this Section 13.11, such
other party may make copies thereof. Such books and records relating to the
Business or the Assets shall be retained in accordance with the holder's records
retention policy, provided, however, thereafter any portion of such books and
records may be destroyed in whole or in part, by the party in possession thereof
upon thirty (30) days' notice to the other party, unless the party to whom such
notice is given shall object, in which event the objecting party shall be given
such records in lieu of destruction thereof. To the extent that any such books
and records contain confidential information of either party, the other party
shall maintain the confidentiality thereof as provided in the Confidentiality
Agreement referred to in Section 13.6.
13.12 Agreements Affecting DJJ. DJJ agrees to be bound and is hereby
bound by, and entitled to the benefits of, the agreements concerning the payment
of Royalties contained in Section 1.6 hereof. In the event of conflict between
the provisions of the DJJ/Seller Agreements and the Royalty
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<PAGE> 50
provisions set forth in Section 1.6 hereof, the Royalty provisions set forth in
Section 1.6 shall control.
13.13 No Third Party Rights. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon, create or give to
any person or entity other than the parties any rights or remedies hereunder or
by reason hereof; the parties expressly agree that there are no intended or
incidental third party beneficiaries to this Agreement; provided, however, that
Buyer is expressly and intentionally made a third party beneficiary to all
license agreements and other contracts and agreements that Buyer has elected at
this time not to assume for purposes of enforcing, at Buyer's discretion
(without any obligation of Buyer to do so), any rights of Seller under such
contracts and agreements, including, without limitation, rights respecting
protection of the Assets being sold to Buyer pursuant to this Agreement.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Agreement to be effective as of the date set forth in the
introductory clause.
Attest: /s/ William E. McNally NEURAL APPLICATIONS CORPORATION
---------------------------
By: William E. McNally By: /s/ Robert A. Squires
------------------------------- ----------------------------------
Its: Secretary Name: Robert A. Squires
------------------------------ --------------------------------
Title: President
-------------------------------
Attest: /s/ J. Paul Trestan SYSTEMS ALTERNATIVES, INC.
---------------------------
By: J. Paul Trestan By: /s/ John W. Underwood
------------------------------- ----------------------------------
Its: Chief Financial Officer Name: John W. Underwood
------------------------------ --------------------------------
Title: President
-------------------------------
Attest: *THE DAVID J. JOSEPH COMPANY
---------------------------
By: By: /s/ Benjamin M. Blemker
------------------------------- ----------------------------------
Its: Name: Benjamin M. Blemker
------------------------------ --------------------------------
Title: President - [illegible]
-------------------------------
Corp. V.P.
-------------------------------
*Solely for purposes of Section
13.12 hereof
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<PAGE> 1
EXHIBIT 2.2
AMENDMENT TO ASSET PURCHASE AGREEMENT
AMENDMENT, dated as of May 25, 1999 (the "Amendment") to the Asset
Purchase Agreement (the "Asset Purchase Agreement"), dated to be effective April
2, 1999 among Systems Alternatives, Inc. ("Buyer"), an Ohio corporation, Neural
Applications Corporation ("Seller"), a Delaware corporation, and The David J.
Joseph Company ("DJJ"), a Delaware corporation.
WHEREAS, the parties desire to amend the Asset Purchase Agreement to
reflect the Royalties due DJJ as of the Closing;
NOW, THEREFORE, of the premises and the mutual covenants and agreement
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Section 1.6 of the Asset Purchase Agreement is hereby amended by
deleting the references to "Forty Five Thousand Dollars ($45,000)" or "$45,000"
and replacing them with "Fifty One Thousand Dollars ($51,000)" or "51,000."
2. When the balance of the accounts receivable is received from
Keystone Steel and Wire and Northstar Steel Company, Seller shall pay the five
percent (5%) Royalty to Buyer and Buyer shall pay it to DJJ and the amount shall
be credited against the $360,000 Royalty Payment.
3. Other than as expressly set forth herein, the Asset Purchase
Agreement is hereby ratified and confirmed and shall remain unchanged in all
other respects.
4. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original copy of the Amendment, and all of which, when
taken together, will be deemed to constitute one and the same agreement.
5. This Agreement will be governed by the internal law of the State of
Ohio, without regard to the conflicts of law principles thereof.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first written above.
NEURAL APPLICATIONS CORPORATION
BY: /s/ Robert A. Squires
---------------------------------------
NAME: Robert A. Squires
-------------------------------------
TITLE: President/CEO
------------------------------------
SYSTEMS ALTERNATIVES, INC.
BY: /s/ John W. Underwood
---------------------------------------
NAME: John W. Underwood
-------------------------------------
TITLE: President
------------------------------------
THE DAVID J. JOSPEH COMPANY
BY: /s/ Benjamin M. Blemker
---------------------------------------
NAME: Benjamin M. Blemker
-------------------------------------
TITLE: Senior Vice President
------------------------------------
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPOARTION
OF
NEURAL APPLICATIONS CORPORATION
* * * *
1. The name of the corporation is
NEURAL APPLICATIONS CORPORATION
2 The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
4. The total number of shares of stock, which the corporation
shall have authority to issue, is One Million (1,000,000) and the par
value of each of such shares is one Dollar ($1.00) amounting in the
aggregate to One million ($1,000,000).
5. The name and mailing address of each incorporator is as
follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
M. C. Kinnamon 1209 Orange Street
Wilmington, DE 19801
T. L. Ford 1209 Orange Street
Wilmington, DE 19801
R. L. Parsons 1209 Wilmington Street
Wilmington, DE 19801
</TABLE>
<PAGE> 2
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized to make,
alter, or repeal the by-laws of the corporation.
8. The corporation reserves the right to amend, alter, change or
repeal any provisions contained in this certificate of Incorporation,
in the manner now or hereafter prescribed by statue, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
9. A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director except for (i) for any breach of the
director's duty or loyalty to the corporation or its stockholders, (ii)
for acts or omission not in good faith or which involve intentional
misconduct or a knowing violation of law, (ii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from
which the director derived any improper personal benefit.
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named, for the purposes of forming a corporation pursuant
to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is our act and
deed and the facts herein stated are true, and accordingly have
hereunto set our hands this 1st day of February 1993.
-----------------------------------
M. C. Kinnamon
-----------------------------------
T. L. Ford
-----------------------------------
R. L. Parsons
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEURAL APPLICATIONS CORPORATION
ARTICLE 1.
The name of this corporation is Neural Applications Corporation.
ARTICLE 2.
The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
ARTICLE 3.
The registered office of this corporation in Delaware is 1209 Orange
Street, Wilmington, Delaware 19801, and the name of its registered agent is The
Corporation Trust Company.
ARTICLE 4.
(a) Authorized Capital Stock. The total number of shares of capital
stock of all classes which this corporation is authorized to issue is 25,000,000
shares, par value $.01 per share, of which 20,000,000 shares are designated
common stock and 5,000,000 shares are designated preferred stock.
(b) Preferred Stock. Authority is expressly vested in the board of
directors of this corporation to authorize the issuance from time to time of one
or more classes or series of preferred stock by resolution or resolutions
adopted by a majority of the board of directors, and to establish the number,
voting powers (full, partial or no voting powers) and designations and the
preferences, qualifications, limitations or restrictions of the shares of each
such class or series.
ARTICLE 5.
-1-
<PAGE> 2
In furtherance, and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, amend, alter,
change, add to or repeal bylaws of this corporation, without any action on the
part of the stockholders. The bylaws made by the directors may be amended,
altered, changed, added to or repealed by the stockholders. Any specific
provision in the bylaws regarding amendment thereof shall be controlling.
ARTICLE 6.
A director of this corporation shall not be personally liable to this
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that this Article 6 shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to this corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv)
for any transaction from which the director derived an improper personal
benefit. This Article 6 shall not eliminate or limit the liability of a director
for any act or omission occurring prior to the effective date of this Article 6.
If the Delaware General Corporation Law is hereafter amended to
authorize any further limitation of the liability of a director, then the
liability of a director of this corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as
amended.
Any repeal or modification of the foregoing provisions of this Article
6 by the stockholders of this corporation shall not adversely affect any right
or protection of a director of this corporation existing at or prior to the time
of such repeal or modification.
ARTICLE 7.
The business and affairs of the Corporation shall be managed by or
under the direction of a board of directors consisting of not less than three
nor more than eleven persons, none of whom need be shareholders. The number of
directors may from time to time be increased or decreased by the stockholders or
the board of directors; provided, however, that, unless such change shall have
been approved by a majority of the entire board of directors, any change in the
number of directors (including, without limitation, changes at an annual meeting
of the stockholders) shall be approved by the affirmative vote of not less than
75% of the votes entitled to be cast by the holders of all then outstanding
shares of common stock.
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<PAGE> 3
The directors shall be divided into three classes as determined by the
board of directors, designated as Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one-third of the total number of
directors then constituting the entire board of directors. At the 1996 annual
meeting of the stockholders, Class I directors shall be elected for a one-year
term, Class II directors shall be elected for a two-year term and Class III
directors for a three-year term. At each succeeding annual meeting of
stockholders thereafter, successors to the class of directors whose terms
expired at that annual meeting shall be elected for a three-year term. If the
number of directors has changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class. In no case will
a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his or her term expires and until his or her successor shall be elected
and qualified, subject, however, to such director's prior death, resignation,
retirement, disqualification or removal from office.
Newly created directorships resulting from any increase in the number
of directors may be filled by a majority of the board of directors then in
office, and any other vacancy on the board of directors resulting from death,
resignation, disqualification, removal or other cause shall be filled solely by
the affirmative vote of a majority of the remaining directors then in office or
a sole remaining director, even if less than a quorum of the board of directors.
Any director elected in accordance with the preceding sentence shall hold office
for the remainder of the full term of the new directorship which was created or
in which the vacancy occurred and until such director's successor shall have
been elected and qualified.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by this corporation shall have the
right, voting separately by class or series, to elect directors at any annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by or
pursuant to the applicable terms of the resolution or resolutions of the board
of directors establishing the rights, designations and preferences of such
preferred stock, and such directors so elected shall not be divided into classes
pursuant to this Article 7 unless expressly provided by such resolutions.
No person other than a person nominated by or on behalf of the board of
directors shall be eligible for election as a director at any annual or special
meeting of stockholders unless a written request that his or her name be placed
in nomination is received from a stockholder of record by the Secretary of this
corporation not less than 60 days prior to the date fixed for the meeting,
together with the written consent of such person to serve as a director.
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<PAGE> 4
Notwithstanding any other provisions of this Certificate of
Incorporation (and notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law or this Certificate of Incorporation), the
affirmative vote of not less than 75% of the votes entitled to be cast by the
holders of all then outstanding shares of common stock shall be required to
amend or repeal, or adopt any provisions inconsistent with, this Article 7.
-4-
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NEURAL APPLICATIONS CORPORATION
The undersigned hereby certifies that Neural Applications Corporation was
incorporated in the State of Delaware on February 1, 1993 and that the following
amendment to its Amended and Restated Articles of Incorporation was duly adopted
by a majority of the stockholders by written consent effective July 22, 1999,
and written notice has been given to those stockholders who have not consented
in writing, in accordance with the provisions of Sections 228 and 242 of the
Delaware General Corporation Law, and that such amendment has not been
subsequently modified or resecinded:
RESOLVED, that Article I of the Amended and Restated Certificate of
Incorporation be stricken and in lieu thereof inserted the following:
"The name of the corporation is Stockpoint, Inc."
IN WITNESS WHEREOF, I have executed this certificate the ____th day of July
1999.
-----------------------------------------
William E. Staib, Chief Executive Officer
<PAGE> 1
EXHIBIT 3.4
BY-LAWS
OF
MILLTECH-HOH, INC.
ARTICLE I
OFFICES
The corporation shall continuously maintain in the State of Illinois a
registered office and a registered agent whose business office is identical with
such registered office, and may have other offices within or without the state.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders
shall be held on the 1st Monday in May of each year or at such time as the board
of directors may designate for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders
may be called either by the president, by the board of directors or by the
holders of not less than one-fifth of all the outstanding shares of the
corporation entitled to vote, for the purpose or purposes stated in the call of
the meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate
any place, as the place of meeting for any annual meeting or for any special
meeting called by the board of directors. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be at the
offices of the company.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place,
date, and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than 10
nor more than 60 days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets not less than 20 nor more than 60 days before the date of the meeting,
either personally or by mail, by or at the direction of the president, or the
secretary, or the officer or persons calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail. addressed to the
shareholder at his or her address as it appears on the records of the
corporation, with postage thereon prepaid. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
the shareholders entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive payment of any dividend, or in
order to make a
<PAGE> 2
determination of shareholders FOR ANY OTHER PROPER PURPOSE, the board of
directors of the corporation may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than 60 days and for a meeting of shareholders, not less than 10 days, or in the
case of a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets, not less than 20 days before the date of such meeting. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. A determination of shareholders shall apply to any adjournment
of the meeting.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer book for shares of the corporation shall make, within 20 days after the
record date for a meeting of shareholders or 10 days before such meeting,
whichever is earlier, a complete list of the shareholders entitled to vote at
such meeting, arranged in alphabetical order, with the address of and the number
of shares held by each, which list, for a period of 10 days prior to such
meeting, shall be kept on file at the registered office of the corporation and
shall be subject to inspection by any shareholder, and to copying at the
shareholder's expense, at any time during usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original share ledger or transfer book, or a duplicate thereof kept
in this State, shall be prima facie evidence as to who are the shareholders
entitled to examine such list or share ledger or transfer book or to vote at any
meeting of shareholders.
SECTION 7. QUORUM. The holders of a majority of the outstanding
shares of the corporation entitled to vote on a matter, represented in person or
by proxy, shall constitute a quorum for consideration of such matter at any
meeting of shareholders, but in no event shall a quorum consist of less than
one-third of the outstanding shares entitled so to vote; provided that if less
than a majority of the outstanding shares are represented at said meeting, a
majority of the shares so represented may adjourn the meeting at any time
without further notice. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting shall be the act of the
shareholders, unless the vote of a greater number or voting by classes is
required by the Business Corporation Act, the articles of incorporation or
these by-laws. At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the original
meeting. Withdrawal of shareholders from any meeting shall not cause failure of
a duly constituted quorum at that meeting.
SECTION 8. PROXIES. Each shareholder may appoint a proxy to vote or
otherwise act for him or her by signing an appointment form and delivering it to
the person so appointed, but no such proxy shall be valid after 11 months from
the date of its execution, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote in each matter submitted to vote at a
meeting of shareholders, and in all elections for directors, every shareholder
shall have the right to vote the number of shares owned by such shareholder for
<PAGE> 3
as many persons as there are directors multiplied by the number of such shares
or to distribute such cumulative votes in any proportion among any number of
candidates. Each shareholder may vote either in person or by proxy as provided
in SECTION 8 hereof.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the
corporation in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares entitled to vote at any given
time.
Shares registered in the name of another corporation, domestic or
foreign, may be voted by any officer, agent, proxy or other legal representative
authorized to vote such shares under the law of incorporation of such
corporation.
Shares registered in the name of a deceased person, a minor ward or a
person under legal disability, may be voted by his or her administrator,
executor or court appointed guardian, either in person or by proxy without a
transfer of such shares into the name of such administrator, executor or court
appointed guardian. Shares registered in the name of a trustee may be voted by
him or her, either in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his or her name if authority to
do so is contained in an appropriate order of the court by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, for a period not to exceed 10 years, by entering into a written
voting trust agreement specifying the terms and conditions of the voting trust,
and by transferring their shares to such trustee or trustees for the purpose of
the agreement. Any such trust agreement shall not become effective until a
counterpart of the agreement is deposited with the corporation at its registered
office. The counterpart of the voting trust agreement so deposited with the
corporation shall be subject to the same right of examination by a shareholder
of the corporation, in person or by agent or attorney, as are the books and
records of the corporation, and shall be subject to examination by any holder of
a beneficial interest in the voting trust, either in person or by agent or
attorney, at any reasonable time for any proper purpose.
SECTION 1l. CUMULATIVE VOTING. In all elections for directors, every
shareholder shall have the right to vote in person or by proxy, the number of
shares owned by him/her, for as many persons as are directors to be elected, or
to cumulate such votes, and give one candidate as many votes as the number of
directors multiplied by the number of his/her shares shall equal, or to
distribute them on the same principle among as many candidates as he/she shall
think fit.
<PAGE> 4
The articles of incorporation may be amended to limit or eliminate
cumulative voting rights in all or specified circumstances, or to limit or deny
voting rights or to provide special voting rights as to any class or classes or
series of shares of the corporation.
SECTION 12. INSPECTORS. At any meeting of shareholders, the
presiding officer may, or upon the request of any shareholder, shall appoint one
or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or
her or by a majority of them if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The REPORT OF the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to
be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of the shareholders, may be taken without a meeting and
without a vote, if a consent in writing, setting forth the action so taken shall
be signed (a) if 5 days prior notice of the proposed action is given in writing
to all of the shareholders entitled to vote with respect to the subject matter
hereof, by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voting or
(b) by all of the shareholders entitled to vote with respect to the subject
matter thereof.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given in writing to those
shareholders who have not consented in writing. In the event that the action
which is consented to is such as would have required the filing of a certificate
under any section of the Business Corporation Act if such action had been voted
on by the shareholders at a meeting thereof, the certificate filed under such
section shall state, in lieu of any statement required by such section
concerning any vote of shareholders, that written consent has been given in
accordance with the provisions of SECTION 7.10 of the Business Corporation Act
and that written notice has been given as provided in such SECTION 7.10.
SECTION 14. VOTING BY BALLOT. Voting on any question or in any
election may be by voice unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the corporation shall be
managed by or under the direction of its board of directors. A majority of the
<PAGE> 5
board of directors may establish reasonable compensation for their services and
the services of other officers, irrespective of any personal interest.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the corporation shall be three (3). Each director shall hold office
until the next annual meeting of shareholders; or until his successor shall have
been elected and qualified. Directors need not be residents of Illinois or
shareholders of the corporation. The number of directors may be increased or
decreased from time to time by the amendment of this section. No decrease shall
have the effect of shortening the term of any incumbent director.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this by-law, immediately after
the annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place for holding of additional regular meetings
without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of
directors any be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place as the place for holding any special
meeting of the board of directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at
least 10 days previous thereto by written notice to each director at his
business address. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegram company. The attendance of a director
at any meeting shall constitute a waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by
these by-laws shall constitute a quorum for transaction of business at any
meeting of the board of directors, provided that if less than a majority of such
number of directors are present at said meeting, a majority of the directors
present may adjourn the meeting at any time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors, unless the act of a greater number is required by
statute, these by-laws, or the articles of incorporation.
SECTION 8. VACANCIES. Any vacancy on the board of directors may be
filled by election at the next annual or special meeting of shareholders. A
majority of the board of directors may fill any vacancy prior to such annual or
special meeting of shareholders.
SECTION 9. RESIGNATION AND REMOVAL OF DIRECTORS. A director may
resign at any time upon written notice to the board of directors. A director may
be
<PAGE> 6
removed with or without cause, by a majority of shareholders if the notice of
the meeting names the director or directors to be removed at said meeting.
SECTION 10. INFORMAL ACTION BY DIRECTORS. The authority of the board
of directors may be exercised without a meeting if a consent in writing, setting
forth the action taken, is signed by all of the directors entitled to vote.
SECTION 11. COMPENSATION. The board of directors, by the affirmative
vote of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise notwithstanding any director conflict of interest. By
resolution of the board of directors, the directors may be paid their expenses,
if any, of attendance at each meeting of the board. No such payment previously
mentioned in this section shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
SECTION 12. PRESUMPTION OF ASSENT. A director of the CORPORATION who
is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be conclusively presumed to have assented to the
action taken unless his or her dissent shall be entered in the minutes of the
meeting or unless he or she shall file his or her written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered or certified mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
SECTION 13. COMMITTEES. A majority of the board of directors may
create one or more committees of two or more members to exercise appropriate
authority of the board of directors. A majority of such committee may transact
business without a meeting by unanimous written consent.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a
chairman of the board, a president, one or more vice-presidents, a treasurer, a
secretary, and such other officers as may be elected or APPOINTED BY THE BOARD
of directors. Any two or more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Vacancies
may be filled or new offices created and filled at any meeting of the board of
directors. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided. Election
of an officer shall not of itself create contract rights.
SECTION 3. REMOVAL. Any officer elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the
<PAGE> 7
best interest of the corporation would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board shall
be the principal executive officer of the corporation. Subject to the direction
and control of the board of directors, he/she shall be in charge of the business
of the corporation; he shall see that the resolutions and directions of the
board of directors are carried into effect except in those instances in which
that responsibility is specifically assigned to some other person by the board
of directors; and, in general he/she shall discharge all duties incident to the
office of chairman of the board and such other duties as may be prescribed by
the board of directors from time to time. He shall preside at all meetings of
the shareholders and of the board of directors. Except in those instances in
which the authority to execute is expressly delegated to another officer or
agent of the corporation or a different mode of execution is expressly
prescribed by the board of directors or these by-laws, he may execute for the
corporation certificates for its shares, and any contracts, deeds, mortgages,
bonds, or other instruments which the board of directors has authorized to be
executed, and he may accomplish such execution either under or without the seal
of the corporation and either individually or with the secretary, any assistant
secretary, or any other officer thereunto authorized by the board of directors,
according to the requirement of the form of the instrument. He may vote all
securities which the corporation is entitled to vote except as and to the extent
such authority shall be vested in a different officer or agent of the
corporation by the board of directors.
SECTION 5. PRESIDENT. The president shall assist the chairman of
the board in the discharge of his/her duties as chairman of the board may direct
and shall perform such other duties as from time to time may be assigned to
him/her by the chairman of the board or by the board of directors. Subject to
the direction and control of the chairman of the board and the board of
directors, he/she shall be in charge of the business of the corporation, if the
chairman of the board is not present; he shall see that the resolutions and
directions OF THE BOARD of directors are carried into effect except in those
instances in which that responsibility is specifically assigned to some other
person by the board of directors; and, in general he/she shall discharge all
duties incident to the office of president and such other duties as may be
prescribed by the chairman of the board and/or board of directors from time to
time. He shall preside at all meetings of the shareholders and of the board of
directors. Except in those instances in which the authority to execute is
expressly delegated to another officer or agent of the corporation or a
different mode of execution is expressly prescribed by the board of directors or
these by-laws, he may execute for the corporation certificates for its shares,
and any contracts, deeds, mortgages, bonds, or other instruments which the board
of directors has authorized to be executed, and he may accomplish such execution
either under or without the seal of the corporation and either individually or
with the secretary, any assistant secretary, or any other officer thereunto
authorized by the board of directors, according to the requirement of the form
of the instrument. He may vote all securities which the corporation is entitled
to vote except as and to the extent such authority shall be vested in a
different officer or agent of the corporation by the board of directors.
SECTION 6. THE VICE-PRESIDENTS. The vice-president (or in the event
there be more than one vice-president, each of the vice-presidents) shall assist
<PAGE> 8
the president in the discharge of his/her duties as the president may direct and
shall perform such other duties as from time to time may be assigned to him/her
by the president or by the board of directors. In the absence of the president
or in the event of his/her inability or refusal to act, the vice-president (or
in the event there be more than one vice-president, the vice-presidents in the
order designated by the board of directors, or by the president if the board of
directors has not made such a designation, or in the absence of any designation,
then in the order of seniority of tenure as vice president) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. Except in those instances in
which the authority to execute is expressly delegated to another officer or
agent of the corporation or a different mode of execution is expressly
prescribed by the board of directors or these by-laws, the vice-president (or
each of them if there are more than one) may execute for the corporation
certificates for its shares and any contracts, deeds, mortgages, bonds or other
instruments which the board of directors has authorized to be executed, and
he/she may accomplish such execution either under or without the seal of the
corporation and either individually or with the secretary, any assistant
secretary, or any other officer thereunto authorized by the board of directors,
according to the requirements of the form of the instrument.
SECTION 7. THE TREASURER. The treasurer shall be the principal
accounting and financial officer of the corporation. He shall: (a) have charge
of and be responsible for the maintenance of adequate books of account for the
corporation; (b) have charge and custody of all funds and securities of the
corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the president
of by the board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors may determine.
SECTION 8. THE SECRETARY. The secretary shall:(a) record the
minutes of the shareholders' and of the board of directors' meetings in one or
more books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation; (d) keep
a register of the post-office address of each shareholder which shall be
furnished to the secretary by such shareholder; (e) sign with the president, or
a vice-president, or any other officer thereunto authorized by the board of
directors, certificates for shares of the corporation, the issue of which shall
have been authorized by the board of directors, and any contracts, deeds,
mortgages, bonds, or other instruments which the board of directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the board of directors or these by-laws; (f) have general charge of the stock
transfer books of the corporation; (g) have authority to certify the by-laws,
resolutions of the shareholders and board of directors and committees thereof,
and other documents of the corporation as true and correct copies thereof, and
(h) perform all duties incident to the office of secretary and such other duties
as from time to time may be assigned to him/her by the president or by the board
of directors.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
Assistant treasurers and assistant secretaries shall perform such duties as
shall
<PAGE> 9
be assigned to them by the treasurer or the secretary, respectively, or by the
president or the board of directors. The assistant secretaries may sign with the
president, or a vice-president, or any other office thereunto authorized by the
board of directors, certificates for shares of the corporation, the issue of
which shall have been authorized by the board of directors, any and contracts,
deeds, mortgages, bonds, or other instruments which the board of directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the board of directors or these by-laws. The assistant treasurers shall
respectively, if required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the board of
directors shall determine.
SECTION 10. SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness is issued in
the name of the corporation, shall be signed by such officer or officers, agent
or agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the board of directors
may select.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 1. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED
SHARES. Shares either shall be represented by certificates or shall be
uncertificated shares.
Certificates representing shares of the corporation shall be signed by
the appropriate officers and may be sealed with the seal or a facsimile of the
seal of the corporation. If a certificate is countersigned by a transfer agent
or
<PAGE> 10
registrar, other than the corporation or its employee, any other signatures may
be facsimile. Each certificate representing shares shall be consecutively
numbered or otherwise identified, and shall also state the name of the person to
whom issued, the number and class of shares (with designation of series, if
any), the date of issue, and that the corporation is organized under Illinois
law. If the corporation is authorized to issue shares of more than one class or
of series within a class, the certificate shall also contain such information or
statement as may be required by law.
Unless prohibited by the articles of incorporation, the board of
directors may provide by resolution that some or all of any class or series of
shares shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until the certificate has been surrendered
to the corporation. Within a reasonable time after the issuance or transfer of
uncertificated shares, the corporation shall send the registered owner thereof a
written notice of all information that would appear on a certificate. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of uncertificated shares shall be identical to those of the holders of
certificates representing shares of the same class and series.
The name and address of each shareholder, the number and class of
shares held and the date on which the shares were issued shall be entered on the
books of the corporation. The person in whose name shares stand on the books of
the corporation shall be deemed the owner thereof for all purposes as regards
the corporation.
SECTION 2. LOST CERTIFICATES. If a certificate representing shares has
allegedly been lost or destroyed, the board of directors may in its discretion,
except as may be required by law, direct that a new certificate be issued upon
such indemnification and other reasonable requirements as it may impose.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the corporation
shall be recorded on the books of the corporation. Transfer of shares
represented by a certificate, except in the case of a lost or destroyed
certificate, shall be made on surrender for cancellation of the certificate for
such shares. A certificate presented for transfer must be duly endorsed and
accompanied by proper guaranty of signature and other appropriate assurances
that the endorsement is effective. Transfer of an uncertificated share shall be
made on receipt by the corporation of an instruction from the registered owner
or other appropriate person. The instruction shall be in writing or a
communication in such form as may be agreed upon in writing by the corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
ARTICLE VIII
DISTRIBUTIONS
<PAGE> 11
The board of directors may authorize, and the corporation may make,
distributions to its shareholders, subject to any restrictions in its articles
of incorporation or provided by law.
ARTICLE IX
SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, Illinois." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced, provided that the affixing of the corporate seal to an
instrument shall not give the instrument additional force or effect, or change
the construction thereof, and the use of the corporate seal is not mandatory.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of
these by-laws or under the provisions of the articles of incorporation or under
the provisions of The Business corporation Act of the State of Illinois, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Attendance at any meeting shall
constitute waiver of notice thereof unless the person at the meeting objects to
the holding of the meeting because proper notice was not given.
ARTICLE XI
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the CORPORATION, OR WHO is or was serving at the request of the
CORPORATION as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
<PAGE> 12
SECTION 2. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonable incurred by such
person in connection with the defense or settlement of such action or suit if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which this court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or
agent of a corporation has been successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in Sections 1 and 2, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses actually and reasonably incurred by such person in connection
therewith.
SECTION 4. Any indemnification under Sections 1 and 2 shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in Sections 1 and 2. Such determination shall be made (a) by the board
of directors by a majority vote of a quorum consisting of the directors who were
not parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
shareholders.
SECTION 5. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding, as authorized by the board
of directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount, unless
it shall ultimately be determined that he or she is entitled to be indemnified
by the corporation as authorized in this Article.
SECTION 6. The indemnification provided by this Article shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any by-law, agreement vote of shareholders or
disinterested directors or otherwise, both as to action in his or her 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.
SECTION 7. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or
<PAGE> 13
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify such person against such liability under the provisions of these
sections.
SECTION 8. If the corporation has paid indemnity or had advanced
expenses to a director, officer, employee or agent, the corporation shall report
the indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting
SECTION 9. For purposes of this Article references to "the
corporation" shall include, in addition to the surviving corporation, any
merging corporation (including any corporation having merged with a merging
corporation) absorbed in a merger which, if its separate existence had continued
would have had the power and authority to indemnify its directors, officers, and
employees or agents, so that any person who was a director, officer, employee or
agent of such merging corporation, or was serving at the request of such merging
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the surviving
corporation as such person would have with respect to such merging corporation
if its separate existence had continued.
SECTION 10. For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries. A person who acted in good faith and in a manner
he or she reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to in
this Article.
ARTICLE XII
AMENDMENTS
Unless the power to make, alter, amend or repeal the by-laws is
reserved to the shareholders by the articles of incorporation, the bylaws of the
corporation may be made, altered, amended or repealed by the shareholders or the
board of directors, but no by-law adopted by the shareholders may be altered,
amended or repealed by the board of directors if the by-laws so provide. The
by-laws may contain any provisions for the regulation and management of the
affairs of the CORPORATION NOT inconsistent with the law or the articles of
incorporation.
<PAGE> 1
EXHBIT 3.5
AMENDED AND RESTATED
BYLAWS
OF
NEURAL APPLICATIONS CORPORATION
ARTICLE I.
OFFICES, CORPORATE SEAL
SECTION 1.01. OFFICES. The Corporation shall have a registered office,
a principal office and such other offices as the Board of Directors may
determine.
SECTION 1.02. CORPORATE SEAL. The Corporation shall have no corporate
seal.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 2.01. PLACE AND TIME OF MEETINGS. Meetings of the stockholders
may be held at such place and at such time as may be designated by the Board of
Directors. In the absence of a designation of place, this meeting shall be held
at the principal office. In the absence of a designation of time, the meeting
shall be held at nine o'clock a.m. Central Standard Time or ten o'clock Central
Daylight Savings Time, regardless of whether or not such meeting is held in the
United States.
SECTION 2.02. ANNUAL MEETINGS. The annual meeting of the stockholders
of the Corporation for the election of directors and for the transaction of any
other proper business, notice of which was given in the notice of the meeting,
shall be held in April of each year on such business day as the Secretary of the
Corporation shall determine from time to time. However, the necessity of such
annual meeting of stockholders may be dispensed with if it is determined by the
President to seek the written consent of the stockholders. If a sufficient
number of written consents are not obtained prior to the time hereinabove
provided, the Board of Directors shall cause an annual meeting to be held as
soon thereafter as possible.
SECTION 2.03. SPECIAL MEETINGS. Special meetings of the stockholders
for any purpose or purposes shall be called by the Secretary at the written
request of a majority of the total number of directors, by Chairman of the
Board, by the President or by the stockholders owning a majority of the shares
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting
shall be limited to the purposes stated in the notice.
<PAGE> 2
SECTION 2.04. QUORUM, ADJOURNED MEETINGS. The holders of a majority of
the shares outstanding and entitled to vote shall constitute a quorum for the
transaction of business at any annual or special meeting. If a quorum is not
present at the meeting, those present shall adjourn to such day as they shall
agree upon by majority vote. Notice of any adjourned meeting need not be given
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At adjourned meetings at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If a quorum is present, the stockholders may continue to
transact business until adjournment notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 2.05. ORGANIZATION. At each meeting of the stockholders, the
Chairman of the Board or in his absence the President or in his absence the
chairman chosen by a majority in voting interest of the stockholders present in
person or by proxy and entitled to vote shall act as chairman; and the Secretary
of the Corporation or in his absence an Assistant Secretary or in his absence
any person whom the chairman of the meeting shall appoint shall act as Secretary
of the meeting.
SECTION 2.06. ORDER OF BUSINESS. The order of business at all meetings
of the stockholders shall be determined by the Chairman of the meeting, but such
order of business may be changed by the vote of a majority in voting interest of
those present or represented at such meeting and entitled to vote thereat.
SECTION 2.07. VOTING. Each stockholder of the Corporation entitled to
vote at a meeting of stockholders or entitled to express consent in writing the
corporate action without a meeting shall have one vote in person or by proxy for
each share of stock having voting rights held by him and registered in his name
on the books of the Corporation. Upon the request of any stockholder, the vote
upon any question before a meeting shall be written by written ballot, and all
elections of directors shall be by written ballot. All questions at a meting
shall be decided by a majority vote of the number of shares entitled to vote
except where otherwise required bay statute, the Certificate of Incorporation or
these Bylaws. Any action to be taken by written consent without a meeting may be
taken by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting in which all shares entitled to vote thereon were present and voted. For
the election of directors, the persons receiving the largest number of votes (up
to and including the number of directors to be elected) shall be directors. If
directors are to be elected by consent in writing of the largest number of
shares in the aggregate and constituting not less than a majority of the total
outstanding shares entitled to consent in writing thereon (up to and including
the number of directors to be elected) shall be directors. Persons holding stock
in a fiduciary capacity shall be entitled to vote the shares so held. If shares
stand of record in the names of two or more persons, whether fiduciaries,
members of a partnership, joint tenants, tenants in common, tenants by the
entirety or otherwise, or if two or more persons shall have the same fiduciary
relationship respecting the same shares, unless the Secretary of the Corporation
shall have been
<PAGE> 3
furnished with a copy of the instrument or order appointing them or creating a
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect:
(i) if only one shall vote, his act shall bind all.
(ii) if more than one shall vote, the act of the majority voting
shall bind all.
(iii) If more than one shall vote, but the votes shall be evenly
split on any particular matter, then, except as otherwise
required by statute, each fraction may vote the shares in
question proportionately.
SECTION 2.08. INSPECTORS OF ELECTION. At each meeting of the
Stockholders, the chairman of such meeting may appoint two inspectors of
election to act. Each inspector of election so appointed shall first subscribe
an oath or affirmation briefly to execute the duties of an inspector of election
at such meeting with strict impartiality and according to the best of his
ability such inspectors of election, if any, shall take charge of the ballots at
such meeting and after the balloting thereat on any question shall count the
ballots thereon and shall make a report in writing to the Secretary of such
meeting of the results thereof. An inspector of election need not be a
stockholder of the Corporation, and any officer or employee of the Corporation
may be an inspector of election on any question other than a vote for or against
his election to any position with the Corporation or on any other question in
which he may be directly interested.
SECTION 2.09. NOTICES OF MEETINGS AND CONSENTS. Every stockholder
shall furnish the Secretary of the Corporation with an address at which notices
of meetings and notices and consent material with respect to proposed corporate
action without a meeting and all other corporate communications may be served on
or mailed to him. Except as otherwise provided by the Certificate of
Incorporation or by statute, a written notice of each annual and special meeting
of stockholders shall be given not less than 10 nor more than 60 days before the
date of such meeting or the date on which the corporate action without a meeting
is proposed to be taken to each stockholder of record of the Corporation
entitled to vote at such meeting by delivering such notice of meeting to him
personally or depositing the same in the United States mail, postage prepaid,
directed to him at the post office address shown upon the records of the
Corporation. Service of notice is complete upon mailing. Personal delivery to
any officer of a corporation or association or to any member of a partnership is
delivery to such corporation, association or partnership. Every notice of a
meeting of stockholders shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called.
SECTION 2.10. PROXIES. Each stockholder entitled to vote at a meeting
of stockholders or consent to corporate action without a meeting may authorize
another person or persons to act for him by proxy by an instrument executed in
writing. If any such instrument designates two or more persons to act as
proxies, a majority of such
<PAGE> 4
persons present at the meeting, or, if only one shall be present, then that one,
shall have and may exercise all of the powers conferred by such written
instrument upon all of the persons so designated unless the instrument shall
otherwise provide. No such proxy shall be valid after three years from the date
of its execution unless the proxy provides for a longer period. A proxy may be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient to support an irrevocable power. Subject
to the above, any proxy may be revoked if an instrument revoking it or proxy
bearing a later date is filed with the Secretary.
SECTION 2.11 WAIVER OF NOTICE. Notice of any annual or special meeting
may be waived either before, at or after such meeting in writing signed by the
person or persons entitled to the notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transacting of any business because the meeting is not lawfully
called or convened.
SECTION 2.12. WRITTEN ACTION. Any action that may be taken at a
meeting of the stockholders may be taken without a meeting, without prior notice
and without a vote if a consent in writing, setting forth the actions so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be required to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
SECTION 2.13. STOCKHOLDER LIST. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
each meeting of the stockholders, a complete list of the stockholders entitled
to vote at such meeting, arranged in alphabetical order and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten 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 shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any stockholder
who is present.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 3.01. GENERAL POWERS. The business of the Corporation shall be
managed by the Board of Directors.
<PAGE> 5
SECTION 3.02. NUMBER, QUALIFICATION AND TERM OF OFFICE. The number of
directors shall be established by a resolution adopted by a majority of the
total number of directors. Directors need not be stockholders. Each director
shall hold office until the annual meeting of stockholders next held after his
election or until the stockholders have elected directors by consent in writing
without a meeting and until his successor is elected and qualified or until his
earlier death, resignation or removal.
SECTION 3.03. ANNUAL MEETING. As soon as practicable after each
election of directors, the Board of Directors shall meet at the registered
office of the Corporation, or at such other place previously designated by the
Board of Directors, for the purpose of electing the officers of the Corporation
and for the transaction of such other business as may come before the meeting.
SECTION 3.04. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held from time to time at such time and place as may be fixed
by resolution adopted by a majority of the total number of directors.
SECTION 3.05. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, or by any
two of the directors and shall be held from time to time at such time and place
as may be designated in the notice of such meeting.
SECTION 3.06. NOTICE OF MEETINGS. No notice need be given of any
annual or regular meeting of the Board of Directors. Notice of each special
meeting of the Board of Directors shall be given by the secretary who shall give
at least twenty-four hours' notice thereof to each directors by mail, telephone,
telegram, or in person. Notice shall be effective upon receipt.
SECTION 3.07. WAIVER OF NOTICE. Notice of any meeting of the Board of
Directors may be waived either before, at, or after such meeting in writing
signed by each director. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purposes of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 3.08. QUORUM. A majority of the total number of directors
shall constitute a quorum for the transaction of business. The vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors unless these Bylaws require a greater
number.
SECTION 3.09. VACANCIES. Any vacancy among the directors or increase
in the authorized number of directors shall be filled for the unexpired term by
a majority of the directors then in office though less than a quorum or by the
sole remaining director. When one or more directors shall resign from the Board,
effective at a future date, a
<PAGE> 6
majority of the directors then in office may fill such vacancy or vacancies to
take effect when such resignation or resignations shall become effective.
SECTION 3.10. REMOVAL. Any director may be removed from office at any
special meeting of the stockholders either with or without cause. If the entire
Board of Directors or any one or more directors be so removed, new directors
shall be elected at the same meeting.
SECTION 3.11. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution adopted by a majority of the total number of directors, designate one
or more committees, each to consist of two or more of the directors of the
Corporation, which, to the extent provided in the resolution, may exercise the
powers of the Board of Directors in the management of the business and affairs
of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Such committees shall have
such name or names as may be determined by the resolution adopted by the
directors. The committees shall keep regular minutes of their proceedings and
report the same to the Board of Directors when required.
SECTION 3.12. WRITTEN ACTION. Any action required or permitted to be
taken at a meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all directors or committee members consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board of Directors or committee.
SECTION 3.13. COMPENSATION. Directors who are not salaried officers of
the Corporation may receive a fixed sum per meeting attended or a fixed annual
sum and such other forms of reasonable compensation as may be determined by
resolution of the Board of Directors. All directors shall receive their
expenses, if any, of attendance at meetings of the Board of Directors or any
committee thereof. Any director may serve the Corporation in any other capacity
and receive proper compensation therefor.
SECTION 3.14. CONFERENCE COMMUNICATIONS. Directors may participate in
an meeting of the Board of Directors, or of any duly constituted committee
thereof, by means of a conference telephone conversation or other comparable
communication technique whereby all persons participating in the meeting can
hear and communicate to each other. For the purposes of establishing a quorum
and taking any action at the meeting, such directors participating pursuant to
this Section 3.14 shall be deemed present in person at the meeting; and the
place of the meeting shall be the place of origination of the conference
telephone conversation or other comparable communication technique.
<PAGE> 7
ARTICLE IV.
OFFICERS
SECTION 4.01. NUMBER. The officers of the Corporation shall consist of
a President, at least one Vice President, a Secretary, a Treasurer, and any
officers and agents as the Board of Directors by a majority vote of the total
number of directors may designate. Any person may hold two or more offices.
SECTION 4.02. ELECTION, TERM OF OFFICE, AND QUALIFICATIONS. At each
annual meeting of the Board of Directors all officers, from within or without
their number, shall be elected. Such officers shall hold office until the next
annual meeting of the directors or until their successors are elected and
qualified, or until such office is eliminated by a vote of the majority of all
directors. Officers who may be directors shall hold office until the election
and qualification of their successors notwithstanding an earlier termination of
their directorship.
SECTION 4.03. REMOVAL AND VACANCIES. Any officer may be removed from
his office by a majority vote of the total number of directors with or without
cause. Such removal shall be without prejudice to the contract rights of the
person so removed. A vacancy among the officers by death, resignation, removal,
or otherwise shall be filled for the unexpired term by the Board of Directors.
SECTION 4.04. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
is elected, shall preside at all meetings of the stockholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
Board of Directors.
SECTION 4.05. PRESIDENT. The President shall have general active
management of the business of the Corporation. He shall preside at all meetings
of the stockholders and directors. He shall be the chief executive officer of
the Corporation and shall see that all orders and resolutions of the directors
are carried into effect. He shall be ex officio a member of all standing
committees. He may execute and deliver in the name of the Corporation any deeds,
mortgages, bonds, contracts or other instruments pertaining to the business of
the Corporation and in general shall perform all duties usually incident to the
office of the president. He shall have such other duties as may, from time to
time, be prescribed by the Board of Directors.
SECTION 4.06. VICE PRESIDENT. Each Vice President shall have such
powers and shall perform such duties as may be prescribed by the Board of
Directors or by the President. In the event of absence or disability of the
President, Vice Presidents shall succeed to his power and duties in the order
designated by the Board of Directors.
SECTION 4.07. SECRETARY. The Secretary shall by secretary of and shall
attend all meetings of the stockholders and Board of Directors and shall record
all
<PAGE> 8
proceedings of such meetings in the minute book of the Corporation. He shall
give proper notice of meetings of stockholders and the Board of Directors. He
shall perform such other duties as may from time to time be prescribed by the
Board of Directors or by the President.
SECTION 4.08. TREASURER. The Treasurer shall keep accurate accounts of
all moneys of the Corporation received or disbursed. He shall deposit all
moneys, drafts and checks in the name of and to the credit of the Corporation in
such banks and depositaries as a majority of the whole Board of Directors shall
from time to time designate. He shall have the power to endorse for deposit all
notes, checks and drafts received by the Corporation. He shall disburse the
funds of the Corporation as ordered by the directors, making proper vouchers
therefor. He shall render to the President and the Board of Directors whenever
required an account of all his transactions as Treasurer and of the financial
condition of the Corporation and shall perform such other duties as may from
time to time be prescribed by the Board of Directors or by the President.
SECTION 4.09. DUTIES OF OTHER OFFICERS. The duties of such other
officers and agents as the Board of Directors may designate shall be set forth
in the resolution creating such office or by subsequent resolution.
SECTION 4.10. COMPENSATION. The officers of the Corporation shall
receive such compensation for their services as may be determined from time to
time by resolution of the Board of Directors or by one or more committees to the
extent so authorized from time to time by the Board of Directors.
ARTICLE V.
SHARES AND THEIR TRANSFER
SECTION 5.01. CERTIFICATES FOR STOCK. The shares of stock of the
Corporation shall be represented by certificates, provided that the Board of
Directors may provide by resolution or resolutions that some or all of any or
all classes or series of the Corporation's stock shall be uncertificated shares.
Any such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the Corporation. Notwithstanding the adoption
of such a resolution by the Board of Directors, every holder of stock
represented by certificates, and upon request every holder of uncertificated
shares, shall be entitled to a certificate, to be in such form as shall be
prescribed by the Board of Directors, certifying the number of share in the
Corporation owned by such person. The certificates for such shares shall be
numbered in the order in which they shall be issued and shall be signed in the
name of the Corporation by the Chairman of the Board, the President or a vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary. Every certificate surrendered to the Corporation for
exchange or transfer shall be canceled, and no new certificate or certificates
shall be issued in exchange for any existing certificate until such certificate
shall have been so canceled, except in cases provided for in Section 5.05.
<PAGE> 9
SECTION 5.02. ISSUANCE OF STOCK. The Board of directors is authorized
to cause to be issued stock of the Corporation up to the bull amount authorized
by the Certificate of Incorporation in such amounts and for such consideration
as may be determined by the Board of Directors. No shares shall be allotted
except in consideration of cash, labor, personal property, or real property, or
leases thereof, or of an amount transferred from surplus to stated capital upon
a share dividend. At the time of such allotment of stock, the Board of Directors
shall state its determination of the fair value to the Corporation in monetary
terms of any consideration other than cash for which share are allotted. Stock
so issued shall be fully paid and non-assessable. The amount of consideration to
be received in cash or otherwise shall not be less than the par value of the
shares so allotted. Treasury shares may be disposed of by the Corporation for
such consideration, expressed in dollars, as may be fixed by the Board of
Directors.
SECTION 5.03. PARTLY PAID STOCK. The Corporation may issue the whole
or any part of its stock as partly paid and subject to call for the remainder of
the consideration to be paid therefor. Upon the face or back of each certificate
issued to represent any such partly paid stock, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid stock, the Corporation shall
declare a dividend upon partly paid stock of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon. The Board of
Directors may, from time to time, demand payment, in respect of each share of
stock not fully paid, of such sum of money as the necessities of the business
may, in the judgment of the Board of Directors, require, not exceeding in the
whole the balance remaining unpaid on such stock, and such sum so demanded shall
be paid to the Corporation at such times and by such installments as the
directors shall direct. The directors shall give written notice of the time and
place of such payments, which notice shall be mailed at least 30 days before the
time for such payment, to each holder of or subscriber for stock which is not
fully paid at his last know post office address.
SECTION 5.04. TRANSFER OF STOCK. Transfer of stock on the books of the
Corporation may be authorized only by the stockholder, the stockholder's legal
representative or the stockholder's duly authorized attorney-in-fact and only
upon, for stock represented by certificates, the surrender of the certificate or
the certificates representing such stock or, for stock not represented by
certificates, the submission of a duly executed assignment covering such stock.
The Corporation may treat as the absolute owner of stock of the Corporation the
person or persons in whose name stock is registered on the books of the
Corporation.
SECTION 5.05. LOSS OF CERTIFICATES. Any stockholder claiming a
certificate for stock to be lost, stolen or destroyed shall make an affidavit of
that fact in such form as the Board of Directors may require and shall, if the
Board of Directors may require, give the Corporation a bond of indemnity in
form, in an amount, and with one or more sureties satisfactory to the Board of
Directors, to indemnify the Corporation against any claims which may then be
issued in the same tenor and for the same number of shares as the one claimed to
have been lost, stolen or destroyed.
<PAGE> 10
SECTION 5.06. FACSIMILE SIGNATURES. Whenever any certificate is
countersigned by a transfer agent or by a registrar other than the Corporation
or its employee, then the signatures of the officers or agents of the
Corporation may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed on any such
certificate shall cease to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation as though the
person who signed such certificate or whose facsimile signature or signatures
had been placed thereon were such officer, transfer agent or registrar at the
date of issue.
ARTICLE VI.
DIVIDENDS, SURPLUS, ETC.
SECTION 6.01. DIVIDENDS. The Board of Directors may declare dividends
from the Corporation's surplus, or if there be none, out of its net profits for
the current fiscal year, and/or the preceding fiscal year in such amounts as in
their opinion the condition of the affairs of the Corporation shall render it
advisable unless otherwise restricted by law.
SECTION 6.02. USE OF SURPLUS, RESERVES. The Board of Directors may use
any of its property or funds, unless such would cause an impairment of capital,
in purchasing any of the stock, bonds, debentures, notes, scrip or other
securities or evidences of indebtedness of the Corporation. The Board of
Directors may from time to time set aside from its surplus or net profits such
sums as it deems proper as a reserve fund for any purpose.
ARTICLE VII.
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
SECTION 7.01. BOOKS AND RECORDS. The Board of Directors of the
Corporation shall cause to be kept: (a) a share ledger which shall be a charge
of an officer designated by the Board of Directors; (b) records of all
proceedings of stockholders and directors; and (c) such other records and books
of account as shall be necessary and appropriate to the conduct of the corporate
business.
SECTION 7.02. AUDIT. The Board of Directors shall cause the records
and books of account of the Corporation to be audited at least once in each
fiscal year and at such other times as it may deem necessary or appropriate.
SECTION 7.03. ANNUAL REPORT. The Board of Directors shall cause to be
filed with the Delaware Secretary of State in each year the annual report
required by law.
SECTION 7.04. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
<PAGE> 11
SECTION 7.05. EXAMINATION BY STOCKHOLDERS. Any stockholder of record
of the Corporation, upon written demand under oath stating the purpose thereof,
shall have the right to inspect in person or by agent or attorney, during usual
business hours, for any proper purpose, the Corporation's stock ledger, a list
of its stockholders and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean a purpose reasonably related to
such person's interest as a stockholder. Holders of voting trust certificates
representing stock of the Corporation shall be regarded as stockholders for the
purpose of this subsection. In every instance where an attorney or other agent
shall be the person who seeks the right to inspection, the demand under oath
shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in Delaware or at its principal office.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01. INDEMNIFICATION. The Corporation shall indemnify such
persons for such liabilities in such manner under such circumstances and to such
extent as permitted by Section 245 of the Delaware General Corporation Law, as
now enacted or hereafter amended. The Board of Directors may authorize the
purchase and maintenance of insurance and/or the execution of individual
agreements for the purpose of such indemnification, and the Corporation shall
advance all reasonable costs and expenses (including attorney's fees) incurred
in defending any action, suit or proceeding to all persons entitled to
indemnification under this section 8.01, all in the manner, under the
circumstances and to the extent permitted by Section 145 of the Delaware General
Corporation Law, as now enacted or hereafter amended.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a 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 lawful action,
The Board of Directors may fix, in advance, a record date, which shall not be
more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action.
(b) If no record date is fixed:
(1) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is
given, or, if notice is
<PAGE> 12
waived, at the close of business on the day next preceding the
day on which the meeting is held.
(2) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed.
(3) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(c) A determination of stockholders of record entitle to notice of or vote
at a Meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 9.02. PERIODS OF TIME. During any period of time prescribe by
these Bylaws, the date from which the designated period of time begins to run
shall not be included, and the last day of the period so computed shall be
included.
SECTION 9.03. VOTING SECURITIES HELD BY THE CORPORATION. Unless
otherwise ordered by the Board of Directors, the President shall have full power
and authority on behalf of the Corporation (a) to attend and to vote at any
meeting of security holders of other corporations in which the Corporation may
hold securities; (b) to execute any proxy for such meeting on behalf of the
Corporation; or (c) to execute a written action in lieu of a meeting of such
other corporation on behalf of the Corporation. At such meeting, by such proxy
or by such writing in lieu of meeting, the President shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities that the Corporation might have possessed and exercised if it had
been present. The Board of Directors may, from time to time, confer like powers
upon any person or persons.
SECTION 9.04. PURCHASE AND SALE OF SECURITIES. Unless otherwise
ordered by the Board of Directors, the President shall have full power and
authority on behalf of the Corporation to purchase, sell, transfer or encumber
any and all securities of any other corporation owned by the Corporation and may
execute and deliver such documents as may be necessary to effectuate such
purchase, sale, transfer or encumbrance. The Board of Directors may, from time
to time, confer like powers upon any other person or persons.
<PAGE> 13
ARTICLE X.
AMENDMENTS
SECTION 10.01. These Bylaws may be amended, altered or repealed by a
vote of the majority of the total number of directors or of the stockholders at
nay meeting upon proper notice.
EFFECTIVE DATE OF BYLAWS: DECEMBER 1, 1995
<PAGE> 1
EXHIBIT 4.1
No. Shares
----------- ------------
STOCKPOINT.
THIS CERTIFIES THAT is the owner of
-----------------------------------------
Shares of the Capital Stock of
- ------------------------------------------------
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate
to be signed by its duly authorized officers and its Corporate Seal to be
hereunto affixed this day of A.D.
-------------- --------------------
SHARES $ EACH
<PAGE> 2
CERTIFICATE
FOR
SHARES
OF THE
CAPITAL STOCK
ISSUED TO
DATE
For Value Received hereby sell, assign and transfer unto
------------
- -------------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------
of the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
---------------------------------------------
Attorney to transfer the said Stock on the books of the within named Company
with full power of substitution in the premises.
Dated
---------------------------
In presence of
---------------------------------------------------
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as
of August 15, 1997, by and among Neural Applications Corporation, a Delaware
corporation (the "Company"), and the persons listed on the signature page hereof
(the "Purchasers").
WHEREAS, the Purchasers have agreed to purchase shares of the Company's
Convertible Series C Voting Preferred Stock (the "Series C Preferred Stock").
WHEREAS, in connection with such purchase, the Company and the
Purchasers desire to enter into certain arrangements with respect to the
registration for public sale under the Securities Act of 1933, as amended (the
"Securities Act"), of the shares of the Company's Common Stock, $.01 par value
per share, issuable upon conversion of the Series C Preferred Stock.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers
hereby agree as follows:
1. Definitions.
1.1 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 "Company" shall mean Neural Applications Corporation, a
Delaware corporation.
1.3 "Common Shares" shall mean the shares of common stock, par
value $.01 per share, authorized by the Company's Certificate of Incorporation
and any additional shares of common stock which may be authorized in the future
by the Company, and any stock into which such Common Shares may hereafter be
changed, and shall also include capital stock of any other class of the Company
which is not preferred as to dividends or assets over any other class of stock
of the Company and which is not subject to redemption.
1.4 "Public Offering" shall mean any offering of Common Shares
to the public, either on behalf of the Company or any of its security holders,
pursuant to an effective registration statement under the Securities Act.
1
<PAGE> 2
1.5 "Purchasers" shall mean the holders from time to time of
the Series C Preferred Stock.
1.6 "Registrable Securities" shall mean (a) the Common Shares
at any time issued or subject to issuance upon the conversion of the Series C
Preferred Stock and any other series of preferred stock, warrants, options or
rights, the holders of which are granted registration rights by agreement with
the Company and (b) any additional securities issued with respect to the
above-described securities upon any stock split, stock dividend,
recapitalization, or similar event. Registrable Securities shall cease to be
Registrable Securities when (x) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (y) such securities shall be eligible to be distributed
pursuant to Rule 144 under the Securities Act in a single three-month period by
the holder thereof or (z) such securities shall have ceased to be outstanding.
1.7 "Registration Expenses" shall mean the expenses described
in Section 5.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.9 "Series C Preferred Stock" shall mean the outstanding
shares of the Convertible Series C Voting Preferred Stock, par value $.01 per
share, of the Company, and any securities (other than Common Shares) into which
such shares may hereafter be changed.
2. Demand Registration.
2.1 Subject to Sections 2.4 and 2.5, if at any time after one
year has elapsed from the date the Company first consummates a Public Offering
pursuant to a registration statement on Form S-1 or Form SB-2, the Company shall
receive a written request therefor from the record holder or holders of an
aggregate of at least 51% of the Registrable Securities, the Company shall
prepare and file a registration statement under the Securities Act covering such
number of Registrable Securities as are the subject of such request and shall
use its best efforts to cause such registration statement to become effective.
Upon the receipt of a registration request meeting the requirements of this
Section 2.1, the Company shall promptly give written notice to all other record
holders of Registrable Securities that such registration is to be effected. The
Company shall include in such registration statement such additional Registrable
Securities as such other record holders request in writing within thirty (30)
days after the date of the Company's written notice to them. If (a) the holders
of a majority of the Registrable Securities for which registration has been
requested pursuant to this Section 2.1 determine for any reason not to proceed
with the registration at any time before the related registration statement has
been declared effective by the Commission, (b) such
2
<PAGE> 3
registration statement, if theretofore filed with the Commission, is withdrawn
and (c) the holders of the Registrable Securities subject to such registration
statement agree to bear their own Registration Expenses incurred in connection
therewith and to reimburse the Company for the Registration Expenses incurred by
it in such connection or if such registration statement, if theretofore filed
with the Commission, is withdrawn at the initiative of the Company, then the
holders of the Registrable Securities shall not be deemed to have exercised
their demand registration right pursuant to this Section 2.1.
2.2 At the request of the holders of a majority of the
Registrable Securities to be registered, the method of disposition of all
Registrable Securities included in such registration shall be an underwritten
Public Offering. The managing underwriter of any such Public Offering shall be
selected by the Company. If in the good faith judgment of the managing
underwriter of such Public Offering, the inclusion of all of the Registrable
Securities the registration of which has been requested would interfere with
their successful marketing, the number of Registrable Securities to be included
in the Public Offering shall be reduced, pro rata, among the requesting holders
thereof in proportion to the number of Registrable Securities included in their
respective requests for registration. Registrable Securities that are so
excluded from such underwritten Public Offering shall be withheld by the holders
thereof for such period, not exceeding one hundred and twenty (120) days, as the
managing underwriter reasonably determines is necessary to effect such Public
Offering.
2.3 The Company shall be obligated to prepare, file and cause
to be effective only one (1) registration statement pursuant to Section 2.1.
2.4 Notwithstanding the foregoing, the Company may delay
initiating the preparation and filing of any registration statement requested
pursuant to Section 2.1 for a period not to exceed one hundred eighty (180) days
if, in the good faith judgment of the Company's Board of Directors, effecting
the registration would adversely affect a proposed Public Offering by the
Company or would require the premature disclosure of any financing, acquisition,
disposition of assets or stock, merger or other comparable transaction or would
require the Company to make public disclosure of information the public
disclosure of which could have material adverse effect on the Company.
2.6 Notwithstanding anything to the contrary contained herein,
at any time within thirty (30) days after receiving a demand for registration
pursuant to Section 2.1, the Company may elect to effect an underwritten primary
registration in lieu of the requested registration. If the Company so elects,
the Company shall give prompt written notice to all holders of Registrable
Securities of its intention to effect such a registration and shall afford such
holders the rights contained in Article 3 with
3
<PAGE> 4
respect to "piggyback" registrations. In such event, the demand for registration
pursuant to Section 2.1 shall be deemed to have been withdrawn.
3. Piggyback Registration.
3.1 From and after the date on which one year has elapsed from
the date the Company first consummates a Public Offering pursuant to a
registration statement on Form S-1 or Form SB-2, each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for money of any of its securities by it or any of its security holders
(other than a registration statement on Form S-8, Form S-4 or other limited
purpose form), the Company will give written notice of its determination to all
record holders of Registrable Securities. Upon the written request of a record
holder of any Registrable Securities given within 30 days after the date of any
such notice from the Company, the Company will, except as herein provided, cause
all Registrable Securities the registration of which is requested to be included
in such registration statement, all to the extent requisite to permit the sale
or other disposition by the prospective seller or sellers of the Registrable
Securities to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any registration;
and provided, further, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the
Commission, and the Company's decision not to proceed is primarily based upon
the anticipated Public Offering price of the securities to be sold by the
Company, the Company shall promptly complete the registration for the benefit of
those selling security holders who wish to proceed with a Public Offering of
their Registrable Securities and who agree to bear all of the Registration
Expenses in excess of $25,000 incurred by the Company as the result of such
registration after the Company has decided not to proceed. In the discretion of
the holders of the Registrable Securities to be included in the registration
(provided that such holders are the record holders of at least 51% of the
Registrable Securities), such registration may count as a demand registration
under Section 2.1 (if it otherwise meets the requirements of Section 2.1) for
which the Company will pay all Registration Expenses.
3.2 If any registration pursuant to Section 3.1 is
underwritten in whole or in part, the Company may require that the Registrable
Securities included in the registration be included in the underwriting on the
same terms and conditions as the securities otherwise being sold through the
underwriters. If, in the good faith judgment of the managing underwriter of the
Public Offering, the inclusion of all of the Registrable Securities originally
covered by requests for registration would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of the shares
offered by the Company, the number of Registrable Securities to be included in
the Public Offering may be reduced in the following manner: first, securities
held by officers and directors of the Company (other than Registrable
Securities) shall be excluded from such underwritten public offering to the
extent
4
<PAGE> 5
required by the managing underwriter, second, if a further reduction in
the Public Offering is required, any securities, other than Registrable
Securities, proposed to be sold in the Public Offering by persons other than the
Company shall be excluded and third, if a further reduction in the Public
Offering is required, the Registrable Securities requested to be included in the
Public Offering shall be reduced, pro rata, among the requesting holders thereof
in proportion to the number of Registrable Securities included in their
respective requests for registration. The Registrable Securities which are thus
excluded from the underwritten Public Offering shall be withheld from the market
by the holders thereof for a period which the managing underwriter reasonably
determines is necessary in order to effect the Public Offering.
4. Short Form Registration. In addition to the registration rights
provided in Articles 2 and 3, if the Company qualifies for the use of Form S-3
or any similar registration form then in force, the Company shall on one
occassion at its expense at the request of a majority of the holders of
Registrable Securities then outstanding file a registration statement on such
form covering Registrable Securities on behalf of such holder or holders. The
Company shall give notice to all the holders of Registrable Securities who did
not join in such request and afford them a reasonable opportunity to do so.
5. Registration Procedures. If and whenever the Company is required by
the provisions of Article 2, Article 3 or Articles 4 to effect a registration of
Registrable Securities under the Securities Act, the Company will use its best
efforts to effect the registration and sale of such Registrable Securities in
accordance with the intended methods of disposition specified by the holders
participating therein. Without limiting the foregoing, the Company in each such
case will, as expeditiously as possible:
5.1 In the case of a demand registration pursuant to Section
2.1 or Article 4, prepare and file with the Commission the requisite
registration statement to effect such registration (including such audited
financial statements as may be required by the Securities Act or the rules and
regulations thereunder) and use its best efforts to cause such registration
statement to become effective; provided, however, that as far in advance as
practical before filing such registration statement or any amendment thereto,
the Company will furnish counsel for the requesting holders of Registrable
Securities with copies of reasonably complete drafts of all such documents
proposed to be filed (including exhibits), and any such holder shall have the
opportunity to object to any information pertaining solely to such holder that
is contained therein and the Company will make the corrections reasonably
requested by such holder with respect to such information prior to filing such
registration statement or amendment.
5.2 Prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Securities Act with respect
to the
5
<PAGE> 6
disposition of all Registrable Securities included in such registration
statement, in accordance with the intended methods of disposition thereof, until
the earlier of (a) such time as all of the Registrable Securities included in
such registration statement have been disposed of in accordance with the
intended methods of disposition by the holder or holders thereof as set forth in
such registration statement or (b) one hundred eighty (180) days after such
registration statement becomes effective.
5.3 Promptly notify each requesting holder and the underwriter
or underwriters, if any, of:
(a) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become effective;
(b) any written request by the Commission for amendments or
supplements to such registration statement or prospectus;
(c) any notification received by the Company from the
Commission regarding the Commission's initiation of any proceeding with
respect to, or of the issuance by the Commission of, any stop order
suspending the effectiveness of such registration statement; and
(d) the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws of
any jurisdiction.
5.4 Furnish to each holder of Registrable Securities included
in such registration statement such number of conformed copies of such
registration statement and of each amendment and supplement thereto, and such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 promulgated under the Securities Act relating to
such seller's Registrable Securities, and such other documents, as such holder
may reasonably request to facilitate the disposition of its Registrable
Securities.
5.5 Use its best efforts to register or qualify all
Registrable Securities included in such registration statement under the
securities or "blue sky" laws of such states as each holder of Registrable
Securities shall reasonably request within twenty (20) days following the
original filing of such registration statement and to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or advisable
to enable such holder to consummate the disposition in such states of the
Registrable
6
<PAGE> 7
Securities owned by such holder, except that the Company shall not
for any such purpose be required (a) to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this Section 5.5 be obligated to be so qualified, (b) to consent
to general service of process in any such jurisdiction or (c) to subject itself
to taxation in any such jurisdiction by reason of such registration or
qualification.
5.6 Use its best efforts to cause all Registrable Securities
included in such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
each holder thereof to consummate the disposition of such Registrable
Securities.
5.7 Notify each holder whose Registrable Securities are
included in such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which any prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and at the request of any such holder promptly
prepare and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5.8 Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission.
5.9 Use its best efforts to cause all Registrable Securities
included in such registration statement to be listed, upon official notice of
issuance, on any securities exchange or quotation system on which any of the
securities of the same class as the Registrable Securities are then listed.
5.10 The Company may require each holder whose Registrable
Securities are being registered to, and each such holder, as a condition to
including Registrable Securities in such registration statement, shall, furnish
the Company and the underwriters with such information and affidavits regarding
such holder and the distribution of such Registrable Securities as the Company
and the underwriters may from time to time reasonably request in writing in
connection with such registration statement. At any time during the
effectiveness of any registration statement covering Registrable Securities
offered by a holder, if such holder becomes aware of any change materially
affecting the accuracy of the information contained in such registration
7
<PAGE> 8
statement or the prospectus (as then amended or supplemented) relating to such
holder, it will immediately notify the Company of such change.
5.11 Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5.7, each holder will
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder receives the copies of the supplemented or amended prospectus
contemplated by Section 5.7 and, if so directed by the Company, shall deliver to
the Company all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities.
6. Expenses. With respect to any registration requested pursuant
to Article 2 (except as otherwise provided in such Article with respect to a
registration voluntarily terminated at the request of the requesting holders of
Registrable Securities), Article 3 (except as otherwise provided in such Article
with respect to a registration continued by holders of Registrable Securities
who wish to proceed with a Public Offering that is withdrawn by the Company) or
Article 4, the Company shall bear all of the expenses ("Registration Expenses")
incident to the Company's performance of or compliance with its obligations
under this Agreement in connection with such registration including, without
limitation, all registration, filing, securities exchange listing and NASD fees,
all registration, filing, qualification and other fees and expenses or complying
with state securities or "blue sky" laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, premiums and other costs of any
policies of insurance against liabilities arising out of the Public Offering of
the Registrable Securities being registered obtained by the Company (it being
understood that the Company shall have no obligation to obtain such insurance)
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities; but excluding underwriting discounts and commissions and
transfer taxes, if any, in respect of Registrable Securities and any fees and
disbursements of counsel and accountants to the holders of the Registrable
Securities, which discounts, commissions, transfer taxes, fees and disbursements
shall in any registration be payable by the holders of the Registrable
Securities being registered, pro rata in proportion to the number of Registrable
Securities being sold by them.
7. Indemnification.
7.1 The Company will, to the full extent permitted by law,
indemnify and hold harmless each holder of Registrable Securities which are
included in a registration statement pursuant to the provisions of this
Agreement, and its directors,
8
<PAGE> 9
officers and partners and each other person, if any, who controls such holder
within the meaning of the Securities Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (collectively,
"Losses") to which such holder or any such director, officer, partner or
controlling person may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in a
registration statement prepared and filed hereunder, any preliminary, final or
summary prospectus contained therein or any amendment or supplement thereto or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, and the Company will reimburse the holder and each such director,
officer, partner and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
against any such Losses (or action or proceeding in respect thereof); provided,
however, that the Company will not be liable in any such case to the extent that
any such Losses arise out of or are based upon (a) an untrue statement or
alleged untrue statement or omission or alleged omission made in conformity with
written information furnished by such holder specifically for use in the
preparation of the registration statement or (b) such holder's failure to send
or give a copy of the final prospectus to the persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or any such director, officer,
partner or controlling person of such holder and shall survive the transfer of
such securities by such holder. The Company shall also indemnify each other
person who participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors, and partners, and each
other person, if any, who controls any such participating person within the
meaning of the Securities Act to the same extent provided above with respect to
holders of Registrable Securities.
7.2 Each holder of Registrable Securities which are included
in a registration pursuant to the provisions of this Agreement will, to the full
extent permitted by law, indemnify and hold harmless the Company, its officers,
directors and each other person, if any, who controls the Company within the
meaning of the Securities Act from and against any and all Losses to which the
Company or any such officer, director or controlling person may become subject
under the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in a registration statement prepared and filed hereunder, any
preliminary, final or summary prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission
9
<PAGE> 10
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written information
furnished by such holder specifically for use in the preparation of such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling person of the Company. The holder of
Registrable Securities included in a registration statement shall also indemnify
each other person who participates (including as an underwriter) in the offering
or sale of Registrable Securities, their officers and directors, and partners,
and each other person, if any, who controls any such participating person within
the meaning of the Securities Act to the same extent as provided above with
respect to the Company. In no event shall the liability of any holder under this
Section 7.2 exceed the net proceeds received by such holder from the sale of
their Registrable Securities.
7.3 Promptly after receipt by a party indemnified pursuant to
the provisions of Section 7.1 or Section 7.2 of notice of the commencement of
any action involving the subject matter of the foregoing indemnity provisions,
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2,
promptly notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against any indemnified party,
the indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party
reasonably concludes that there is a conflict of interest that would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of the indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of Section 7.1 or
Section 7.2 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof unless (a) the
indemnified party shall have employed counsel in accordance with the proviso of
the preceding sentence, (b) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (c) the
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indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel for the
indemnified parties with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other indemnified parties with respect to such claim,
in which event the indemnifying party shall be obligated to pay the fees and
expenses of additional counsel or counsels for the indemnified parties. No
indemnifying party shall consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation without the consent of the
indemnified party. No indemnifying party shall be subject to any liability for
any settlement made without its consent. An indemnified party may at any time
elect to participate in the defense of any claim or proceeding at its own
expense.
8. Covenants Relating to Rule 144. If at any time the Company is
required to filed reports in compliance with either Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") the
Company will (a) file reports in compliance with the Exchange Act and (b) comply
with all rules and regulations of the Commission applicable to the use of Rule
144.
9. Underwritten Offerings. If a distribution of Registrable Securities
pursuant to a registration statement is to be underwritten, the holders whose
Registrable Securities are to be distributed by such underwriters shall be
parties to such underwriting agreement. No requesting holder may participate in
such underwritten offering unless such holder agrees to sell its Registrable
Securities on the basis provided in such underwriting agreement and completes
and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement. If
any requesting holder disapproves of the terms of an underwriting, such holder
may elect to withdraw therefrom and from such registration by notice to the
Company and the managing underwriter, and each of the remaining requesting
holders shall be entitled to increase the number of Registrable Securities being
registered to the extent of the Registrable Securities so withdrawn in the
proportion which the number of Registrable Securities being registered by such
remaining requesting holder bears to the total number of Registrable Securities
being registered by all such remaining requesting holders.
10. Stand-Off Agreement. Each holder of Registrable Securities agrees,
so long as such holder holds at least 1% of the Company's outstanding voting
equity securities, in connection with the Company's initial Public Offering,
upon request of the Company or the underwriters managing such Public Offering,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any
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<PAGE> 12
Common Shares of the Company without the prior written consent of the Company or
such underwriters, as the case may be, for such period of time (not exceeding
180 days) from the effective date of the registration statement relating to such
initial Public Offering as may be requested by the underwriters; provided,
however, that all other holders of at least 1% of the Company's outstanding
voting equity securities and all of the officers and directors of the Company
who own stock of the Company must also agree to not less onerous restrictions.
11. Amendment. The Company shall not amend this Agreement without the
written consent of the holders of more than 50% of the Registrable Securities.
12. Termination. This Agreement, and all of the Company's obligations
hereunder (other than its obligations pursuant to Article 7, which obligations
shall survive such termination), shall terminate upon the earlier to occur of
(a) the date on which there are no Registrable Securities outstanding or (b)
September 30, 2002.
Neural Applications Corporation
By: ____________________________
Name: _______________________
Title: ________________________
[NAMES OF ALL PURCHASERS]
By: Neural Applications Corporation, as
Attorney-in-Fact
By: ____________________________
Name: _______________________
Title: ________________________
12
<PAGE> 1
EXHIBIT 4.3
--------------------------------------
NEURAL APPLICATIONS CORPORATION
TO
FIRST TRUST & SAVINGS BANK
-------------
TRUST INDENTURE
-------------
Dated as of August 1, 1997
--------------------------------------
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TABLE OF CONTENTS
(The Table of Contents is not part of the Indenture]
<TABLE>
<S> <C> <C> <C>
ARTICLE I ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES............... 2
Section 101. Amount, Execution and Delivery............................................. 2
Section 102. Execution.................................................................. 2
Section 103. Form, Denominations and Dating............................................. 2
Section 104. Calculation and Payment of Interest........................................ 2
Section 105. Payment of Principal....................................................... 3
Section 106. Exchange and Registration of Transfer ..................................... 3
Section 107. Mutilated, Destroyed, Lost and Stolen Debentures .......................... 3
Section 108. Cancellation and Destruction of Debentures ................................ 4
Section 109. Paying Agents.............................................................. 4
ARTICLE II COVENANTS OF THE COMPANY ............................................................ 5
Section 201. Payment of Principal and Interest.......................................... 5
Section 202. Letter of Credit; Substitute Letter of Credit ............................. 5
Section 203. Office or Agency for Certain Purposes ..................................... 5
Section 204. Pledge, Mortgage or Sale of Assets......................................... 5
Section 205. Appointments to Fill Vacancies in Trustee's Office ........................ 6
Section 206. Certificate to Trustee..................................................... 6
Section 207. Waiver of Certain Covenants................................................ 6
ARTICLE III DEBENTURE HOLDERS LISTS, COMMUNICATIONS TO DEBENTURE
HOLDERS, AND COMPANY AND TRUSTEE REPORTS................................................7
Section 301. Company to Furnish Trustee Information as to Names and Addresses of
Debenture Holders ............................................................7
Section 302. Preservation of Information; Communications to Debenture Holders .............7
Section 303. Reports by Company............................................................8
ARTICLE IV REDEMPTION OF DEBENTURES ...............................................................8
Section 401. Right of Redemption and Redemption Price ................................... 8
Section 402. Notice of Redemption..........................................................8
Section 403. Payment of Debentures Called for Redemption ................................ 9
Section 404. Deposit of Redemption Price...................................................9
ARTICLE V REMEDIES OF THE TRUSTEE AND DEBENTURE HOLDERS ON EVENT OF
DEFAULT.................................................................................9
Section 501. Events of Default Defined; Acceleration of Maturity; Waiver of Default ..... 9
Section 502. Collection of Indebtedness by Trustee; Call of Letter of Credit; Trustee
May Prove Debt..............................................................10
Section 503. Application of Proceeds .....................................................11
Section 504. Limitations on Suits by Debenture Holders ................................. 12
Section 505. Powers and Remedies Cumulative; Delay or Omission Not Waiver .............. 13
Section 506. Control by Debenture Holders; Waiver of Default ........................... 13
Section 507. Trustee to Give Notice of Defaults Known to It, but May Withhold in
Certain Circumstances........................................................13
Section 508. Right of Court to Require Filing of Undertaking to Pay Costs .............. 13
ARTICLE VI CONCERNING THE TRUSTEE ................................................................14
Section 601. Duties and Responsibilities of Trustee ......................................14
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Section 602. Certain Rights of Trustee....................................................15
Section 603. Trustee Exoneration From Responsibility ................................... 16
Section 604. Moneys Held by Trustee ......................................................16
Section 605. Compensation of Trustee .....................................................16
Section 606. Right of Trustee to Rely on Certificate of Certain Officers .................16
Section 607. Conflicting Interests........................................................16
Section 608. Persons Eligible for Appointment as Trustee .................................19
Section 609. Resignation and Removal of Trustee; Appointment of Successor ................19
Section 610. Acceptance of Appointment by Successor Trustee ..............................20
Section 611. Merger or Consolidation of Trustee...........................................21
Section 612. Preferential Collection of Claims Against Company ...........................21
ARTICLE VII CONCERNING THE DEBENTURE HOLDERS.......................................................24
Section 701. Evidence of Action Taken by Debenture Holders ...............................24
Section 702. Proof of Execution of Instruments and of Holding of Debentures ..............24
Section 703. When Deemed Absolute Owners..................................................25
Section 704. Debentures Owned by Company Deemed Not Outstanding...........................25
Section 705. Right of Revocation of Action Taken .........................................25
ARTICLE VIII DEBENTURE HOLDERS' MEETINGS............................................................25
Section 801. Purposes for Which Debenture Holders' Meetings May Be Called ................25
Section 802. Call of Meetings by Trustee..................................................26
Section 803. Company and Debenture Holders May Call Meetings .............................26
Section 804. Persons Entitled to Vote at Meeting .........................................26
Section 805. Determination of Voting Rights; Conduct and Adjournment of Meeting ..........26
Section 806. Counting Votes and Recording Action of Meeting ..............................27
Section 807. Meeting Does Not Hinder Exercise of Rights ..................................27
ARTICLE IX SUPPLEMENTAL INDENTURES................................................................27
Section 901. Supplemental Indentures Without Consent of Debenture Holders.................27
Section 902. Supplemental Indentures with Consent of Debenture Holders....................28
Section 903. Effect of Supplemental Indentures............................................29
Section 904. Notation on Debentures in Respect of Supplemental Indentures.................29
ARTICLE X CONSOLIDATION, MERGER, AND SALE........................................................29
Section 1001. Company May Consolidate or Merge on Certain Terms............................29
Section 1002. Sale of Assets by the Company................................................29
ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE;
UNCLAIMED MONEYS.......................................................................30
Section 1101. Satisfaction and Discharge of Indenture......................................30
Section 1102. Application by Trustee of Funds Deposited for Payment of Debentures..........30
Section 1103. Defeasance and Discharge of Indenture and the Debentures.....................30
Section 1104. Legal Defeasance and Discharge...............................................30
Section 1105. Covenant Defeasance..........................................................31
Section 1106. Conditions to Legal or Covenant Defeasance. ............................. 31
Section 1107. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions....................................................32
Section 1108. Reinstatement................................................................32
Section 1109. Return of Unclaimed Moneys...................................................33
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS..............................................................................33
</TABLE>
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<TABLE>
<S> <C> <C> <C>
ARTICLE XIII MISCELLANEOUS PROVISIONS AND DEFINITIONS...............................................33
Section 1301. Successors...................................................................33
Section 1302. Benefit of Indenture Restricted to Parties and Debenture Holders.............33
Section 1303. Payments Due on Sundays and Holidays.........................................33
Section 1304. Notices and Demands on Company and Trustee ..................................33
Section 1305. Laws of Iowa to Govern.......................................................34
Section 1306. Officers' Certificates and Opinions of Counsel; Statements to
Be Contained Therein........................................................34
Section 1307. Counterparts.................................................................34
Section 1308. Definitions..................................................................34
Section 1311. TIA Not Applicable...........................................................36
</TABLE>
EXHIBITS TO INDENTURE
Exhibit A - Form of Debenture
Exhibit B - Letter of Credit
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TRUST INDENTURE
THIS TRUST INDENTURE (the "Indenture") dated as of August 1, 1997, is
entered into by and between NEURAL APPLICATIONS CORPORATION, a Delaware
corporation (hereinafter referred to as the "Company") and FIRST TRUST & SAVINGS
BANK, a state banking association duly organized and existing under the laws of
the State of Iowa (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the issuance of a series of
debentures to be designated 8.75% Senior Secured Debentures due 2002 (the
"Debentures") in an aggregate principal amount not to exceed Nine Million
Dollars ($9,000,000); and
WHEREAS, to provide the terms and conditions upon which the Debentures are
to be issued and delivered, the Company has duly authorized the execution and
delivery of this Indenture; and
WHEREAS, the Debentures and the Certificate of Authentication to be borne
by each of same are to be substantially in the form set forth as Exhibit A to
this Indenture; and
WHEREAS, all things have been done which are necessary to make the
Debentures, when executed, issued and delivered by the Company hereunder, the
valid obligations of the Company and to constitute this Indenture a valid
contract for the security of the Debentures, in accordance with the terms of the
Debentures and this Indenture;
GRANTING CLAUSE
NOW, THEREFORE, to secure the payment of the principal of and interest on
the Debentures and the performance of the covenants therein and herein contained
and to declare the terms and conditions on which the Debentures are secured, and
in consideration of the premises and of the purchase of the Debentures by the
Holders thereof, the Company by these presents does grant, convey, assign,
transfer, mortgage, pledge and confirm to the Trustee the rights of the Trustee
pursuant to the Irrevocable Standby Letter of Credit (the "Letter of Credit") as
more specifically described in Sections 202 of this Indenture and in the Letter
of Credit (a copy of which is attached hereto as Exhibit B), to assure the
payment of the principal and interest of the Debentures for the purposes herein
expressed.
NOW, THEREFORE, in consideration of the premises and of the purchase and
acceptance of the Debentures by the Holders thereof and of the sum of One Dollar
duly paid by the Trustee at the execution of these presents, the receipt whereof
is hereby acknowledged, the Company covenants and agrees with the Trustee for
the equal and proportionate benefit of all present and future Holders of the
Debentures as follows:
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ARTICLE I
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF DEBENTURES
Section 101. Amount, Execution and Delivery. Debentures for an aggregate
principal sum of up to Nine Million Dollars ($9,000,000) may be executed by the
Company and delivered to the Holders of the Debentures upon the execution of
this Indenture or from time to time thereafter subject to the terms and
conditions of this Indenture.
Section 102. Execution. The Debentures shall be signed on behalf of the
Company by its President or a Vice President and by its Treasurer or an
Assistant Treasurer. Such signatures may be manual or facsimile signatures and
may be imprinted or otherwise reproduced on the Debentures.
In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Debentures may nevertheless be authenticated, and delivered or
disposed of as though the person who signed such Debentures had not ceased to be
such officer of the Company and shall bind the Company; and any Debenture signed
on behalf of the Company by any such person who at the actual date of the
execution of the Debenture shall be a proper officer of the Company, although at
the date of the execution of this Indenture any such person shall not have been
such an officer, may likewise be authenticated and delivered or disposed of and
shall bind the Company.
Section 103. Form, Denominations and Dating. The Debentures to be issued
pursuant to this Indenture shall be identified as 8.75% Senior Secured
Debentures due 2002. Each of the Debentures shall be substantially in the form
of the 8.75% Senior Secured Debenture due 2002 attached hereto as Exhibit A. The
Debentures may have such letters, numbers, or other marks of identification and
such legends or endorsements placed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto, or to conform to usage.
The Debentures shall be issuable as registered Debentures without coupons
in denominations of Fifty Thousand Dollars ($50,000), or multiples thereof.
Every Debenture shall be dated from the date of its issuance and shall bear
interest from such date, said interest and the principal sum of such Debenture
to be paid pursuant to the payment terms of such Debenture.
Section 104. Calculation and Payment of Interest.
Each Debenture shall bear interest at the rate of 8.75% per annum from the
date of its original issuance. Interest shall be computed on the basis of a
360-day year of twelve 30-day months. Interest shall be payable on March 31 and
September 30 of each year beginning on March 31, 1998 (each such date an
"Interest Payment Date").
The person in whose name any Debenture is registered at the close of
business on any Record Date (as hereinafter defined) with respect to interest
payable on an Interest Payment Date shall be entitled to receive the interest
payable on such Interest Payment Date (subject to the provisions of Article IV,
in the case of any Debenture or Debentures, or portion thereof, redeemed on a
date subsequent to the relevant Record Date and prior to such Interest Payment
Date) notwithstanding the cancellation of such Debenture upon any registration
or transfer or exchange subsequent to the Record Date and prior to such Interest
Payment Date; provided, however, that if and to the extent of Default in the
payment of the interest due on such Interest Payment Date, such defaulted
interest shall be paid to the persons in whose names Outstanding Debentures are
registered at the close of business on a subsequent Record Date
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(which shall be not less than fifteen (15) days prior to the date of payment of
such defaulted interest) which the Company shall establish for such payment by
notice given by mail on behalf of the Company to the Holders of Debentures and
the Trustee not less than ten (10) days preceding such Record Date. Payment of
any defaulted interest may be made in any other lawful manner if, after notice
given by the Company to the Trustee of the proposed payment pursuant to this
sentence, such payment shall be deemed practicable by the Trustee. The term
"Record Date" as used in this Section with respect to any Interest Payment Date
shall mean the March 15 or September 15 immediately preceding such Interest
Payment Date.
Section 105. Payment of Principal. Principal of, and interest accrued to
maturity on, the Debentures shall be considered paid on the date due, whether
such principal and interst are due at maturity, upon acceleration or otherwise,
if the Company shall deposit funds sufficient to pay the principal of and
accrued interest on the Debentures with the Trustee at or before 10:00 a.m.
Central Time on such date. The Trustee shall promptly return to the Company any
funds deposited with the Trustee by the Company that are in excess of the amount
necessary to pay the principal of, and accrued interest on, the Debentures.
Section 106. Exchange and Registration of Transfer. Debentures may be
exchanged for a like aggregate principal amount of Debentures of other
authorized denominations. The Debentures to be exchanged shall be surrendered at
the office or agency to be maintained by the Company in accordance with Section
203, and the Company shall execute in exchange therefor the Debenture or
Debentures which the Debenture Holder making the exchange shall be entitled to
receive.
The Company shall keep, at the office or agency to be maintained by the
Company in accordance with Section 203, a register or registers in which,
subject to such reasonable regulations as it may prescribe, the Company shall
register Debentures and shall register the transfer of Debentures as in this
Article provided. Upon due presentment for registration of transfer of any
Debenture at such office or agency (including compliance with the conditions to
transfer noted on the form of Debenture attached hereto as Exhibit A), the
Company shall execute and register and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Debenture or
Debentures for a like aggregate principal amount. The Trustee shall deliver the
authenticated Debenture or Debentures to the Company for delivery to the
transferee or transferees.
All Debentures presented or surrendered for registration of transfer or for
exchange, redemption or payment (if so required by the Company or the Trustee)
shall be duly endorsed by, or accompanied by a written instrument or instruments
of transfer, in form satisfactory to the Company and the Trustee, duly executed
by the Holder or by such Holder's attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto.
The Company shall not be required to exchange or register any transfer of
any Debentures from and after the mailing date of the notice of redemption
provided for in Section 402.
Section 107. Mutilated, Destroyed, Lost and Stolen Debentures. In case any
Debentures shall become mutilated or be destroyed, lost or stolen, the Company,
in the case of a mutilated Debenture shall, and in the case of a destroyed,
lost, or stolen Debenture in its discretion may, execute and deliver, a new
Debenture bearing a number not contemporaneously Outstanding, in exchange and
substitution for the mutilated Debenture, or in lieu and substitution for the
Debenture so destroyed, lost or stolen and the Trustee shall authenticate any
such substituted Debenture and deliver the same upon the written request or
authorization of any officer of the Company. In every case the applicant for a
substituted Debenture
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shall furnish to the Company and to the Trustee such reasonable security or
indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss, or theft, the applicant shall also furnish to
the Company and to the Trustee evidence to their satisfaction of the
destruction, loss, or theft of such Debenture and of the ownership thereof. Upon
the issue of any substituted Debenture, the Company may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses connected therewith. In case any
Debenture which has matured or is about to mature or in respect of which a
notice of redemption under Section 402, has been mailed shall become mutilated
or be destroyed, lost, or stolen, the Company may, instead of issuing a
substitute Debenture, pay the same (without surrender thereof except in the case
of a mutilated Debenture) if the applicant for such payment shall furnish to the
Company and to the Trustee such reasonable security or indemnity as they may
require to save each of them harmless, and, in case of destruction, loss, or
theft, evidence satisfactory to the Company and the Trustee of the destruction,
loss, or theft of such Debenture and of the ownership thereof.
Every substituted Debenture issued pursuant to this Section shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost, or stolen Debenture shall be found at any time, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Debentures duly issued hereunder. All Debentures shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost, or stolen Debentures, and shall preclude any and all other rights or
remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Debentures, and shall preclude any and all other rights or
remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
Section 108. Cancellation and Destruction of Debentures. All Debentures
surrendered for payment, redemption, exchange, or registration of transfer
shall, if surrendered to the Company or any paying agent, be delivered to the
Trustee for cancellation, or, if surrendered to the Trustee, shall be canceled
by it, and no Debentures shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. The Trustee shall destroy,
or make appropriate arrangements for the destruction of, canceled Debentures and
deliver a certificate of such destruction to the Company. If the Company shall
acquire any of the Debentures, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are surrendered to the Trustee for cancellation.
Section 109. Paying Agents. The Company shall serve as Paying Agent for
payments of interest on the Debentures and the Trustee shall serve as Paying
Agent for payments of principal of, and accrued interest on, the Debentures at
maturity, upon redemption, upon acceleration or otherwise (each, in such
capacity, the "Paying Agent").
ARTICLE II
COVENANTS OF THE COMPANY
Section 201. Payment of Principal and Interest. The Company will duly and
punctually pay or cause to be paid the principal of and interest on each of the
Debentures at the times and place and in the manner specified in this Indenture
and in the Debentures.
Section 202. Letter of Credit; Substitute Letter of Credit.
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(a) The Company shall obtain in favor of the Trustee, for the benefit of
the Holders of the Debentures, and maintain until the earlier of November 29,
2002 or such time as the principal amount and all interest payable pursuant to
the Debentures have been paid in full, an Irrevocable Standby Letter of Credit
(the "Letter of Credit") in substantially the form attached hereto as Exhibit B,
providing for payment to the Trustee, for the benefit of the Holders of the
Debentures, of the Outstanding principal amount of the Debentures, plus all
interest due and unpaid pursuant to the Debentures, and all costs of collection
recoverable hereunder or pursuant to the Debenture, upon a Notice of
Acceleration as provided for by Article V below and call by the Trustee as
required by the Letter of Credit. The amount of the Letter of Credit shall at
all times total at least one hundred seven percent (107%) of the Outstanding
principal amount of the Debentures.
(b) Subject to the terms and conditions hereof, at any time before
December 31 of any year commencing in 1999 the Company may, at its option,
obtain a substitute Letter of Credit meeting the conditions contained below (a
"Substitute Letter of Credit"), in replacement of or substitution for the Letter
of Credit then in effect. Any Substitute Letter of Credit shall be a letter of
credit in favor of the Trusteee, for the benefit of the Holders of the
Debentures, (i) the terms of which shall in all material respects be the same as
those of the original Letter of Credit and (ii) the issuer of which shall be a
bank, trust company or financial lender with assets in excess of $1 billion and
with long-term obligations rated by Standard & Poors or a similar rating service
of A (or the equivalent) or better. In order for such letter of credit to
qualify as a Substitute Letter of Credit, the Company shall deliver to the
Trustee at least forty-five (45) days prior to the effective date of such
proposed Substitute Letter of Credit (iii) a copy of such proposed Substitute
Letter of Credit, (iv) a copy of the agreement pursuant to which such Substitute
Letter of Credit is proposed to be issued and (v) evidence that the issuer meets
the qualifications contained in (ii) above. Unless the Trustee shall have given
written notice to the Company within such forty-five (45) day period that the
Substitute Letter of Credit does not, in the Trustee's reasonable opinion, meet
the qualifications listed above, then upon the effective date of any qualifying
Substitute Letter of Credit and the receipt thereof, the Trustee shall surrender
the Letter of Credit previously in effect to the issuer thereof. Thereafter, any
Substitute Letter of Credit shall be deemed the Letter of Credit for all
purposes of this Indenture.
Section 203. Office or Agency for Certain Purposes. As long as any of the
Debentures remain Outstanding, the Company will maintain an office or agency (or
offices or agencies) in the City of Coralville, Iowa, or in such other city in
the State of Iowa as the Company shall notify the Trustee and the Holders of
Debentures in writing, where the Debentures may be presented for registration of
transfer and exchange as in this Indenture provided, and where notices and
demands to or upon the Company in respect to the Debentures or this Indenture
may be served. The principal office of the Company shall be the office or agency
for the registration or transfer and exchange of Debentures unless the Company
shall maintain some other office or agency for such purpose and shall give the
Trustee written notice of the location thereof.
Section 204. Pledge, Mortgage or Sale of Assets. The Company shall not
pledge, mortgage, grant a security interest in, agree to the placement of any
lien upon, or, other than in the ordinary course of its business, sell, any of
its assets; provided, that the Company may grant a security interest in, or
agree to the placement of a lien upon, any asset or assets if such security
interest is granted or lien incurred to secure all or part of the purchase
price, or to secure indebtedness incurred to pay all or part of the purchase
price, of such asset or assets; and provided, further, that (a) any such
security interest or lien shall be confined solely to the asset or assets so
acquired and, if required by the terms of the instrument originally creating
such security interest or lien, other assets which are an improvement to or are
acquired for specific use in connection with such acquired assets or assets,
together with any proceeds, including insurance proceeds, thereof and (b) any
such security interest or lien shall be created within 120 days after the
acquisition of such asset or assets; and provided, further, that in the event
that the Company merges with another corporation (as permitted by Section 1001),
the covenant contained in this Section 204 shall
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not apply to any pledge, mortgage, security interest or lien that existed upon
the assets of such other corporation prior to such merger and was not created in
contemplation of such merger, even if, after the merger, such pledge, mortgage,
security interest or lien shall also apply to assets owned by the Company prior
to the merger.
Section 205. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of the
Trustee, will appoint, in the manner provided in Section 609, a Trustee, so that
there shall at all times be a Trustee hereunder.
Section 206. Certificate to Trustee. The Company will deliver to the
Trustee on or before April 1 in each year (beginning with 1998) an Officers'
Certificate stating:
(a) That the signing officers have conducted a review of the
activities of the Company during the preceding year to determine whether there
has been any Default by the Company in the performance of any covenants
contained in this Article II, and Sections 1001 or 1002, and further stating
whether or not they have obtained knowledge of any such Default and, if so,
specifying each such Default of which the signers have knowledge and the nature
thereof;
(b) That the Company is not required to file any reports with the
Securities and Exchange Commission (the "Commission") pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or, if the Company is required to file any reports with the Securities and
Exchange Commission, it has timely filed all such reports and has provided the
Trustee with a copy of each such report; and
(c) The identity of each director duly elected by the stockholders
of the Company and the identity of each officer duly appointed by the board of
directors of the Company as of such date.
Section 207. Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any term, provision or condition set forth in
Section 204 with respect to the Debentures if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Debentures, by act of such Holders, either shall waive such
compliance in such instance or generally shall have waived compliance with such
term, provision or condition, but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE III
DEBENTURE HOLDERS LISTS, COMMUNICATIONS TO
DEBENTURE HOLDERS, AND COMPANY AND TRUSTEE REPORTS
Section 301. Company to Furnish Trustee Information as to Names and
Addresses of Debenture Holders. The Company shall furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the Holders of Debentures. The Company
shall also furnish or cause to be furnished to the Trustee an updated list
reflecting any changes in the names or addresses of any of the Debenture Holders
within fifteen (15) days after such change is furnished or caused to be
furnished to the Company.
Section 302. Preservation of Information; Communications to Debenture
Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of
Debentures contained in the most recent list
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furnished to it as provided in Section 301. The Trustee may destroy any list
furnished to it as provided in Section 301 upon receipt of a new list so
furnished.
(b) In case three (3) or more Holders of Debentures, hereinafter
referred to as applicants, apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Debenture for a
period of at least six (6) months preceding the date of such application, and
such application states that the applicants desire to communicate with other
Holders of Debentures with respect to their rights under this Indenture or under
the Debentures, and is accompanied by a copy of the communication which such
applicants propose to transmit, then the Trustee shall, within five (5) business
days after the receipt of such application, at its election, either:
(1) Afford such applicants access to the information preserved
at the time by the Trustee in accordance Section 302(a); or
(2) Inform such applicants as to the approximate number of
Holders of Debentures whose names and addresses appear in the
information preserved at the time by the Trustee, in accordance with
Section 302(a), and as to the approximate cost of mailing to such
Debenture Holders the communication specified in such application.
(c) If the Trustee shall elect not to afford such applicants' access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Debenture Holder whose name and address appears in the
information preserved at the time by the Trustee in accordance with Section
302(a), a copy of the communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be mailed
and of payment, or the provision for the payment, of the reasonable expenses of
mailing, unless within five (5) days after such tender the Trustee shall mail to
such applicants a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the Holders of
Debentures or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion.
(d) Each and every Holder of the Debentures, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders of Debentures in
accordance with Section 302(b), regardless of the source from which such
information was derived and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 302(b).
Section 303. Reports by Company.
(a) If the Company is required to file reports with the Commission, the
Company agrees to file with the Trustee, within fifteen (15) days after the
Company is required to file the same with the Commission, copies of the annual
reports and of the information, documents, and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file with
the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act.
(b) The Company agrees, if required by law to do so, to file with the
Trustee and the Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Indenture as may be required from
time to time by such rules and regulations.
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(c) The Company agrees to transmit to the Holders of Debentures as the
names and addresses of such Holders appear upon the registration books of the
Company, within thirty (30) days after filing thereof with the Trustee, such
summaries of any information, documents, and Reports required to be filed by the
Company pursuant to Section 303(a) or (b) as may be required by rules and
regulations prescribed from time to time by the Commission.
(d) The Company agrees to transmit to the Holders of Debentures as the
names and addresses of such Holders appear upon the registration books of the
Company, within thirty (30) days after receipt by the Company thereof, a copy of
any audited annual financial statements of the Company.
ARTICLE IV
REDEMPTION OF DEBENTURES
Section 401. Right of Redemption and Redemption Price.
(a) Debentures may be redeemed in the manner, at the time and at the
redemption prices specified in this Article.
(b) The Company may, at its option, redeem all, but not part, of the
Debentures, prior to maturity, at any time within one hundred eighty (180) days
after the closing of a public offering of the common stock of the Company,
registered pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), that results in net proceeds to the Company of at least Fifteen Million
Dollars ($15,000,000), at a price of at least Eight Dollars ($8.00) per share,
subject to adjustment for splits, reverse stock splits and stock dividends (a
"Qualifying Public Offering").
(c) Redemption shall be made only upon notice as set forth in Section
402, at a redemption price equal to One Hundred Percent (100%) of the principal
amount plus accrued but unpaid interest to the date fixed for redemption.
Section 402. Notice of Redemption. In case the Company shall desire to
exercise its option to redeem all of the Debentures in accordance with Section
401 above, it shall fix a date for redemption, which date shall be not later
than one hundred eighty (180) after the closing date of the Qualifying Public
Offering, and shall mail or cause to be mailed a notice of such redemption at
least thirty (30) days prior to the date fixed for redemption to the Holders of
Debentures at their last addresses as the same appear on the registry books.
Such mailing shall be by first class mail. Notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the Holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the Holder of any Debenture shall not affect
the validity of the proceeding for the redemption of that Debenture or any other
Debenture.
The notice of redemption shall specify the date fixed for redemption
and the redemption price at which Debentures are to be redeemed, and shall state
that payment of the redemption price of the Debentures, together with accrued
interest to the date fixed for redemption, will be made at the office or agency
to be maintained by the Company in accordance with Section 203, upon
presentation and surrender of such Debentures and that, unless the Company
defaults in making the redemption payment, from and after the redemption date
named in the notice of redemption interest will cease to accrue on the
Debentures.
Section 403. Payment of Debentures Called for Redemption. If the giving
of notice of redemption shall have been completed as above provided, the
Debentures shall become due and payable on the date and at the place stated in
such notice at the applicable redemption price, together with interest
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accrued to the date fixed for redemption, and on and after such date of
redemption (unless the Company defaults in the payment of such Debentures)
interest on the Debentures shall cease to accrue, and such Debentures shall be
deemed not to be Outstanding hereunder and shall not be entitled to any benefit
under this Indenture except to receive payment of the redemption price, together
with accrued interest to the date fixed for redemption. On presentation and
surrender of such Debentures at said place of payment in said notice specified,
such Debentures shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued thereon to the date fixed for
redemption.
Section 404. Deposit of Redemption Price. At or before 10:00 a.m.
Central Time on the date of redemption, the Company shall deposit with the
Trustee an amount of money, sufficient to pay the applicable redemption price of
and accrued interest on the Debentures. The Trustee shall promptly return to the
Company any money deposited with the Trustee by the Company in excess of the
amounts necessary to pay the applicable redemption price of and accrued interest
on, the Debentures.
ARTICLE V
REMEDIES OF THE TRUSTEE AND DEBENTURE HOLDERS
ON EVENT OF DEFAULT
Section 501. Events of Default Defined; Acceleration of Maturity;
Waiver of Default. The following events shall be Events of Default:
(a) Default in the payment when due of any interest upon any of the
Debentures as and when the same shall become due and payable, and continuance of
such Default for a period of forty five (45) days; or
(b) Default in payment when due of principal on any of the Debentures
at maturity, upon redemption or otherwise, and continuance of such Default for a
period of ten (10) days; or
(c) Failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Debentures or in this Indenture for a period of ninety (90) days after the date
on which written notice of such failure, requiring the Company to remedy the
same, shall have been given to the Company and the Trustee by Holders of at
least twenty-five percent (25%) in aggregate principal amount of the Debentures
at the time Outstanding; or
(d) If the Company shall:
(1) Admit in writing its inability to pay its debts
generally as they become due; or
(2) File a petition in bankruptcy or a petition to take
advantage of any insolvency act; or
(3) Make an assignment for the benefit of its creditors;
or
(4) Consent to the appointment of a receiver of itself or
of the whole or any substantial part of its property;
or
(e) If the Company shall, on a petition in bankruptcy filed against it,
be adjudicated a bankrupt or a court of competent jurisdiction shall enter an
order or decree appointing, without the consent of the Company, a receiver of
the Company or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of the Company
under the federal bankruptcy laws or any other applicable law or statute of the
United States of America or any
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State thereof, and such adjudication, order, or decree shall not be vacated or
set aside or stayed within sixty (60) days from the date of entry thereof; or
(f) The occurrence of any Event of Default under the terms of the
Debentures.
If an Event of Default has occurred and is continuing, the Trustee by
written notice to the Company, or the Holders of at least twenty-five percent
(25%) in aggregate principal amount of the Debentures at the time Outstanding by
written notice to the Company and the Trustee (such written notice to the
Company or to the Company and the Trustee, as applicable, a "Notice of
Acceleration"), may declare the principal of all Debentures to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable. This provision, however, is subject to the
condition that if, at any time after the principal of the Debentures shall have
been so declared due and payable, the Company shall voluntarily pay to the
Holders of the Debentures a sum sufficient to pay all interest theretofore due
and payable upon all the Debentures and the expenses of the Trustee, and any and
all Events of Default under this Indenture or the Debentures, other than
nonpayment of principal on Debentures which shall have become due solely as the
result of such Notice of Acceleration, shall have been remedied, then and in
every such case the Holders of a majority in aggregate principal amount of the
Debentures then Outstanding, by written notice to the Company and to the
Trustee, may on behalf of the Holders of all of the Debentures waive all
Defaults and rescind and annul such declaration and its consequences; but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent Event of Default, or shall impair any right consequent thereon.
Section 502. Collection of Indebtedness by Trustee; Call of Letter of
Credit; Trustee May Prove Debt. The Trustee covenants that upon (a) the
acceleration of the maturity of the Debentures pursuant to Section 501 hereof or
(b) the occurrence of an Event of Default under Section 501(b) above, the
Trustee shall, within five (5) business days, deliver to the institution issuing
the Letter of Credit (the "Issuing Institution") such drafts and other documents
as shall be required pursuant to the Letter of Credit to call and obtain payment
of the amount that then shall have become due and payable pursuant hereto and
pursuant to the Debentures for principal and interest, with interest upon the
overdue principal and (to the extent legally enforceable under applicable law)
upon overdue installments of interest at the rate borne by the Debentures; and,
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including a reasonable compensation to the
Trustee, its agents, attorneys, and counsel, and any expenses or liabilities
incurred by the Trustee hereunder other than through its gross negligence or bad
faith.
In case the Issuing Institution shall fail forthwith to pay such
amounts upon presentment of such drafts and documents, the Trustee, in its own
name as trustee of an express trust, shall be entitled and empowered to
institute any action or proceedings at law or in equity for the collection of
the sums so due and unpaid from and by the Issuing Institution, and may
prosecute any such action or proceeding to judgment or final decree and may
enforce any such judgment or final decree against the Issuing Institution
pursuant to the Letter of Credit, and may collect in the manner provided by law
from the Issuing Institution, the moneys adjudged or decreed to be payable
pursuant to the Letter of Credit.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company under the federal bankruptcy laws or any other
applicable law relative to the Company, its creditors, or its property, or in
case a receiver or trustee shall have been appointed for its property or in case
of any other judicial proceedings relative to the Company, its creditors, or its
property, the Trustee, irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to this Section 502, shall be entitled and empowered, by intervention
in such proceedings or otherwise, to file and prove a claim or claims for the
whole amount of principal, premium, if any, and interest owing and unpaid in
respect of the Debentures, and to file such other papers or documents as
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may be necessary or advisable in order to have the claims of the Trustee and the
Debenture Holders allowed in any judicial proceeding relative to the Company,
its creditors, or its property, and to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses; and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized by each of the
Debenture Holders to make such payments to the Trustee on behalf of the Holders,
and, in the event that the Trustee shall consent to the making of such payments
directly to the Debenture Holders, to pay to the Trustee any amount due it for
compensation and expenses, including counsel fees incurred by it up to the date
of such distribution; provided, however, that nothing in this Indenture shall be
deemed to give to the Trustee any right to accept or consent to any plan of
reorganization or otherwise by action of any character in any such proceeding to
waive or change in any way any right of any Debenture Holders.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures or under the Letter of Credit, may be enforced by
the Trustee without the possession of any of the Debentures, or of the
production thereof on any trial or other proceeding relative thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall be for
the ratable benefit of the Holders of the Debentures.
In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceedings in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 503. Application of Proceeds. Any moneys collected by the
Trustee pursuant to Section 502 shall be applied in the order following, at the
date or dates fixed by the Trustee for the distribution of such moneys:
(a) To the payment of costs and expenses of collection, and of all
amounts payable to the Trustee under Section 605;
(b) In case the principal of the Outstanding Debentures shall not have
become and be then due and payable, to the payment of interest on the
Debentures, in the order of the maturity of the installments of such interest,
with interest (to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest at the rate per annum expressed
in the Debentures, such payments to be made ratably to the persons entitled
thereto, without discrimination or preference;
(c) In case the principal of the Outstanding Debentures shall have
become and shall be then due and payable, to the payment of the whole amount
then owing and unpaid upon all the Debentures for principal and interest, with
interest on the overdue principal and interest (to the extent that such interest
has been collected by the Trustee) upon overdue installments of interest at the
rate per annum expressed in the Debentures; and in case such moneys shall be
insufficient to pay in full the whole amount so due and unpaid upon the
Debentures, then, to the payment of such principal and interest, without
preference or priority of principal over interest, or of interest over principal
or of any installment of interest over any other installment of interest, or of
any Debenture over any other Debenture, ratably to the aggregate of such
principal and accrued and unpaid interest.
(d) To the payment of the remainder, if any, to the Company, its
successors or assigns, or to whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may direct.
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Section 504. Limitations on Suits by Debenture Holders. No Debenture
Holder shall have the right by virtue or by availing of any provision of the
Debentures or this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to the Debentures or this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holder or Holders of at least 25% in principal amount
of the Debentures make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders of at least 25% in principal amount
of the Debentures offer and, if requested, provide to the Trustee
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 90
days after receipt of the request and the offer of indemnity and, if
requested, the provision of indemnity; and
(e) during such 90 period the Holder or Holders of a majority
in principal amount of the Debentures do not give the Trustee a
direction inconsistent with the request;
it being understood and intended, and being expressly covenanted by the Holder
of every Debenture with every other Holder and the Trustee, that no one or more
Holders of Debentures shall have any right in any manner whatever by virtue or
by availing of any provision of this Indenture to affect, disturb, or prejudice
the rights of the Holders of any other of such Debentures, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal, ratable, and common benefit of all Holders of Debentures. For the
protection and enforcement of this Section 504, each and every Debenture Holder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
Notwithstanding any provision of this Indenture, however, the right of
any Holder of any Debenture to receive payment on the principal of, and premium,
if any, and interest on, such Debenture, on and after the respective due dates
thereof as provided in such Debenture and this Indenture, or to institute suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
Section 505. Powers and Remedies Cumulative; Delay or Omission Not
Waiver. All powers and remedies given by this Article V to the Trustee or to the
Debenture Holders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and remedies available
to the Trustee or the Debenture Holders, by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained in this Indenture, and no delay or omission of the Trustee or any
Holder of any of the Debentures to exercise any right or power accruing upon any
Default occurring and continuing as aforesaid, shall impair any such right or
power, or shall be construed to be a waiver of any such Default or an
acquiescence therein; and, subject to the provisions of Section 504, every power
and remedy given by this Article or by law to the Trustee or to the Debenture
Holders may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Debenture Holders.
Section 506. Control by Debenture Holders; Waiver of Default. The
Holders of a majority in aggregate principal amount of the Debentures at the
time Outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee; provided, however, that subject to
the provisions of Section 601, the Trustee shall have the right to decline to
follow any such direction if the Trustee,
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having been advised by counsel, shall determine that the action so directed may
not be lawfully taken or if a responsible officer shall determine that the
action so directed would be unduly prejudicial to the Debenture Holders not
taking part in such direction. Prior to the giving of a Notice of Acceleration
as provided in Section 501, the Holders of a majority in aggregate principal
amount of the Debentures at the time Outstanding may on behalf of the Holders of
all the Debentures waive any past Default or Event of Default hereunder and its
consequences, except a Default in the payment of the principal of or interest on
any of the Debentures. In the case of any such waiver, the Company, the Trustee,
and the Holders of the Debentures shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
Section 507. Trustee to Give Notice of Defaults Known to It, but May
Withhold in Certain Circumstances. The Trustee shall, within ninety (90) days
after the occurrence of a Default, mail to the Debenture Holders, as the names
and addresses of such Holders appear upon the registration books of the Company,
notice of each Default hereunder known to the Trustee, unless such Events of
Default have been cured before the giving of such notice; provided, that, except
in the case of default in the payment of the principal or interest on any of the
Debentures, the Trustee shall be protected in withholding such notice if and so
long as responsible officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Debenture Holders.
Section 508. Right of Court to Require Filing of Undertaking to Pay
Costs. All parties to this Indenture agree, and each Holder of any Debenture by
such Holder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party litigant in such suit
of an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but this
Section 508 shall not apply to any suit instituted by the Trustee, or any suit
instituted by any Debenture Holder, or group of Debenture Holders, holding in
the aggregate more than twenty-five percent (25%) in principal amount of the
Debentures Outstanding, or to any suit instituted by any Debenture Holder for
the enforcement of the payment of the principal of and premium, if any, or
interest, on any Debenture on or after the due date expressed in such Debenture.
ARTICLE VI
CONCERNING THE TRUSTEE
Section 601. Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing or waiving of all
Events of Default which may have occurred, undertakes to perform such duties as
are specifically set forth in this Indenture. In case an Event of Default has
occurred (which has not been cured or waived), the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders, or other instruments, furnished to the
Trustee pursuant to any provision of this Indenture, shall examine them to
determine whether they conform to the requirements of this Indenture.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
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(a) Prior to the occurrence of an Event of Default and after the curing
or waiving of all such Events of Default which may have occurred:
(1) The duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) In the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a
duty to examine the same to determine whether or not they conform to
the requirements of this Indenture;
(b) The Trustee shall not be liable for any error or judgment made in
good faith by a responsible officer, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(c) The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of not less than a majority in principal amount of the Debentures at the
time Outstanding relating to the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for belief that the
repayment of such funds or liability is not reasonably assured to it.
Section 602. Certain Rights of Trustee. Except as otherwise provided in
Section 601:
(a) The Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, appraisal, bond, bond or other paper, or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) Any request, direction, order, or demand of the Company mentioned
herein shall be sufficiently evidenced by an instrument signed in the name of
the Company by the President or any Vice President and the Secretary or an
Assistant Secretary or Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors of the Company may be evidenced to the
Trustee by a copy thereof certified by the Secretary or an Assistant Secretary
of the Company;
(c) The Trustee may consult with counsel and any opinion of counsel
shall be full and complete authorization and protection in respect of any action
taken, suffered, or omitted by it hereunder in good faith and in accordance with
such opinion of counsel;
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order, or
direction of any of the Debenture Holders, pursuant to the provision of this
Indenture, unless such Debenture Holders shall have offered to the Trustee
reasonable
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security or indemnity against the costs, expenses, and liabilities which may be
incurred therein or thereby; nothing herein contained shall, however, relieve
the Trustee of the obligation, upon the occurrence of an Event of Default (which
has not been cured or waived) to exercise such of the rights and powers vested
in it by this Indenture, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs;
(e) The Trustee shall not be liable for any action taken, suffered, or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(f) Prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be bound
to make any investigation into the acts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, appraisal, bond, debenture, or other paper documents, unless
requested in writing to do so by the Holders of not less than a majority in
aggregate principal amount of the Debentures then Outstanding; provided, that if
the payment within a reasonable time to the Trustee of the costs, expenses, or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to so
proceeding;
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney employed with due care by the
Trustee; and
(h) The Trustee shall not be required to see that insurance on the
property of the Company is effected or maintained, or to keep itself informed as
to the performance or observance by the Company of any covenant or condition
herein contained.
Section 603. Trustee Exoneration From Responsibility. The recitals
contained herein and in the Debentures (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee shall not be accountable for the use or application by
the Company of any of the Debentures or of the proceeds of such Debentures, or
for the use or application of any moneys paid over by the Trustee in accordance
with any provision of this Indenture, or for the use or application of any
moneys received by any paying agent other than the Trustee.
Section 604. Moneys Held by Trustee. All moneys received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall not be under any
liability for interest on any moneys received by it hereunder except as it may
agree with the Company to pay thereon. So long as no Event of Default shall have
occurred and be continuing, all interest allowed on any such moneys shall be
paid from time to time upon the written order of the Company, signed by its
President or any Vice President or its Treasurer or an Assistant Treasurer, its
Secretary or an Assistant Secretary.
Section 605. Compensation of Trustee. The Company covenants and agrees
to pay to the Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and, except as
otherwise expressly provided, the Company will pay or reimburse the Trustee,
upon its request, for all reasonable expenses, disbursements, and advances
incurred or made by the Trustee in accordance
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with any of the provisions of this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement, or
advance as may arise from its negligence or bad faith.
Section 606. Right of Trustee to Rely on Certificate of Certain
Officers. Except as otherwise provided in Section 601, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered, or
omitted by it under the provisions of this Indenture upon the faith thereof.
Section 607. Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section 607, it shall, within ninety (90) days after
ascertaining that it has such conflicting interest, either eliminate such
conflicting interest or resign in the manner and with the effect specified in
this Section 609.
(b) In the event that the Trustee shall fail to comply with the
provisions of Section 607(a), the Trustee shall, within ten (10) days after the
expiration of such ninety (90) day period, transmit notice of such failure to
the Debenture Holders as the names and addresses of such Holders may appear upon
the registration books of the Company.
(c) For the purpose of this Section 607, the Trustee shall be deemed to
have a conflicting interest if:
(1) The Trustee or, any of its directors or executive
officers, is an obligor upon the Debentures issued under this Indenture
or an underwriter for the Company;
(2) The Trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common
control with the Company or an underwriter for the Company;
(3) The Trustee or any of its directors or executive officers
is a director, officer, partner, employee, appointee, or representative
of the Company, or of an underwriter (other than the Trustee itself)
for the Company who is currently engaged in the business of
underwriting, except that:
(A) One individual may be a director and/or an
executive officer of the Trustee and a director and/or an
executive officer of the Company, but may not be at the same
time an executive officer of both the Trustee and the Company;
(B) If and so long as the number of directors of the
Trustee in office is more than nine (9), one (1) additional
individual may be a director and/or an executive officer of
the Trustee and a director of the Company; and
(C) The Trustee may be designated by the Company or
by an underwriter for the Company to act in the capacity of
transfer agent, registrar, custodian, paying agent, fiscal
agent, escrow agent, or depository, or in any other similar
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capacity, or, subject to this Section 607(c)(1), to act as
trustee whether under an indenture or otherwise;
(4) Ten percent (10%) or more of the voting securities of the
Trustee is beneficially owned either by the Company or by any director,
partner, or executive officer thereof, or twenty percent (20%) or more
of such voting securities is beneficially owned, collectively, by any
two or more of such persons; or ten percent (10%) or more is owned
either by an underwriter for the Company or any director, partner, or
executive officer thereof, or is beneficially owned, collectively, by
any two or more persons;
(d) For the purposes of this Section 607:
(1) The term "underwriter" when used with reference to the
Company shall mean every person, who, within three (3) years prior to
the time as of which the determination is made, has purchased from the
Company with a view to, or has offered or sold for the Company in
connection with, the distribution of any security of the Company
Outstanding at such time, or has participated or has had a direct or
indirect participation in any such undertaking, or has participated or
has had a participation in the direct or indirect underwriting of any
such undertaking, but such term shall not include a person whose
interest was limited to a commission from an underwriter or dealer not
in excess of the usual and customary distributors' or sellers'
commission.
(2) The term "director" shall mean any director of a
corporation or any individual performing similar functions with respect
to any organization whether incorporated or unincorporated.
(3) The term "person" shall mean an individual, a corporation,
a limited liability company, a partnership, an association, a
joint-stock company, a trust, an unincorporated organization, or a
government or political subdivision thereof. As used in this paragraph,
the term "trust" shall include only a trust where the interest or
interests of the beneficiary or beneficiaries are evidenced by a
security.
(4) The term "voting security" shall mean any security
presently entitling the owner or holder thereof to vote in the
direction or management of the affairs of a person, or any security
issued under or pursuant to any trust, agreement, or arrangement
whereby a trustee or trustees or agent or agents for the owner or
holder of such security are presently entitled to vote in the direction
or management of the affairs of a person.
(5) The term "executive officer" shall mean the president,
every vice president, every trust officer, the secretary, and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated
or unincorporated, but shall not include the chairman of the board of
directors.
The percentages of voting securities and other securities
specified in this Section shall be calculated in accordance with the
following provisions:
(A) A specified percentage of the voting securities
of the Trustee, the Company or any other person referred to in
this Section 607 (each of whom is referred to as a "person" in
this paragraph), means such amount of the Outstanding voting
securities of such person as entitle the holder or holders
thereof to cast such specified percentage of the aggregate
votes which the holders of all the
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outstanding voting securities of such person are entitled to
cast in the direction or management of the affairs of such
person.
(B) A specified percentage of a class of securities
of a person means such percentage of the aggregate amount of
securities of the class outstanding.
(C) The term "amount," when used in regard to
securities, means the principal amount if relating to
evidences of indebtedness, the number of shares if relating to
capital shares, and the number of units if relating to any
other kind of security.
(D) The term "outstanding" means issued and not held
by or for the account of the issuer. The following securities
shall not be deemed outstanding within the meaning of this
definition:
(i) Securities of an issuer held in a
sinking fund relating to securities of the issuer of
the same class.
(ii) Securities of an issuer held in a
sinking fund relating to another class of securities
of the issuer, if the obligation evidenced by such
other class of securities is not in default as to
principal or interest or otherwise.
(iii) Securities pledged by the issuer
thereof as security for an obligation of the issuer
not in default as to principal or interest or
otherwise.
(iv) Securities held in escrow if placed in
escrow by the issuer thereof.
Provided, however, that any voting securities of an
issuer shall be deemed outstanding if any person other than
the issuer is entitled to exercise the voting rights thereof.
(E) A security shall be deemed to be of the same
class as another security if both securities confer upon the
holder or holders thereof substantially the same rights and
privileges; provided, however, that, in the case of secured
evidences of indebtedness, all of which are issued under a
single indenture, differences in the interest rates or
maturity dates of various series thereof shall not be deemed
sufficient to constitute such series as different classes and
provided, further, that, in the case of unsecured evidences of
indebtedness, differences in the interest rates or maturity
dates thereof shall not be deemed sufficient to constitute
them securities of different classes, whether or not they are
issued under a single indenture.
Section 608. Persons Eligible for Appointment as Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States or any state authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least Three Million Five Hundred Thousand Dollars ($3,500,000), subject to
supervision or examination by federal or state authority and having a place of
business at the City of Iowa City or Cedar Rapids, Iowa, if there be such a
corporation having a place of business in such cities willing and able to act as
Trustee on reasonable and customary terms. If such corporation publishes reports
of condition at least
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annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 609.
Section 609. Resignation and Removal of Trustee; Appointment of
Successor.
(a) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign by giving written notice of such resignation to the Company and
by mailing notice thereof to the Holders of Debentures at their addresses as
they shall appear on the registration books of the Company. Upon receiving such
notice of resignation the Company shall promptly appoint a successor trustee by
written instrument executed by order of the Board of Directors of the Company.
If no successor trustee shall have been so appointed and have accepted
appointment within thirty (30) days after the mailing of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Debenture Holder
who has been a bona fide Holder of a Debenture or Debentures for at least six
(6) months may, subject to the provisions of Section 508, on behalf of such
Holder and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon after such notice,
if any, as it may deem proper and prescribe appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) The Trustee shall fail to comply with Section 607(a) after
written request therefor by the Company or by any Debenture Holder who
has been a bona fide Holder of a Debenture or Debentures for at least
six (6) months; or
(2) The Trustee shall cease to be eligible under Section 608
and shall fail to resign after written request therefor by the Company
or by any such Debenture Holder; or
(3) The Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or
subject to Section 508, any Debenture Holder who has been a bona fide Holder of
a Debenture or Debentures for at least six (6) months may, on behalf of such
Holder and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee. Such court may thereupon after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding may at any time remove the Trustee and
appoint a successor trustee.
(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 610.
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Section 610. Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed under Section 609 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed, or conveyance, shall become vested with all the rights,
powers, duties, and obligations of its predecessor hereunder, with like effect
as if originally named as trustee herein; but, nevertheless, on the written
request of the Company or of the successor trustee, the trustee ceasing to act
shall upon payment of any amounts then due it pursuant to the provisions of
Section 605 execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon request
of any such successor trustee, the Company shall execute any and all instruments
in writing for more fully and certainly vesting in and confirming to such
successor trustee all such rights and powers.
No successor trustee shall accept appointment as provided in this
Section 610, unless at the time of such acceptance such successor trustee shall
be eligible under Section 608.
Upon acceptance of appointment as provided in this Section 610, the
Company shall mail notice of the succession of such trustee hereunder to the
Holders of Debentures at their addresses as they shall appear on the
registration books of the Company. If the Company fails to mail such notice
within ten (10) days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Company.
Section 611. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Trustee
shall be a party, or any corporation succeeding to the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder without
execution or filing any paper or any further act on the part of any of the
parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of the original Trustee or any successor to the
Trustee hereunder and deliver such Debentures so authenticated; and in the case
at that time any of the Debentures shall not have been authenticated, any
successor to the Trustee may authenticate such Debentures either in the name of
any predecessor hereunder or in the name of the successor trustee; and in all
such cases such certificate shall have the same full force and effect as that
provided in the Debentures or in this Indenture with respect to a certificate of
the original Trustee hereunder; provided, however, that the right to
authenticate Debentures in the name of the Trustee herein shall apply only to
its successor or successors by merger, conversion or consolidation.
Section 612. Preferential Collection of Claims Against Company.
(a) Subject to Section 612(b), if the Trustee shall be or shall become
a creditor, directly or indirectly, secured or unsecured, of the Company within
four (4) months prior to a default (as defined for purposes of this Section 612
in Section 612(c)) or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Debentures, and the holders of other indenture securities (as defined for
purposes of this Section 612 in Section 612(c)):
(1) An amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or
interest, effected after the beginning of such four (4) month period
and valid as against the Company and its other creditors, except any
such reduction resulting from the receipt or disposition of any
property described in Section 612(a)(2),
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or from the exercise of any right of set-off which the Trustee could
have exercised if a petition in bankruptcy had been filed by or against
the Company upon the date of such default; and
(2) All property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such four (4)
month period, or an amount equal to the proceeds of such property, if
disposed of, subject, however, to the rights, if any, of the Company
and its other creditors in such property or such proceeds.
Nothing contained herein, however, shall affect the right of the
Trustee:
(A) To retain for its own account (i) payments made on account of
any such claim by any person (other than the Company) who is liable
thereon; and (ii) the proceeds of the bona fide sale of any such claim
by the Trustee to a third person; and (iii) distributions made in cash,
securities, or other property in respect of claims filed against the
Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the federal bankruptcy laws or applicable
state law;
(B) To realize for its own account, upon any property held by it as
security for any such claim, if such property was held prior to the
beginning of such four (4) month period;
(C) To realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security
for any such claim, if such claim was created after the beginning of
such four (4) month period and such property was received as security
therefor simultaneously with the creation thereof, and if the Trustee
shall sustain the burden of proving that at the time such property was
so received the Trustee had no reasonable cause to believe that a
default, as defined in paragraph (c) of this Section 612, would occur
within four (4) months;
(D) To receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such
claim as provided in such paragraph (B) or (C), as the case may be, to
the extent of the fair value of such property.
For the purposes of paragraphs (B), (C), and (D), property
substituted after the beginning of such four (4) month period for
property held as security at the time of such substitution shall, to
the extent of the fair value of the property released, have the same
status as the property released, and, to the extent that any claim
referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any
preexisting claim of the Trustee as such creditor, such claim shall
have the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be
apportioned between the Trustee, the Debenture Holders, and the holders
of other indenture securities in such manner that the Trustee, the
Debenture Holders, and the holders of other indenture securities
realize, as a result of payments from such special account and payments
of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the
federal bankruptcy laws or applicable state law, the same percentage of
their respective claims, figured before crediting to the claim of the
Trustee anything on account of the receipt by it from the Company of
the funds and property in such special account and before crediting to
the respective claims of the Trustee, the Debenture Holders, and the
holders of other indenture securities dividends on claims filed against
the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the federal bankruptcy laws or applicable
state law, but after
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crediting thereon receipts on account of the indebtedness represented
by their respective claims from all sources other than from such
dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim,
in bankruptcy or receivership or in proceedings for applicable state
law, whether such distribution is made in cash, securities, or other
property, but shall not include any such distribution with respect to
the secured portion, if any, of such claim. The court in which such
bankruptcy, receivership, or proceeding for reorganization is pending
shall have jurisdiction (i) to apportion between the Trustee, the
Debenture Holders, and the holders of other indenture securities, in
accordance with the provisions of this paragraph, the funds and
property held in such special accounts and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the
fairness of the distributions to be made to the Trustee, the Debenture
Holders and the holders of other indenture securities with respect to
their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property
held in such special account or as security for any such claim, or to
make a specific allocation of such distributions as between the secured
and unsecured portions of such claims, or otherwise to apply the
provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the
beginning of such four (4) month period shall be subject to paragraph
(a) of this Section 612, as though such resignation or removal had not
occurred. If any Trustee has resigned or been removed prior to the
beginning of such four (4) month period, it shall be subject to Section
612(a) if and only if the following conditions exist:
(i) The receipt of property or reduction of claim
which would have given rise to the obligation to account, if
such Trustee had continued as Trustee, occurred after the
beginning of such four (4) month period; and
(ii) Such receipt of property or reduction of claim
occurred within four (4) months after such resignation or
removal.
(b) There shall be excluded from the operation of paragraph (a) of this
Section 612, a creditor relationship arising from:
(1) The ownership or acquisition of securities issued under
any indenture, or any security or the securities having a maturity of
one year or more at the time of acquisition by the Trustee;
(2) Advances authorized by a receivership or bankruptcy court
of competent jurisdiction, or by this Indenture, for the purpose of
preserving any property which shall at any time be subject to the lien
of this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advance and of the
circumstances surrounding the making thereof is given to the Debenture
Holders at the time and in the manner provided in this Indenture;
(3) Disbursements made in the ordinary course of business in
the capacity of trustee, under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depository, or other similar
capacity;
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(4) An indebtedness created as a result of services rendered
or premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction (as defined in paragraph (c) of
this Section 612);
(5) The ownership of stock or of other securities of a
corporation organized under the provisions of Section 25(a) of the
Federal Reserve Act, as amended, which is directly or indirectly a
creditor of the Company; or
(6) The acquisition, ownership, acceptance, or negotiation of
any drafts, bills of exchange, acceptances, or obligations which fall
within the classification of self-liquidating paper (as defined in
paragraph (c) of this Section 612).
(c) As used in this Section 612:
(1) The term "default" shall mean any failure to make payment
in full of the principal of or interest upon any of the Debentures or
upon other indenture securities when and as such principal or interest
becomes due and payable.
(2) The term "other indenture securities" shall mean
securities upon which the Company is an obligor (as defined in the
Trust Indenture Act of 1939, as amended (the "TIA")) outstanding under
any other indenture (A) under which the Trustee is also trustee, (B)
which contains provisions substantially similar to the provisions of
paragraph (a) of this Section 612, and (C) under which a default exists
at the time of the apportionment of the funds and property held in said
special account.
(3) The term "cash transaction" shall mean any transaction in
which full payment for goods or securities sold is made within seven
(7) days after delivery of the goods or securities in currency or in
checks or other orders drawn upon banks or bankers and payable upon
demand.
(4) The term "self-liquidating paper" shall mean any draft,
bill of exchange, acceptance or obligation which is made, drawn,
negotiated, or incurred by the Company for the purpose of financing the
purchase, processing, manufacture, shipment, storage or sale of goods,
wares of merchandise, and which is secured by documents evidencing
title to, possession of, or lien upon the goods, wares or merchandise
or the receivables or proceeds arising from the sale of the goods,
wares, or merchandise previously constituting the security, provided
the security is received by the Trustee simultaneously with the
creation of the creditor relationship with the Company arising from the
making, drawing, negotiation, or incurring of the draft, bill of
exchange, acceptance, or obligation.
ARTICLE VII
CONCERNING THE DEBENTURE HOLDERS
Section 701. Evidence of Action Taken by Debenture Holders. Whenever in
this Indenture it is provided that the Holders of a specified percentage in
aggregate principal amount of the Debentures may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action), the fact that at the time of taking any such
action the Holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by Debenture Holders in person or by agent or by proxy appointed in
writing, or (b) by the record of the Holders of Debentures voting in favor
thereof at any meeting of Debenture Holders duly called and held in accordance
with the provisions of Article VIII, or (c) by a
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combination of such instrument or instruments and any such record of such a
meeting of Debenture Holders.
Section 702. Proof of Execution of Instruments and of Holding of
Debentures. Subject to the provisions of Sections 601, 602 and Section 806,
proof of the execution of any instrument by a Debenture Holder or such Holder's
agent or proxy and proof of the holding by any person of any of the Debentures
shall be sufficient if made in accordance with such reasonable rules and
regulation as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee. The ownership of Debentures shall be proved by the
register of such Debentures or by a certificate of the Debenture registrar.
The record of any Debenture Holders' meeting shall be proved in the
manner in Section 806.
Section 703. When Deemed Absolute Owners. Prior to due presentment for
registration of transfer, the Company, the Trustee, any paying agent, and any
Debenture registrar may deem and treat the person in whose name any Debenture
shall be registered upon the books of the Company as the absolute owner of such
Debenture (whether or not such Debenture shall be overdue and notwithstanding
any notice of ownership or writing thereon) for the purpose of receiving payment
of or on account of the principal of and premium, if any, and interest on such
Debenture and for all other purposes; and neither the Company nor the Trustee
nor any paying agent nor any Debenture registrar shall be affected by any notice
to the contrary. All such payment so made to any such registered Holder for the
time being, or upon such Holder's order, shall be valid, and, to the extent of
the sum or sums so paid, effectual to satisfy and discharge the liability for
moneys payable upon any such Debenture.
Section 704. Debentures Owned by Company Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Debentures have concurred in any direction, consent, or waiver under this
Indenture, Debentures which are owned by the Company or by any person directly
or indirectly controlling or controlled by or under common control with the
Company shall be disregarded and deemed not to be Outstanding for the purpose of
any such determination, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction or consent or waiver
only Debentures which the Trustee knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
Outstanding for the purposes of this Section 704 if the pledgee shall establish
to the satisfaction of the Trustee the pledgee's right to vote such Debentures
and that the pledgee is not a person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. In
case of a dispute as to such right, any decision by the Trustee taken upon the
advice of counsel shall be full protection to the Trustee.
Section 705. Right of Revocation of Action Taken. At any time prior to
(but not after) the evidencing to the Trustee, as provided in Section 701, of
the taking of any action by the Holders of the percentage in aggregate principal
amount of the Debentures specified in this Indenture in connection with such
action, any Holder of a Debenture which is shown by the evidence to be included
in the Debentures the Holders of which have consented to such action may, by
filing written notice with the Trustee at its principal office and upon proof of
holding as provided in Section 702, revoke any such action so far as concerns
such Debenture. Except as aforesaid any such action taken by the Holder of any
Debenture shall be conclusive and binding upon such Holder and upon all future
Holders and owners of such Debenture or of any Debenture issued in exchange or
substitution therefor, irrespective of whether or not any notation in regard
thereto is made upon such Debenture. Any action taken by the Holders of the
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action shall be conclusively binding upon the
Company, the Trustee and the Holders of all the Debentures.
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ARTICLE VIII
DEBENTURE HOLDERS' MEETINGS
Section 801. Purposes for Which Debenture Holders' Meetings May Be
Called. A meeting of Debenture Holders may be called at any time and from time
to time pursuant to the provisions of this Article VIII, for any of the
following purposes:
(1) To give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of any
Default or Event of Default hereunder and its consequences, or to take
any other action authorized to be taken by Debenture Holders pursuant
to Article V;
(2) To remove the Trustee and appoint a successor trustee
pursuant to Article VI;
(3) To consent to the execution of an indenture or indentures
supplemental hereto pursuant to Section 902; or
(4) To take any other action authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of
the Debentures under any other provision of this Indenture or under
applicable law.
Section 802. Call of Meetings by Trustee. The Trustee may at any time
call for a meeting of Debenture Holders to take any action authorized in Section
801, to be held at such time and at such place in the Cities of Cedar Rapids,
Iowa City or Coralville, Iowa, as the Trustee shall determine. Notice of every
meeting of the Debenture Holders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be mailed to Holders of Debentures at their addresses as they shall appear
on the registration books of the Company not less than twenty (20) nor more than
one hundred eighty (180) days prior to the date fixed for the meeting.
Section 803. Company and Debenture Holders May Call Meetings. In case
at any time the Company, pursuant to the resolution of its Board of Directors,
or the Holders of at least twenty-five percent (25%) in aggregate principal
amount of the Debentures then Outstanding, shall have requested the Trustee to
call a meeting of Debenture Holders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within twenty (20) days
after receipt of such request, then the Company or the Holders of Debentures in
the amount above specified may determine the time and place in the Cities of
Cedar Rapids, Iowa City or Coralville, Iowa, for such meeting and may call such
meeting to take any action authorized in Section 801, by mailings notice thereof
as provided in Section 802.
Section 804. Persons Entitled to Vote at Meeting. To be entitled to
vote at any meeting of Debenture Holders a person shall be (a) a Holder of one
or more Debentures, or (b) a person appointed by an instrument in writing as
proxy by a Holder of one or more Debentures. The only persons who shall be
entitled to be present or to speak at any meeting of Debenture Holders shall be
the persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
Section 805. Determination of Voting Rights; Conduct and Adjournment of
Meeting. Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Debenture Holders, in regard to proof of the holding of Debentures and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
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The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debenture Holders as provided in Section 803, in which case the
Company or the Debenture Holders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote.
At any meeting, the presence of persons holding or representing
Debentures in an aggregate principal amount sufficient to take action upon the
business for the transaction of which such meeting was called shall be necessary
to constitute a quorum; but, if less than a quorum be present, the persons
holding or representing a majority of the Debentures represented at the meeting
may adjourn such meeting with the same effect, for all intents and purposes, as
though a quorum had been present.
Subject to the provisions of Section 704, at any meeting each Debenture
Holder or proxy shall be entitled to one (1) vote for each One Dollar ($1.00) of
principal amount of Debentures held or represented by such Holder, provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Debenture challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Debentures held by such person or instruments in writing
as aforesaid duly designating such person as the person to vote on behalf of
other Debenture Holders. Any meeting of Debenture Holders duly called pursuant
to Section 802 or 803, may be adjourned from time to time, by vote of the
Holders of a majority in principal amount of the Debentures represented at the
meeting and entitled to vote, and the meeting may be held as so adjourned
without further notice.
Section 806. Counting Votes and Recording Action of Meeting. The vote
upon any resolution submitted to any meeting of Debenture Holders shall be by
written ballots on which shall be subscribed the signatures of the Holders of
Debentures or of their representatives by proxy and the principal amount of the
Debentures held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Debenture Holders shall be prepared by the secretary of the meeting
and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section 802.
The record shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one of the duplicates shall be
delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 807. Meeting Does Not Hinder Exercise of Rights. Nothing in
this Article VIII shall be deemed or construed to authorize or permit, by reason
of any call of a meeting of Debenture Holders or any rights expressly or
impliedly conferred hereunder to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Debenture Holders under any of the provisions of this Indenture or of the
Debentures.
ARTICLE IX
SUPPLEMENTAL INDENTURES
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Section 901. Supplemental Indentures Without Consent of Debenture
Holders. The Company, when authorized by a resolution of its Board of Directors,
and the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) To transfer, assign, mortgage or pledge to the Trustee as security
for the Debentures any property or assets which the Company may desire to
transfer, assign, mortgage or pledge;
(b) To evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements, and obligations of the Company pursuant to Article X
hereof;
(c) To add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Holders of the Debentures
as its Board of Directors and the Trustee shall consider to be for the
protection of the Holders of Debentures, and to make the occurrence, or the
occurrence and continuance, of a Default in any such additional covenants,
restrictions, or conditions a Default or an Event of Default permitting the
enforcement of all or any of the several remedies provided in this indenture as
herein set forth; provided, however, that in respect of any such additional
covenant, restriction, or condition, such supplemental indenture may provide for
a particular period of grace after Default (which period may be shorter or
longer than that allowed in the case of other Defaults) or may provide for an
immediate enforcement upon such Default or may limit the remedies available to
the Trustee upon such Default or may limit the right of the Holders of a
majority in aggregate principal amount of the Debentures to waive such Default;
and
(d) To cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provisions contained herein or in any supplemental
matters or questions arising under this Indenture as shall not adversely affect
the interests of the Holders of the Debentures.
(e) To conform this Indenture with any requirements of the Securities
Act, the Exchange Act, or the TIA, or any similar state statute to which this
Indenture, the Debentures issues pursuant hereto, or the Company shall
hereinafter become subject to and governed by.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations as may be therein contained and to accept the
conveyance, transfer, assignment, mortgage, or pledge of any property
thereunder, but the Trustee shall not be obligated to enter into any such
supplemental indenture which affects the Trustee's own rights, duties, or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
901 may be executed by the Company and the Trustee without the consent of the
Holders of any of the Debentures at the time Outstanding, notwithstanding any of
the provisions of Section 902.
Section 902. Supplemental Indentures with Consent of Debenture Holders.
With the consent (evidenced as provided in Section 701) of the Holders of not
less than sixty-six and two-thirds percent (66-2/3%) in aggregate principal
amount of the Debentures at the time Outstanding, the Company, when authorized
by a resolution of its Board of Directors, and the Trustee may from time to time
and at any time enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures; provided,
however, that no supplemental indenture shall (a) extend the fixed maturity of
any Debentures, or reduce the principal amount thereof or any premium thereon,
without the consent of the Holder of
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each Debenture so affected, or (b) reduce the aforesaid percentage of
Debentures, the Holders of which are required to consent to such supplemental
indenture, without the consent of the Holders of all Debentures then
Outstanding.
Upon the request of the Company, accompanied by a copy of a resolution
of its Board of Directors certified by the Secretary or Assistant Secretary of
the Company authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Debenture Holders
as aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion but shall not be obligated to enter into
such supplemental indenture.
It shall not be necessary for the consent of the Debenture Holders
under this Section 902 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 902, the
Company shall mail a notice, setting forth in general terms the substance of,
such supplemental indenture, to the Holders of Debentures, at their addresses as
they shall appear on the registration books of the Company. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
Section 903. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture pursuant to the provisions of this Article IX, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the Holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 904. Notation on Debentures in Respect of Supplemental
Indentures. Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article IX may bear a
notation in form approved by the Trustee as to any matter provided in such
supplemental indenture. If the Company or the Trustee shall so determine, new
Debentures so modified as to conform, in the opinion of the Trustee and the
Board of Directors of the Company, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Company,
authenticated by the Trustee, and delivered in exchange for the Debentures then
Outstanding.
ARTICLE X
CONSOLIDATION, MERGER, AND SALE
Section 1001. Company May Consolidate or Merge on Certain Terms.
Provided that the obligations of the Indenture and the Debentures survive,
nothing contained in this Indenture or in any of the Debentures shall prevent
any consolidation or merger of the Company with or into any other corporation or
corporations (whether or not affiliated with the Company), or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party or parties.
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Section 1002. Sale of Assets by the Company. The Company may not make a
sale of all or substantially all of its assets, outside the ordinary course of
business, without the consent of Holders of two-thirds (2/3) of the aggregate
principal amount of the Debentures then Outstanding.
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE;
DEFEASANCE; UNCLAIMED MONEYS
Section 1101. Satisfaction and Discharge of Indenture. If (a) the
Company shall deliver to the Trustee for cancellation all Outstanding
Debentures, or (b) all Outstanding Debentures not delivered to the Trustee for
cancellation shall have become due and payable or by their terms are to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee as trust funds the
entire amount sufficient to pay at maturity or upon redemption all such
Debentures not delivered to the Trustee for cancellation, including principal
and premium, if any, and interest due or to become due to such date of maturity
or redemption, as the case may be, and if in either case the Company shall also
pay or cause to be paid all other sums payable hereunder by the Company, then
(1) This Indenture shall cease to be of further effect, and
on and after such maturity date or redemption date, as the case may be,
the Trustee, on demand of the Company accompanied by an Officers'
Certificate and an opinion of counsel and at the cost and expense of
the Company, shall execute proper instruments acknowledging
satisfaction of, and discharging, this Indenture; and
(2) All obligations of the Company in respect of the
Debentures shall cease and be discharged and, subject to the provisions
of Section 1103, the Holders of the Debentures shall thereafter be
restricted exclusively to such funds for any and all claims of
whatsoever nature on their part under this Indenture or with respect to
the Debentures.
Section 1102. Application by Trustee of Funds Deposited for Payment of
Debentures. In the event the Trustee is designated as a paying agent, or in the
event that funds come into the possession of the Trustee (whether by exercise of
any remedy due to Default or otherwise), all moneys deposited with the Trustee
pursuant to Section 1101, shall be held in trust and applied by it to the
payment, either directly or through any paying agent (including the Company
acting as its own paying agent), to the Holders of the particular Debentures,
for the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal, premium, if
any, and interest.
Section 1103. Defeasance and Discharge of Indenture and the Debentures.
The Company may at any time elect to have either Section 1104 or 1105 be applied
to the Outstanding Debentures upon compliance with the conditions set forth in
Section 1106.
Section 1104. Legal Defeasance and Discharge. Upon the Company's
exercise under Section 1103 of the option applicable to this Section 1104, the
Company shall be deemed to have been discharged from its obligations with
respect to the Debentures on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the Debentures, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 1107 and the other
Sections of this Indenture referred to in clauses (a) and (b) of this Section
1104, and to have satisfied all its other obligations under the Debentures and
this Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except
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for the following which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of Outstanding Debentures to receive solely
from the trust fund described in Section 1106, and as more fully set forth in
such Section, payments in respect of the principal of, premium, if any, and
interest on the Debentures when such payments are due, (b) the Company's
obligations under Sections 106, 107 and 203, (c) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (iv) this Article XI. Subject
to compliance with this Article XI, the Company may exercise its option under
this Section 1104 notwithstanding the prior exercise of its option under Section
1105 with respect to the Debentures.
Section 1105. Covenant Defeasance. Upon the Company's exercise under
Section 1103 of the option applicable to this Section 1105, the Company shall be
released from its obligations under the covenants contained in Sections 202,
204, 206, 302, 303 and 1002 on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Debentures shall
thereafter be deemed not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders of Debentures (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the Outstanding
Debentures, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default with respect to the
Debentures under Section 501(c) or (f) but, except as specified above, the
remainder of this Indenture and the Debentures shall be unaffected thereby. In
addition, upon the Company's exercise under Section 1103 of the option
applicable to this Section 1105, Sections 501(d) and (e) shall not constitute
Events of Default.
Section 1106. Conditions to Legal or Covenant Defeasance. The
following shall be the conditions to application of either Section 1104 or
Section 1105 to the Debentures:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 608 who shall agree to comply with the provisions of this Article XI
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Debentures, (i) cash in U.S. Dollars in an
amount, or (ii) non-callable Government Securities which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any payment,
cash in U.S. Dollars in an amount, or (iii) a combination thereof, in such
amounts, as will be sufficient to pay and discharge and which shall be applied
by the Trustee to pay and discharge (A) interest payments on the Debentures on
each Interest Payment Date and (B) the principal of the Outstanding Debentures
on September 30, 2002; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such non-callable Government
Securities to said payments with respect to the Debentures.
(b) In the case of an election under Section 1104, the Company shall
have delivered to the Trustee an opinion of counsel in the United States
reasonably satisfactory to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the Outstanding Debentures will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance has not occurred.
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(c) In the case of an election under Section 1105, the Company shall
have delivered to the Trustee an opinion of counsel in the United States to the
effect that the Holders of the Outstanding Debentures will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax in the same amount, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred.
(d) No Default or Event of Default with respect to the Debentures shall
have occurred and be continuing on the date of such deposit or, in so far as
subsection 501(d) or (e) is concerned, at any time in the period ending on the
91st day after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period).
(e) Such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company is a party or by
which the Company is bound.
(f) The Company shall have delivered to the Trustee an opinion of
counsel to the effect that the deposit with the Trustee of the assets deposited
in connection with such Legal Defeasance or Covenant Defeasance, as the case may
be, and the payment, from the assets so deposited or the proceeds thereof, of
the principal of and interest on the Outstanding Debentures in accordance with
the terms of the Indenture and the Debentures, would not be avoidable under
Section 544, 547 or 548 of Title 11 of the United States Code (the "Bankruptcy
Code") as in effect on the date of such opinion in the event a petition naming
the Company as debtor were filed under the Bankruptcy Code after the 91st day
following such deposit.
Section 1107. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions. Subject to Section 1108, all money and
non-callable Government Securities (including the proceeds thereof) deposited
with the Trustee pursuant to Section 1106 in respect of the Outstanding
Debentures shall be held in trust and applied by the Trustee, in accordance with
the provisions of the Debentures and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of the Debentures of all
sums due and to become due thereon in respect of principal and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 1106 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Debentures.
Anything in this Article XI to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any money or non-callable Government Securities held by it as provided
in Section 1106 which are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 1108. Reinstatement. If the Trustee or Paying Agent is unable
to apply any U.S. Dollars or non-callable Government Securities in accordance
with Section 1104 or 1105, as the case may be, by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 1104 or 1105 until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1104 or 1105, as the case may be; provided, however, that, if the
Company makes any payment of principal of or interest on any Debenture following
the reinstatement of its obligations, the Company
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shall be subrogated to the rights of the Holders of such Debenture to receive
such payment from the money held by the Trustee or Paying Agent.
Section 1109. Return of Unclaimed Moneys. Any moneys deposited with the
Trustee or any Paying Agent not applied but remaining unclaimed by the Holders
of Debentures for one (1) year after the date upon which the principal of and
premium, if any, or interest on such Debentures shall have become due and
payable, shall be repaid to the Company by the Trustee or such agent on demand;
and the Holder of any of the Debentures entitled to receive such payment shall
thereafter look only to the Company for the payment thereof.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
Section 1201. Personal Immunity from Liability of Incorporators,
Stockholders, Officers and Directors. No recourse under or upon any obligation,
covenant, or agreement of this Indenture, or of any Debenture, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, or against any past, present, or future stockholder, officer, or
director, as such, of the Company or of any successor corporation, either
directly or through the Company, whether by virtue of any constitution, statute,
or rule of law, or by the enforcement of any assessment or penalty or otherwise,
all such liability and all such claims being hereby expressly waived and
released as a condition of, and as consideration for, the execution of this
Indenture and the issue of the Debentures, it being expressly understood that
this Indenture and the obligations issued hereunder are solely non-recourse
corporate obligations, and that any and all such personal liability is hereby
expressly waived and released by every Holder of Debentures as a condition of,
and as a consideration for, the execution of this Indenture and the issue of
such Debentures.
ARTICLE XIII
MISCELLANEOUS PROVISIONS AND DEFINITIONS
Section 1301. Successors. All the covenants, stipulations, promises,
and agreements in this Indenture by or on behalf of the Company shall bind its
successors and assigns, whether so expressed or not.
Section 1302. Benefit of Indenture Restricted to Parties and Debenture
Holders. Nothing in this Indenture or in the Debentures, express or implied,
shall give or be construed to give to any person, firm, or corporation, other
than the parties hereto and the Debenture Holders, any legal or equitable right,
remedy, or claim under or in respect of the Indenture, or under any covenant,
condition, or provision herein contained; and subject to the provisions of
Section 1201, all its covenants, conditions, and provisions shall be for the
sole benefit of the parties hereto and of the Debenture Holders.
Section 1303. Payments Due on Sundays and Holidays. In any case where
the date of maturity of interest on or principal of the Debentures or the date
fixed for redemption of any Debentures shall be a Saturday, Sunday or legal
holiday or a day on which banking institutions in the City of Cedar Rapids,
Iowa, are authorized by law to close, then payment of interest or principal and
premium, if any, may be made on the next succeeding business day with the same
force and effect as if made on the date of maturity or the date fixed for
redemption, and no interest shall accrue for the period after such date.
Section 1304. Notices and Demands on Company and Trustee. Any notice or
demand which by any provision of this Indenture is required or permitted to be
given or served by the Trustee or by the Holders of Debentures on the Company
shall be deemed to have been sufficiently given or served, for all
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<PAGE> 38
purposes, if given or served on the Company at 2600 Crosspark Road, Coralville,
Iowa 52241-3212 (until another address is filed by the Company with the
Trustee). Any notice, direction, request, or demand by any Debenture Holder to
or upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or made at the principal office of the Trustee at 1800
First Avenue NE, P.O. Box 2189, Cedar Rapids, IA 52406 (until another address is
filed by the Trustee with the Company).
Section 1305. Laws of Iowa to Govern. This Indenture and each Debenture
shall be deemed to be a contract made under the laws of the State of Iowa, and
for all purposes shall be construed in accordance with the laws of such State.
Section 1306. Officers' Certificates and Opinions of Counsel;
Statements to Be Contained Therein. Upon any application or demand by the
Company to the Trustee to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent provided for in this Indenture relating to
the proposed action have been complied with and an opinion of Counsel stating
that in the opinion of such counsel all conditions precedent have been complied
with, except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relative to such particular application or demand, no additional
certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture, and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture, shall include (a) a statement that the person
making such certificate or opinion has read such covenant or condition; (b) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (d) a statement as to whether or not in the opinion of such
person, such condition or covenant has been complied with.
Section 1307. Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
Section 1308. Definitions. The terms defined in this Section 1308
(except as otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto, shall have the respective means specified in this Section.
(a) Affiliate. The term "Affiliate" shall mean a person
controlling, controlled by, or under common control with, another
person.
(b) Board of Directors. The term "Board of Directors" shall
mean the Board of Directors of the Company, or the Executive Committee
of such Board.
(c) Debenture; Outstanding. The term "Debenture" or
"Debentures" shall mean any Debentures authenticated and delivered
under this Indenture.
The term "Outstanding," when used with reference to
Debentures, shall, subject to the provisions of Section 704, mean, as
of any particular time, all Debentures authenticated and delivered by
the Trustee under this Indenture, except:
(1) Debentures theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
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<PAGE> 39
(2) Debentures for the payment or redemption of which
moneys in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than
the Company) or shall have been set aside and segregated in
trust by the Company (if the Company shall act as its own
paying agent), provided that if such Debentures are to be
redeemed prior to the maturity thereto, notice of such
redemption shall have been given as in Article IV provided, or
provision satisfactory to the Trustee shall have been made for
giving such notice; and
(3) Debentures in lieu of or in substitution for
which other Debentures shall have been authenticated and
delivered pursuant to Section 107.
(d) Default. The term "Default" means any event that is
or with the passage of time or the giving of notice or both would be an
Event of Default.
(e) Event of Default. The term "Event of Default" shall
mean any event specified in Section 501, continued for the period of
time, if any, and after the giving of the notice, if any, thereof
designated in the Indenture.
(f) Government Securities. The term "Government Securities"
means securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof.
(g) Holder. The terms "Debenture Holder" and "Holder," and
other similar terms, shall mean the person in whose name a particular
Debenture is registered on the books of the Company kept for that
purpose in accordance with the terms of this Indenture.
(h) Officers' Certificate. The term "Officers'
Certificate" shall mean a certificate signed by the President or a Vice
President and the Treasurer or an Assistant Treasurer or any accounting
officer of the Company.
(i) Opinion of Counsel. The term "Opinion of Counsel"
shall mean a written opinion of counsel (who may be an employee of or
of counsel to the Company).
(j) Responsible Officer. The term "responsible officer,"
when used with respect to the Trustee, shall mean the chairman or the
vice chairman of the board of directors or trustees, the chairman or
vice chairman of the executive committee of the board of directors or
trustees, the president, any vice president, the treasurer, the
secretary, any trust officer, any second or assistant vice president,
or any officer or assistant officer of the Trustee other than those
specifically above mentioned customarily performing functions similar
to those performed by the persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with a
particular subject.
(k) Trustee. The term "Trustee" shall mean First Trust &
Savings Bank, a state banking association duly organized and existing
under the laws of the State of Iowa and, subject to the provisions of
Article VII, shall also include its successors and assigns. The term
"principal office" of the Trustee shall mean the principal office of
the Trustee at which the corporate trust business of the Trustee shall,
at any particular time, be administered.
Section 1311. TIA Not Applicable. This Indenture is exempt from
application of the TIA as in effect on the date of execution of this Indenture.
In no event shall the amount of Debentures issued and Outstanding under this
Indenture exceed Ten Million Dollars ($10,000,000).
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<PAGE> 40
SIGNATURE PAGE FOR TRUST INDENTURE
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
NEURAL APPLICATIONS CORPORATION
--------------------------------------
By /s/ Robert A. Squires
---------------------------------- --------------------------------------
Robert A Squires, President
....FIRST TRUST & SAVINGS BANK,
Cedar Rapids, Iowa
--------------------------------------
By /s/ [illegible]
---------------------------------- --------------------------------------
---------------------------------- --------------------------------------
and Trust Officer
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<PAGE> 41
EXHIBIT "A"
No. $
----- --------
NEURAL APPLICATIONS CORPORATION
8.75% SENIOR SECURED DEBENTURES DUE 2002
THE DEBENTURE EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAS BEEN TAKEN BY
THE HOLDER SOLELY FOR INVESTMENT PURPOSES. SAID DEBENTURE MAY NOT BE SOLD OR
TRANSFERRED UNLESS (A) IT HAS BEEN REGISTERED UNDER SAID ACT AND REGISTERED OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR (B) THE COMPANY IS
PRESENTED WITH EITHER A WRITTEN OPINION OF COUNSEL OR A "NO ACTION" LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION AND ANY APPLICABLE STATE SECURITIES
COMMISSION, IN EITHER CASE IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE
COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
NEURAL APPLICATIONS CORPORATION, a Delaware corporation, hereinafter
referred to as the "Company," for value received, hereby promises to pay, solely
in conformity with the terms of this Debenture and the Indenture (as such terms
are defined below), to the Debenture Holder, or registered assigns, the
principal sum of_________________ Thousand Dollars ($_______) on June 30, 2002
(or upon earlier redemption, as provided in the Indenture) in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debt, and to pay interest on
the principal sum at the rate of 8.75% per annum from the date of issue of this
Debenture until full payment of the principal sum has been made or duly provided
for. Interest shall be computed on the basis of a 360-day year of twelve 30-day
months and shall be payable on March 31 and September 30 of each year beginning
on March 31, 1998 (each such date an "Interest Payment Date") to the person in
whose name any Debenture is registered at the close of business on the March 15
or September 15 immediately preceding such Interest Payment Date. All payments
to be paid hereunder shall be paid by check mailed to the registered Holder
entitled thereto at such Holder's last address as it appears on the records of
the Company.
1. DEBENTURES. This Debenture is one of a duly authorized issue of
Debentures of the Company designated as its "8.75% Senior Secured Debentures due
2002" (hereinafter referred to as the "Debentures") limited to an aggregate
principal amount not to exceed Nine Million Dollars ($9,000,000), issued or to
be issued under and pursuant to an Indenture dated as of August 1, 1997
(hereinafter referred to as the "Indenture") duly executed and delivered by the
Company to First Trust & Savings Bank, Cedar Rapids, Iowa, as trustee
(hereinafter referred to as the "Trustee"), to which Indenture and all
indentures supplemental thereto (whether entered into with or without the
consent of the Holder hereof, as provided in the Indenture) reference is hereby
made for a complete description of the respective rights, limitations of rights,
obligations, duties, and immunities thereunder of the Trustee, the Company, and
the Holders of the Debentures. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Indenture; in the
event of any conflict or inconsistency between the terms of this Debenture and
the terms of the Indenture, the terms of the Indenture shall govern.
2. DEFAULT. In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal hereof may be declared, and
upon such declaration shall become, due and payable, in the manner, with the
effect, and subject to the conditions provided in the Indenture.
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<PAGE> 42
3. LIMITATION ON SUITS BY DEBENTURE HOLDERS; UNDERTAKING TO PAY COSTS.
The Indenture provides that, if the Trustee and the Company shall have been
given a Notice of Acceleration (as defined in the Indenture) in accordance with
the terms of the Indenture, no Debenture Holder shall have the right by virtue
or by availing of any provision of the Debentures or the Indenture to institute
any suit, action or proceeding in equity or at law upon or under or with respect
to the Debentures or the Indenture, or for the appointment of a receiver or
trustee, or for any other remedy hereunder; it being understood and intended,
and being expressly covenanted by the Holder of every Debenture with every other
Holder and the Trustee, that no one or more Holders of Debentures shall have any
right in any manner whatever by virtue or by availing of any provision of the
Indenture to affect, disturb, or prejudice the rights of the Holders of any
other Debentures, or to obtain or seek to obtain priority over or preference to
any other such Holder, or to enforce any right under the Indenture, except in
the manner provided in the Indenture and for the equal, ratable, and common
benefit of all Holders of Debentures. Notwithstanding any provision of the
Indenture, however, the right of any Holder of any Debenture to receive payment
on the principal of, and premium, if any, and interest on, such Debenture, on
and after the respective due dates thereof as in such Debenture and the
Indenture provided, or to institute suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
The Indenture further provides that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under the
Indenture, or any suit against the Trustee for any action taken or omitted by it
as Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but this provision shall not
apply to any suit instituted by the Trustee, or any suit instituted by any
Debenture Holder, or group of Debenture Holders, holding in the aggregate more
than twenty-five percent (25%) in principal amount of the Debentures
Outstanding, or to any suit instituted by any Debenture Holder for the
enforcement of the payment of the principal of and premium, if any, or interest,
on any Debenture on or after the due date expressed in such Debenture.
4. REGISTRATION. The Debentures shall be registered as to principal and
interest in the Holders' name in the manner hereinafter provided. Books for the
registry of the Debentures shall be maintained at the office of the Company, and
no transfer hereof shall be valid unless made on the Company's books at the
office of the Company, by the registered Holder hereof, in person, or such
Holder's attorney duly authorized in writing, and similarly noted hereon.
Payment to the registered Holder hereof of the principal hereof or interest
hereon shall be a complete discharge of the Company's liability with respect to
any such payment, but the Company may, at any time, require the presentation
hereof as a condition precedent to such payment.
5. REDEMPTION. The Debentures constituting this series are subject to
redemption by the Company on a date not later than sixty (60) days following the
closing date of a Qualifying Public Offering (as defined in the Indenture), upon
the terms and subject to the conditions described in the Indenture. Such
redemption shall be at a redemption price equal to One Hundred Percent (100%) of
the principal amount hereof plus accrued but unpaid interest hereon to the date
fixed for redemption. Notice of redemption to the Holders of Debentures shall be
in the form of written notice mailed by the Company at least thirty (30) days
prior to the date fixed for redemption to the registered Holders of Debentures
at their last addresses as they shall appear on the registry books of the
Company, said notice to be by first class mail, postage prepaid. Payment of the
redemption price of the Debentures, together with accrued interest to the date
fixed for redemption, will be made at the office or agency to be maintained by
the Company in accordance with the Indenture, upon presentation and surrender of
such Debentures. Unless the Company defaults in making the redemption payment,
from and after the redemption date named in the notice of redemption, interest
will cease to accrue on the Debentures.
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<PAGE> 43
6. REGISTERED HOLDER DEEMED OWNER. The Company and the Trustee may
deem and treat the registered Holder hereof as the absolute owner of this
Debenture (whether or not this Debenture shall be overdue and notwithstanding
any notice of ownership or writing hereon or thereon made by anyone other than
the Company or any Debenture registrar), for the purpose of receiving payment
hereof or thereof or an account hereof or thereof and for all other purposes,
and neither the Company nor the Trustee shall be affected by any notice to the
contrary.
7. LETTER OF CREDIT. The Company has obtained in favor of the Trustee,
for the benefit of the Holders of the Debentures, and shall maintain until the
earlier of November 29, 2002 or such time as the principal amount and all
interest payable pursuant to the Debentures have been paid in full, an
Irrevocable Standby Letter of Credit (the "Letter of Credit"), providing for
payment to the Trustee, for the benefit of the Holders of the Debentures, of the
Outstanding principal amount of the Debentures, plus all interest due and unpaid
pursuant to the Debentures, and all costs of collection recoverable hereunder or
pursuant to the Indenture, upon a Notice of Acceleration as provided for by the
Indenture and call by the Trustee as required by the Letter of Credit. The
amount of the Letter of Credit shall at all times total at least one hundred
seven percent (107%) of the Outstanding principal amount of the Debentures.
The Indenture further provides that, subject to the terms and
conditions contained therein, the Company may, at its option, obtain a
substitute Letter of Credit (a "Substitute Letter of Credit"), the terms of
which shall in all material respects be the same as those of the original Letter
of Credit and the issuer of which shall be a bank, trust company or financial
lender with assets in excess of $1 billion and with long-term obligations rated
by Standard & Poors or a similar rating service of B+ or better.
8. NEGATIVE COVENANT. In the Indenture, and subject to the terms and
provisions thereof, the Company has agreed that it shall not pledge, mortgage,
grant a security interest in, agree to the placement of any lien upon, or, other
than in the ordinary course of its business, sell, any of its assets; provided,
that the Company may grant a security interest in, or agree to the placement of
a lien upon, any asset or assets if such security interest is granted or lien
incurred to secure all or part of the purchase price, or to secure indebtedness
incurred to pay all or part of the purchase price, of such asset or assets; and
provided, further, that (a) any such security interest or lien shall be confined
solely to the asset or assets so acquired and, if required by the terms of the
instrument originally creating such security interest or lien, other assets
which are an improvement to or are acquired for specific use in connection with
such acquired assets or assets, together with any proceeds, including insurance
proceeds, thereof and (b) any such security interest or lien shall be created
within 120 days after the acquisition of such asset or assets.
9. NON-RECOURSE AGAINST INCORPORATORS, STOCKHOLDERS, OFFICERS, OR
DIRECTORS; LIABILITY OF TRUSTEE. No recourse under or upon any obligation,
covenant, or agreement of this Debenture, or of the Indenture, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, or against any past, present, or future stockholder, officer, or
director, as such, of the Company or of any successor corporation, either
directly or through the Company, whether by virtue of any constitution, statute,
or rule of law, or by the enforcement of any assessment or penalty or otherwise,
all such liability and all such claims being hereby expressly waived and
released as a condition of, and as consideration for, the execution of the
Indenture and the issue of the Debentures, it being expressly understood that
the Indenture and the Debentures issued thereunder are solely non-recourse
corporate obligations, and that any and all such personal liability is hereby
expressly waived and released by every Holder of Debentures as a condition of,
and as a consideration for, the execution of the Indenture and the issue of such
Debentures. Except as provided for in the Indenture, the Trustee shall not be
liable to the Holders on the Debentures.
10. AUTHORIZATION. The Company represents that all things necessary to
make this Debenture, when executed by the Company as provided in the Indenture,
the valid, binding and legal obligation of the Company as set forth in and
limited by the terms of the Indenture, and to constitute
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<PAGE> 44
these presents a valid Debenture and agreement according to its terms and the
terms of the Indenture and that the execution of the Indenture and the execution
and issue of this Debenture have in all respects been duly authorized.
Witness the original or facsimile signature of the duly authorized
officers of the Company.
Dated:
--------------------
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
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<PAGE> 45
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described above issued pursuant to the
above-mentioned Indenture.
Dated:
-------------
FIRST TRUST & SAVINGS BANK, as Trustee
By
-------------------------------------
Authorized Signatory
Name
-------------------------------
Title
------------------------------
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<PAGE> 1
Exhibit 4.4
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT (this "Agreement") dated as of December 3, 1999,
between Robert Staib ("Staib" or "Shareholder"), Stockpoint, Inc., a Delaware
corporation ("Stockpoint") and U.S. Bank, National Association (the "Voting
Trustee").
WHEREAS, Staib holds 246,000 shares of common stock and 1600 Shares of
Series B Preferred Stock of Stockpoint (the "Shares") and warrants ("Warrants")
to purchase an additional 500,000 shares of Stockpoint"s common stock (the
"Warrant Shares");
WHEREAS, Staib deems it to be in the best interests of Stockpoint to vest
voting power of the Shares and the Warrant Shares issuable upon exercise of the
Warrants, in the Voting Trustee as provided in this Agreement; and
WHEREAS, the Voting Trustee is willing to act in such capacity pursuant to
the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein set forth below and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree as follows:
1. Delivery of Shares. Concurrently with the execution of this Agreement,
Staib shall deliver to the Voting Trustee stock certificates evidencing the
Shares. Staib shall also deliver to the Voting Trustee stock certificates
evidencing the Warrant Shares issued upon exercise of the Warrants. Staib hereby
agrees that any shares of common stock issued upon exercise of the Warrants
shall be issued directly in the name of the Voting Trustee for retention
pursuant to this Agreement. All certificates delivered to the Voting Trustee
shall be properly endorsed for transfer on the books of Stockpoint.
2. Voting Trust Certificates. Upon receipt from Staib of a stock
certificate or certificates for Shares or Warrant Shares issued upon exercise of
the Warrants (together, the "Staib Shares"), the Voting Trustee shall deliver or
cause to be delivered to Staib a voting trust certificate or certificates for
the number of shares represented by the certificate or certificates so deposited
with the Voting Trustee, which voting trust certificate or certificates shall be
in substantially the following form:
VOTING TRUST CERTIFICATE
For Shares of Common Stock of
STOCKPOINT, INC.
No. _____________ _______________ Shares
This certifies that Robert Staib has deposited ____________
shares of __________ stock of Stockpoint, Inc. (the "Company"),
with the Voting Trustee hereinafter named, pursuant to a voting
trust agreement dated December ___,1999, between Robert Staib, a
shareholder of Stockpoint and _____________ as Voting Trustee
(the "Agreement"). This certificate and the interest represented
thereby is transferable only on the books of the Voting Trustee
upon the surrender of this certificate, properly endorsed. The
holder of this certificate shall be subject to all the terms and
conditions of the Agreement and shall be entitled to the benefits
thereof.
IN WITNESS WHEREOF, the Voting Trustee have caused this
certificate to be signed this ______ day of ________________,
______.
________________________________________
Voting Trustee
________________________________________
Voting Trustee
Record ownership of the Staib Shares shall be vested in the Voting Trustee and
shall be transferred to the Voting Trustee upon the books and records of
Stockpoint. In the event of a stock split, stock dividend, distribution of
shares of any class of Stockpoint or recapitalization, the Voting Trustee shall
issue additional or substitute certificates to Staib, which additional
certificates shall be modified as necessary to indicate the class of shares so
represented and to reflect Staib's interest in such shares.
3. Transfer of Staib Shares. The Voting Trustees shall have no right or
power to sell, pledge or otherwise transfer the Staib Shares except as
specifically provided in Section 4 of this Agreement.
<PAGE> 2
4. Powers of Voting Trustee. The record ownership of the Staib Shares shall
be vested in the Voting Trustee and shall be transferred into the names of the
Voting Trustee upon the books of Stockpoint.
(a) Subject to Section 5, the Voting Trustee shall, with respect to
the Staib Shares, be entitled to exercise all shareholders" rights of every
kind, including the right to vote and express a consent and the right to
take part in any meeting. The holders of voting trust certificates shall
not have any right to vote or express a consent with respect to the Staib
Shares or to take part in any meeting.
(b) The Voting Trustee may deliver certificates representing the Staib
Shares to Stockpoint for exchange or surrender pursuant to any amendment to
the articles of incorporation or any plan of reclassification, merger,
consolidation, exchange, liquidation or dissolution of Stockpoint.
(c) The Voting Trustee shall transfer certificates representing the
Staib Shares to any person designated by both Staib and Stockpoint and the
shares represented by such voting trust certificates shall no longer be
subject to this Agreement. Staib and the Company shall provide the Voting
Trustee with written notice of consent to transfer signed by both parties
and authorizing the transfer by the Voting Trustee of any Staib Shares
transferred in accordance with this Agreement. The Voting Trustee shall be
entitled to rely upon such written notice of consent with respect to the
delivery and transfer of any Staib Shares (as evidenced by a voting trust
certificate or certificates) hereunder, as evidenced, with respect to
Stockpoint, by a notice signed by any two individuals holding the title of
Chief Executive Officer, President, Chief Operating Officer, Chief
Technology Officer, Vice President--Finance, General Counsel, Vice
President--Sales, or similar position.
(d) The Voting Trustee shall have all other rights and obligations
specifically provided elsewhere in this Agreement or as otherwise
reasonably necessary to carry out the provisions of this Agreement.
5. Exercise of Voting Rights by Voting Trustee; Appointment of Proxy.
(a) The Voting Trustee shall vote on all matters that may come before
any shareholders" meeting and may express consent as shareholder. With
respect to any matter submitted to Stockpoint"s shareholders for approval
at any regular or special meeting of the shareholders or by written action
in lieu of such meeting, the Voting Trustee shall vote the Staib Shares in
the same proportion as the shares of Stockpoint not held by the Voting
Trustee voting on such matter shall vote.
(b) To secure the Voting Trustee" obligations to vote the Staib Shares
in accordance with the provisions of Section 5(a) hereof, the Voting
Trustee hereby appoints Stockpoint, Inc. and its officers, or any one or
more of them, as the Voting Trustee"s proxy and attorney, with full power
of substitution, to vote all of the Staib Shares which the Voting Trustee
is entitled to vote in accordance with Section 5(a) hereof at any meeting
of the shareholders and to transact such other business as may come before
any such meeting or any adjournment thereof or that may be taken by written
action of the shareholders in lieu of a meeting. The proxies granted by the
Voting Trustee pursuant to this Section 5(b) are coupled with an interest
and are given to secure performance of the Voting Trustee"s agreements
under this Agreement. Such proxies are irrevocable and shall survive the
death and disability of the Voting Trustee and the merger, reorganization,
consolidation or dissolution of any Voting Trustee that is a corporation or
other entity.
6. Distributions. Staib or any transferee of the Staib Shares, shall be
entitled to receive, from time to time, their pro rata share of the dividends or
distributions payable in cash or property (other than shares of any class of
Stockpoint), if any, received by the Voting Trustee in respect of the Staib
Shares subject to the ratable payment of expenses of the Voting Trustee. The
Voting Trustee shall promptly deliver to Staib any tax forms relating to the
Staib Shares that are received by the Voting Trustee.
7. Exculpation; Indemnification. The Voting Trustee shall not be liable for
any error of judgment or mistake of law, or other mistake, except for his or her
own willful misconduct or gross negligence. Staib shall indemnify the Voting
Trustee against all expenses, liabilities and other costs incurred by the Voting
Trustee which arise out of actions or omissions relating to their duties under
this Agreement. The Voting Trustee shall not be liable for transferring Staib
Shares in reliance on written notice of consent to transfer delivered pursuant
to Section 4(c) hereof.
8. Compensation; Expense Reimbursement. The Voting Trustee shall be
reimbursed by Staib for any expenses, liabilities or other costs incurred by the
Voting Trustee in connection with its duties under this Agreement or in
connection with any lawsuit brought against any of the Voting Trustee for which
they are entitled to be indemnified under Section 7, including the disbursements
and reasonable compensation of their agents, attorneys, employees and officers
whom they may employ in carrying out the terms and provisions of this Agreement.
Further the Voting Trustee shall be entitled to compensation for its services in
accordance with the schedule attached hereto. The Voting Trustee shall be
entitled to reimburse itself for all expenses incurred in the performance of
their duties, and to deduct any compensation due the Voting Trustee, out of any
monies held or received by it as distributions with respect to the Staib Shares.
In the event that Staib fails to promptly pay such compensation or fees of the
Voting Trustee, Stockpoint agrees to pay the same, and Stockpoint shall
thereafter be entitled to recover the same from Staib or from any monies held or
distributions received by the Trustee under this Agreement.
9. Filing of this Agreement. A copy of this Agreement shall be filed by the
Voting Trustee with
<PAGE> 3
Stockpoint.
10. Amendment. The Voting Trustee may submit an amendment to this Agreement
to Staib and Stockpoint for their approval at a meeting called for that purpose
upon at least 10 days" prior written notice. If the proposed amendment is
approved by both Staib and the Board of Directors of Stockpoint, a certificate
to that effect shall be made and certified by the Voting Trustee and filed in
the offices in which a copy of this Agreement is required to be filed.
11. Term; Termination.
(a) This Agreement shall automatically terminate upon the earliest of
any of the following events to occur:
(i) the Voting Trustee has resigned, died, or dissolved and no
substitute Voting Trustee is selected by Stockpoint within 30 days
after the date of resignation or death of the Voting Trustee;
(ii) Stockpoint is dissolved and liquidated;
(iii) voting trust certificates representing all of the Staib
Shares have been transferred to one or more transferees pursuant to
Section 4, except in the event such voting trust certificates are held
by a custodian or trustee for the benefit of Staib;
(iv) Stockpoint has commenced a voluntary case under any
applicable bankruptcy law or has had an involuntary case under any
such law filed in its name;
(v) Staib and Stockpoint mutually agree in writing to terminate
this Agreement; or
(vi) Upon the later to occur of December 31, 2002 or the date
that Staib beneficially owns (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) less than five percent (5%) of the
outstanding common stock of Stockpoint.
(b) At any time after such termination, the holders of voting trust
certificates shall be entitled, upon surrender of such certificates to the
Voting Trustee for cancellation, to receive certificates for the number of
Staib Shares of Stockpoint"s common stock or other securities then
represented by their respective voting trust certificates. Upon delivery of
certificates representing the shares of common stock or other securities
represented by any voting trust certificate by the Voting Trustee, this
Agreement shall no longer be in force or effect with respect to such
securities. The Voting Trustee shall deliver to each person who surrendered
a voting trust certificate the certificate(s) therefor properly endorsed
for transfer on the books of Stockpoint.
12. Successor Trustees. In the event of the death, dissolution or
resignation of the Voting Trustee, Stockpoint shall select a replacement Voting
Trustee. If the Voting Trustee shall be declared incompetent by any court of
competent jurisdiction, such Voting Trustee shall be deemed to have resigned.
Stockpoint may replace the Voting Trustee, with or without cause, at any time.
The Voting Trustee may resign upon 30 days" prior written notice to Stockpoint.
13. Acceptance by Voting Trustee. The Voting Trustee hereby accepts the
trust created by the terms of this Agreement and agree to perform their duties
hereunder.
14. Miscellaneous Provisions.
(a) Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior understandings, agreements or representations, written
or oral, relating to the subject matter hereof.
(b) Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken
together shall constitute one and the same agreement, and any party hereto
may execute this Agreement by signing any such counterpart.
(c) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule, the
validity, legality and enforceability of the other provision of this
Agreement will not be affected or impaired thereby.
(d) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
personal representatives and successors and assigns.
(e) Modification, Amendment, Waiver or Termination. No provision of
this Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No course of
dealing between the parties will modify, amend, waive or terminate any
provision of this Agreement or any rights or obligations of any party under
or by reason of this Agreement.
(f) Headings. The headings and any table of contents contained in this
Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
<PAGE> 4
(g) Governing Law. ALL MATTERS OF CORPORATE LAW UNDER THIS AGREEMENT
SHALL BE GOVERNED BY THE DELAWARE GENERAL CORPORATION LAW. ALL OTHER
MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION, VALIDITY AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS
THEREOF.
(h) Third-Party Benefit. This Agreement is for the benefit of the
parties hereto and their permitted successors and assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any other person
any rights, remedies, obligations or liabilities of any nature whatsoever.
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as
of the date set forth in the first paragraph of this Agreement.
U.S. BANK NATIONAL ASSOCIATION,
as Voting Trustee
By:_______________________________________
Its:______________________________________
STOCKPOINT, INC.
By:_______________________________________
Its:______________________________________
ROBERT STAIB
__________________________________________
SHAREHOLDER
<TABLE>
<CAPTION>
Name and Address No. of Shares
- ---------------- -------------
<S> <C>
Robert Staib 246,000 shares of common stock as evidenced by Certificates Nos. ________;
1600 shares of Series B preferred Stock as evidenced by
Certificate No.______
________________
________________ Warrant to purchase an aggregate of 312,500 shares of Common Stock dated as of
the date of this Agreement and that certain Warrant to Purchase Common Stock of
Neural Applications Corporation dated June 1, 1996 representing the right
to purchase 187,500 shares of Common Stock.
</TABLE>
<PAGE> 1
EXHIBIT 4.5
MASTER AGREEMENT
DATED AS OF DECEMBER 3, 1999,
AMONG
STOCKPOINT, INC.,
AS THE COMPANY,
AND
JOHN PAPPAJOHN,
GERALD M. KIRKE
IOWA FARM BUREAU FEDERATION
DERACE SCHAFFER
MATTHEW P. KINLEY
DOMINION SECURITIES INC.
MICHAEL J. RICHARDS
JOSEPH DUNHAM
AS THE GUARANTORS,
AND
EQUITY DYNAMICS, INC.,
AS THE AGENT FOR THE GUARANTORS.
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. CREDIT SUPPORT AGREEMENTS.........................................1
SECTION 2. AGENT.............................................................4
2.1. ACTIONS........................................................4
2.2. EXCULPATION....................................................4
2.3. SUCCESSOR......................................................5
SECTION 3. WARRANTS..........................................................5
3.1. ISSUANCE.......................................................5
3.2. REGISTRATION RIGHTS............................................6
SECTION 4. CLOSING...........................................................6
SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY.........................6
5.1. ORGANIZATION...................................................6
5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY........................6
5.3. NO CONFLICT....................................................6
5.4. CAPITALIZATION.................................................7
5.5. FINANCIAL INFORMATION..........................................8
5.6. SECURITIES LAWS................................................8
5.7. TITLE TO ASSETS................................................8
5.8. REAL PROPERTY..................................................9
5.9. INTELLECTUAL PROPERTY RIGHTS...................................9
5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.............9
5.11. MATERIAL AGREEMENTS...........................................9
5.12. LITIGATION...................................................10
5.13. SOLVENCY.....................................................10
5.14. ENVIRONMENTAL MATTERS........................................10
5.15. TAX MATTERS..................................................10
5.16. ERISA........................................................11
5.17. DISCLOSURE...................................................11
SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS.....................11
6.1. INVESTMENT INTENT.............................................11
6.2. DUE ORGANIZATION AND REQUISITE POWER..........................12
6.3. ACTION AND EXECUTION..........................................12
<PAGE> 3
6.4. NO CONFLICT...................................................12
SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS....................................12
SECTION 8. COVENANTS........................................................13
8.1. ACCESS TO RECORDS.............................................13
8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT..................13
8.3. PAYMENT; PREPAYMENT...........................................14
8.4. PAYMENT OF OBLIGATIONS........................................14
8.5. INSURANCE.....................................................14
8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE...................15
8.7. CONDUCT OF BUSINESS...........................................15
8.8. DEBT..........................................................15
8.9. RESTRICTED PAYMENTS...........................................15
8.10. NEGATIVE PLEDGE..............................................16
8.11. TERMINATION..................................................16
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS...........16
SECTION 10. INDEMNIFICATION.................................................16
SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT......17
SECTION 12. FEES AND EXPENSES...............................................18
SECTION 13. CONFIDENTIALITY.................................................18
SECTION 14. ASSIGNMENT; PARTIES IN INTEREST.................................18
SECTION 15. ENTIRE AGREEMENT................................................18
SECTION 16. FURTHER ASSURANCES..............................................19
SECTION 17. NOTICES.........................................................19
<PAGE> 4
SECTION 18. AMENDMENTS......................................................21
SECTION 19. COUNTERPARTS....................................................21
SECTION 20. HEADINGS, GENDER, TENSE.........................................21
SECTION 21. GOVERNING LAW, JURISDICTION.....................................21
SECTION 22. WAIVER OF JURY TRIAL............................................21
<PAGE> 5
MASTER AGREEMENT dated as of December 3, 1999, among (a)
STOCKPOINT, INC., a Delaware corporation (the "Company"), and (b)(i)
JOHN PAPPAJOHN ("Pappajohn") (ii) GERALD M. KIRKE, IOWA FARM BUREAU
FEDERATION, DERACE SCHAFFER, MATTHEW P. KINLEY, DOMINION SECURITIES
INC., MICHAEL J. RICHARDS, JOSEPH DUNHAM (together with Pappajohn, the
"Guarantors"), and (c) EQUITY DYNAMICS, INC., an Iowa corporation, as
agent (the "Agent") for the Guarantors.
RECITALS
WHEREAS, the Company requested that the Guarantors execute guarantees in favor
of and/or arrange for the issuance of standby letters of credit or pledge
certificates of deposit (collectively, the "Credit Support Agreements") naming
Norwest Bank Iowa, National Association, or any successor or assign thereof
approved by the Agent (the "Bank") as beneficiary or pledgee in connection with
a line of credit with a maximum principal amount of $2,500,000 (the "Facility")
to be made available by the Bank to the Company;
WHEREAS, the Company offered to issue warrants in the form attached hereto as
Exhibit A ("Warrants") to purchase its common stock, $.01 par value (the "Common
Stock") to the Guarantors if they would provide the Credit Support Agreements;
WHEREAS, the Guarantors agreed to provide the Credit Support Agreements in
accordance with terms and conditions set forth herein.
ACCORDINGLY, the parties agree as follows:
SECTION 1. CREDIT SUPPORT AGREEMENTS.
(a) Upon the terms and subject to the conditions set forth in the this
Agreement, the Warrants, and the registration rights agreement in the form
attached hereto as Exhibit B (the "Registration Rights Agreement") (the
"Documents"), the Guarantors shall, for the benefit of the Company, arrange
for the issuance by one or more institutions acceptable to the Bank of
standby letters of credit or, in the alternative, pledge such Guarantors'
right, title and interest in and to certificates of deposit (each a
"Guarantor Commitment") in the aggregate amount of $2,500,000 naming the
Bank as beneficiary or pledgee, as the case may be, thereunder. The maximum
Guarantor Commitment of each of the Guarantors shall be as follows: (i)
Pappajohn - $1,250,000; (ii) Gerald M. Kirke - $500,000; Iowa Farm Bureau
Federation - $250,000; Derace Schaffer - $250,000; Matthew P. Kinley -
$100,000; Dominion Securities Inc. - $100,000; Michael J. Richards -
$25,000 and Joseph Dunham - $25,000. Each Guarantor's Commitment as a
proportion of the maximum amount of the loans (the "Loans") available under
the Facility ($2,500,000.00) shall be its "Pro Rata Share." In addition, if
necessary, Pappajohn shall execute a personal guaranty (the "Pappajohn
Guaranty") of the Company's obligations to the Bank in an amount agreed to
by Pappajohn and the Bank.
(b) The obligation of the Guarantors to provide the Credit Support
Agreements shall be subject to the following conditions precedent:
<PAGE> 6
(i) the Company's execution and delivery of this Agreement and the
Documents;
(ii) the Company's execution and delivery to the Bank of (A) a
security agreement, in form satisfactory to the Agent, which includes
provision for security agreements in favor of the Bank by each
subsidiary of the Company (the "Bank Security Agreement"); (B) a pledge
agreement, in form satisfactory to the Agent (the "Pledge Agreement");
(C) a conditional assignment of intellectual property covering
trademarks, in form satisfactory to the Agent (the "Bank Intellectual
Property Assignment," and, together with Bank Security Agreement,
Pledge Agreement and all documents executed in connection therewith,
the "Bank Security Documents"); (D) the Credit Agreement dated December
3, 1999, between the Company and the Bank (the "Credit Agreement"); and
(E) the Promissory Note dated December 3, 1999, executed by the Company
in favor of the Bank (the "Promissory Note").
(iii) the Company's payment to the Agent of the Agent's costs and
expenses incurred in connection herewith and the Documents, as provided
in Section 12 below;
(iv) the Bank's agreement with the Guarantors, satisfactory to the
Guarantors, regarding the respective remedies of the Bank and the
Guarantors with respect to the Facility;
(v) the Company's delivery to the Bank of waivers by the Series C
Debenture Holders to the transactions contemplated by the Agreement, in
a form satisfactory to the Agent;
(vi) the Company's delivery to the Bank of a release of lien on form
UCC-3 by Iowa State Bank and Trust and Robert Staib, and a
confirmation, waiver and consent by Northern Trust to the first lien
position by the Bank, in each case in a form satisfactory to the Agent;
(vii) review and approval by the Agent of all outstanding liens on the
Company's assets by CEBA, Kirkwood Community College and Berthel
Fisher;
(viii) a cash flow budget in form and content acceptable to the Agent,
and attached hereto as Exhibit C (the "Budget");
(ix) evidence satisfactory to the Agent that the Settlement Agreement
and Release by and between the Company and Robert Staib has been
executed;
(x) satisfaction by the Agent with the senior management team and
structure and long term management plan;
(xi) evidence satisfactory to the Agent that certain California-based
employees received grants under the Employee option plan; and
(xiii) confirmation satisfactory to Agent of employment agreements of
William Staib and other key management.
-2-
<PAGE> 7
(c) The Company has agreed to pay the Bank all sums due and owing in
connection with the Facility. The Company realizes and understands that the
reason it was able to obtain the Facility was due to the willingness of the
Guarantors to provide the Credit Support Agreements in respect of the
Company's obligations to the Bank. The Company agrees that at any time the
Guarantors, individually, or collectively, deem themselves to be insecure
they may acquire the position of the Bank in the Facility by paying the
obligation of the Company to the Bank. The Company fully agrees that upon
acquisition of the Bank's position or the Bank's exercise of its remedies
against the Guarantor Commitments and/or Pappajohn Guaranty, the Guarantors
shall be subrogated to all rights of the Bank under the Company's
agreements with the Bank (including, without limitation, the Credit
Agreement, the Promissory Note, and the Bank Security Documents; together,
the "Bank Documents") whether or not the Bank may have canceled all or any
portion of the Company's obligations to the Bank under the Facility.
(d) As between the Guarantors, each of the Guarantors agrees that no
Guarantor should bear a proportionately greater loss under the Credit
Support Agreements than any other Guarantor. Therefore, each of the
Guarantors shall bear any losses under the Credit Support Agreements in
accordance with its Pro Rata Share. Each Guarantor promises each other
Guarantor that it will pay, on demand, his or its Pro Rata Share of the
Company's obligations to the Bank, in connection with such party's
obligations under the Credit Support Agreements, either to the Bank, if the
obligations under the Facility have not been satisfied, or to another
Guarantor who has made payment to the Bank in satisfaction of the Company's
obligations under the Facility. The demand for payment made by any
Guarantor to any other Guarantor shall be made in writing to the Agent,
accompanied by proof of the demanding party's payment under a Credit
Support Agreement. Each Guarantor (an "Indemnifying Guarantor") hereby
agrees to indemnify and hold harmless each other Guarantor from and against
any and all losses, claims, damages or liabilities, joint or several, which
such other party may suffer by reason of the failure of an Indemnifying
Guarantor to pay his or its Pro Rata Share on demand. The Company promises
to pay each Guarantor any and all sums which that Guarantor has paid to the
Bank in satisfaction of all or any portion of the Company's obligations to
the Bank when such obligations are due, plus all costs, including, without
limitation, interest and reasonable attorney's fees, incurred in connection
therewith.
(e) In the event the indemnification referred to in the immediately
preceding paragraph above is determined to be invalid or unenforceable for
any reason whatsoever, each Guarantor agrees that the common law principle
of contribution shall apply and that each Guarantor shall be obligated to
contribute his or its Pro Rata Share towards satisfaction of any payment
made or to be made under the Credit Support Agreements or made by any other
Guarantor, if the payments by such other Guarantor exceeds such other
Guarantor's Pro Rata Share of the Company's obligations to the Bank.
-3-
<PAGE> 8
SECTION 2. AGENT.
2.1. ACTIONS
(a) Each Guarantor hereby irrevocably appoints the Agent as its agent under
and for purposes of this Agreement and the Documents. Each Guarantor
authorizes the Agent to act on behalf of such Guarantor under this
Agreement and each Document and, in the absence of written instructions
from the Guarantors received from time to time by the Agent (with respect
to which the Agent agrees that it will comply, except as otherwise provided
in this Section or as otherwise advised by counsel), to exercise such
powers hereunder and thereunder as are delegated to or required of the
Agent by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Guarantor hereby indemnifies and holds
harmless (which indemnity shall survive any termination of this Agreement)
the Agent, and the directors, officers, agents or employees of the Agent,
from and against any and all liabilities, obligations, losses, damages,
claims, costs or expenses of any kind or nature whatsoever which may at any
time be imposed on, incurred by, or asserted against, the Agent in any way
relating to or arising out of this Agreement and any Documents, including,
without limitation, attorneys' fees, and as to which the Agent is not
indemnified or reimbursed by the Company. The Agent shall not be required
to take any action hereunder or under any Document, or to prosecute or
defend any suit in respect of this Agreement or any Document, unless it is
indemnified hereunder to the Agent's satisfaction. If any indemnity in
favor of the Agent shall be or become, in the Agent's determination,
inadequate, the Agent may demand additional indemnification from the
Guarantors and cease to act as Agent hereunder until such additional
indemnity is given.
(b) Each Guarantor acknowledges that it has, independently and without
reliance upon the Agent, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and the transactions contemplated hereby. Each
Guarantor also acknowledges that it will, independently and without
reliance upon the Agent, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under this Agreement.
2.2. EXCULPATION.
Neither the Agent nor any of its directors, officers, employees or agents shall
be liable to any Guarantor for any action taken or omitted to be taken by it
under this Agreement or any Document, or in connection herewith or therewith,
except for its own willful misconduct or gross negligence, nor shall they be
responsible for any recitals or warranties herein or therein, nor for the
effectiveness, enforceability, validity or due execution of this Agreement or
any other Document, nor for the creation, perfection or priority of any liens
purported to be created by any of the Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral security, nor
to make any inquiry respecting the performance by the Company of its obligations
hereunder or under any Document. Any such inquiry which may be made by the Agent
shall not obligate it to make any further inquiry or to take any action. The
Agent shall be
-4-
<PAGE> 9
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which the Agent believes to
be genuine and to have been presented by a proper person.
2.3. SUCCESSOR.
The Agent may resign as such at any time upon at least 30 days' prior notice to
the Company and all Guarantors. If the Agent at any time shall resign, the
Guarantors may appoint another Guarantor as a successor Agent which shall
thereupon become the Agent hereunder. If no successor Agent shall have been so
appointed by the Guarantors, and shall have accepted such appointment, within 30
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Guarantors, appoint a successor Agent, which shall
be one of the Guarantors. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Agent, and the, retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as the Agent the provisions of this Section shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was the Agent
under this Agreement.
SECTION 3. WARRANTS.
3.1. ISSUANCE.
At the Closing (defined below in Section 4), the Company shall sell to the
Guarantors, and the Guarantors shall purchase from the Company, Warrants to
purchase an aggregate of 500,000 shares of the Common Stock (the "Warrant
Shares") upon the terms set forth in the Warrants. Each Guarantor shall purchase
a Warrant at the purchase price stated below to purchase the number of Warrant
Shares set forth below:
<TABLE>
<CAPTION>
Common Shares Guarantors Purchase
Guarantor Exercisable Price
- ---------------------------------------------------------- ------------------------- ---------------------------------
<S> <C> <C>
Pappajohn 250,000 $2,500
Gerald M. Kirke 100,000 $1,000
Iowa Farm Bureau Federation 50,000 $500
Derace Schaffer 50,000 $500
Matthew P. Kinley 20,000 $200
Dominion Securities Inc. 20,000 $200
Michael J. Richards 5,000 $50
Joseph Dunham 5,000 $50
</TABLE>
-5-
<PAGE> 10
3.2. REGISTRATION RIGHTS.
At the Closing, the Company and the Guarantors shall enter into the Registration
Rights Agreement.
SECTION 4. CLOSING.
The closing of the Transactions (the "Closing") shall take place at the offices
of BELIN LAMSON McCORMICK ZUMBACH FLYNN, a Professional Corporation, The
Financial Center, 666 Walnut Street, Suite 2000, Des Moines, Iowa 50309,
simultaneously with the execution and delivery of this Agreement and the other
Documents to be executed and delivered at Closing.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY.
The Company hereby represents and warrants to the Guarantors as follows:
5.1. ORGANIZATION.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate the assets
used in its business, to carry on its business as presently- conducted, to enter
into the Documents, to perform its obligations thereunder, and to consummate the
transactions contemplated thereby. Attached as Schedule 5.1 are correct and
complete copies of the Certificate of Incorporation and the Bylaws of the
Company, as in effect on the date of the Closing (the "Certificate of
Incorporation" and the "Bylaws," respectively).
5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY.
The Company has taken all corporate action necessary to authorize its execution
and delivery of the Documents and the Bank Documents, its performance of its
obligations thereunder, and its consummation of the transactions contemplated
thereby. Each Document and each Bank Document has been executed and delivered by
an officer of the Company in accordance with such authorization. Each Document
and each Bank Document constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer, and
similar laws affecting creditors' rights generally, and the effect of general
principles of equity.
5.3. NO CONFLICT.
The execution and delivery by the Company of the Documents and the Bank
Documents, its consummation of the transactions contemplated thereby, and its
compliance with the provisions thereof, will not (i) violate or conflict with
its Certificate of Incorporation or Bylaws, (ii) violate, conflict with, or give
rise to any right of termination, cancellation, or acceleration under any
-6-
<PAGE> 11
material agreement, lease, security, license, permit, or instrument to which the
Company is a party, or to which it or any of its assets is subject (except where
same would not individually or in the aggregate have a Material Adverse Effect
(as defined below)), (iii) result in the imposition of any Encumbrance on any
asset of the Company, other than pursuant to the Bank Documents and the
Documents, (iv) violate or conflict with any Laws, which violation would cause a
Material Adverse Change (as defined below), or (v) require any consent, approval
or other action of, notice to, or filing with any entity or person (governmental
or private), except for those that have been obtained or made, or where the
failure to obtain such consent or approval would not cause a Material Adverse
Change.
"Encumbrance" means any security interest, mortgage, lien, pledge, charge,
easement, reservation, restriction, or similar right of any third party except
for Encumbrances in favor of the Bank in connection with the Facility.
"Laws" means all laws, rules, regulations, ordinances, orders, judgments,
injunctions and decrees. "Material Adverse Change" means any material adverse
change in the business, operations, properties, assets, or financial condition
of the Company. "Material Adverse Effect" means a material adverse effect on the
business, financial condition, assets, liabilities, property or operations of
the Company, or a material impairment of the Company's ability to perform its
obligations under the Documents.
5.4. CAPITALIZATION.
(a) The authorized equity securities of the Company consist of 25,000,000
shares of capital stock, including 20,000,000 shares of common stock, $.01
par value, of which there are 2,172,028 shares issued and outstanding,
5,000,000 shares of preferred stock, initially undesignated as to terms, of
which the Company has designated the terms and preferences of 320,000
shares of Convertible Series A Voting Preferred Stock (of which there are
320,000 shares outstanding), 282,720 shares of Convertible Series B Voting
Preferred Stock (of which there are 282,720 shares outstanding), and
1,179,540 shares of Convertible Series C Voting Preferred Stock (of which
there are 773,254 shares outstanding). The persons set forth on Schedule
5.4 own the shares and common stock equivalents set forth opposite such
persons' names. All of the outstanding equity securities of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except for the Documents and the common stock equivalents
set forth on Schedule 5.4 there are no agreements of any sort relating to
the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the Securities
Act or any other legal requirement. Except as set forth in paragraph (b)
below, the Company does not own, nor has any contract to acquire, any
equity securities or other securities of any person or any direct or
indirect equity or ownership interest in any other business. The fully
diluted common stock equivalents of the Company outstanding before issuance
of the Warrants do not exceed 7.1 million shares.
-7-
<PAGE> 12
(b) The Company owns 100% of the capital stock of Neural, Inc. and Ethos
Corporation (collectively, the "Subsidiaries", and the capital stock of the
Subsidiaries being the "Subsidiary Stock"). The Subsidiary Stock is free
and clear of all Encumbrances.
5.5. FINANCIAL INFORMATION.
The Company has delivered to Agent: (a) audited consolidated balance sheets of
the Company as at December 31 for each of the years 1996 through 1998, and the
related audited consolidated statements of income, changes in stockholders'
equity, and cash flow for each of the fiscal years then ended, including in each
case the notes thereto and (b) an unaudited consolidated balance sheet of the
Company as at September 30, 1999 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income, changes in stockholders' equity,
and cash flow for the nine months then ended. Such financial statements and
notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with United States generally accepted accounting
principles consistently applied ("GAAP"). No financial statements of any persons
other than the Company and the Subsidiaries are required by GAAP to be included
in the consolidated financial statements of the Company.
5.6. SECURITIES LAWS.
Based upon the representation of each Guarantor contained in Section 6.1 below,
the Transactions contemplated hereby are exempt from registration under the
Securities Act.
5.7. TITLE TO ASSETS.
The Company has good and marketable title to all of its assets, free and clear
of all encumbrances except for Permitted Liens (defined below). Such assets are
in good operating condition and repair (ordinary wear and tear excepted), and
are suitable for their intended use in the business of the Company as conducted
at the date hereof. "Permitted Liens" means (i) liens in favor of the Bank
granted in connection with the Facility and in favor of the Agent granted in
connection herewith, (ii) liens arising by operation of law in the ordinary
course of business that, individually and in the aggregate, do not in any
material respect interfere with the use or value of any of the assets subject
thereto, (iii) liens for taxes not yet due and payable or that are being
contested in good faith, (iv) liens created by the Documents, (v) purchase money
liens to finance property of the Company acquired in the ordinary course of
business, (vi) liens existing on the date hereof listed in Schedule 5.7 or
incurred in connection with extension or renewal of indebtedness secured by such
liens, (vii) liens consisting of deposits or pledges to secure the performance
of trade contracts, bids, leases, public or statutory obligations and similar
obligations incurred in the ordinary course of business, and (viii) any
judgment, attachment or similar lien unless the judgment secured is not covered
by insurance or not discharged or stayed or bonded pending appeal or vacated
within 30 days of entry thereof.
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5.8. REAL PROPERTY.
The Company does not own, directly or indirectly, any fee title to real
property.
5.9. INTELLECTUAL PROPERTY RIGHTS.
The Company owns or is licensed to use, and has the right to bring infringement
actions with respect to, all material patents, trademarks, copyrights, service
marks, and applications and registrations therefor, and all trade names,
customer lists, trade secrets, proprietary processes and formulae, inventions,
know-how, other confidential and proprietary information, and other industrial
and intellectual property rights necessary to permit the Company to carry on its
business as presently conducted. Schedule 5.9 sets forth a list of all material
patents, trademarks, copyrights, service marks, and applications and
registrations therefor, and all trade names held or owned by the Company and all
rights (except for know-how and similar other undocumented intellectual
property) of the Company. All registered patents, copyrights, trademarks, and
service marks listed on Schedule 5.9 are in full force and effect and are not
subject to any taxes or maintenance fees which are delinquent. Except as set
forth on Schedule 5.9, the Company (i) did not license or grant to anyone rights
of any nature to use any intellectual property right that is material to its
business, and (ii) to the Company's knowledge, does not market or sell any
product or service that violates any intellectual property right of a third
party. Except as set forth on such Schedule, there is no pending or, to the
knowledge of the Company, threatened claim or litigation against the Company
contesting the right to use any of its material intellectual property rights,
asserting the misuse of any thereof, or asserting the infringement or other
violation of any intellectual property rights of a third party.
5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.
To the Company's knowledge after due inquiry, it is not in violation of any Law,
which violation could reasonably be expected to have a Material Adverse Effect.
5.11. MATERIAL AGREEMENTS.
Schedule 5.11 sets forth each agreement or understanding which is material to
the business of the Company. Except as set forth on Schedule 5.11, each
agreement or understanding set forth on Schedule 5.11 is in full force and
effect and, to the knowledge of the Company, constitutes a valid and binding
obligation of all parties thereto. Except as set forth on Schedule 5.11, to the
Company's knowledge, the Company has in all material respects performed the
obligations required to be performed by it and is not in default or alleged to
be in default in any material respect under any material agreement or
understanding. Except as set forth on Schedule 5.11, to the Company's knowledge,
there exists no event or condition which, after notice or lapse of time, or
both, would constitute such a default in a material respect under such
agreements. The Company is not aware of any material defaults by any other party
to any such agreement or understanding.
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<PAGE> 14
5.12. LITIGATION.
Except as set forth on Schedule 5.12 hereto, there are no (i) actions, suits,
claims, investigations or other proceedings by or before any governmental
authority or arbitrator pending or, to the knowledge of the Company, threatened
against the Company which, if determined adversely to the Company, would have a
Material Adverse Effect, or (ii) judgments, decrees, injunctions or orders of
any governmental authority or arbitrator against the Company.
5.13. SOLVENCY.
The Company is solvent, meaning that the fair salable value of the Company's
assets is in excess of its liabilities.
5.14. ENVIRONMENTAL MATTERS.
Except as otherwise stated in this Section 5.14, the Company is in compliance
with all Laws relating to the protection of the environment (the "Environmental
Laws"). The Company has not handled, stored or released, or exposed any person
to, any hazardous substance, as defined in 42 U.S.C.A. Section 9601(14) or any
other applicable Environmental Laws (a "Hazardous Substance"). To the Company's
knowledge, the Company is not and will not be liable or responsible for clean-up
costs, remedial work or damages in connection with the handling, storage,
release, or exposure by the Company of any Hazardous Substance in excess of
$25,000 in the aggregate. No claims for clean-up costs, remedial work or damages
have been made by any person or entity in connection with the handling, storage,
release, or exposure by the Company of any Hazardous Substance.
5.15. TAX MATTERS.
(a) (i) The Company has filed or been included in all required returns,
declarations of estimated tax, reports, and statements relating to any
Taxes (defined below) payable by it (collectively, the "Returns"); (ii) all
Returns were correct and complete in all material respects as of the time
of filing; (iii) the Company has timely paid all Taxes required to be paid
by it through the date hereof, except to the extent that Taxes are being
contested in good faith; (iv) the Company has made provision on the Interim
Balance Sheet in accordance with GAAP for all Taxes payable by it for all
periods prior to the date of the Interim Balance Sheet for which no Returns
have yet been filed; (v) the Company is not delinquent in the payment of
any Taxes, except to the extent that Taxes are being contested in good
faith; (vi) there are no pending tax audits of any Returns; and (vii)
except with respect to Taxes which are being contested in good faith, no
deficiency or addition to any Taxes or interest or penalty for any Taxes
has been proposed, asserted or assessed in writing against the Company.
(b) "Taxes" means, with respect to any person or entity, (i) all Federal,
state, local, and foreign taxes, including, without limitation, all taxes
on or based upon net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings, or profits, and
all gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property,
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<PAGE> 15
or windfall profits taxes, alternative or add-on minimum taxes, customs
duties, or other taxes, fees, assessments or charges of any kind, together
with any interest, penalties, additions to tax or additional amounts
imposed by any taxing authority on such person or entity, and (ii) any
liability for the payment of any amount of the type described in the
preceding clause (i) as a result of being a "transferee" (within the
meaning of Section 6901 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any other applicable Laws) of another person or entity.
5.16. ERISA.
Any plan maintained or contributed to by the Company that is an "employee
benefit plan," as defined in Section 3(3) or 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA") is being administered in compliance with
the terms of such plan and applicable law in all material respects.
5.17. DISCLOSURE.
None of the documents or materials relating to the Company referred to herein or
on any Schedule, or furnished to the Guarantors by the Company in connection
with this Agreement, contains any untrue statement of a material fact by the
Company or, to the knowledge of the Company, by any other person or entity.
Neither this Agreement (including the Schedules) nor any such document or
material omits to state a material fact necessary in order to make the
statements contained herein or therein not materially misleading.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS.
Each Guarantor, severally and only with respect to itself, represents and
warrants to the Company as of the date of this Agreement as follows:
6.1. INVESTMENT INTENT.
(a) Each Guarantor is acquiring the Warrants, and it will acquire any
Warrant Shares issuable upon exercise of the Warrants, for its own account,
for investment and not with a view to the distribution thereof, nor with
any present intention of distributing the same.
(b) Each Guarantor understands that the Warrants have not been, and any
Warrant Shares issuable upon exercise of the Warrants will not be,
registered under the Securities Act, and that they must be held
indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from registration.
(c) Each Guarantor understands that the exemption from registration
afforded by Rule 144 of the Securities Act (the provisions of which are
known to the Guarantors) depends on the satisfaction of various conditions
and that, if applicable, Rule 144 may only afford the basis for sales under
certain circumstances only in limited amounts.
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<PAGE> 16
(d) Each Guarantor is an "accredited investor," as such term is defined in
Rule 501 promulgated under the Securities Act.
(e) Each Guarantor (i) has received copies of the financial statements of
the Company described in Section 5.5 and (ii) believes that such Guarantor,
either alone or with the assistance of such Guarantor's own professional
advisor, has such knowledge and experience in financial and business
matters that such Guarantor is capable of reading and interpreting the
Company's financial statements and evaluating the merits and risks of the
transactions contemplated by this Agreement.
(f) In addition to the Company's financial statements referenced in
paragraph (e) above, each Guarantor has been given access to full and
complete information regarding the Company and has utilized such access to
his, her or its satisfaction.
6.2. DUE ORGANIZATION AND REQUISITE POWER.
Each Guarantor has all requisite power and authority, including, where
applicable, corporate power and authority, necessary to perform its obligations
to the Company and to the Bank as provided for in this Agreement.
6.3. ACTION AND EXECUTION.
Each Guarantor has taken all action necessary for the authorization, execution,
delivery and performance of this Agreement and the Credit Support Agreements.
When executed, each of this Agreement and the Credit Support Agreements will be
the legal, valid and binding obligation of each Guarantor enforceable in
accordance with its terms.
6.4. NO CONFLICT.
Neither the execution nor the delivery nor the performance of this Agreement or
the Credit Support Agreements by any Guarantor will violate or otherwise
contravene, where applicable, the Guarantor's articles or certificate of
incorporation or bylaws or the terms of any agreement, the breach of which would
invalidate this Agreement.
SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS.
Prior to or at the Closing, concurrently with the execution and delivery of this
Agreement, the following actions have been or are being taken:
(a) Fees and Expenses. The fees and expenses of the Agent are being paid by
the Company to the Agent as provided under Section 12 below.
(b) Warrants. The Warrants are being executed and delivered by the Company.
(c) Security Agreement. The Bank Security Agreement has been executed and
delivered by the Company to the Bank.
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<PAGE> 17
(d) Registration Rights Agreement. The Registration Rights Agreement is
being executed and delivered by the Company to the Agent for the benefit of
the Guarantors.
(e) Intellectual Property Assignment. The Bank Intellectual Property
Assignment have been executed and delivered by the Company to the Bank.
(f) Required Consents. All consents, approvals and other actions of, and
notices and filings with, all entities and persons as may be necessary or
required with respect to the execution and delivery by the parties of the
Documents, and the consummation by the parties of the transactions
contemplated thereby, have been obtained or made.
(g) Authorizing Actions of the Company. The Guarantors are receiving
certified copies of all requisite corporate actions taken by the Company to
authorize its execution and delivery of the Documents and its consummation
of the transactions contemplated thereby, and such other corporate
documents and other papers as the Guarantors may reasonably request.
(h) Opinion of Counsel. The Guarantors are receiving an opinion dated the
date hereof of counsel to the Company, in form reasonably satisfactory to
the Agent.
SECTION 8. COVENANTS.
8.1. ACCESS TO RECORDS.
The Company shall afford to the Guarantors and their authorized employees,
counsel, accountants and other representatives, upon reasonable notice and
during ordinary business hours, (i) reasonable access to all books, records, and
properties of the Company, as the same may relate to the Agreement and the
Documents and (ii) the opportunity to interview any officer of the Company
regarding its affairs as the same may relate to the Agreement and the Documents.
8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT.
(a) The Company shall deliver to each Guarantor the following:
(i) within 45 days after the end of each fiscal quarter of the Company,
(i) the balance sheet of the Company at the end of such quarter, and
(ii) the statements of income and cash flows of the Company for such
quarter;
(ii) within 90 days after the end of each fiscal year of the Company,
(i) the balance sheet of the Company at the end of such fiscal year,
(ii) the statements of income and cash flows of the Company for such
fiscal year, and (iii) an audit report of a nationally-recognized firm
of independent certified public accountants on such balance sheets and
statements; and
(iii) All financial statements to be delivered under this Section shall
be in accordance with the books and records of the Company and shall
have been prepared in accordance with generally accepted accounting
principles consistently applied. At any time at which
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<PAGE> 18
the Company has any subsidiaries, all such financial statements shall
be the consolidated financial statements of the Company and such
subsidiaries.
(b) The Company agrees that it shall not without the Agent's prior written
approval draw more than $500,000 against the Facility in the aggregate
during any seven day time period during the term thereof. In addition, the
Company agrees that it shall provide written notice of all draw requests to
the Agent at the same time that any draw requests are made to the Bank
under the Facility. The Company shall not request any draws more than ten
percent in excess of the Budget, on a cumulative basis.
8.3. PAYMENT; PREPAYMENT.
(a) The Company shall pay all its obligations to the Bank under the
Facility on or before June 30, 2001.
(b) Notwithstanding paragraph (a) above, the net cash proceeds of any of
the following shall be applied immediately and in full against Company's
obligations to the Bank under the Facility (i) any sale, lease, transfer or
other disposition of the Company's direct or indirect assets including any
sale, lease, transfer or other disposition of the assets of any direct or
indirect subsidiary of the Company (except equipment leases and pledges
under purchase money obligations which in the aggregate do not exceed those
dollar amounts set forth in Section 8.8(c) and trade sales, in each case in
the ordinary course of business), (ii) any equity or debt issuance by the
Company, including, without limitation, an initial public offering or
private placement of debt or equity securities or, (iii) after default
under the Bank Documents or Section 11 hereof, collection of any assets
(including accounts receivable) of the Company. Further, the Company agrees
to prepay its obligations to the Bank under the Facility upon any
consolidation or merger of the Company with or into another entity, or a
transfer of all or substantially all of the assets of the Company.
8.4. PAYMENT OF OBLIGATIONS.
The Company shall pay or discharge or cause to be paid or discharged all
material claims or demands, and all Taxes levied or imposed upon the Company or
upon the income, profits or property of the Company; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such claim, demand, or Tax the amount, applicability or validity
of which is being contested in good faith by appropriate proceedings and for
which adequate provision has been made.
8.5. INSURANCE.
The Company shall maintain with financially sound and reputable insurers such
insurance as may be required by law and such other insurance, to such extent and
against such hazards and liabilities, as is customarily maintained by companies
similarly situated and in the same or similar business.
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<PAGE> 19
8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE.
The Company shall promptly notify the Agent of (i) the commencement or threat of
any action, suit, proceeding, labor dispute or grievance, governmental
investigation, or arbitration against or affecting the Company, which, if
adversely determined, could reasonably be expected to result in a Material
Adverse Change, (ii) any monetary or other material default under any
indebtedness of the Company in excess of $100,000; and (iii) any other Material
Adverse Change.
8.7. CONDUCT OF BUSINESS; BOARD OF DIRECTORS.
(a) The Company shall (i) take all actions required to assure that the
Company remains duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) take all actions
required to assure that the Company maintains all requisite governmental
authority, licenses, and permits necessary for the conduct its business,
and (iii) conduct its business in compliance with all Laws except where
noncompliance could not reasonably be expected to result in a Material
Adverse Change.
(b) Upon request by the Agent, the Company agrees to appoint a person
identified by the Agent to fill the vacancy on the Board of Directors
caused by the resignation of Robert Staib and to nominate as a member of
the Board of Directors a person identified by the Agent in connection with
each election of directors that occurs while the Facility remains
outstanding.
8.8. DEBT.
The Company will not directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt (defined below), except for:
(a) Debt of the Company to the Bank or hereunder;
(b) Accounts payable to trade creditors for goods and services, and current
operating liabilities incurred in the ordinary course of business;
(c) Debt of the Company with respect to capital leases in an aggregate
amount less than $750,000 in calendar 1999; $1,500,000 in calendar 2000 and
$1,500,000 during the first six months of calendar 2001; or
(d) Permitted Liens.
"Debt" means all indebtedness (i) for borrowed money, (ii) evidenced by
bonds, debentures, notes or similar instruments, or (iii) evidenced by
guaranties or similar contingent obligations.
8.9. RESTRICTED PAYMENTS.
While any amount payable to the Bank, or the Guarantors or the Agent in
connection herewith, including the Documents, is outstanding or the Company has
the ability to borrow under the
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<PAGE> 20
Facility, the Company shall not directly or indirectly pay or declare any
dividend or authorize or make any distribution upon, or redeem, retire,
repurchase or otherwise acquire, any shares of capital stock of the Company
(except that the Company may adjust the conversion price of the Series C
Preferred Stock pursuant to the accumulating dividend provisions set forth in
the Series C designation). Furthermore, the Company shall not (i) invest more
than $200,000 in any existing or $100,000 in any newly-created subsidiary or
affiliate during any one year period or (ii) make any voluntary prepayments on
Debt unrelated to the Facility.
8.10. NEGATIVE PLEDGE.
The Company will not create, assume or suffer to exist any encumbrance on any
asset now owned or hereafter acquired by it, except:
(a) any lien on any asset securing Debt permitted under Section 8.8 above;
(b) Permitted Liens;
(c) liens securing the payment of taxes, assessments and governmental
charges or levies, either not yet due and payable or which are being
actually contested; and
(d) any lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any lien permitted by any of the foregoing
clauses of this Section; provided, however, that the principal amount of
such Debt is not increased and is not secured by any additional assets.
The Company shall at all times from and after the date hereof keep reserved,
free from Encumbrances solely for the purpose of effecting the exercise of the
Warrants, sufficient Warrant Shares to provide for the full exercise of the
Warrants.
8.11. TERMINATION.
The obligations of the Company hereunder shall terminate when the Guarantors are
released from their obligations under the Credit Support Agreements and no
amounts are owing in connection with the Facility or the Credit Support
Agreements.
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS.
The representations, warranties and covenants contained in this Agreement shall
survive the Closing indefinitely.
SECTION 10. INDEMNIFICATION.
(a) The Company shall indemnify, defend and hold the Agent and Guarantors
harmless against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including reasonable legal
fees and expenses), relating to or arising from the transactions described
herein and the untruth, inaccuracy or breach of any of the
<PAGE> 21
representations, warranties or agreements of the Company contained in this
Agreement or the other Documents; provided however, that none of the Agent
or the Guarantors will be indemnified for any costs or expenses that have
resulted primarily from its own gross negligence or willful misconduct.
(b) The Guarantors shall indemnify and hold the Company harmless against
all liability, loss or damage, together with all reasonable costs and
expenses related thereto (including reasonable legal fees and expenses),
relating to or arising from the untruth, inaccuracy or breach of any of the
representations, warranties or agreements of the Guarantors contained in
this Agreement.
SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT.
If one or more of the Guarantors purchases the Bank's rights and interests under
the Bank Documents (collectively, the "Bank's Position"), violation by the
Company of any representation, warranty or covenant in this Agreement shall be
deemed to be an event of default under the Bank Documents, as will any one or
more of the following events (each, an "Event of Default"):
(a) if one of more judgments, decrees or orders for the payment of money in
excess of $100,000 shall be rendered against the Company, any such
judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of 30 consecutive days without being vacated, discharged,
satisfied or stayed or bonded pending appeal; or
(b) if the Company shall become insolvent, or is adjudicated insolvent or
bankruptcy; or
(c) if the Company admits in writing its inability to pay its debts; or
(d) if the Company shall come under the authority of a custodian, receiver
or trustee for it or for substantially all its property; or
(e) if the Company makes an assignment for the benefit of creditors, or
suffers proceedings under any law related to bankruptcy, insolvency,
liquidation or the reorganization, readjustment or the release of debtors
to be instituted against it and if contested by it not dismissed or stayed
within 60 days; or
(f) if proceedings under any law related to bankruptcy, insolvency,
liquidation or the reorganization, readjustment or the release of debtors
are instituted or commenced by the Company; or
(g) if any order for relief is entered relating to any of the foregoing
proceedings under clauses (d) through (f); or
(h) the acquisition by any person (whether an individual, corporation,
association or other entity), or two or more persons acting in concert, of
beneficial ownership (within the meaning
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of Rule l3d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 30% or more of the outstanding voting
securities of the Company; or
(i) if there is a Material Adverse Effect, as determined in the reasonable
discretion of the Agent; or
(j) if the Company or any of its subsidiaries shall fail to make any
material payment in respect of any indebtedness (including all amounts owed
Northern Trust) or other material contract when due or within any
applicable grace period; or any event or condition shall occur which
results in the acceleration of the maturity of any indebtedness or material
contract or enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of any indebtedness or material contract or
any Person acting on such holder's behalf to accelerate the maturity
thereof or obligations thereunder.
The Events of Default set forth in this Section 11 shall be applicable only upon
a purchase of the Bank's Position by one or more of the Guarantors.
SECTION 12. FEES AND EXPENSES.
The Company, shall pay or reimburse the Agent for all direct expenses associated
with this Agreement, the transactions contemplated hereby, and/or the
enforcement of or collection under this Agreement, including in each case,
without limitation, the reasonable fees and charges of BELIN LAMSON McCORMICK
ZUMBACH FLYNN, a Professional Corporation, counsel to the Agent and all letter
of credit fees or other fees related to the Guarantor Commitments.
SECTION 13. CONFIDENTIALITY.
Each Guarantor shall keep all confidential, non-public information on the
business operations and affairs of the Company, which it receives as a
consequence of this Agreement and the other Documents, strictly confidential and
shall not disclose such information to any third party without the Company's
prior consent.
SECTION 14. ASSIGNMENT; PARTIES IN INTEREST.
This Agreement and the rights and obligations of the parties hereunder shall be
assignable by the Guarantors, but not the Company. This Agreement shall bind and
inure to the benefit of the Company, the Guarantors, the Agent, and their
respective successors and permitted assigns.
SECTION 15. ENTIRE AGREEMENT.
This Agreement and the other Documents contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect to such subject
matter.
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SECTION 16. FURTHER ASSURANCES.
The Company agrees to do such further acts and things and to execute and deliver
to Agent such additional assignments, agreements, powers and instruments, as
Agent may reasonably require to carry into effect the purposes of this Agreement
or any of the Documents.
SECTION 17. NOTICES.
All notices, claims, certificates, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if sent by nationally-recognized overnight courier, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
if to the Company:
Stockpoint, Inc.
2600 Crosspark Road
Coralville, IA 52241-3212
with a copy to:
Thomas Martin, Esq.
Dorsey & Whitney LLP
220 South 6th Street
Minneapolis, MN 55402
if to the Agent:
Equity Dynamics, Inc.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
with a copy to:
Belin Lamson McCormick Zumbach Flynn
A Professional Corporation
The Financial Center
666 Walnut Street
Suite 2000
Des Moines, Iowa 50309
ATTN: Garth D. Adams, Esq.
if to the Guarantors:
John Pappajohn
c/o Equity Dynamics
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<PAGE> 24
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Gerald M. Kirke
Kirke Financial Services, L.L.C.
417 Locust Street
Des Moines, Iowa 50309
Iowa Farm Bureau Federation
5400 University Avenue
West Des Moines, Iowa 50266
Attn: James Christenson, Director of Finance
Derace Schaffer
3489 Elmwood Avenue
Rochester, New York 14610
Matthew Kinley
c/o Equity Dynamics
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Dominion Securities Inc.
211 First Avenue S.E.
Cedar Rapids, Iowa 52401
Michael J. Richards
Kirke Financial Services, L.L.C.
417 Locust Street
Des Moines, Iowa 50309
Joseph Dunham
c/o Equity Dynamics
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, upon receipt of electronic
confirmation of transmission, and (d) in the case of mailing, on the third
business day following that on which the piece of mail containing such
communication is posted.
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SECTION 18. AMENDMENTS.
The terms and provisions of this Agreement may only be modified or amended
pursuant to an instrument signed by all parties. Notwithstanding the foregoing,
the obligations of the Company under Sections 8.1 through 8.10 may also be
waived, temporarily or permanently, but solely with respect to any Guarantor,
pursuant to an instrument signed by such Guarantor.
SECTION 19. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 20. HEADINGS, GENDER, TENSE.
The section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever from the context it appears appropriate, each term
stated in either of the singular or the plural will include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender will
include the masculine, the feminine and the neuter. Unless otherwise expressly
stated in the Agreement, the words "herein," "hereof," "hereto," "hereunder" and
others of similar inference refer to the Agreement as a whole and not to any
particular section, subsection or clause contained in the Agreement. The term
"including" shall not be deemed to be exclusive and shall be deemed to mean
"including, without limitation."
SECTION 21. GOVERNING LAW, JURISDICTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF IOWA WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF IOWA TO BE
APPLIED. THE PARTIES HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF IOWA AND OF ANY IOWA
STATE COURT SITTING IN DES MOINES FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH OF THE PARTIES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 22. WAIVER OF JURY TRIAL.
EACH OF THE COMPANY, THE AGENT AND THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
-21-
<PAGE> 26
PROCEEDING ARISING OUT OF OR RELATING TO THE DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY
RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN
CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OR RELATING TO THE FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
-22-
<PAGE> 27
IN WITNESS WHEREOF the parties have executed and delivered this Master Agreement
on the date first above written.
STOCKPOINT, INC.
By: /s/ [illegible]
---------------------------------------
By: /s/ John Pappajohn
---------------------------------------
John Pappajohn
By: /s/ Gerald M. Kirke
---------------------------------------
Gerald M. Kirke
IOWA FARM BUREAU FEDERATION
By: /s/ James Christenson
---------------------------------------
James Christenson
By: /s/ Derace Schaffer
---------------------------------------
Derace Schaffer
By: /s/ Matthew P. Kinley
---------------------------------------
Matthew P. Kinley
DOMINION SECURITIES INC.
By: /s/ Steve Michalicek
---------------------------------------
Steve Michalicek
By: /s/ Michael J. Richards
---------------------------------------
Michael J. Richards
-23-
<PAGE> 28
By: /s/ Joseph Dunham
---------------------------------------
Joseph Dunham
EQUITY DYNAMICS, INC., as Agent
By: /s/ [illegible]
---------------------------------------
-24-
<PAGE> 1
EXHIBIT 4.6
STOCKPOINT, INC.
STOCK PURCHASE WARRANT
To Purchase Common Stock of
STOCKPOINT, INC.
<PAGE> 2
THE ISSUANCE OF THIS WARRANT AND THE OFFER AND SALE OF THE SHARES OF COMMON
STOCK ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAW AND THIS WARRANT AND ANY
SUCH SHARES OF COMMON STOCK MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (IF SO
REQUESTED) TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
STOCKPOINT, INC. WARRANT NUMBER:
Void after 5:00 p.m. Eastern Standard Time, on December , 2004.
Warrant to Purchase ,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
STOCKPOINT, INC.
This is to Certify That, for United States Dollars ($ )
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, ("Holder") is entitled to purchase,
subject to the provisions of this Warrant, from Stockpoint, Inc., a Delaware
corporation ("Company"), 000 fully paid, validly issued and nonassessable
shares of Common Stock, $0.01 par value per share, of the Company ("Common
Stock") at a price initially set at Seven Dollars and Fifty Cents ($7.50) per
share at any time or from time to time during the period from the date hereof to
expiration, but not later than 5:00 p.m. Eastern Standard Time, on December __,
2004. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any
time or from time to time on or after the date hereof and
until 5:00 p.m. Eastern
<PAGE> 3
Standard Time on December __, 2004; provided, however,
that if either such day is a day on which banking
institutions in the State of New York are authorized by
law to close, then on the next succeeding day which shall
not be such a day. This Warrant may be exercised by
presentation and surrender hereof to the Company at its
principal office, or at the office of its stock transfer
agent if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form.
As soon as practicable after each such exercise of this
Warrant warrants, but not later than seven (7) days from
the date of such exercise, the Company shall issue and
deliver to the Holder a certificate or certificate for the
Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant
should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder
thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of
this Warrant at its office, or by the stock transfer agent
of the Company at its office, in proper form for exercise
together with payment in full of the exercise price for
the Warrant Shares to be purchased, the Holder shall be
deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be
closed or that certificates representing such shares of
Common Stock shall not then be physically delivered to the
Holder.
(2) In lieu of delivering the Exercise Price in cash or check
the Holder may elect to receive shares equal to the value
of the Warrant or portion thereof being exercised ("Net
Issue Exercise"). If the Holder wishes to elect the Net
Issue Exercise, the Holder shall notify the Company of its
election in writing at the time it delivers to the Company
the Purchase Form. In the event the Holder shall elect Net
Issue Exercise, the Holder shall receive the number of
shares of Common Stock equal to the product of (a) the
number of shares of Common Stock purchasable under the
Warrant, or portion thereof being exercised, and (b) the
current market value, as defined in paragraph (c) below,
of one share of Common Stock minus the Exercise Price,
divided by (c) the current market value, as defined in
paragraph (c) below, of one share of Common Stock.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such
number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(c) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon
any exercise hereof, the Company shall pay to
2
<PAGE> 4
the Holder an amount in cash equal to such fraction multiplied by
the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the NASDAQ system,
the current market value shall be the last reported sale
price of the Common Stock on such exchange or system on
the last business day prior to the date of exercise of
this Warrant or if no such sale is made on such day, the
mean of the last reported bid and asked prices for such
day on such exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value
shall be the mean of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of
this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are
not so reported, the current market value of a share of
Common Stock shall be an amount, not less than book value
thereof as at the end of the most recent fiscal year of
the Company ending prior to the date of the exercise of
the Warrant, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Subject to the
restrictions noted at the beginning of this Warrant, this Warrant
is exchangeable, without expense, at the option of the Holder,
upon presentation and surrender hereof to the Company or at the
office of its stock transfer agent, if any, for other warrants of
different denominations entitling the holder thereof to purchase
in the aggregate the same number of shares of Common Stock
purchasable hereunder. Upon surrender of this Warrant to the
Company at its principal office or at the office of its stock
transfer agent, if any, with the Assignment Form annexed hereto
duly executed and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be cancelled. This
Warrant may be divided or combined with other warrants which
carry the same rights upon presentation hereof at the principal
office of the Company or at the office of its stock transfer
agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued
and signed by the Holder hereof. The term "Warrant" as used
herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and
3
<PAGE> 5
date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen,
destroyed, or mutilated shall be at any time enforceable by
anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at
law or equity, and the rights of the Holder are limited to those
expressed in the Warrant and are not enforceable against the
Company except to the extent set forth herein.
(f) ANTI-DILUTION AND ADJUSTMENT PROVISIONS. The Exercise Price in
effect at any time and the number and kind of securities
purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events
as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number
of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares,
the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to
such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately
prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its
Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or
having a conversion price per share) less than the
Exercise Price on such record date the Exercise Price
shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect
immediately prior to the date of issuance by a fraction,
the numerator of which shall be the sum of the number of
shares outstanding on the record date mentioned above and
the number of additional shares of Common Stock which the
aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate conversion price
of the convertible securities so offered) would purchase
at the Exercise Price in effect immediately prior to the
date of such issuance, and the denominator of which shall
be the sum of the number of shares of Common Stock
outstanding on the record date mentioned above and the
number of additional shares of Common Stock offered for
subscription or purchase (or into which the
<PAGE> 6
convertible securities so offered are convertible).
Such adjustment shall be made successively whenever
such rights or warrants are issued and shall become
effective immediately after the record date for the
determination of shareholders entitled to receive
such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or
securities convertible into Common Stock are not
delivered) after the expiration of such rights or
warrants the Exercise Price shall be readjusted to
the Exercise Price which would then be in effect had
the adjustments made upon the issuance of such rights
or warrants been made upon the basis of delivery of
only the number of shares of Common Stock (or
securities convertible into Common Stock) actually
delivered.
(3) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or
distributions and dividends or distributions referred
to in Subsection (1) above) or subscription rights or
warrants (excluding those referred to in Subsection
(2) above), then in each such case the Exercise Price
in effect thereafter shall be determined by
multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which
shall be the total number of shares of Common Stock
outstanding multiplied by the current market price
per share of Common Stock (as defined in Section (c)
above), less the fair market value (as determined by
the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which
shall be the total number of shares of Common Stock
outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is
fixed. Such adjustment shall be made whenever any
such distribution is made and shall become effective
immediately after the record date for the
determination of shareholders entitled to receive
such distribution.
(4) (A). In case the Company shall issue shares of its
Common Stock excluding shares issued (i) in any of
the transactions described in Subsection (1) above,
(ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by
the Company's Board of Directors and approved by its
shareholders, if such shares would otherwise be
included in this Subsection (4), (iii) upon exercise
of options and warrants outstanding at December ____,
1999, and this Warrant, (iv) to shareholders of any
corporation which merges into the Company in
proportion to their stock holdings of such
corporation immediately prior to such merger, upon
such merger, (v) in a bona fide public offering
pursuant to a firm commitment underwriting, or (vi)
on conversion or exchange of any securities for which
full adjustment has already been made in accordance
with Subsection 4(B) below but only if no adjustment
is required pursuant to any other specific subsection
of this Section (f)
5
<PAGE> 7
(without regard to Subsection (9) below) with respect
to the transaction giving rise to such rights for a
consideration per share (the "Offering Price") less
than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall
equal such Offering Price. Such adjustment shall be
made successively whenever such an issuance is made.
(B). In case the Company shall issue any securities
convertible into or exchangeable for its Common Stock
excluding securities issued in transactions described
in Subsections (2) and (3) above for a consideration
per share of Common Stock (the "Conversion Price")
initially deliverable upon conversion or exchange of
such securities determined as provided in Subsection
(7) below less than the Exercise Price, the Exercise
Price shall be adjusted immediately thereafter so
that it shall equal such Conversion Price Such
adjustment shall be made successively whenever such
an issuance is made.
(C). In case the Company shall issue shares of its
Common Stock excluding shares issued (i) in any of
the transactions described in Subsection (1) above,
(ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by
the Company's Board of Directors and approved by its
shareholders, if such shares would otherwise be
included in this Subsection (4), (iii) upon exercise
of options and warrants outstanding at December __,
1999, and this Warrant, (iv) to shareholders of any
corporation which merges into the Company in
proportion to their stock holdings of such
corporation immediately prior to such merger, upon
such merger, (v) in a bona fide public offering
pursuant to a firm commitment underwriting, or (vi)
on conversion or exchange of any securities for which
full adjustment has already been made in accordance
with Subsection 4(B) above or Subsection 4(D) below
but only if no adjustment is required pursuant to any
other specific subsection of this Section (f)
(without regard to Subsection (9) below) with respect
to the transaction giving rise to such rights for a
consideration per share (the "Offering Price") less
than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall
equal the price determined by multiplying the
Exercise Price in effect immediately prior to the
date of issuance by a fraction, the numerator of
which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the
issuance of such additional shares and the number of
shares of Common Stock which the aggregate
consideration received determined as provided in
subsection (7) below for the issuance of such
additional shares would purchase at the Exercise
Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after the issuance of such additional
shares. Such adjustment shall be made successively
whenever such an issuance is made.
6
<PAGE> 8
(D). In case the Company shall issue any securities
convertible into or exchangeable for its Common Stock
excluding securities issued in transactions described
in Subsections (2) and (3) above for a consideration
per share of Common Stock (the "Conversion Price")
initially deliverable upon conversion or exchange of
such securities determined as provided in Subsection
(7) below less than the Exercise Price, the Exercise
Price shall be adjusted immediately thereafter so
that it shall equal the price determined by
multiplying the Exercise Price in effect immediately
prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of
shares outstanding immediately prior to the issuance
of such securities and the number of shares of Common
Stock which the aggregate consideration received
determined as provided in subsection (7) below for
such securities would purchase at the Exercise Price
in effect immediately prior to the date of such
issuance, and the denominator of which shall be the
sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such
securities and the maximum number of shares of Common
Stock of the Company deliverable upon conversion of
or in exchange for such securities at the initial
conversion or exchange price or rate. Such adjustment
shall be made successively whenever such an issuance
is made.
(5) In case the Company shall (i) issue shares of its
Common Stock in a bona fide public offering pursuant
to a firm commitment at a price per share ("Public
Offering Price") less than 200% of the then current
Exercise Price, the Exercise Price shall be adjusted
immediately so that it shall equal the price
determined by multiplying the Public Offering Price
by a factor of 0.50, or (ii) issue or exchange shares
of its Common Stock in connection with a Change of
Control (defined as the acquisition by any person
(whether an individual, corporation, association or
other entity), or two or more persons acting in
concert, of beneficial ownership (within the meaning
of 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934) of 50% or
more of the outstanding voting securities of the
Company) for a consideration per share ("Exchange
Consideration") less than 200% of the then current
Exercise Price, the Exercise Price shall be adjusted
immediately so that it shall equal the price
determined by multiplying the Exchange Consideration
by a factor of 0.50. No more than one adjustment
shall be made pursuant to this Subsection (5), which
adjustment shall be made at the time of such
issuance.
(6) Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (1),
(2), (3), (4) and (5) above, the number of Shares
purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on
7
<PAGE> 9
the date hereof and dividing the product so obtained
by the Exercise Price, as adjusted.
(7) For purposes of any computation respecting
consideration received pursuant to Subsections (4)
and (5) above, the following shall apply:
(A) in the case of the issuance of shares of
Common Stock for cash, the consideration
shall be the amount of such cash, provided
that in no case shall any deduction be made
for any commissions, discounts or other
expenses incurred by the Company for any
underwriting of the issue or otherwise in
connection therewith;
(B) in the case of the issuance of shares of
Common Stock for a consideration in whole or
in part other than cash, the consideration
other than cash shall be deemed to be the
fair market value thereof as determined in
good faith by the Board of Directors of the
Company (irrespective of the accounting
treatment thereof), whose determination
shall be conclusive; and
(C) in the case of the issuance of securities
convertible into or exchangeable for shares
of Common Stock, the aggregate consideration
received therefor shall be deemed to be the
consideration received by the Company for
the issuance of such securities plus the
additional minimum consideration, if any, to
be received by the Company upon the
conversion or exchange thereof the
consideration in each case to be determined
in the same manner as provided in clauses
(A) and (B) of this Subsection (7).
(8) INTENTIONALLY OMITTED.
(9) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such
price; provided, however, that any adjustments which
by reason of this Subsection (9) are not required to
be made shall be carried forward and taken into
account in any subsequent adjustment required to be
made hereunder. All calculations under this Section
(f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary
notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the
Exercise Price, in addition to those required by this
Section (f), as it shall determine, in its sole
discretion, to be advisable in order that any
dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination
of Common Stock, hereafter made by the Company shall
not result in any Federal Income tax liability to the
holders of Common Stock or securities convertible
into Common Stock (including Warrants).
8
<PAGE> 10
(10) The Company may retain a firm of independent
certified public accountants selected by the Board of
Directors (who may be the regular accountants
employed by the Company) to make any computation
required by this Section (f), and a certificate
signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(11) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the
Holder of this Warrant thereafter shall become
entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (9),
inclusive above.
(12) Irrespective of any adjustments in the Exercise Price
or the number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or
thereafter issued may continue to express the same
price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to
this Agreement.
(13) The provisions of Subsections (4)(A), (4)(B), and (5)
above shall cease to have any effect immediately
after the closing of the Company's first bona fide
public offering after the date of this Warrant and
thereafter no adjustments in the Exercise Price shall
be made pursuant to such Subsections. The provisions
of Subsections (4)(C) and (4)(D) shall not be
effective as long as Subsections (4)(A) and (4)(B)
remain effective. Immediately after the closing of
the Company's first bona fide public offering the
provisions of Subsections (4)(C) and (4)(D) shall
become effective and adjustments in the Exercise
Price shall be made pursuant to such Subsections.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing
Section, the Company shall promptly and in no event later than
20 days after the effective date of adjustment cause to be
mailed by certified mail to each Holder at his last address
appearing in the Warrant Register and shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment, including a
statement of the number of additional shares of Common Stock,
if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each
such officer's certificate shall be
9
<PAGE> 11
made available at all reasonable times for inspection by the
Holder or any holder of a Warrant executed and delivered
pursuant to Section (a).
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make
any distribution upon the Common Stock or (ii) if the Company
shall offer to the holders of Common Stock for subscription or
purchase by them any share of any class or any other rights or
(iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected,
then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior to
the date specified in (x) or (y) below, as the case may be, a
notice containing a brief description of the proposed action
and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to
take place and the date, if any is to be fixed, as of which the
holders of Common Stock or other securities shall receive cash
or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution,
liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case
of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and
which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock of the class issuable upon exercise of this Warrant) or
in case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company
shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind
and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization
and other change, consolidation, merger, sale or conveyance by
a holder of the number of shares of Common Stock which might
have been purchased upon exercise of this Warrant immediately
prior to such reclassification, change, consolidation, merger,
sale or conveyance. Any such provision shall include provision
for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant.
The foregoing provisions of this Section (i) shall similarly
apply to successive reclassifications, capital reorganizations
and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or
reclassification,
10
<PAGE> 12
consolidation, merger, sale or conveyance, additional shares of
Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of
the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions
of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company and
the Holder have entered into a Registration Rights Agreement as
of even date herewith providing for certain rights and
obligations related to registration of the shares of Common
Stock issuable upon exercise of this Warrant.
(k) RESTRICTIVE LEGEND. Each Warrant Share, when issued, shall
include a legend in substantially the following form: THE
ISSUANCE OF THESE SHARES HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE
SECURITIES LAW AND THESE SHARES MAY NOT BE PLEDGED, SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW
HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY
THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
(IF SO REQUESTED) TO THE EFFECT THAT REGISTRATION UNDER THE ACT
OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN
CONNECTION WITH THE PROPOSED TRANSFER.
(l) NO IMPAIRMENT. The Company will not, by amendment of its
charter or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action,
avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will 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.
Dated: December __, 1999
STOCKPOINT, INC.
Attest:
______________________________ By:_____________________________
Name: William McNally Name: William E. Staib
Title: Secretary Title: President & CEO
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<PAGE> 13
PURCHASE FORM
Dated____________________
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing shares of Common
Stock and hereby makes payment of in payment of the actual
exercise price thereof. In lieu of such payment of the actual exercise
price, the undersigned may direct the Company to net issue such shares
of Common Stock in accordance with Section (a)(2) of the within Warrant
by writing "net issue" in the space after "payment of" in the preceding
sentence.
________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ___________________________________________________________
(Please typewrite or print in block letters)
Address_________________________________________________________
Signature ______________________________________________
________________
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________ hereby
sells, assigns and transfers unto
Name____________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________
the right to purchase Common Stock represented by this Warrant to the
extent of _______ shares as to which such right is exercisable and does
hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the same on the books of the Company with full power of
substitution in the premises.
Date ______________,_______
Signature __________________________
12
<PAGE> 14
Date ______________,_______
Signature __________________________
13
<PAGE> 1
EXHIBIT 4.7
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into
as of December 3, 1999, by and among Stockpoint, Inc., a Delaware corporation
(the "Company"), and the persons listed on the signature page hereof (the
"Purchasers").
WHEREAS, the Purchasers (the "Purchasers") have purchased Stock
Purchase Warrants (the "Warrants") for the purchase of Common Stock, $.01 par
value per share, of the Company;
WHEREAS, the Company and the Purchasers desire to provide for certain
arrangements with respect to the registration under the Securities Act of 1933,
as amended (the "Securities Act"), of shares of Common Stock of the Company,
$.01 par value per share, to be issued upon exercise of the Warrants held by the
Purchasers as provided in this Agreement:
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers
hereby agree as follows:
1. Definitions.
1.1 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 "Company" shall mean Stockpoint, Inc., a Delaware
corporation.
1.3 "Common Shares" shall mean the shares of common stock, par
value $.01 per share, authorized by the Company's Certificate of Incorporation
and any additional shares of common stock which may be authorized in the future
by the Company, and any stock into which such Common Shares may hereafter be
changed, and shall also include capital stock of any other class of the Company
which is not preferred as to dividends or assets over any other class of stock
of the Company and which is not subject to redemption.
1.4 "Public Offering" shall mean any offering of Common Shares to
the public, either on behalf of the Company or any of its security holders,
pursuant to an effective registration statement under the Securities Act.
1.5 "Purchasers" shall mean the holders from time to time of the
Warrants.
1.6 "Registrable Securities" shall mean (a) the Common Shares at
any time issued or subject to issuance upon the exercise of the Warrants and any
series of preferred stock, warrants, options or rights, the holders of which are
granted registration rights by agreement with the Company and (b) any additional
securities issued with respect to the above-described
<PAGE> 2
securities upon any stock split, stock dividend, recapitalization, or similar
event. Registrable Securities shall cease to be Registrable Securities when (x)
a registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (y) all such
securities held by a Purchaser shall be eligible to be distributed pursuant to
Rule 144 under the Securities Act in a single three-month period by the holders
thereof or (z) such securities shall have ceased to be outstanding.
1.7 "Registration Expenses" shall mean the expenses described in
Section 5.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
amended.
2. Demand Registration.
2.1 Subject to Sections 2.4 and 2.5, if at any time after one year
has elapsed from the date the Company first consummates a Public Offering
pursuant to a registration statement on Form S-1 or Form SB-2, the Company shall
receive a written request therefor from the record holder or holders of an
aggregate of at least 51% of the Registrable Securities, the Company shall
prepare and file a registration statement under the Securities Act covering such
number of Registrable Securities as are the subject of such request and shall
use its best efforts to cause such registration statement to become effective.
Upon the receipt of a registration request meeting the requirements of this
Section 2.1, the Company shall promptly give written notice to all other record
holders of Registrable Securities that such registration is to be effected. The
Company shall include in such registration statement such additional Registrable
Securities as such other record holders request in writing within thirty (30)
days after the date of the Company's written notice to them. If (a) the holders
of a majority of the Registrable Securities for which registration has been
requested pursuant to this Section 2.1 determine for any reason not to proceed
with the registration at any time before the related registration statement has
been declared effective by the Commission, (b) such registration statement, if
theretofore filed with the Commission, is withdrawn and (c) the holders of the
Registrable Securities subject to such registration statement agree to bear
their own Registration Expenses incurred in connection therewith and to
reimburse the Company for the Registration Expenses incurred by it in such
connection or if such registration statement, if theretofore filed with the
Commission, is withdrawn at the initiative of the Company, then the holders of
the Registrable Securities shall not be deemed to have exercised their demand
registration right pursuant to this Section 2.1.
2.2 At the request of the holders of a majority of the Registrable
Securities to be registered, the method of disposition of all Registrable
Securities included in such registration shall be an underwritten Public
Offering. The managing underwriter of any such Public Offering shall be selected
by the Company. If in the good faith judgment of the managing underwriter of
such Public Offering, the inclusion of all of the Registrable Securities the
registration of which has been requested would interfere with their successful
marketing, the number of Registrable Securities to be included in the Public
Offering shall be reduced, pro rata, among the requesting holders thereof in
proportion to the number of Registrable Securities included in their respective
requests for registration. Registrable Securities that are so excluded from such
underwritten
2
<PAGE> 3
Public Offering shall be withheld by the holders thereof for such period, not
exceeding one hundred and twenty (120) days, as the managing underwriter
reasonably determines is necessary to effect such Public Offering.
2.3 The Company shall be obligated to prepare, file and cause to be
effective only one (1) registration statement pursuant to Section 2.1.
2.4 Notwithstanding the foregoing, the Company may delay initiating
the preparation and filing of any registration statement requested pursuant to
Section 2.1 for a period not to exceed one hundred eighty (180) days if, in the
good faith judgment of the Company's Board of Directors, effecting the
registration would adversely affect a proposed Public Offering by the Company or
would require the premature disclosure of any financing, acquisition,
disposition of assets or stock, merger or other comparable transaction or would
require the Company to make public disclosure of information the public
disclosure of which could have material adverse effect on the Company.
2.6 Notwithstanding anything to the contrary contained herein, at any
time within thirty (30) days after receiving a demand for registration pursuant
to Section 2.1, the Company may elect to effect an underwritten primary
registration in lieu of the requested registration. If the Company so elects,
the Company shall give prompt written notice to all holders of Registrable
Securities of its intention to effect such a registration and shall afford such
holders the rights contained in Article 3 with respect to "piggyback"
registrations. In such event, the demand for registration pursuant to Section
2.1 shall be deemed to have been withdrawn.
3. Piggyback Registration.
3.1 From and after the date on which one year has elapsed from the
date the Company first consummates a Public Offering pursuant to a registration
statement on Form S-1 or Form SB-2, each time the Company shall determine to
proceed with the actual preparation and filing of a registration statement under
the Securities Act in connection with the proposed offer and sale for money of
any of its securities by it or any of its security holders (other than a
registration statement on Form S-8, Form S-4 or other limited purpose form), the
Company will give written notice of its determination to all record holders of
Registrable Securities. Upon the written request of a record holder of any
Registrable Securities given within 30 days after the date of any such notice
from the Company, the Company will, except as herein provided, cause all
Registrable Securities the registration of which is requested to be included in
such registration statement, all to the extent requisite to permit the sale or
other disposition by the prospective seller or sellers of the Registrable
Securities to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any registration;
and provided, further, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the
Commission, and the Company's decision not to proceed is primarily based upon
the anticipated Public Offering price of the securities to be sold by the
Company, the Company shall promptly complete the registration for the benefit of
those selling security holders who wish to proceed with a Public Offering of
their Registrable Securities and who agree to bear all of the Registration
Expenses in excess of $25,000 incurred by the Company as the result of such
registration after the Company has decided not to proceed. In the
3
<PAGE> 4
discretion of the holders of the Registrable Securities to be included in the
registration (provided that such holders are the record holders of at least 51%
of the Registrable Securities), such registration may count as a demand
registration under Section 2.1 (if it otherwise meets the requirements of
Section 2.1) for which the Company will pay all Registration Expenses.
3.2 If any registration pursuant to Section 3.1 is underwritten in
whole or in part, the Company may require that the Registrable Securities
included in the registration be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
If, in the good faith judgment of the managing underwriter of the Public
Offering, the inclusion of all of the Registrable Securities originally covered
by requests for registration would reduce the number of shares to be offered by
the Company or interfere with the successful marketing of the shares offered by
the Company, the number of Registrable Securities to be included in the Public
Offering may be reduced in the following manner: first, securities held by
officers and directors of the Company (other than Registrable Securities) shall
be excluded from such underwritten public offering to the extent required by the
managing underwriter, second, if a further reduction in the Public Offering is
required, any securities, other than Registrable Securities, proposed to be sold
in the Public Offering by persons other than the Company shall be excluded and
third, if a further reduction in the Public Offering is required, the
Registrable Securities requested to be included in the Public Offering shall be
reduced, pro rata, among the requesting holders thereof in proportion to the
number of Registrable Securities included in their respective requests for
registration. The Registrable Securities which are thus excluded from the
underwritten Public Offering shall be withheld from the market by the holders
thereof for a period which the managing underwriter reasonably determines is
necessary in order to effect the Public Offering.
4. Short Form Registration. In addition to the registration rights provided
in Articles 2 and 3, if the Company qualifies for the use of Form S-3 or any
similar registration form then in force, the Company shall on one occasion at
its expense at the request of a majority of the holders of Registrable
Securities then outstanding file a registration statement on such form covering
Registrable Securities on behalf of such holder or holders. The Company shall
give notice to all the holders of Registrable Securities who did not join in
such request and afford them a reasonable opportunity to do so.
5. Registration Procedures. If and whenever the Company is required by the
provisions of Article 2, Article 3 or Articles 4 to effect a registration of
Registrable Securities under the Securities Act, the Company will use its best
efforts to effect the registration and sale of such Registrable Securities in
accordance with the intended methods of disposition specified by the holders
participating therein. Without limiting the foregoing, the Company in each such
case will, as expeditiously as possible:
5.1 In the case of a demand registration pursuant to Section 2.1 or
Article 4, prepare and file with the Commission the requisite registration
statement to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and regulations
thereunder) and use its best efforts to cause such registration statement to
become effective; provided, however, that as far in advance as practical before
filing
4
<PAGE> 5
such registration statement or any amendment thereto, the Company will
furnish counsel for the requesting holders of Registrable Securities with copies
of reasonably complete drafts of all such documents proposed to be filed
(including exhibits), and any such holder shall have the opportunity to object
to any information pertaining solely to such holder that is contained therein
and the Company will make the corrections reasonably requested by such holder
with respect to such information prior to filing such registration statement or
amendment.
5.2 Prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities included in such registration
statement, in accordance with the intended methods of disposition thereof, until
the earlier of (a) such time as all of the Registrable Securities included in
such registration statement have been disposed of in accordance with the
intended methods of disposition by the holder or holders thereof as set forth in
such registration statement or (b) one hundred eighty (180) days after such
registration statement becomes effective.
5.3 Promptly notify each requesting holder and the underwriter or
underwriters, if any, of:
(a) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become effective;
(b) any written request by the Commission for amendments or
supplements to such registration statement or prospectus;
(c) any notification received by the Company from the Commission
regarding the Commission's initiation of any proceeding with respect to, or
of the issuance by the Commission of, any stop order suspending the
effectiveness of such registration statement; and
(d) the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale
under the applicable securities or blue sky laws of any jurisdiction.
5.4 Furnish to each holder of Registrable Securities included in such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto, and such number of
copies of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to such
seller's Registrable Securities, and such other documents, as such holder may
reasonably request to facilitate the disposition of its Registrable Securities.
5
<PAGE> 6
5.5 Use its best efforts to register or qualify all Registrable
Securities included in such registration statement under the securities or "blue
sky" laws of such states as each holder of Registrable Securities shall
reasonably request within twenty (20) days following the original filing of such
registration statement and to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such holder to
consummate the disposition in such states of the Registrable Securities owned by
such holder, except that the Company shall not for any such purpose be required
(a) to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this Section 5.5
be obligated to be so qualified, (b) to consent to general service of process in
any such jurisdiction or (c) to subject itself to taxation in any such
jurisdiction by reason of such registration or qualification.
5.6 Use its best efforts to cause all Registrable Securities included
in such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable each holder
thereof to consummate the disposition of such Registrable Securities.
5.7 Notify each holder whose Registrable Securities are included in
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which any prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of any such holder promptly prepare and
furnish to such holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5.8 Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission.
5.9 Use its best efforts to cause all Registrable Securities included
in such registration statement to be listed, upon official notice of issuance,
on any securities exchange or quotation system on which any of the securities of
the same class as the Registrable Securities are then listed.
5.10 The Company may require each holder whose Registrable Securities
are being registered to, and each such holder, as a condition to including
Registrable Securities in such registration statement, shall, furnish the
Company and the underwriters with such information and affidavits regarding such
holder and the distribution of such Registrable Securities as the Company and
the underwriters may from time to time reasonably request in writing in
connection with such registration statement. At any time during the
effectiveness of any registration statement covering Registrable Securities
offered by a holder, if such holder becomes
6
<PAGE> 7
aware of any change materially affecting the accuracy of the information
contained in such registration statement or the prospectus (as then amended or
supplemented) relating to such holder, it will immediately notify the Company of
such change.
5.11 Upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 5.7, each holder will forthwith
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such holder
receives the copies of the supplemented or amended prospectus contemplated by
Section 5.7 and, if so directed by the Company, shall deliver to the Company all
copies, other than permanent file copies, then in such holder's possession of
the prospectus relating to such Registrable Securities.
6. Expenses. With respect to any registration requested pursuant to Article
2 (except as otherwise provided in such Article with respect to a registration
voluntarily terminated at the request of the requesting holders of Registrable
Securities), Article 3 (except as otherwise provided in such Article with
respect to a registration continued by holders of Registrable Securities who
wish to proceed with a Public Offering that is withdrawn by the Company) or
Article 4, the Company shall bear all of the fees and expenses ("Registration
Expenses") incident to the Company's performance of or compliance with its
obligations under this Agreement in connection with such registration, or
participation by the holders of Registrable Securities in any such registration,
including, without limitation, all registration, filing, securities exchange
listing and NASD fees, all registration, filing, qualification and other fees
and expenses or complying with state securities or "blue sky" laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, and one counsel for the selling holders selected by them,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, premiums and other costs of
any policies of insurance against liabilities arising out of the Public Offering
of the Registrable Securities being registered obtained by the Company (it being
understood that the Company shall have no obligation to obtain such insurance)
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities; but excluding underwriting discounts and commissions and
transfer taxes, if any, in respect of Registrable Securities and any fees and
disbursements of more than one counsel or any accountant to the holders of the
Registrable Securities, which discounts, commissions, transfer taxes, fees and
disbursements shall in any registration be payable by the holders of the
Registrable Securities being registered, pro rata in proportion to the number of
Registrable Securities being sold by them.
7. Indemnification.
7.1 The Company will, to the full extent permitted by law, indemnify
and hold harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of this Agreement, and its
directors, officers and partners and each other person, if any, who controls
such holder within the meaning of the Securities Act, from and against any and
all losses, claims, damages, expenses or liabilities, joint or several
(collectively, "Losses") to which such holder or any such director, officer,
partner or controlling person may
7
<PAGE> 8
become subject under the Securities Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in a registration statement prepared and filed
hereunder, any preliminary, final or summary prospectus contained therein or any
amendment or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, and the Company will
reimburse the holder and each such director, officer, partner and controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending against any such Losses (or action or proceeding
in respect thereof); provided, however, that the Company will not be liable in
any such case to the extent that any such Losses arise out of or are based upon
(a) an untrue statement or alleged untrue statement or omission or alleged
omission made in conformity with written information furnished by such holder
specifically for use in the preparation of the registration statement or (b)
such holder's failure to send or give a copy of the final prospectus to the
persons asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such holder
or any such director, officer, partner or controlling person of such holder and
shall survive the transfer of such securities by such holder. The Company shall
also indemnify each other person who participates (including as an underwriter)
in the offering or sale of Registrable Securities, their officers and directors,
and partners, and each other person, if any, who controls any such participating
person within the meaning of the Securities Act to the same extent provided
above with respect to holders of Registrable Securities.
7.2 Each holder of Registrable Securities which are included in a
registration pursuant to the provisions of this Agreement will, to the full
extent permitted by law, indemnify and hold harmless the Company, its officers,
directors and each other person, if any, who controls the Company within the
meaning of the Securities Act from and against any and all Losses to which the
Company or any such officer, director or controlling person may become subject
under the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in a registration statement prepared and filed hereunder, any
preliminary, final or summary prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in reliance
upon and in strict conformity with written information furnished by such holder
specifically for use in the preparation of such registration statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person of the Company. The holder of Registrable Securities included in a
registration statement shall also indemnify each other person who participates
(including as an
8
<PAGE> 9
underwriter) in the offering or sale of Registrable Securities, their officers
and directors, and partners, and each other person, if any, who controls any
such participating person within the meaning of the Securities Act to the same
extent as provided above with respect to the Company. In no event shall the
liability of any holder under this Section 7.2 exceed the net proceeds received
by such holder from the sale of their Registrable Securities.
7.3 Promptly after receipt by a party indemnified pursuant to the
provisions of Section 7.1 or Section 7.2 of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2,
promptly notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against any indemnified party,
the indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party
reasonably concludes that there is a conflict of interest that would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of the indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of Section 7.1 or
Section 7.2 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof unless (a) the
indemnified party shall have employed counsel in accordance with the proviso of
the preceding sentence, (b) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (c) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party. If
the indemnifying party is not entitled to, or elects not to, assume the defense
of a claim, it will not be obligated to pay the fees and expenses of more than
one counsel for the indemnified parties with respect to such claim, unless in
the reasonable judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of additional counsel or counsels for the
indemnified parties. No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation without
the consent of the indemnified party. No indemnifying party shall be subject to
any liability for any settlement made without its consent. An indemnified party
may at any time elect to participate in the defense of any claim or proceeding
at its own expense.
7.4 If the indemnification provided for in this Article 7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability,
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<PAGE> 10
claim, damage, or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as it appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
8. Covenants Relating to Rule 144. If at any time the Company is required
to filed reports in compliance with either Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") the Company
will (a) file reports in compliance with the Exchange Act and (b) comply with
all rules and regulations of the Commission applicable to the use of Rule 144.
9. Underwritten Offerings. If a distribution of Registrable Securities
pursuant to a registration statement is to be underwritten, the holders whose
Registrable Securities are to be distributed by such underwriters shall be
parties to such underwriting agreement. No requesting holder may participate in
such underwritten offering unless such holder agrees to sell its Registrable
Securities on the basis provided in such underwriting agreement and completes
and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement. If
any requesting holder disapproves of the terms of an underwriting, such holder
may elect to withdraw therefrom and from such registration by notice to the
Company and the managing underwriter, and each of the remaining requesting
holders shall be entitled to increase the number of Registrable Securities being
registered to the extent of the Registrable Securities so withdrawn in the
proportion which the number of Registrable Securities being registered by such
remaining requesting holder bears to the total number of Registrable Securities
being registered by all such remaining requesting holders.
10. Stand-Off Agreement. Each holder of Registrable Securities agrees, so
long as such holder holds at least 1% of the Company's outstanding voting equity
securities, in connection with the Company's initial Public Offering, upon
request of the Company or the underwriters managing such Public Offering, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Shares of the Company without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not exceeding 180 days) from the effective date of the registration
statement relating to such initial Public Offering as may be requested by the
underwriters; provided, however, that all other holders of at least 1% of the
Company's outstanding voting equity securities and all of the officers and
directors of the Company who own stock of the Company must also agree to not
less onerous restrictions.
10
<PAGE> 11
11. Amendment. The Company shall not amend this Agreement without the
written consent of the holders of more than 50% of the Registrable Securities.
12. Termination. This Agreement, and all of the Company's obligations
hereunder (other than its obligations pursuant to Article 7, which obligations
shall survive such termination), shall terminate upon the earlier to occur of
(a) the date on which there are no Registrable Securities outstanding or (b)
December , 2004.
13. Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Agreement may be assigned (but
only with all related obligations) by a holder of Registrable Securities to a
transferee or assignee of all, but not less than all, such securities provided
the Company is within a reasonable time after such transfer furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned.
IN WITNESS WHEREOF, the parties hereto have duly executed this Registration
Rights Agreement as of the date and year first above-written.
STOCKPOINT, INC.
By:
-----------------------------------------
By:
-----------------------------------------
John Pappajohn
By:
-----------------------------------------
Gerald M. Kirke
IOWA FARM BUREAU FEDERATION
By:
-----------------------------------------
By:
-----------------------------------------
Derace Schaffer
13
<PAGE> 12
By:
-----------------------------------------
Matthew P. Kinley
DOMINION SECURITIES INC.
By:
-----------------------------------------
Steve Michalicek
By:
-----------------------------------------
Michael J. Richards
By:
-----------------------------------------
Joseph Dunham
EQUITY DYNAMICS, INC., as Agent
By:
-----------------------------------------
12
<PAGE> 1
EXHIBIT 4.8
MASTER AGREEMENT
DATED AS OF MARCH 29, 2000,
AMONG
STOCKPOINT, INC.,
AS THE COMPANY,
AND
ZEKE INVESTMENT PARTNERS
MATTHEW P. KINLEY
JOSEPH DUNHAM
AS THE GUARANTORS,
AND
EQUITY DYNAMICS, INC.,
AS THE AGENT FOR THE GUARANTORS.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1. CREDIT SUPPORT AGREEMENTS.........................................................................1
SECTION 2. AGENT.............................................................................................4
2.1. ACTIONS........................................................................................4
2.2. EXCULPATION....................................................................................4
2.3. SUCCESSOR......................................................................................5
SECTION 3. WARRANTS..........................................................................................5
3.1. ISSUANCE.......................................................................................5
3.2. REGISTRATION RIGHTS............................................................................5
SECTION 4. CLOSING...........................................................................................5
SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY.........................................................6
5.1. ORGANIZATION...................................................................................6
5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY........................................................6
5.3. NO CONFLICT....................................................................................6
5.4. CAPITALIZATION.................................................................................7
5.5. FINANCIAL INFORMATION..........................................................................7
5.6. SECURITIES LAWS................................................................................8
5.7. TITLE TO ASSETS................................................................................8
5.8. REAL PROPERTY..................................................................................8
5.9. INTELLECTUAL PROPERTY RIGHTS...................................................................8
5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.............................................9
5.11. MATERIAL AGREEMENTS...........................................................................9
5.12. LITIGATION....................................................................................9
5.13. SOLVENCY......................................................................................9
5.14. ENVIRONMENTAL MATTERS.........................................................................9
5.15. TAX MATTERS..................................................................................10
5.16. ERISA........................................................................................10
5.17. DISCLOSURE...................................................................................10
SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS.....................................................11
6.1. INVESTMENT INTENT.............................................................................11
6.2. DUE ORGANIZATION AND REQUISITE POWER..........................................................11
6.3. ACTION AND EXECUTION..........................................................................11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6.4. NO CONFLICT...................................................................................12
SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS....................................................................12
SECTION 8. COVENANTS........................................................................................12
8.1. ACCESS TO RECORDS.............................................................................12
8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT..................................................13
8.3. PAYMENT; PREPAYMENT...........................................................................13
8.4. PAYMENT OF OBLIGATIONS........................................................................14
8.5. INSURANCE.....................................................................................14
8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE...................................................14
8.7. CONDUCT OF BUSINESS...........................................................................14
8.8. DEBT..........................................................................................14
8.9. RESTRICTED PAYMENTS...........................................................................15
8.10. NEGATIVE PLEDGE..............................................................................15
8.11. TERMINATION..................................................................................15
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS...........................................16
SECTION 10. INDEMNIFICATION.................................................................................16
SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT......................................16
SECTION 12. FEES AND EXPENSES...............................................................................17
SECTION 13. CONFIDENTIALITY.................................................................................17
SECTION 14. ASSIGNMENT; PARTIES IN INTEREST.................................................................17
SECTION 15. ENTIRE AGREEMENT................................................................................18
SECTION 16. FURTHER ASSURANCES..............................................................................18
SECTION 17. NOTICES.........................................................................................18
SECTION 18. AMENDMENTS......................................................................................20
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 19. COUNTERPARTS....................................................................................20
SECTION 20. HEADINGS, GENDER, TENSE.........................................................................20
SECTION 21. GOVERNING LAW, JURISDICTION.....................................................................20
SECTION 22. WAIVER OF JURY TRIAL............................................................................21
</TABLE>
<PAGE> 5
MASTER AGREEMENT dated as of March 29, 2000, among
(a) STOCKPOINT, INC., a Delaware corporation (the "Company"),
and (b)(i) ZEKE INVESTMENT PARTNERS ("Zeke") (ii) MATTHEW P.
KINLEY, JOSEPH DUNHAM (together with Zeke, the "Guarantors"),
and (c) EQUITY DYNAMICS, INC., an Iowa corporation, as agent
(the "Agent") for the Guarantors.
RECITALS
WHEREAS, the Company requested that the Guarantors execute guarantees in favor
of and/or arrange for the issuance of standby letters of credit or pledge
certificates of deposit (collectively, the "Credit Support Agreements") naming
Norwest Bank Iowa, National Association, or any successor or assign thereof
approved by the Agent (the "Bank") as beneficiary or pledgee in connection with
a line of credit with a maximum principal amount of $500,000 (the "Facility") to
be made available by the Bank to the Company;
WHEREAS, the Company has an existing $2,500,000 senior secured debt facility
("Previous Facility") executed on December 3, 1999;
WHEREAS, the Company offered to issue warrants in the form attached hereto as
Exhibit A ("Warrants") to purchase its common stock, $.01 par value (the "Common
Stock") to the Guarantors if they would provide the Credit Support Agreements;
WHEREAS, the Guarantors agreed to provide the Credit Support Agreements in
accordance with terms and conditions set forth herein.
ACCORDINGLY, the parties agree as follows:
SECTION 1. CREDIT SUPPORT AGREEMENTS.
(a) Upon the terms and subject to the conditions set forth in the this
Agreement, the Warrants, and the registration rights agreement in the form
attached hereto as Exhibit B (the "Registration Rights Agreement") (the
"Documents"), the Guarantors shall, for the benefit of the Company, arrange
for the issuance by one or more institutions acceptable to the Bank of
standby letters of credit or, in the alternative, pledge such Guarantors'
right, title and interest in and to certificates of deposit (each a
"Guarantor Commitment") in the aggregate amount of $500,000 naming the Bank
as beneficiary or pledgee, as the case may be, thereunder. The maximum
Guarantor Commitment of each of the Guarantors shall be as follows: (i)
Zeke - $350,000; (ii) Matthew P. Kinley - $100,000; Joseph Dunham -
$50,000. Each Guarantor's Commitment as a proportion of the maximum amount
of the loans (the "Loans") available under the Facility ($500,000.00) shall
be its "Pro Rata Share." In addition, if necessary, John Pappajohn has
executed a personal guaranty (the "Pappajohn Guaranty") of the Company's
obligations to the Bank in an amount agreed to by Pappajohn and the Bank.
(b) The obligation of the Guarantors to provide the Credit Support
Agreements shall be subject to the following conditions precedent:
<PAGE> 6
(i) the Company's execution and delivery of this Agreement and the
Documents;
(ii) the Company has executed and delivered to the Bank of (A) a
security agreement, in form satisfactory to the Agent, which includes
provision for security agreements in favor of the Bank by each
subsidiary of the Company (the "Bank Security Agreement"); (B) a
pledge agreement, in form satisfactory to the Agent (the "Pledge
Agreement"); (C) a conditional assignment of intellectual property
covering trademarks, in form satisfactory to the Agent (the "Bank
Intellectual Property Assignment," and, together with Bank Security
Agreement, Pledge Agreement and all documents executed in connection
therewith, the "Bank Security Documents"); (D) and the Company will
execute and deliver to the Bank the Credit Agreement dated March 29,
2000, between the Company and the Bank (the "Credit Agreement"); and
(E) the Promissory Note dated March 29, 2000, executed by the Company
in favor of the Bank (the "Promissory Note").
(iii) the Company's payment to the Agent of the Agent's costs and
expenses incurred in connection herewith and the Documents, as
provided in Section 12 below;
(iv) the Bank's agreement with the Guarantors, satisfactory to the
Guarantors, regarding the respective remedies of the Bank and the
Guarantors with respect to the Facility;
(v) the Company's delivery to the Bank of waivers by the Series C
Debenture Holders to the transactions contemplated by the Agreement,
in a form satisfactory to the Agent;
(vi) the Company's delivery to the Bank of a confirmation, waiver and
consent by Northern Trust to the first lien position by the Bank, in
each case in a form satisfactory to the Agent;
(vii) review and approval by the Agent of all outstanding liens on the
Company's assets by CEBA, Kirkwood Community College, Linn County REC
and Cisco Systems Capital;
(viii)...a cash flow budget in form and content acceptable to the
Agent, and attached hereto as Exhibit C (the "Budget");
(c) The Company has agreed to pay the Bank all sums due and owing in
connection with the Facility. The Company realizes and understands that the
reason it was able to obtain the Facility was due to the willingness of the
Guarantors to provide the Credit Support Agreements in respect of the
Company's obligations to the Bank. The Company agrees that at any time the
Guarantors, individually, or collectively, deem themselves to be insecure
they may acquire the position of the Bank in the Facility by paying the
obligation of the Company to the Bank. The Company fully agrees that upon
acquisition of the Bank's position or the Bank's exercise of its remedies
against the Guarantor Commitments and/or Pappajohn Guaranty, the Guarantors
shall be subrogated to all rights of the Bank under the Company's
agreements with the Bank (including, without limitation, the Credit
Agreement, the Promissory Note, and the Bank Security Documents; together,
the "Bank Documents") whether or not the Bank may have canceled all or any
portion of the Company's obligations to the Bank under the Facility.
-2-
<PAGE> 7
(d) As between the Guarantors, each of the Guarantors agrees that no
Guarantor should bear a proportionately greater loss under the Credit
Support Agreements than any other Guarantor. Therefore, each of the
Guarantors shall bear any losses under the Credit Support Agreements in
accordance with its Pro Rata Share. Each Guarantor promises each other
Guarantor that it will pay, on demand, his or its Pro Rata Share of the
Company's obligations to the Bank, in connection with such party's
obligations under the Credit Support Agreements, either to the Bank, if the
obligations under the Facility have not been satisfied, or to another
Guarantor who has made payment to the Bank in satisfaction of the Company's
obligations under the Facility. The demand for payment made by any
Guarantor to any other Guarantor shall be made in writing to the Agent,
accompanied by proof of the demanding party's payment under a Credit
Support Agreement. Each Guarantor (an "Indemnifying Guarantor") hereby
agrees to indemnify and hold harmless each other Guarantor from and against
any and all losses, claims, damages or liabilities, joint or several, which
such other party may suffer by reason of the failure of an Indemnifying
Guarantor to pay his or its Pro Rata Share on demand. The Company promises
to pay each Guarantor any and all sums which that Guarantor has paid to the
Bank in satisfaction of all or any portion of the Company's obligations to
the Bank when such obligations are due, plus all costs, including, without
limitation, interest and reasonable attorney's fees, incurred in connection
therewith.
(e) In the event the indemnification referred to in the immediately
preceding paragraph above is determined to be invalid or unenforceable for
any reason whatsoever, each Guarantor agrees that the common law principle
of contribution shall apply and that each Guarantor shall be obligated to
contribute his or its Pro Rata Share towards satisfaction of any payment
made or to be made under the Credit Support Agreements or made by any other
Guarantor, if the payments by such other Guarantor exceeds such other
Guarantor's Pro Rata Share of the Company's obligations to the Bank. (f)
The Agent hereby deems that the Facility and Previous Facility shall be
pari passu in all material respects.
SECTION 2. AGENT.
2.1. ACTIONS
(a) Each Guarantor hereby irrevocably appoints the Agent as its agent under
and for purposes of this Agreement and the Documents. Each Guarantor
authorizes the Agent to act on behalf of such Guarantor under this
Agreement and each Document and, in the absence of written instructions
from the Guarantors received from time to time by the Agent (with respect
to which the Agent agrees that it will comply, except as otherwise provided
in this Section or as otherwise advised by counsel), to exercise such
powers hereunder and thereunder as are delegated to or required of the
Agent by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Guarantor hereby indemnifies and holds
harmless (which indemnity shall survive any termination of this Agreement)
the Agent, and the directors, officers, agents or employees of the Agent,
from and against any and all liabilities, obligations, losses, damages,
claims, costs or expenses of any kind or nature whatsoever which may at any
time be imposed on, incurred by, or asserted against, the Agent in any way
-3-
<PAGE> 8
relating to or arising out of this Agreement and any Documents, including,
without limitation, attorneys' fees, and as to which the Agent is not
indemnified or reimbursed by the Company. The Agent shall not be required
to take any action hereunder or under any Document, or to prosecute or
defend any suit in respect of this Agreement or any Document, unless it is
indemnified hereunder to the Agent's satisfaction. If any indemnity in
favor of the Agent shall be or become, in the Agent's determination,
inadequate, the Agent may demand additional indemnification from the
Guarantors and cease to act as Agent hereunder until such additional
indemnity is given.
(b) Each Guarantor acknowledges that it has, independently and without
reliance upon the Agent, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and the transactions contemplated hereby. Each
Guarantor also acknowledges that it will, independently and without
reliance upon the Agent, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under this Agreement.
2.2. EXCULPATION.
Neither the Agent nor any of its directors, officers, employees or agents shall
be liable to any Guarantor for any action taken or omitted to be taken by it
under this Agreement or any Document, or in connection herewith or therewith,
except for its own willful misconduct or gross negligence, nor shall they be
responsible for any recitals or warranties herein or therein, nor for the
effectiveness, enforceability, validity or due execution of this Agreement or
any other Document, nor for the creation, perfection or priority of any liens
purported to be created by any of the Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral security, nor
to make any inquiry respecting the performance by the Company of its obligations
hereunder or under any Document. Any such inquiry which may be made by the Agent
shall not obligate it to make any further inquiry or to take any action. The
Agent shall be entitled to rely upon advice of counsel concerning legal matters
and upon any notice, consent, certificate, statement or writing which the Agent
believes to be genuine and to have been presented by a proper person.
2.3. SUCCESSOR.
The Agent may resign as such at any time upon at least 30 days' prior notice to
the Company and all Guarantors. If the Agent at any time shall resign, the
Guarantors may appoint another Guarantor as a successor Agent which shall
thereupon become the Agent hereunder. If no successor Agent shall have been so
appointed by the Guarantors, and shall have accepted such appointment, within 30
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Guarantors, appoint a successor Agent, which shall
be one of the Guarantors. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Agent, and the, retiring Agent shall be discharged from its duties and
obligations under this Agreement.
-4-
<PAGE> 9
After any retiring Agent's resignation
hereunder as the Agent the provisions of this Section shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was the Agent
under this Agreement.
SECTION 3. WARRANTS.
3.1. ISSUANCE.
At the Closing (defined below in Section 4), the Company shall sell to the
Guarantors, and the Guarantors shall purchase from the Company, Warrants to
purchase an aggregate of 100,000 shares of the Common Stock (the "Warrant
Shares") upon the terms set forth in the Warrants. Each Guarantor shall purchase
a Warrant at the purchase price stated below to purchase the number of Warrant
Shares set forth below:
<TABLE>
<CAPTION>
Common Shares Guarantors Purchase
Guarantor Exercisable Price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Zeke 70,000 $700
Matthew P. Kinley 20,000 $200
Joseph Dunham 10,000 $100
</TABLE>
3.2. REGISTRATION RIGHTS.
At the Closing, the Company and the Guarantors shall enter into the Registration
Rights Agreement.
SECTION 4. CLOSING.
The closing of the Transactions (the "Closing") shall take place at the offices
of BELIN LAMSON McCORMICK ZUMBACH FLYNN, a Professional Corporation, The
Financial Center, 666 Walnut Street, Suite 2000, Des Moines, Iowa 50309,
simultaneously with the execution and delivery of this Agreement and the other
Documents to be executed and delivered at Closing.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY.
The Company hereby represents and warrants to the Guarantors as follows:
5.1. ORGANIZATION.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate the assets
used in its business, to carry on its business as presently-conducted, to enter
into the Documents, to perform its obligations thereunder, and to
-5-
<PAGE> 10
consummate the transactions contemplated thereby. Attached as Schedule 5.1 are
correct and complete copies of the Certificate of Incorporation and the Bylaws
of the Company, as in effect on the date of the Closing (the "Certificate of
Incorporation" and the "Bylaws," respectively).
5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY.
The Company has taken all corporate action necessary to authorize its execution
and delivery of the Documents and the Bank Documents, its performance of its
obligations thereunder, and its consummation of the transactions contemplated
thereby. Each Document and each Bank Document has been executed and delivered by
an officer of the Company in accordance with such authorization. Each Document
and each Bank Document constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer, and
similar laws affecting creditors' rights generally, and the effect of general
principles of equity.
5.3. NO CONFLICT.
The execution and delivery by the Company of the Documents and the Bank
Documents, its consummation of the transactions contemplated thereby, and its
compliance with the provisions thereof, will not (i) violate or conflict with
its Certificate of Incorporation or Bylaws, (ii) violate, conflict with, or give
rise to any right of termination, cancellation, or acceleration under any
material agreement, lease, security, license, permit, or instrument to which the
Company is a party, or to which it or any of its assets is subject (except where
same would not individually or in the aggregate have a Material Adverse Effect
(as defined below)), (iii) result in the imposition of any Encumbrance on any
asset of the Company, other than pursuant to the Bank Documents and the
Documents, (iv) violate or conflict with any Laws, which violation would cause a
Material Adverse Change (as defined below), or (v) require any consent, approval
or other action of, notice to, or filing with any entity or person (governmental
or private), except for those that have been obtained or made, or where the
failure to obtain such consent or approval would not cause a Material Adverse
Change.
"Encumbrance" means any security interest, mortgage, lien, pledge, charge,
easement, reservation, restriction, or similar right of any third party except
for Encumbrances in favor of the Bank in connection with the Facility.
"Laws" means all laws, rules, regulations, ordinances, orders, judgments,
injunctions and decrees. "Material Adverse Change" means any material adverse
change in the business, operations, properties, assets, or financial condition
of the Company. "Material Adverse Effect" means a material adverse effect on the
business, financial condition, assets, liabilities, property or operations of
the Company, or a material impairment of the Company's ability to perform its
obligations under the Documents.
5.4. CAPITALIZATION.
(a) The authorized equity securities of the Company consist of 25,000,000
shares of capital stock, including 20,000,000 shares of common stock, $.01
par value, of which there are
-6-
<PAGE> 11
2,172,028 shares issued and outstanding, 5,000,000 shares of preferred
stock, initially undesignated as to terms, of which the Company has
designated the terms and preferences of 320,000 shares of Convertible
Series A Voting Preferred Stock (of which there are 320,000 shares
outstanding), 282,720 shares of Convertible Series B Voting Preferred Stock
(of which there are 282,720 shares outstanding), and 1,179,540 shares of
Convertible Series C Voting Preferred Stock (of which there are 773,254
shares outstanding). The persons set forth on Schedule 5.4 own the shares
and common stock equivalents set forth opposite such persons' names. All of
the outstanding equity securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Except for the
Documents and the common stock equivalents set forth on Schedule 5.4 there
are no agreements of any sort relating to the issuance, sale, or transfer
of any equity securities or other securities of the Company. None of the
outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other legal requirement. Except
as set forth in paragraph (b) below, the Company does not own, nor has any
contract to acquire, any equity securities or other securities of any
person or any direct or indirect equity or ownership interest in any other
business. The fully diluted common stock equivalents of the Company
outstanding before issuance of the Warrants do not exceed 7.1 million
shares.
(b) The Company owns 100% of the capital stock of Neural, Inc. and Ethos
Corporation (collectively, the "Subsidiaries", and the capital stock of the
Subsidiaries being the "Subsidiary Stock"). The Subsidiary Stock is free
and clear of all Encumbrances.
5.5. FINANCIAL INFORMATION.
The Company has delivered to Agent: (a) audited consolidated balance sheets of
the Company as at December 31 for each of the years 1996 through 1998, and the
related audited consolidated statements of income, changes in stockholders'
equity, and cash flow for each of the fiscal years then ended, including in each
case the notes thereto and (b) an unaudited consolidated balance sheet of the
Company as at September 30, 1999 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income, changes in stockholders' equity,
and cash flow for the nine months then ended. Such financial statements and
notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with United States generally accepted accounting
principles consistently applied ("GAAP"). No financial statements of any persons
other than the Company and the Subsidiaries are required by GAAP to be included
in the consolidated financial statements of the Company.
5.6. SECURITIES LAWS.
Based upon the representation of each Guarantor contained in Section 6.1 below,
the Transactions contemplated hereby are exempt from registration under the
Securities Act.
5.7. TITLE TO ASSETS.
The Company has good and marketable title to all of its assets, free and clear
of all encumbrances except for Permitted Liens (defined below). Such assets are
in good operating condition and
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<PAGE> 12
repair (ordinary wear and tear excepted), and are suitable for their intended
use in the business of the Company as conducted at the date hereof. "Permitted
Liens" means (i) liens in favor of the Bank granted in connection with the
Facility and in favor of the Agent granted in connection herewith, (ii) liens
arising by operation of law in the ordinary course of business that,
individually and in the aggregate, do not in any material respect interfere with
the use or value of any of the assets subject thereto, (iii) liens for taxes not
yet due and payable or that are being contested in good faith, (iv) liens
created by the Documents, (v) purchase money liens to finance property of the
Company acquired in the ordinary course of business, (vi) liens existing on the
date hereof listed in Schedule 5.7 or incurred in connection with extension or
renewal of indebtedness secured by such liens, (vii) liens consisting of
deposits or pledges to secure the performance of trade contracts, bids, leases,
public or statutory obligations and similar obligations incurred in the ordinary
course of business, and (viii) any judgment, attachment or similar lien unless
the judgment secured is not covered by insurance or not discharged or stayed or
bonded pending appeal or vacated within 30 days of entry thereof.
5.8. REAL PROPERTY.
The Company does not own, directly or indirectly, any fee title to real
property.
5.9. INTELLECTUAL PROPERTY RIGHTS.
The Company owns or is licensed to use, and has the right to bring infringement
actions with respect to, all material patents, trademarks, copyrights, service
marks, and applications and registrations therefor, and all trade names,
customer lists, trade secrets, proprietary processes and formulae, inventions,
know-how, other confidential and proprietary information, and other industrial
and intellectual property rights necessary to permit the Company to carry on its
business as presently conducted. Schedule 5.9 sets forth a list of all material
patents, trademarks, copyrights, service marks, and applications and
registrations therefor, and all trade names held or owned by the Company and all
rights (except for know-how and similar other undocumented intellectual
property) of the Company. All registered patents, copyrights, trademarks, and
service marks listed on Schedule 5.9 are in full force and effect and are not
subject to any taxes or maintenance fees which are delinquent. Except as set
forth on Schedule 5.9, the Company (i) did not license or grant to anyone rights
of any nature to use any intellectual property right that is material to its
business, and (ii) to the Company's knowledge, does not market or sell any
product or service that violates any intellectual property right of a third
party. Except as set forth on such Schedule, there is no pending or, to the
knowledge of the Company, threatened claim or litigation against the Company
contesting the right to use any of its material intellectual property rights,
asserting the misuse of any thereof, or asserting the infringement or other
violation of any intellectual property rights of a third party.
5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.
To the Company's knowledge after due inquiry, it is not in violation of any Law,
which violation could reasonably be expected to have a Material Adverse Effect.
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<PAGE> 13
5.11. MATERIAL AGREEMENTS.
Schedule 5.11 sets forth each agreement or understanding which is material to
the business of the Company. Except as set forth on Schedule 5.11, each
agreement or understanding set forth on Schedule 5.11 is in full force and
effect and, to the knowledge of the Company, constitutes a valid and binding
obligation of all parties thereto. Except as set forth on Schedule 5.11, to the
Company's knowledge, the Company has in all material respects performed the
obligations required to be performed by it and is not in default or alleged to
be in default in any material respect under any material agreement or
understanding. Except as set forth on Schedule 5.11, to the Company's knowledge,
there exists no event or condition which, after notice or lapse of time, or
both, would constitute such a default in a material respect under such
agreements. The Company is not aware of any material defaults by any other party
to any such agreement or understanding.
5.12. LITIGATION.
Except as set forth on Schedule 5.12 hereto, there are no (i) actions, suits,
claims, investigations or other proceedings by or before any governmental
authority or arbitrator pending or, to the knowledge of the Company, threatened
against the Company which, if determined adversely to the Company, would have a
Material Adverse Effect, or (ii) judgments, decrees, injunctions or orders of
any governmental authority or arbitrator against the Company.
5.13. SOLVENCY.
The Company is solvent, meaning that the fair salable value of the Company's
assets is in excess of its liabilities.
5.14. ENVIRONMENTAL MATTERS.
Except as otherwise stated in this Section 5.14, the Company is in compliance
with all Laws relating to the protection of the environment (the "Environmental
Laws"). The Company has not handled, stored or released, or exposed any person
to, any hazardous substance, as defined in 42 U.S.C.A. Section 9601(14) or any
other applicable Environmental Laws (a "Hazardous Substance"). To the Company's
knowledge, the Company is not and will not be liable or responsible for clean-up
costs, remedial work or damages in connection with the handling, storage,
release, or exposure by the Company of any Hazardous Substance in excess of
$25,000 in the aggregate. No claims for clean-up costs, remedial work or damages
have been made by any person or entity in connection with the handling, storage,
release, or exposure by the Company of any Hazardous Substance.
5.15. TAX MATTERS.
(a) (i) The Company has filed or been included in all required returns,
declarations of estimated tax, reports, and statements relating to any
Taxes (defined below) payable by it (collectively, the "Returns"); (ii) all
Returns were correct and complete in all material respects as of the time
of filing; (iii) the Company has timely paid all Taxes required to be paid
by it through the date hereof, except to the extent that Taxes are being
contested in good faith; (iv)
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<PAGE> 14
the Company has made provision on the Interim Balance Sheet in accordance
with GAAP for all Taxes payable by it for all periods prior to the date of
the Interim Balance Sheet for which no Returns have yet been filed; (v) the
Company is not delinquent in the payment of any Taxes, except to the extent
that Taxes are being contested in good faith; (vi) there are no pending tax
audits of any Returns; and (vii) except with respect to Taxes which are
being contested in good faith, no deficiency or addition to any Taxes or
interest or penalty for any Taxes has been proposed, asserted or assessed
in writing against the Company.
(b) "Taxes" means, with respect to any person or entity, (i) all Federal,
state, local, and foreign taxes, including, without limitation, all taxes
on or based upon net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings, or profits, and
all gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, or windfall profits taxes, alternative or add-on minimum
taxes, customs duties, or other taxes, fees, assessments or charges of any
kind, together with any interest, penalties, additions to tax or additional
amounts imposed by any taxing authority on such person or entity, and (ii)
any liability for the payment of any amount of the type described in the
preceding clause (i) as a result of being a "transferee" (within the
meaning of Section 6901 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any other applicable Laws) of another person or entity.
5.16. ERISA.
Any plan maintained or contributed to by the Company that is an "employee
benefit plan," as defined in Section 3(3) or 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA") is being administered in compliance with
the terms of such plan and applicable law in all material respects.
5.17. DISCLOSURE.
None of the documents or materials relating to the Company referred to herein or
on any Schedule, or furnished to the Guarantors by the Company in connection
with this Agreement, contains any untrue statement of a material fact by the
Company or, to the knowledge of the Company, by any other person or entity.
Neither this Agreement (including the Schedules) nor any such document or
material omits to state a material fact necessary in order to make the
statements contained herein or therein not materially misleading.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS.
Each Guarantor, severally and only with respect to itself, represents and
warrants to the Company as of the date of this Agreement as follows:
6.1. INVESTMENT INTENT.
(a) Each Guarantor is acquiring the Warrants, and it will acquire any
Warrant Shares issuable upon exercise of the Warrants, for its own account,
for investment and not with a view to the distribution thereof, nor with
any present intention of distributing the same.
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<PAGE> 15
(b) Each Guarantor understands that the Warrants have not been, and any
Warrant Shares issuable upon exercise of the Warrants will not be,
registered under the Securities Act, and that they must be held
indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from registration.
(c) Each Guarantor understands that the exemption from registration
afforded by Rule 144 of the Securities Act (the provisions of which are
known to the Guarantors) depends on the satisfaction of various conditions
and that, if applicable, Rule 144 may only afford the basis for sales under
certain circumstances only in limited amounts.
(d) Each Guarantor is an "accredited investor," as such term is defined in
Rule 501 promulgated under the Securities Act.
(e) Each Guarantor (i) has received copies of the financial statements of
the Company described in Section 5.5 and (ii) believes that such Guarantor,
either alone or with the assistance of such Guarantor's own professional
advisor, has such knowledge and experience in financial and business
matters that such Guarantor is capable of reading and interpreting the
Company's financial statements and evaluating the merits and risks of the
transactions contemplated by this Agreement.
(f) In addition to the Company's financial statements referenced in
paragraph (e) above, each Guarantor has been given access to full and
complete information regarding the Company and has utilized such access to
his, her or its satisfaction.
6.2. DUE ORGANIZATION AND REQUISITE POWER.
Each Guarantor has all requisite power and authority, including, where
applicable, corporate power and authority, necessary to perform its obligations
to the Company and to the Bank as provided for in this Agreement.
6.3. ACTION AND EXECUTION.
Each Guarantor has taken all action necessary for the authorization, execution,
delivery and performance of this Agreement and the Credit Support Agreements.
When executed, each of this Agreement and the Credit Support Agreements will be
the legal, valid and binding obligation of each Guarantor enforceable in
accordance with its terms.
6.4.1 NO CONFLICT.
Neither the execution nor the delivery nor the performance of this Agreement or
the Credit Support Agreements by any Guarantor will violate or otherwise
contravene, where applicable, the Guarantor's articles or certificate of
incorporation or bylaws or the terms of any agreement, the breach of which would
invalidate this Agreement.
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<PAGE> 16
SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS.
Prior to or at the Closing, concurrently with the execution and delivery of this
Agreement, the following actions have been or are being taken:
(a) Fees and Expenses. The fees and expenses of the Agent are being paid by
the Company to the Agent as provided under Section 12 below.
(b) Warrants. The Warrants are being executed and delivered by the Company.
(c) Security Agreement. The Bank Security Agreement has been executed and
delivered by the Company to the Bank.
(d) Registration Rights Agreement. The Registration Rights Agreement is
being executed and delivered by the Company to the Agent for the benefit of
the Guarantors.
(e) Intellectual Property Assignment. The Bank Intellectual Property
Assignment have been executed and delivered by the Company to the Bank.
(f) Required Consents. All consents, approvals and other actions of, and
notices and filings with, all entities and persons as may be necessary or
required with respect to the execution and delivery by the parties of the
Documents, and the consummation by the parties of the transactions
contemplated thereby, have been obtained or made.
(g) Authorizing Actions of the Company. The Guarantors are receiving
certified copies of all requisite corporate actions taken by the Company to
authorize its execution and delivery of the Documents and its consummation
of the transactions contemplated thereby, and such other corporate
documents and other papers as the Guarantors may reasonably request.
(h) Opinion of Counsel. The Guarantors are receiving an opinion dated the
date hereof of counsel to the Company, in form reasonably satisfactory to
the Agent.
SECTION 8. COVENANTS.
8.1. ACCESS TO RECORDS.
The Company shall afford to the Guarantors and their authorized employees,
counsel, accountants and other representatives, upon reasonable notice and
during ordinary business hours, (i) reasonable access to all books, records, and
properties of the Company, as the same may relate to the Agreement and the
Documents and (ii) the opportunity to interview any officer of the Company
regarding its affairs as the same may relate to the Agreement and the Documents.
8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT.
(a) The Company shall deliver to each Guarantor the following:
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<PAGE> 17
(i) within 45 days after the end of each fiscal quarter of the Company,
(i) the balance sheet of the Company at the end of such quarter, and
(ii) the statements of income and cash flows of the Company for such
quarter;
(ii) within 90 days after the end of each fiscal year of the Company,
(i) the balance sheet of the Company at the end of such fiscal year,
(ii) the statements of income and cash flows of the Company for such
fiscal year, and (iii) an audit report of a nationally-recognized firm
of independent certified public accountants on such balance sheets and
statements; and
(iii) All financial statements to be delivered under this Section shall
be in accordance with the books and records of the Company and shall
have been prepared in accordance with generally accepted accounting
principles consistently applied. At any time at which the Company has
any subsidiaries, all such financial statements shall be the
consolidated financial statements of the Company and such subsidiaries.
8.3. PAYMENT; PREPAYMENT.
(a) The Company shall pay all its obligations to the Bank under the
Facility on or before June 30, 2001.
(b) Notwithstanding paragraph (a) above, the net cash proceeds of any of
the following shall be applied immediately and in full against Company's
obligations to the Bank under the Facility (i) any sale, lease, transfer or
other disposition of the Company's direct or indirect assets including any
sale, lease, transfer or other disposition of the assets of any direct or
indirect subsidiary of the Company (except equipment leases and pledges
under purchase money obligations which in the aggregate do not exceed those
dollar amounts set forth in Section 8.8(c) and trade sales, in each case in
the ordinary course of business), (ii) any equity or debt issuance by the
Company, including, without limitation, an initial public offering or
private placement of debt or equity securities or, (iii) after default
under the Bank Documents or Section 11 hereof, collection of any assets
(including accounts receivable) of the Company. Further, the Company agrees
to prepay its obligations to the Bank under the Facility upon any
consolidation or merger of the Company with or into another entity, or a
transfer of all or substantially all of the assets of the Company.
8.4. PAYMENT OF OBLIGATIONS.
The Company shall pay or discharge or cause to be paid or discharged all
material claims or demands, and all Taxes levied or imposed upon the Company or
upon the income, profits or property of the Company; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such claim, demand, or Tax the amount, applicability or validity
of which is being contested in good faith by appropriate proceedings and for
which adequate provision has been made.
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<PAGE> 18
8.5. INSURANCE.
The Company shall maintain with financially sound and reputable insurers such
insurance as may be required by law and such other insurance, to such extent and
against such hazards and liabilities, as is customarily maintained by companies
similarly situated and in the same or similar business.
8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE.
The Company shall promptly notify the Agent of (i) the commencement or threat of
any action, suit, proceeding, labor dispute or grievance, governmental
investigation, or arbitration against or affecting the Company, which, if
adversely determined, could reasonably be expected to result in a Material
Adverse Change, (ii) any monetary or other material default under any
indebtedness of the Company in excess of $100,000; and (iii) any other Material
Adverse Change.
8.7. CONDUCT OF BUSINESS; BOARD OF DIRECTORS.
(a) The Company shall (i) take all actions required to assure that the
Company remains duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) take all actions
required to assure that the Company maintains all requisite governmental
authority, licenses, and permits necessary for the conduct its business,
and (iii) conduct its business in compliance with all Laws except where
noncompliance could not reasonably be expected to result in a Material
Adverse Change.
8.8. DEBT.
The Company will not directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt (defined below), except for:
(a) Debt of the Company to the Bank or hereunder;
(b) Accounts payable to trade creditors for goods and services, and current
operating liabilities incurred in the ordinary course of business;
(c) Debt of the Company with respect to capital leases in an aggregate
amount less than $750,000 in calendar 1999; $1,500,000 in calendar 2000 and
$1,500,000 during the first six months of calendar 2001; or
(d) Permitted Liens.
"Debt" means all indebtedness (i) for borrowed money, (ii) evidenced by
bonds, debentures, notes or similar instruments, or (iii) evidenced by
guaranties or similar contingent obligations.
8.9. RESTRICTED PAYMENTS.
While any amount payable to the Bank, or the Guarantors or the Agent in
connection herewith, including the Documents, is outstanding or the Company has
the ability to borrow under the
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<PAGE> 19
Facility, the Company shall not directly or indirectly pay or declare any
dividend or authorize or make any distribution upon, or redeem, retire,
repurchase or otherwise acquire, any shares of capital stock of the Company
(except that the Company may adjust the conversion price of the Series C
Preferred Stock pursuant to the accumulating dividend provisions set forth in
the Series C designation). Furthermore, the Company shall not (i) invest more
than $200,000 in any existing or $100,000 in any newly-created subsidiary or
affiliate during any one year period or (ii) make any voluntary prepayments on
Debt unrelated to the Facility.
8.10. NEGATIVE PLEDGE.
The Company will not create, assume or suffer to exist any encumbrance on any
asset now owned or hereafter acquired by it, except:
(a) any lien on any asset securing Debt permitted under Section 8.8 above;
(b) Permitted Liens;
(c) liens securing the payment of taxes, assessments and governmental
charges or levies, either not yet due and payable or which are being
actually contested; and
(d) any lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any lien permitted by any of the foregoing
clauses of this Section; provided, however, that the principal amount of
such Debt is not increased and is not secured by any additional assets.
The Company shall at all times from and after the date hereof keep reserved,
free from Encumbrances solely for the purpose of effecting the exercise of the
Warrants, sufficient Warrant Shares to provide for the full exercise of the
Warrants.
8.11. TERMINATION.
The obligations of the Company hereunder shall terminate when the Guarantors are
released from their obligations under the Credit Support Agreements and no
amounts are owing in connection with the Facility or the Credit Support
Agreements.
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS.
The representations, warranties and covenants contained in this Agreement shall
survive the Closing indefinitely.
SECTION 10. INDEMNIFICATION.
(a) The Company shall indemnify, defend and hold the Agent and Guarantors
harmless against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including reasonable legal
fees and expenses), relating to or arising from the transactions described
herein and the untruth, inaccuracy or breach of any of the
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<PAGE> 20
representations, warranties or agreements of the Company contained in this
Agreement or the other Documents; provided however, that none of the Agent
or the Guarantors will be indemnified for any costs or expenses that have
resulted primarily from its own gross negligence or willful misconduct.
(b) The Guarantors shall indemnify and hold the Company harmless against
all liability, loss or damage, together with all reasonable costs and
expenses related thereto (including reasonable legal fees and expenses),
relating to or arising from the untruth, inaccuracy or breach of any of the
representations, warranties or agreements of the Guarantors contained in
this Agreement.
SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT.
If one or more of the Guarantors purchases the Bank's rights and interests under
the Bank Documents (collectively, the "Bank's Position"), violation by the
Company of any representation, warranty or covenant in this Agreement shall be
deemed to be an event of default under the Bank Documents, as will any one or
more of the following events (each, an "Event of Default"):
(a) if one of more judgments, decrees or orders for the payment of money in
excess of $100,000 shall be rendered against the Company, any such
judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of 30 consecutive days without being vacated, discharged,
satisfied or stayed or bonded pending appeal; or
(b) if the Company shall become insolvent, or is adjudicated insolvent or
bankruptcy; or
(c) if the Company admits in writing its inability to pay its debts; or
(d) if the Company shall come under the authority of a custodian, receiver
or trustee for it or for substantially all its property; or
(e) if the Company makes an assignment for the benefit of creditors, or
suffers proceedings under any law related to bankruptcy, insolvency,
liquidation or the reorganization, readjustment or the release of debtors
to be instituted against it and if contested by it not dismissed or stayed
within 60 days; or
(f) if proceedings under any law related to bankruptcy, insolvency,
liquidation or the reorganization, readjustment or the release of debtors
are instituted or commenced by the Company; or
(g) if any order for relief is entered relating to any of the foregoing
proceedings under clauses (d) through (f); or
(h) the acquisition by any person (whether an individual, corporation,
association or other entity), or two or more persons acting in concert, of
beneficial ownership (within the meaning of Rule l3d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934) of 30%
or more of the outstanding voting securities of the Company; or
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<PAGE> 21
(i) if there is a Material Adverse Effect, as determined in the reasonable
discretion of the Agent; or
(j) if the Company or any of its subsidiaries shall fail to make any
material payment in respect of any indebtedness (including all amounts owed
Northern Trust) or other material contract when due or within any
applicable grace period; or any event or condition shall occur which
results in the acceleration of the maturity of any indebtedness or material
contract or enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of any indebtedness or material contract or
any Person acting on such holder's behalf to accelerate the maturity
thereof or obligations thereunder.
The Events of Default set forth in this Section 11 shall be applicable only upon
a purchase of the Bank's Position by one or more of the Guarantors.
SECTION 12. FEES AND EXPENSES.
The Company, shall pay or reimburse the Agent for all direct expenses associated
with this Agreement, the transactions contemplated hereby, and/or the
enforcement of or collection under this Agreement, including in each case,
without limitation, the reasonable fees and charges of BELIN LAMSON McCORMICK
ZUMBACH FLYNN, a Professional Corporation, counsel to the Agent and all letter
of credit fees or other fees related to the Guarantor Commitments.
SECTION 13. CONFIDENTIALITY.
Each Guarantor shall keep all confidential, non-public information on the
business operations and affairs of the Company, which it receives as a
consequence of this Agreement and the other Documents, strictly confidential and
shall not disclose such information to any third party without the Company's
prior consent.
SECTION 14. ASSIGNMENT; PARTIES IN INTEREST.
This Agreement and the rights and obligations of the parties hereunder shall be
assignable by the Guarantors, but not the Company. This Agreement shall bind and
inure to the benefit of the Company, the Guarantors, the Agent, and their
respective successors and permitted assigns.
SECTION 15. ENTIRE AGREEMENT.
This Agreement and the other Documents contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect to such subject
matter.
SECTION 16. FURTHER ASSURANCES.
The Company agrees to do such further acts and things and to execute and deliver
to Agent such additional assignments, agreements, powers and instruments, as
Agent may reasonably require to carry into effect the purposes of this Agreement
or any of the Documents.
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SECTION 17. NOTICES.
All notices, claims, certificates, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if sent by nationally-recognized overnight courier, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
if to the Company:
Stockpoint, Inc.
2600 Crosspark Road
Coralville, IA 52241-3212
with a copy to:
Thomas Martin, Esq.
Dorsey & Whitney LLP
220 South 6th Street
Minneapolis, MN 55402
if to the Agent:
Equity Dynamics, Inc.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
with a copy to:
Belin Lamson McCormick Zumbach Flynn
A Professional Corporation
The Financial Center
666 Walnut Street
Suite 2000
Des Moines, Iowa 50309
ATTN: Garth D. Adams, Esq.
if to the Guarantors:
Matthew Kinley
c/o Equity Dynamics
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Joseph Dunham
c/o Equity Dynamics
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<PAGE> 23
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Zeke Investment Partners
569 Cantebury Lane
Berwyn, PA 19312
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, upon receipt of electronic
confirmation of transmission, and (d) in the case of mailing, on the third
business day following that on which the piece of mail containing such
communication is posted.
SECTION 18. AMENDMENTS.
The terms and provisions of this Agreement may only be modified or amended
pursuant to an instrument signed by all parties. Notwithstanding the foregoing,
the obligations of the Company under Sections 8.1 through 8.10 may also be
waived, temporarily or permanently, but solely with respect to any Guarantor,
pursuant to an instrument signed by such Guarantor.
SECTION 19. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 20. HEADINGS, GENDER, TENSE.
The section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever from the context it appears appropriate, each term
stated in either of the singular or the plural will include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender will
include the masculine, the feminine and the neuter. Unless otherwise expressly
stated in the Agreement, the words "herein," "hereof," "hereto," "hereunder" and
others of similar inference refer to the Agreement as a whole and not to any
particular section, subsection or clause contained in the Agreement. The term
"including" shall not be deemed to be exclusive and shall be deemed to mean
"including, without limitation."
SECTION 21. GOVERNING LAW, JURISDICTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF IOWA WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION
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<PAGE> 24
OTHER THAN THE STATE OF IOWA TO BE APPLIED. THE PARTIES HEREBY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF IOWA AND OF ANY IOWA STATE COURT SITTING IN DES MOINES FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
SECTION 22. WAIVER OF JURY TRIAL.
EACH OF THE COMPANY, THE AGENT AND THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE
FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR
RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING
ARISING OUT OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
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IN WITNESS WHEREOF the parties have executed and delivered this Master Agreement
on the date first above written.
STOCKPOINT, INC.
By:
----------------------------------
ZEKE INVESTMENT PARTNERS
By: /s/ Edward N. Antoian
----------------------------------
Ed Antoian
By: /s/ Matthew P. Kinley
----------------------------------
Matthew P. Kinley
By:
----------------------------------
Joseph Dunham
EQUITY DYNAMICS, INC., as Agent
By: /s/ Matthew P. Kinley
----------------------------------
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<PAGE> 1
EXHIBIT 4.9
STOCKPOINT, INC.
STOCK PURCHASE WARRANT
To Purchase Common Stock of
STOCKPOINT, INC.
<PAGE> 2
THE ISSUANCE OF THIS WARRANT AND THE OFFER AND SALE OF THE SHARES OF COMMON
STOCK ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAW AND THIS WARRANT AND ANY
SUCH SHARES OF COMMON STOCK MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (IF SO
REQUESTED) TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
STOCKPOINT, INC. WARRANT NUMBER:
Void after 5:00 p.m. Eastern Standard Time, on March 31, 2005.
Warrant to Purchase ,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
STOCKPOINT, INC.
This is to Certify That, for United States Dollars ($ )
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, ("Holder") is entitled to purchase,
subject to the provisions of this Warrant, from Stockpoint, Inc., a Delaware
corporation ("Company"), 000 fully paid, validly issued and nonassessable
shares of Common Stock, $0.01 par value per share, of the Company ("Common
Stock") at a price initially set at Ten Dollars and No Cents ($10.00) per share
at any time or from time to time during the period from the date hereof to
expiration, but not later than 5:00 p.m. Eastern Standard Time, on March 31,
2005. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at
any time or from time to time on or after the date
hereof and until 5:00 p.m. Eastern
<PAGE> 3
Standard Time on March 31, 2005; provided, however,
that if either such day is a day on which banking
institutions in the State of New York are authorized
by law to close, then on the next succeeding day
which shall not be such a day. This Warrant may be
exercised by presentation and surrender hereof to the
Company at its principal office, or at the office of
its stock transfer agent if any, with the Purchase
Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of
Warrant Shares specified in such form. As soon as
practicable after each such exercise of this Warrant
warrants, but not later than seven (7) days from the
date of such exercise, the Company shall issue and
deliver to the Holder a certificate or certificate
for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee.
If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company
of this Warrant at its office, or by the stock
transfer agent of the Company at its office, in
proper form for exercise together with payment in
full of the exercise price for the Warrant Shares to
be purchased, the Holder shall be deemed to be the
holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be
closed or that certificates representing such shares
of Common Stock shall not then be physically
delivered to the Holder.
(2) In lieu of delivering the Exercise Price in cash or
check the Holder may elect to receive shares equal to
the value of the Warrant or portion thereof being
exercised ("Net Issue Exercise"). If the Holder
wishes to elect the Net Issue Exercise, the Holder
shall notify the Company of its election in writing
at the time it delivers to the Company the Purchase
Form. In the event the Holder shall elect Net Issue
Exercise, the Holder shall receive the number of
shares of Common Stock equal to the product of (a)
the number of shares of Common Stock purchasable
under the Warrant, or portion thereof being
exercised, and (b) the current market value, as
defined in paragraph (c) below, of one share of
Common Stock minus the Exercise Price, divided by (c)
the current market value, as defined in paragraph (c)
below, of one share of Common Stock.
(b) RESERVATION OF SHARES. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant
such number of shares of its Common Stock as shall be required
for issuance and delivery upon exercise of this Warrant.
(c) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for
upon any exercise hereof, the Company shall pay to
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<PAGE> 4
the Holder an amount in cash equal to such fraction multiplied
by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on
the NASDAQ system, the current market value shall be
the last reported sale price of the Common Stock on
such exchange or system on the last business day
prior to the date of exercise of this Warrant or if
no such sale is made on such day, the mean of the
last reported bid and asked prices for such day on
such exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value
shall be the mean of the last reported bid and asked
prices reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of
the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices
are not so reported, the current market value of a
share of Common Stock shall be an amount, not less
than book value thereof as at the end of the most
recent fiscal year of the Company ending prior to the
date of the exercise of the Warrant, determined in
such reasonable manner as may be prescribed by the
Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Subject to
the restrictions noted at the beginning of this Warrant, this
Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company
or at the office of its stock transfer agent, if any, for
other warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares
of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company at its principal office or at the
office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without
charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this
Warrant shall promptly be cancelled. This Warrant may be
divided or combined with other warrants which carry the same
rights upon presentation hereof at the principal office of the
Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued and
signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided
or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated,
the Company will execute and deliver a new Warrant of like
tenor and
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<PAGE> 5
date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen,
destroyed, or mutilated shall be at any time enforceable by
anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company,
either at law or equity, and the rights of the Holder are
limited to those expressed in the Warrant and are not
enforceable against the Company except to the extent set forth
herein.
(f) ANTI-DILUTION AND ADJUSTMENT PROVISIONS. The Exercise Price in
effect at any time and the number and kind of securities
purchasable upon the exercise of the Warrants shall be subject
to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii)
subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record
date for such dividend or distribution or of the
effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall
equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of
which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and
the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(2) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its
Common Stock entitling them to subscribe for or
purchase shares of Common Stock (or securities
convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price
per share) less than the Exercise Price on such
record date the Exercise Price shall be adjusted so
that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately
prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of
shares outstanding on the record date mentioned above
and the number of additional shares of Common Stock
which the aggregate offering price of the total
number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible
securities so offered) would purchase at the Exercise
Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the
sum of the number of shares of Common Stock
outstanding on the record date mentioned above and
the number of additional shares of Common Stock
offered for subscription or purchase (or into which
the
4
<PAGE> 6
convertible securities so offered are convertible).
Such adjustment shall be made successively whenever
such rights or warrants are issued and shall become
effective immediately after the record date for the
determination of shareholders entitled to receive
such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or
securities convertible into Common Stock are not
delivered) after the expiration of such rights or
warrants the Exercise Price shall be readjusted to
the Exercise Price which would then be in effect had
the adjustments made upon the issuance of such rights
or warrants been made upon the basis of delivery of
only the number of shares of Common Stock (or
securities convertible into Common Stock) actually
delivered.
(3) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or
distributions and dividends or distributions referred
to in Subsection (1) above) or subscription rights or
warrants (excluding those referred to in Subsection
(2) above), then in each such case the Exercise Price
in effect thereafter shall be determined by
multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which
shall be the total number of shares of Common Stock
outstanding multiplied by the current market price
per share of Common Stock (as defined in Section (c)
above), less the fair market value (as determined by
the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which
shall be the total number of shares of Common Stock
outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is
fixed. Such adjustment shall be made whenever any
such distribution is made and shall become effective
immediately after the record date for the
determination of shareholders entitled to receive
such distribution.
(4) (A). In case the Company shall issue shares of its
Common Stock excluding shares issued (i) in any of
the transactions described in Subsection (1) above,
(ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by
the Company's Board of Directors and approved by its
shareholders, if such shares would otherwise be
included in this Subsection (4), (iii) upon exercise
of options and warrants outstanding at March 31,
2000, and this Warrant, (iv) to shareholders of any
corporation which merges into the Company in
proportion to their stock holdings of such
corporation immediately prior to such merger, upon
such merger, (v) in a bona fide public offering
pursuant to a firm commitment underwriting, or (vi)
on conversion or exchange of any securities for which
full adjustment has already been made in accordance
with Subsection 4(B) below but only if no adjustment
is required pursuant to any other specific subsection
of this Section (f)
5
<PAGE> 7
(without regard to Subsection (9) below) with respect
to the transaction giving rise to such rights for a
consideration per share (the "Offering Price") less
than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall
equal such Offering Price. Such adjustment shall be
made successively whenever such an issuance is made.
(B). In case the Company shall issue any securities
convertible into or exchangeable for its Common Stock
excluding securities issued in transactions described
in Subsections (2) and (3) above for a consideration
per share of Common Stock (the "Conversion Price")
initially deliverable upon conversion or exchange of
such securities determined as provided in Subsection
(7) below less than the Exercise Price, the Exercise
Price shall be adjusted immediately thereafter so
that it shall equal such Conversion Price Such
adjustment shall be made successively whenever such
an issuance is made.
(C). In case the Company shall issue shares of its
Common Stock excluding shares issued (i) in any of
the transactions described in Subsection (1) above,
(ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by
the Company's Board of Directors and approved by its
shareholders, if such shares would otherwise be
included in this Subsection (4), (iii) upon exercise
of options and warrants outstanding at March 31 2000,
and this Warrant, (iv) to shareholders of any
corporation which merges into the Company in
proportion to their stock holdings of such
corporation immediately prior to such merger, upon
such merger, (v) in a bona fide public offering
pursuant to a firm commitment underwriting, or (vi)
on conversion or exchange of any securities for which
full adjustment has already been made in accordance
with Subsection 4(B) above or Subsection 4(D) below
but only if no adjustment is required pursuant to any
other specific subsection of this Section (f)
(without regard to Subsection (9) below) with respect
to the transaction giving rise to such rights for a
consideration per share (the "Offering Price") less
than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall
equal the price determined by multiplying the
Exercise Price in effect immediately prior to the
date of issuance by a fraction, the numerator of
which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the
issuance of such additional shares and the number of
shares of Common Stock which the aggregate
consideration received determined as provided in
subsection (7) below for the issuance of such
additional shares would purchase at the Exercise
Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after the issuance of such additional
shares. Such adjustment shall be made successively
whenever such an issuance is made.
6
<PAGE> 8
(D). In case the Company shall issue any securities
convertible into or exchangeable for its Common Stock
excluding securities issued in transactions described
in Subsections (2) and (3) above for a consideration
per share of Common Stock (the "Conversion Price")
initially deliverable upon conversion or exchange of
such securities determined as provided in Subsection
(7) below less than the Exercise Price, the Exercise
Price shall be adjusted immediately thereafter so
that it shall equal the price determined by
multiplying the Exercise Price in effect immediately
prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of
shares outstanding immediately prior to the issuance
of such securities and the number of shares of Common
Stock which the aggregate consideration received
determined as provided in subsection (7) below for
such securities would purchase at the Exercise Price
in effect immediately prior to the date of such
issuance, and the denominator of which shall be the
sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such
securities and the maximum number of shares of Common
Stock of the Company deliverable upon conversion of
or in exchange for such securities at the initial
conversion or exchange price or rate. Such adjustment
shall be made successively whenever such an issuance
is made.
(5) In case the Company shall (i) issue shares of its
Common Stock in a bona fide public offering pursuant
to a firm commitment at a price per share ("Public
Offering Price") less than 200% of the then current
Exercise Price, the Exercise Price shall be adjusted
immediately so that it shall equal the price
determined by multiplying the Public Offering Price
by a factor of 0.50, or (ii) issue or exchange shares
of its Common Stock in connection with a Change of
Control, that does not qualify as a "pooling of
Interest" transaction, (defined as the acquisition by
any person (whether an individual, corporation,
association or other entity), or two or more persons
acting in concert, of beneficial ownership (within
the meaning of 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934)
of 50% or more of the outstanding voting securities
of the Company) for a consideration per share
("Exchange Consideration") less than 200% of the then
current Exercise Price, the Exercise Price shall be
adjusted immediately so that it shall equal the price
determined by multiplying the Exchange Consideration
by a factor of 0.50. No more than one adjustment
shall be made pursuant to this Subsection (5), which
adjustment shall be made at the time of such
issuance.
(6) Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (1),
(2), (3), (4) and (5) above, the number of Shares
purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number
of Shares initially
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<PAGE> 9
issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise
Price, as adjusted.
(7) For purposes of any computation respecting
consideration received pursuant to Subsections (4)
and (5) above, the following shall apply:
(A) in the case of the issuance of shares of
Common Stock for cash, the consideration
shall be the amount of such cash, provided
that in no case shall any deduction be made
for any commissions, discounts or other
expenses incurred by the Company for any
underwriting of the issue or otherwise in
connection therewith;
(B) in the case of the issuance of shares of
Common Stock for a consideration in whole or
in part other than cash, the consideration
other than cash shall be deemed to be the
fair market value thereof as determined in
good faith by the Board of Directors of the
Company (irrespective of the accounting
treatment thereof), whose determination
shall be conclusive; and
(C) in the case of the issuance of securities
convertible into or exchangeable for shares
of Common Stock, the aggregate consideration
received therefor shall be deemed to be the
consideration received by the Company for
the issuance of such securities plus the
additional minimum consideration, if any, to
be received by the Company upon the
conversion or exchange thereof the
consideration in each case to be determined
in the same manner as provided in clauses
(A) and (B) of this Subsection (7).
(8) INTENTIONALLY OMITTED.
(9) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such
price; provided, however, that any adjustments which
by reason of this Subsection (9) are not required to
be made shall be carried forward and taken into
account in any subsequent adjustment required to be
made hereunder. All calculations under this Section
(f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary
notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the
Exercise Price, in addition to those required by this
Section (f), as it shall determine, in its sole
discretion, to be advisable in order that any
dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination
of Common Stock, hereafter made by the Company shall
not result in any Federal Income tax liability to the
holders
<PAGE> 10
of Common Stock or securities convertible into Common
Stock (including Warrants).
(10) The Company may retain a firm of independent
certified public accountants selected by the Board of
Directors (who may be the regular accountants
employed by the Company) to make any computation
required by this Section (f), and a certificate
signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(11) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the
Holder of this Warrant thereafter shall become
entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (9),
inclusive above.
(12) Irrespective of any adjustments in the Exercise Price
or the number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or
thereafter issued may continue to express the same
price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to
this Agreement.
(13) The provisions of Subsections (4)(A), (4)(B), and (5)
above shall cease to have any effect immediately
after the closing of the Company's first bona fide
public offering after the date of this Warrant and
thereafter no adjustments in the Exercise Price shall
be made pursuant to such Subsections. The provisions
of Subsections (4)(C) and (4)(D) shall not be
effective as long as Subsections (4)(A) and (4)(B)
remain effective. Immediately after the closing of
the Company's first bona fide public offering the
provisions of Subsections (4)(C) and (4)(D) shall
become effective and adjustments in the Exercise
Price shall be made pursuant to such Subsections.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing
Section, the Company shall promptly and in no event later than
20 days after the effective date of adjustment cause to be
mailed by certified mail to each Holder at his last address
appearing in the Warrant Register and shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment, including a
statement of the number of additional shares of Common Stock,
if any, and such other facts as shall be necessary to show the
reason for and the
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<PAGE> 11
manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times
for inspection by the Holder or any holder of a Warrant
executed and delivered pursuant to Section (a).
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make
any distribution upon the Common Stock or (ii) if the Company
shall offer to the holders of Common Stock for subscription or
purchase by them any share of any class or any other rights or
(iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected,
then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior to
the date specified in (x) or (y) below, as the case may be, a
notice containing a brief description of the proposed action
and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is
to take place and the date, if any is to be fixed, as of which
the holders of Common Stock or other securities shall receive
cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case
of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and
which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock of the class issuable upon exercise of this Warrant) or
in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety, the
Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that the Holder shall
have the right thereafter by exercising this Warrant at any
time prior to the expiration of the Warrant, to purchase the
kind and amount of shares of stock and other securities and
property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale
or conveyance by a holder of the number of shares of Common
Stock which might have been purchased upon exercise of this
Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision
shall include provision for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive
reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations,
mergers, sales or conveyances. In the event that
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<PAGE> 12
in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for
a security of the Company other than Common Stock, any such
issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company and
the Holder have entered into a Registration Rights Agreement
as of even date herewith providing for certain rights and
obligations related to registration of the shares of Common
Stock issuable upon exercise of this Warrant.
(k) RESTRICTIVE LEGEND. Each Warrant Share, when issued, shall
include a legend in substantially the following form: THE
ISSUANCE OF THESE SHARES HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE
SECURITIES LAW AND THESE SHARES MAY NOT BE PLEDGED, SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY (IF SO REQUESTED) TO THE EFFECT THAT REGISTRATION
UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
(l) NO IMPAIRMENT. The Company will not, by amendment of its
charter or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action,
avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will 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.
Dated: March 31, 2000
STOCKPOINT, INC.
Attest:
By:
- -------------------------------- -----------------------------------
Name: William McNally Name: William E. Staib
Title: Secretary Title: President & CEO
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<PAGE> 13
PURCHASE FORM
Dated
--------------------
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing shares of Common Stock and
hereby makes payment of in payment of the actual exercise price
thereof. In lieu of such payment of the actual exercise price, the undersigned
may direct the Company to net issue such shares of Common Stock in accordance
with Section (a)(2) of the within Warrant by writing "net issue" in the space
after "payment of" in the preceding sentence.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
--------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-----------------------------------------------------------------
Signature
------------------------------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, hereby sells, assigns and
transfers unto
Name
---------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
------------------------------------------------------------------
the right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint Attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
12
<PAGE> 14
Date ,
-------------------- -------
Signature
------------------------------
13
<PAGE> 1
EXHIBIT 4.10
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into
as of March 30, 2000, by and among Stockpoint, Inc., a Delaware corporation
(the "Company"), and the persons listed on the signature page hereof (the
"Purchasers").
WHEREAS, the Purchasers (the "Purchasers") have purchased Stock
Purchase Warrants (the "Warrants") for the purchase of Common Stock, $.01 par
value per share, of the Company;
WHEREAS, the Company and the Purchasers desire to provide for certain
arrangements with respect to the registration under the Securities Act of 1933,
as amended (the "Securities Act"), of shares of Common Stock of the Company,
$.01 par value per share, to be issued upon exercise of the Warrants held by the
Purchasers as provided in this Agreement:
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers
hereby agree as follows:
1. Definitions.
1.1 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 "Company" shall mean Stockpoint, Inc., a Delaware
corporation.
1.3 "Common Shares" shall mean the shares of common stock, par
value $.01 per share, authorized by the Company's Certificate of Incorporation
and any additional shares of common stock which may be authorized in the future
by the Company, and any stock into which such Common Shares may hereafter be
changed, and shall also include capital stock of any other class of the Company
which is not preferred as to dividends or assets over any other class of stock
of the Company and which is not subject to redemption.
1.4 "Public Offering" shall mean any offering of Common Shares to
the public, either on behalf of the Company or any of its security holders,
pursuant to an effective registration statement under the Securities Act.
1.5 "Purchasers" shall mean the holders from time to time of the
Warrants.
1.6 "Registrable Securities" shall mean (a) the Common Shares at
any time issued or subject to issuance upon the exercise of the Warrants and any
series of preferred stock, warrants, options or rights, the holders of which are
granted registration rights by agreement with the Company and (b) any additional
securities issued with respect to the above-described
<PAGE> 2
securities upon any stock split, stock dividend, recapitalization, or similar
event. Registrable Securities shall cease to be Registrable Securities when (x)
a registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (y) all such
securities held by a Purchaser shall be eligible to be distributed pursuant to
Rule 144 under the Securities Act in a single three-month period by the holders
thereof or (z) such securities shall have ceased to be outstanding.
1.7 "Registration Expenses" shall mean the expenses described in
Section 5.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
amended.
2. Demand Registration.
2.1 Subject to Sections 2.4 and 2.5, if at any time after one year
has elapsed from the date the Company first consummates a Public Offering
pursuant to a registration statement on Form S-1 or Form SB-2, the Company shall
receive a written request therefor from the record holder or holders of an
aggregate of at least 51% of the Registrable Securities, the Company shall
prepare and file a registration statement under the Securities Act covering such
number of Registrable Securities as are the subject of such request and shall
use its best efforts to cause such registration statement to become effective.
Upon the receipt of a registration request meeting the requirements of this
Section 2.1, the Company shall promptly give written notice to all other record
holders of Registrable Securities that such registration is to be effected. The
Company shall include in such registration statement such additional Registrable
Securities as such other record holders request in writing within thirty (30)
days after the date of the Company's written notice to them. If (a) the holders
of a majority of the Registrable Securities for which registration has been
requested pursuant to this Section 2.1 determine for any reason not to proceed
with the registration at any time before the related registration statement has
been declared effective by the Commission, (b) such registration statement, if
theretofore filed with the Commission, is withdrawn and (c) the holders of the
Registrable Securities subject to such registration statement agree to bear
their own Registration Expenses incurred in connection therewith and to
reimburse the Company for the Registration Expenses incurred by it in such
connection or if such registration statement, if theretofore filed with the
Commission, is withdrawn at the initiative of the Company, then the holders of
the Registrable Securities shall not be deemed to have exercised their demand
registration right pursuant to this Section 2.1.
2.2 At the request of the holders of a majority of the Registrable
Securities to be registered, the method of disposition of all Registrable
Securities included in such registration shall be an underwritten Public
Offering. The managing underwriter of any such Public Offering shall be selected
by the Company. If in the good faith judgment of the managing underwriter of
such Public Offering, the inclusion of all of the Registrable Securities the
registration of which has been requested would interfere with their successful
marketing, the number of Registrable Securities to be included in the Public
Offering shall be reduced, pro rata, among the requesting holders thereof in
proportion to the number of Registrable Securities included in their respective
requests for registration. Registrable Securities that are so excluded from such
underwritten
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<PAGE> 3
Public Offering shall be withheld by the holders thereof for such period, not
exceeding one hundred and twenty (120) days, as the managing underwriter
reasonably determines is necessary to effect such Public Offering.
2.3 The Company shall be obligated to prepare, file and cause to be
effective only one (1) registration statement pursuant to Section 2.1.
2.4 Notwithstanding the foregoing, the Company may delay initiating
the preparation and filing of any registration statement requested pursuant to
Section 2.1 for a period not to exceed one hundred eighty (180) days if, in the
good faith judgment of the Company's Board of Directors, effecting the
registration would adversely affect a proposed Public Offering by the Company or
would require the premature disclosure of any financing, acquisition,
disposition of assets or stock, merger or other comparable transaction or would
require the Company to make public disclosure of information the public
disclosure of which could have material adverse effect on the Company.
2.6 Notwithstanding anything to the contrary contained herein, at any
time within thirty (30) days after receiving a demand for registration pursuant
to Section 2.1, the Company may elect to effect an underwritten primary
registration in lieu of the requested registration. If the Company so elects,
the Company shall give prompt written notice to all holders of Registrable
Securities of its intention to effect such a registration and shall afford such
holders the rights contained in Article 3 with respect to "piggyback"
registrations. In such event, the demand for registration pursuant to Section
2.1 shall be deemed to have been withdrawn.
3. Piggyback Registration.
3.1 From and after the date on which one year has elapsed from the
date the Company first consummates a Public Offering pursuant to a registration
statement on Form S-1 or Form SB-2, each time the Company shall determine to
proceed with the actual preparation and filing of a registration statement under
the Securities Act in connection with the proposed offer and sale for money of
any of its securities by it or any of its security holders (other than a
registration statement on Form S-8, Form S-4 or other limited purpose form), the
Company will give written notice of its determination to all record holders of
Registrable Securities. Upon the written request of a record holder of any
Registrable Securities given within 30 days after the date of any such notice
from the Company, the Company will, except as herein provided, cause all
Registrable Securities the registration of which is requested to be included in
such registration statement, all to the extent requisite to permit the sale or
other disposition by the prospective seller or sellers of the Registrable
Securities to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any registration;
and provided, further, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the
Commission, and the Company's decision not to proceed is primarily based upon
the anticipated Public Offering price of the securities to be sold by the
Company, the Company shall promptly complete the registration for the benefit of
those selling security holders who wish to proceed with a Public Offering of
their Registrable Securities and who agree to bear all of the Registration
Expenses in excess of $25,000 incurred by the Company as the result of such
registration after the Company has decided not to proceed. In the
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<PAGE> 4
discretion of the holders of the Registrable Securities to be included in the
registration (provided that such holders are the record holders of at least 51%
of the Registrable Securities), such registration may count as a demand
registration under Section 2.1 (if it otherwise meets the requirements of
Section 2.1) for which the Company will pay all Registration Expenses.
3.2 If any registration pursuant to Section 3.1 is underwritten in
whole or in part, the Company may require that the Registrable Securities
included in the registration be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
If, in the good faith judgment of the managing underwriter of the Public
Offering, the inclusion of all of the Registrable Securities originally covered
by requests for registration would reduce the number of shares to be offered by
the Company or interfere with the successful marketing of the shares offered by
the Company, the number of Registrable Securities to be included in the Public
Offering may be reduced in the following manner: first, securities held by
officers and directors of the Company (other than Registrable Securities) shall
be excluded from such underwritten public offering to the extent required by the
managing underwriter, second, if a further reduction in the Public Offering is
required, any securities, other than Registrable Securities, proposed to be sold
in the Public Offering by persons other than the Company shall be excluded and
third, if a further reduction in the Public Offering is required, the
Registrable Securities requested to be included in the Public Offering shall be
reduced, pro rata, among the requesting holders thereof in proportion to the
number of Registrable Securities included in their respective requests for
registration. The Registrable Securities which are thus excluded from the
underwritten Public Offering shall be withheld from the market by the holders
thereof for a period which the managing underwriter reasonably determines is
necessary in order to effect the Public Offering.
4. Short Form Registration. In addition to the registration rights provided
in Articles 2 and 3, if the Company qualifies for the use of Form S-3 or any
similar registration form then in force, the Company shall on one occasion at
its expense at the request of a majority of the holders of Registrable
Securities then outstanding file a registration statement on such form covering
Registrable Securities on behalf of such holder or holders. The Company shall
give notice to all the holders of Registrable Securities who did not join in
such request and afford them a reasonable opportunity to do so.
5. Registration Procedures. If and whenever the Company is required by the
provisions of Article 2, Article 3 or Articles 4 to effect a registration of
Registrable Securities under the Securities Act, the Company will use its best
efforts to effect the registration and sale of such Registrable Securities in
accordance with the intended methods of disposition specified by the holders
participating therein. Without limiting the foregoing, the Company in each such
case will, as expeditiously as possible:
5.1 In the case of a demand registration pursuant to Section 2.1 or
Article 4, prepare and file with the Commission the requisite registration
statement to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and regulations
thereunder) and use its best efforts to cause such registration statement to
become effective; provided, however, that as far in advance as practical before
filing
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<PAGE> 5
such registration statement or any amendment thereto, the Company will
furnish counsel for the requesting holders of Registrable Securities with copies
of reasonably complete drafts of all such documents proposed to be filed
(including exhibits), and any such holder shall have the opportunity to object
to any information pertaining solely to such holder that is contained therein
and the Company will make the corrections reasonably requested by such holder
with respect to such information prior to filing such registration statement or
amendment.
5.2 Prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities included in such registration
statement, in accordance with the intended methods of disposition thereof, until
the earlier of (a) such time as all of the Registrable Securities included in
such registration statement have been disposed of in accordance with the
intended methods of disposition by the holder or holders thereof as set forth in
such registration statement or (b) one hundred eighty (180) days after such
registration statement becomes effective.
5.3 Promptly notify each requesting holder and the underwriter or
underwriters, if any, of:
(a) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become effective;
(b) any written request by the Commission for amendments or
supplements to such registration statement or prospectus;
(c) any notification received by the Company from the Commission
regarding the Commission's initiation of any proceeding with respect to, or
of the issuance by the Commission of, any stop order suspending the
effectiveness of such registration statement; and
(d) the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale
under the applicable securities or blue sky laws of any jurisdiction.
5.4 Furnish to each holder of Registrable Securities included in such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto, and such number of
copies of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to such
seller's Registrable Securities, and such other documents, as such holder may
reasonably request to facilitate the disposition of its Registrable Securities.
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<PAGE> 6
5.5 Use its best efforts to register or qualify all Registrable
Securities included in such registration statement under the securities or "blue
sky" laws of such states as each holder of Registrable Securities shall
reasonably request within twenty (20) days following the original filing of such
registration statement and to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such holder to
consummate the disposition in such states of the Registrable Securities owned by
such holder, except that the Company shall not for any such purpose be required
(a) to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this Section 5.5
be obligated to be so qualified, (b) to consent to general service of process in
any such jurisdiction or (c) to subject itself to taxation in any such
jurisdiction by reason of such registration or qualification.
5.6 Use its best efforts to cause all Registrable Securities included
in such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable each holder
thereof to consummate the disposition of such Registrable Securities.
5.7 Notify each holder whose Registrable Securities are included in
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which any prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of any such holder promptly prepare and
furnish to such holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5.8 Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission.
5.9 Use its best efforts to cause all Registrable Securities included
in such registration statement to be listed, upon official notice of issuance,
on any securities exchange or quotation system on which any of the securities of
the same class as the Registrable Securities are then listed.
5.10 The Company may require each holder whose Registrable Securities
are being registered to, and each such holder, as a condition to including
Registrable Securities in such registration statement, shall, furnish the
Company and the underwriters with such information and affidavits regarding such
holder and the distribution of such Registrable Securities as the Company and
the underwriters may from time to time reasonably request in writing in
connection with such registration statement. At any time during the
effectiveness of any registration statement covering Registrable Securities
offered by a holder, if such holder becomes
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<PAGE> 7
aware of any change materially affecting the accuracy of the information
contained in such registration statement or the prospectus (as then amended or
supplemented) relating to such holder, it will immediately notify the Company of
such change.
5.11 Upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 5.7, each holder will forthwith
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such holder
receives the copies of the supplemented or amended prospectus contemplated by
Section 5.7 and, if so directed by the Company, shall deliver to the Company all
copies, other than permanent file copies, then in such holder's possession of
the prospectus relating to such Registrable Securities.
6. Expenses. With respect to any registration requested pursuant to Article
2 (except as otherwise provided in such Article with respect to a registration
voluntarily terminated at the request of the requesting holders of Registrable
Securities), Article 3 (except as otherwise provided in such Article with
respect to a registration continued by holders of Registrable Securities who
wish to proceed with a Public Offering that is withdrawn by the Company) or
Article 4, the Company shall bear all of the fees and expenses ("Registration
Expenses") incident to the Company's performance of or compliance with its
obligations under this Agreement in connection with such registration, or
participation by the holders of Registrable Securities in any such registration,
including, without limitation, all registration, filing, securities exchange
listing and NASD fees, all registration, filing, qualification and other fees
and expenses or complying with state securities or "blue sky" laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, and one counsel for the selling holders selected by them,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, premiums and other costs of
any policies of insurance against liabilities arising out of the Public Offering
of the Registrable Securities being registered obtained by the Company (it being
understood that the Company shall have no obligation to obtain such insurance)
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities; but excluding underwriting discounts and commissions and
transfer taxes, if any, in respect of Registrable Securities and any fees and
disbursements of more than one counsel or any accountant to the holders of the
Registrable Securities, which discounts, commissions, transfer taxes, fees and
disbursements shall in any registration be payable by the holders of the
Registrable Securities being registered, pro rata in proportion to the number of
Registrable Securities being sold by them.
7. Indemnification.
7.1 The Company will, to the full extent permitted by law, indemnify
and hold harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of this Agreement, and its
directors, officers and partners and each other person, if any, who controls
such holder within the meaning of the Securities Act, from and against any and
all losses, claims, damages, expenses or liabilities, joint or several
(collectively, "Losses") to which such holder or any such director, officer,
partner or controlling person may
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<PAGE> 8
become subject under the Securities Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in a registration statement prepared and filed
hereunder, any preliminary, final or summary prospectus contained therein or any
amendment or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, and the Company will
reimburse the holder and each such director, officer, partner and controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending against any such Losses (or action or proceeding
in respect thereof); provided, however, that the Company will not be liable in
any such case to the extent that any such Losses arise out of or are based upon
(a) an untrue statement or alleged untrue statement or omission or alleged
omission made in conformity with written information furnished by such holder
specifically for use in the preparation of the registration statement or (b)
such holder's failure to send or give a copy of the final prospectus to the
persons asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such holder
or any such director, officer, partner or controlling person of such holder and
shall survive the transfer of such securities by such holder. The Company shall
also indemnify each other person who participates (including as an underwriter)
in the offering or sale of Registrable Securities, their officers and directors,
and partners, and each other person, if any, who controls any such participating
person within the meaning of the Securities Act to the same extent provided
above with respect to holders of Registrable Securities.
7.2 Each holder of Registrable Securities which are included in a
registration pursuant to the provisions of this Agreement will, to the full
extent permitted by law, indemnify and hold harmless the Company, its officers,
directors and each other person, if any, who controls the Company within the
meaning of the Securities Act from and against any and all Losses to which the
Company or any such officer, director or controlling person may become subject
under the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in a registration statement prepared and filed hereunder, any
preliminary, final or summary prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in reliance
upon and in strict conformity with written information furnished by such holder
specifically for use in the preparation of such registration statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person of the Company. The holder of Registrable Securities included in a
registration statement shall also indemnify each other person who participates
(including as an
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<PAGE> 9
underwriter) in the offering or sale of Registrable Securities, their officers
and directors, and partners, and each other person, if any, who controls any
such participating person within the meaning of the Securities Act to the same
extent as provided above with respect to the Company. In no event shall the
liability of any holder under this Section 7.2 exceed the net proceeds received
by such holder from the sale of their Registrable Securities.
7.3 Promptly after receipt by a party indemnified pursuant to the
provisions of Section 7.1 or Section 7.2 of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2,
promptly notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against any indemnified party,
the indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party
reasonably concludes that there is a conflict of interest that would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of the indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of Section 7.1 or
Section 7.2 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof unless (a) the
indemnified party shall have employed counsel in accordance with the proviso of
the preceding sentence, (b) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (c) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party. If
the indemnifying party is not entitled to, or elects not to, assume the defense
of a claim, it will not be obligated to pay the fees and expenses of more than
one counsel for the indemnified parties with respect to such claim, unless in
the reasonable judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of additional counsel or counsels for the
indemnified parties. No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation without
the consent of the indemnified party. No indemnifying party shall be subject to
any liability for any settlement made without its consent. An indemnified party
may at any time elect to participate in the defense of any claim or proceeding
at its own expense.
7.4 If the indemnification provided for in this Article 7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability,
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<PAGE> 10
claim, damage, or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as it appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
8. Covenants Relating to Rule 144. If at any time the Company is required
to filed reports in compliance with either Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") the Company
will (a) file reports in compliance with the Exchange Act and (b) comply with
all rules and regulations of the Commission applicable to the use of Rule 144.
9. Underwritten Offerings. If a distribution of Registrable Securities
pursuant to a registration statement is to be underwritten, the holders whose
Registrable Securities are to be distributed by such underwriters shall be
parties to such underwriting agreement. No requesting holder may participate in
such underwritten offering unless such holder agrees to sell its Registrable
Securities on the basis provided in such underwriting agreement and completes
and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement. If
any requesting holder disapproves of the terms of an underwriting, such holder
may elect to withdraw therefrom and from such registration by notice to the
Company and the managing underwriter, and each of the remaining requesting
holders shall be entitled to increase the number of Registrable Securities being
registered to the extent of the Registrable Securities so withdrawn in the
proportion which the number of Registrable Securities being registered by such
remaining requesting holder bears to the total number of Registrable Securities
being registered by all such remaining requesting holders.
10. Stand-Off Agreement. Each holder of Registrable Securities agrees, so
long as such holder holds at least 1% of the Company's outstanding voting equity
securities, in connection with the Company's initial Public Offering, upon
request of the Company or the underwriters managing such Public Offering, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Shares of the Company without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not exceeding 180 days) from the effective date of the registration
statement relating to such initial Public Offering as may be requested by the
underwriters; provided, however, that all other holders of at least 1% of the
Company's outstanding voting equity securities and all of the officers and
directors of the Company who own stock of the Company must also agree to not
less onerous restrictions.
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11. Amendment. The Company shall not amend this Agreement without the
written consent of the holders of more than 50% of the Registrable Securities.
12. Termination. This Agreement, and all of the Company's obligations
hereunder (other than its obligations pursuant to Article 7, which obligations
shall survive such termination), shall terminate upon the earlier to occur of
(a) the date on which there are no Registrable Securities outstanding or (b)
March 30, 2005.
13. Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Agreement may be assigned (but
only with all related obligations) by a holder of Registrable Securities to a
transferee or assignee of all, but not less than all, such securities provided
the Company is within a reasonable time after such transfer furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned.
IN WITNESS WHEREOF, the parties hereto have duly executed this Registration
Rights Agreement as of the date and year first above-written.
STOCKPOINT, INC.
By:
-----------------------------------------
ZEKE INVESTMENT PARTNERS
By:
-----------------------------------------
Ed Antoian
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By:
-----------------------------------------
Matthew P. Kinley
By:
-----------------------------------------
Joseph Dunham
EQUITY DYNAMICS, INC., as Agent
By:
-----------------------------------------
12
<PAGE> 1
Exhibit 4.11
Roth Capital Partners Incorporated Individual Lock-Up
24 Corporate Plaza, Suite 200
Newport Beach, California 92660
Ladies and Gentlemen:
In connection with a proposed initial public offering (the "Offering") by
Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the
"Common Stock"), the Company has filed a registration statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). To induce you to enter into an underwriting agreement for the
Offering (the "Underwriting Agreement"), I agree that for the 180 day period
following the day on which the Registration Statement becomes effective under
the Securities Act (the "Lock Up Period"), I will not, without the prior written
consent of Roth Capital Partners Incorporated, directly or indirectly:
o issue,
o offer,
o sell (including any short sale),
o grant any option for the sale of,
o acquire any option to dispose of,
o assign,
o transfer,
o pledge or
o otherwise encumber or dispose of
any shares of Common Stock, or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock or any beneficial interest therein (collectively, "Convertible
Securities"), that, as of the date the Registration Statement was filed with the
U.S. Securities and Exchange Commission or becomes effective, I own of record or
beneficially.
I also agree that if I offer or sell any shares of Common Stock or
Convertible Securities (including securities I acquire after the Offering
commences) during the Lock Up Period (with the prior written consent of Roth
Capital Partners Incorporated) or during the 180 days following the end of Lock
Up Period, I will offer and sell these securities through Roth Capital Partners
Incorporated.
I understand that, notwithstanding the above, I may transfer my Common
Stock or Convertible Securities to:
o my spouse,
o my parents,
o my siblings,
o my children or other lineal descendants,
o any trust for the benefit of the above persons,
o any of my distributees, legatees or devisees who acquire my Common
Stock or Convertible Securities by will or operation of law upon my
death, or
<PAGE> 2
o any other recipient of a bona fide gift or a charitable contribution
of Common Stock or Convertible Securities by me,
but only if my transferees agree in writing to be bound by the terms of this
letter to the same extent as me.
Notwithstanding the above, if the Underwriting Agreement is not executed on
or before July 1, 2000, this agreement shall terminate and be of no effect.
Very truly yours,
____________________________________________
Dated: __________________, 2000
Accepted as of the date set forth immediately above:
ROTH CAPITAL PARTNERS INCORPORATED
By____________________________________
Name:_________________________________
Title:________________________________
-2-
<PAGE> 3
Roth Capital Partners Incorporated Entity Lock-Up
24 Corporate Plaza, Suite 200
Newport Beach, California 92660
Ladies and Gentlemen:
In connection with a proposed initial public offering (the "Offering") by
Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the
"Common Stock"), the Company has filed a registration statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). To induce you to enter into an underwriting agreement for the
Offering (the "Underwriting Agreement"), the undersigned agrees that for the 180
day period following the day on which the Registration Statement becomes
effective under the Securities Act (the "Lock Up Period"), the undersigned will
not, without the prior written consent of Roth Capital Partners Incorporated,
directly or indirectly:
o issue,
o offer,
o sell (including any short sale),
o grant any option for the sale of,
o acquire any option to dispose of,
o assign,
o transfer,
o pledge or
o otherwise encumber or dispose of
any shares of Common Stock, or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock or any beneficial interest therein (collectively, "Convertible
Securities"), that, as of the date the Registration Statement was filed with the
U.S. Securities and Exchange Commission or becomes effective, the undersigned
owns of record or beneficially.
[continued on next page]
<PAGE> 4
The undersigned also agrees that if the undersigned offers or sells any
shares of Common Stock or Convertible Securities (including securities the
undersigned acquires after the Offering commences) during the Lock Up Period
(with the prior written consent of Roth Capital Partners Incorporated) or during
the 180 days following the end of Lock Up Period, the undersigned will offer and
sell these securities through Roth Capital Partners Incorporated.
Very truly yours,
By__________________________________________
Name:_______________________________________
Title:______________________________________
Dated: _______________, 2000
Accepted as of the date set forth above:
ROTH CAPITAL PARTNERS INCORPORATED
By___________________________________
Name:________________________________
Title:_______________________________
-2-
<PAGE> 1
EXHIBIT 10.1
STOCKPOINT, INC.
1995 LONG-TERM INCENTIVE
AND
STOCK OPTION PLAN
SECTION 1. PURPOSE OF PLAN. The purpose of this Stockpoint, Inc., 1995
Long-Term Incentive and Stock Option Plan is to aid in maintaining and
developing personnel capable of contributing to the future success of the
Company, to offer such personnel additional incentives to put forth maximum
efforts for the success of the business, and to afford them an opportunity to
acquire a proprietary interest in the Company through stock options and other
long-term incentive awards as provided herein. Options granted under this Plan
may be either Incentive Stock Options or options that do not qualify as
Incentive Stock Options. Awards granted under this Plan may be SARs, restricted
stock or performance awards as hereinafter described.
SECTION 2. DEFINITIONS. As used herein, the following definitions
shall apply:
(a) "Award" shall mean an SAR, restricted stock award or
performance award granted pursuant to the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean a committee of two or more Directors
appointed by the Board of Directors of the Company, none of
whom shall be officers or employees of the Company and all of
whom shall be "disinterested persons" with respect to the Plan
within the meaning of Rule 16b-3 under the Exchange Act and
any successor rule.
(e) "Common Stock" shall mean the Common Stock, $.01 par value, of
the Company.
(f) "Company" shall mean Stockpoint, Inc., a Delaware corporation.
(g) "Director" shall mean a member of the Board.
(h) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary
of the Company.
<PAGE> 2
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(j) "Fair Market Value" of the Common Stock shall be as determined
by the Committee in its discretion; provided, however, that
where there is a public market for the Common Stock, the fair
market value per share of the Common Stock shall be the
closing price of the Common Stock in the over-the-counter
market on the date of grant, as reported in The Wall Street
Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation
("NASDAQ") System) or, in the event the Common Stock is traded
on the NASDAQ National Market System or listed on a stock
exchange, the fair market value per share of Common Stock
shall be the closing price on such system or exchange on the
date of grant of the Option, as reported in The Wall Street
Journal. If on the date of grant of any option or award under
the Plan the Common Stock is not traded on an established
securities market, the Committee shall determine Fiar Market
Value in good faith and in connection therewith shall take
such action as it deems necessary or advisable.
(k) "Incentive Stock Option" shall mean any Option meeting the
requirements of Section 422 of the Code.
(l) "Option" shall mean a stock option granted pursuant to the
Plan.
(m) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(n) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(o) "Plan" shall mean this 1995 Long-Term Incentive and Stock
Option Plan.
(p) "SAR" shall mean a stock appreciation right granted pursuant
to the Plan.
(q) "Shares" shall mean the shares of Common Stock subject to
Options or Awards under the Plan in accordance with Section 3
below, as adjusted in accordance with Section 16 below.
(r) "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 425(f) of the
Code.
SECTION 3. STOCK SUBJECT TO PLAN. Subject to adjustment as provided in
Section 16 hereof, the number of Shares on which Options may be exercised or
other Awards issued under this Plan shall be 2,000,000 shares of the Company's
authorized Common
<PAGE> 3
Stock plus a number of shares equal to one and one-half percent of the number of
shares of Common Stock outstanding as of the December 31 immediately preceding
the year in which such Options may be granted. The Shares may be either
authorized, but unissued, shares of Common Stock or shares of Common Stock which
have been reacquired by the Company. If an Option or Award under the Plan
expires, or for any reason is terminated or unexercised with respect to any
Shares, or if Shares issued under an Option are reacquired by the Company
pursuant to this Plan, such Shares shall again be available for Options or
Awards thereafter granted during the term of the Plan.
SECTION 4. ADMINISTRATION OF PLAN.
(a) The Plan shall be administered by the Committee.
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan, to: (i) determine the purchase
price of the Common Stock covered by each Option or Award, (ii) determine the
Employees to whom and the time or times at which Options and Awards shall be
granted and the number of Shares to be subject to each, (iii) determine,
pursuant to Section 8(c) hereof, the form of payment to be made upon the
exercise of an SAR or in connection with performance awards, either cash, Common
Stock of the Company or a combination thereof, (iv) determine the terms of
exercise of each Option and Award, (v) accelerate the time at which all or any
part of an Option or Award may be exercised, (vi) amend or modify the terms of
any Option or Award with the consent of the optionee, (vii) interpret the Plan,
(viii) prescribe, amend and rescind rules and regulations relating to the Plan,
(ix) determine the terms and provisions of each Option and Award agreement under
the Plan (which agreements need not be identical), including the designation of
those Options intended to be Incentive Stock Options, (x) delegate such of its
authority granted herein as it deems is in the best interests of the Company,
and (xi) make all other determinations necessary or advisable for the
administration of the Plan, subject to the exclusive authority of the Board
under Section 17 herein to amend or terminate the Plan. The Committee's
determinations on the foregoing matters, unless otherwise disapproved by the
Board, shall be final and conclusive; provided, however, that the Committee's
determinations with respect to the matters set forth in clauses (ii) and (iii)
above, unless delegated as provided in clause (x) above, shall be final and
conclusive without any right of disapproval by the Board.
(c) The Committee shall select one of its members as its chair and
shall hold its meetings at such times and places as it may determine. A majority
of Committee members shall constitute a quorum. All determinations of the
Committee shall be made by not less than a majority of its members. Any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if made by a majority vote at a meeting
duly called and held. The grant of an Option or Award shall be effective only if
a written agreement shall have been duly executed and
<PAGE> 4
delivered by and on behalf of the Company following such grant. The Committee
may appoint a secretary and may make such rules and regulations for the conduct
of its business as the Committee shall deem advisable. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all optionees and grantees.
SECTION 5. ELIGIBILITY AND GRANT.
(a) Eligibility. Incentive Stock Options may only be granted under this
Plan to any full or part-time Employee. Full or part-time Employees, officers,
consultants, Directors (excluding Directors who are not Employees) or
independent contractors of the Company or one of its Subsidiaries shall be
eligible to receive Options which do not qualify as Incentive Stock Options and
Awards. In determining the persons to whom Options and Awards shall be granted
and the number of Shares subject to each, the Committee may take into account
the nature of services rendered by the respective Employees or consultants,
their present and potential contributions to the success of the Company and such
other factors as the Committee in its discretion shall deem relevant.
(b) Grant of Additional Options or Awards. A person who has been
granted an Option or Award under this Plan may be granted additional Options or
Awards under the Plan if the Committee shall so determine; provided, however,
that for Incentive Stock Options, to the extent that the aggregate Fair Market
Value (determined at the time the Incentive Stock Option is granted) of the
Common Stock with respect to which all Incentive Stock Options are exercisable
for the first time by an Employee during any calendar year (under all plans
described in Section 422(d) of the Code of such Employee's employer corporation
and its parent and subsidiary corporations) exceeds $100,000, such Options shall
be treated as Options that do not qualify as Incentive Stock Options. Nothing in
the Plan or in any agreement thereunder shall confer on any Employee any right
to continue in the employ of the Company or any of its Subsidiaries or affect,
in any way, the right of the Company or any of its Subsidiaries to terminate
such Employee's employment at any time.
SECTION 6. PRICE. The exercise price for all Incentive Stock Options
granted under the Plan shall be determined by the Committee but shall not be
less than 100% of the Fair Market Value of the Common Stock at the date of grant
of such Option. The exercise price for Options granted under the Plan that do
not qualify as Incentive Stock Options and, if applicable, the price for all
Awards shall be determined by the Committee.
SECTION 7. TERM. Each Option and Award and all rights and obligations
thereunder shall expire on the date determined by the Committee and specified in
the Option or Award agreement. The Committee shall be under no duty to provide
terms
<PAGE> 5
of like duration for Options or Awards granted under the Plan, but the term of
an Option may not extend more than ten years from the date of grant of such
Option.
SECTION 8. EXERCISE OF OPTION OR AWARD.
(a) Exercisability. The Committee shall have full and complete
authority to determine whether an Option or Award will be exercisable in full at
any time or from time to time during the term thereof, or to provide for the
exercise thereof in such installments, upon the occurrence of such events (such
as termination of employment for any reason) and at such times during the term
of the Option or Award as the Committee may determine and specify in the Option
or Award agreement.
(b) No Violation of State or Federal Laws. The exercise of any Option
or Award granted hereunder shall only be effective at such time that the sale of
Common Stock pursuant to such exercise will not violate any state or federal
securities or other laws. To the extent required in order to comply with Rule
16b-3 of the Exchange Act in the case of an Option or Award granted to a person
considered by the Company as one of its officers or directors for purposes of
Section 16 of the Exchange Act, the terms of the Option or Award will require
that the Shares subject thereto are not disposed of by such officer or director
for a period of at least six months from the date of grant.
(c) Method of Exercise. An optionee or grantee electing to exercise an
Option or Award shall give written notice to the Company of such election and of
the number of Shares subject to such exercise. The Company will verify the
appropriateness of the election and determine the amounts of compensation and
related withholding tax. The exercise amount and applicable taxes must be
tendered by the optionee or grantee prior to the issuance of Shares pursuant to
the exercise. Payment shall be made to the Company in cash (including bank
check, certified check, personal check, or money order), or, at the discretion
of the Committee and as specified by the Committee, (i) by delivering
certificates for the Common Stock already owned by the optionee or grantee
having a Fair Market Value as of the date of exercise equal to the full purchase
price of the Shares as to which the Option or Award is exercised, (ii) by
delivering written authorization for the Company to retain from the total number
of Shares as to which the Option or Award is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option or Award is exercised,
(iii) by delivering the optionee's or grantee's promissory note, which shall
provide for interest at a rate not less than the minimum rate required to avoid
the imputation of income, original issue discount or a below-market-rate loan
pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions
thereto, (iv) by delivery (including by facsimile) to the Company or its
designated agent of an executed irrevocable option exercise form together with
irrevocable instructions to a broker-dealer to sell a sufficient portion of the
Shares and deliver the sale proceeds directly to the Company to pay for the
exercise price, (v) any combination of the
<PAGE> 6
foregoing methods of payment or (vi) such other consideration and method of
payment for the issuance of Shares as may be permitted under applicable laws.
The optionee's or grantee's promissory note shall be a full recourse liability
of the optionee and may, at the discretion of the Committee, be secured by a
pledge of the Shares being purchased. Until such person has been issued the
Shares subject to such exercise, he or she shall possess no rights as a
stockholder with respect to such Shares.
SECTION 9. STOCK OPTION RIGHTS.
(a) Grant. At the time of grant of an Option or Award under the Plan
(or at any other time), the Committee, in its discretion, may grant an SAR
evidenced by an agreement in such form as the Committee shall from time to time
approve. Any such SAR may be subject to restrictions on the exercise thereof as
may be set forth in the agreement representing such SAR, which agreement shall
comply with and be subject to the following terms and conditions and any
additional terms and conditions established by the Committee that are consistent
with the terms of the Plan.
(b) Exercise. An SAR shall be exercised by the delivery to the Company
of a written notice which shall state that the holder thereof elects to exercise
his or her SAR as to the number of Shares specified in the notice and which
shall further state what portion, if any, of the SAR exercise amount
(hereinafter defined) the holder thereof requests is to be paid in cash and what
portion, if any, is to be paid in Shares. The Committee promptly shall cause to
be paid to such holder the SAR exercise amount either in cash, in Shares, or any
combination of cash and Shares as the Committee may determine. Such
determination may be either in accordance with the request made by the holder of
the SAR or in the sole and absolute discretion of the Committee. The SAR
exercise amount is the excess of the Fair Market Value of one Share on the date
of exercise over the per Share exercise price in respect of which the SAR was
granted, multiplied by the number of Shares as to which the SAR is exercised.
For purposes hereof, the Fair Market Value of the Shares shall be determined as
provided in Section 6 herein.
SECTION 10. RESTRICTED STOCK AWARDS. Awards of Shares subject to
forfeiture and transfer restrictions may be granted by the Committee. Any
restricted stock award shall be evidenced by an agreement in such form as the
Committee shall from time to time approve, which agreement shall comply with and
be subject to the following terms and conditions and any additional terms and
conditions established by the Committee that are consistent with the terms of
the Plan:
(a) Grant of Restricted Stock Awards. Each restricted stock award made
under the Plan shall be for such number of Shares as shall be determined by the
Committee and set forth in the agreement containing the terms of such restricted
stock award. Such agreement shall set forth a period of time during which the
grantee must
<PAGE> 7
remain in the continuous employment of the Company or its Subsidiaries in order
for the forfeiture and transfer restrictions to lapse. If the Committee so
determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the Shares covered by the
restricted stock award. The agreement may also, in the discretion of the
Committee, set forth performance or other conditions that will subject the
Shares to forfeiture and transfer restrictions. The Committee may, at its
discretion, waive all or any part of the restrictions applicable to any or all
outstanding restricted stock awards, provided that, in the case of restricted
stock awards made to a person considered by the Company as an officer or
director for purposes of Section 16 of the Exchange Act, the terms of such
restricted stock agreement will provide that the Shares so awarded may not be
disposed of for a period of at least six months from the date the award was
made.
(b) Delivery of Shares and Restrictions. At the time of a restricted
stock award, a certificate representing the number of Shares awarded thereunder
shall be registered in the name of the grantee. Such certificate shall be held
by the Company or any custodian appointed by the Company for the account of the
grantee subject to the terms and conditions of the Plan, and shall bear such a
legend setting forth the restrictions imposed thereon as the Committee, in its
discretion, may determine. The grantee shall have all rights of a stockholder
with respect to the Shares, including the right to receive dividends and the
right to vote such Shares, subject to the following restrictions: (i) the
grantee shall not be entitled to delivery of the stock certificate until the
expiration of the restricted period and the fulfillment of any other restrictive
conditions set forth in the restricted stock agreement with respect to such
Shares; (ii) none of the Shares may be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of during such restricted
period or until after the fulfillment of any such other restrictive conditions;
and (iii) except as otherwise determined by the Committee, all of the Shares
shall be forfeited and all rights of the grantee to such Shares shall terminate,
without further obligation on the part of the Company, unless the grantee
remains in the continuous employment of the Company or its Subsidiaries for the
entire restricted period in relation to which such Shares were granted and
unless any other restrictive conditions relating to the restricted stock award
are met. Any Shares, any other securities of the Company and any other property
(except for cash dividends) distributed with respect to the Shares subject to
restricted stock awards shall be subject to the same restrictions, terms and
conditions as such restricted Shares.
(c) Termination of Restrictions. At the end of the restricted period
and provided that any other restrictive conditions of the restricted stock award
are met, or at such earlier time as otherwise determined by the Committee, all
restrictions set forth in the agreement relating to the restricted stock award
or in the Plan shall lapse as to the restricted Shares subject thereto. Upon
payment by the grantee to the Company of any withholding tax required to be
paid, a stock certificate for the appropriate number of
<PAGE> 8
Shares, free of the restrictions and the restricted stock legend, shall be
delivered to the grantee or his or her beneficiary or estate, as the case may
be.
(d) 83(b) Election. Within 30 days after the grantee is granted a
restricted stock Award, the Company, if the grantee so elects, will prepare and
file, and the grantee will sign, an effective election with the Internal Revenue
Service under Section 83(b) of the Code relative to the Shares granted to the
grantee.
SECTION 11. PERFORMANCE AWARDS. The Committee is further authorized to
grant performance awards. Subject to the terms of this Plan and any applicable
Award agreement, a performance award granted under the Plan (i) may be
denominated or payable in cash, Shares (including, without limitation,
restricted stock), other securities, other Awards, or other property and (ii)
shall confer on the holder thereof rights valued as determined by the Committee,
in its discretion, and payable to, or exercisable by, the holder of the
performance awards, in whole or in part, upon the achievement of such
performance goals during such performance periods as the Committee, in its
discretion, shall establish. Subject to the terms of this Plan and any
applicable Award agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
performance award granted, and the amount of any payment or transfer to be made
by the grantee and by the Company under any performance award shall be
determined by the Committee.
SECTION 12. INCOME TAX WITHHOLDING AND TAX BONUSES.
(a) Withholding of Taxes. In order to comply with all applicable
federal or state income tax laws or regulations, the Company may take such
action as it deems appropriate to ensure that all applicable federal, state or
local payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of an optionee or grantee under the Plan, are withheld
or collected from such optionee or grantee prior to his or her receipt of Shares
pursuant to the exercise of an Option or the satisfaction of the conditions of
any other Award. In order to assist an optionee or grantee in paying all federal
and state taxes to be withheld or collected upon exercise of an Option or Award
which does not qualify as an Incentive Stock Option hereunder, the Committee, in
its absolute discretion and subject to such additional terms and conditions as
it may adopt, shall permit the optionee or grantee to satisfy such tax
obligation by electing to (i) have the Company withhold a portion of the Shares
otherwise to be delivered upon exercise of such Option or Award with a Fair
Market Value equal to such taxes or (ii) deliver to the Company Common Stock
other than the Shares issuable upon exercise of such Option or Award with a Fair
Market Value equal to such taxes. This election must be made on or before the
date that the amount of tax to be withheld is determined.
(b) Tax Bonus. The Committee shall have the authority, at the time of
grant of an Option or Award under the Plan or at any time thereafter, to approve
tax bonuses
<PAGE> 9
to designated optionees or grantees to be paid upon their exercise of Options or
Awards granted hereunder (or upon grant of a restricted stock award and filing
of an 83(b) election pursuant to Section 10(d) of the Plan). The amount of any
such payments shall be determined by the Committee, but shall not exceed 100% of
the excess of the Fair Market Value of the Shares received upon exercise of an
Option or Award over the price paid therefor. The Committee shall have full
authority in its absolute discretion to determine the amount of any such tax
bonus and the terms and conditions affecting the vesting and payment thereof.
SECTION 13. ADDITIONAL RESTRICTIONS. The Committee shall have full and
complete authority to determine whether all or any part of the Shares acquired
upon exercise of any of the Options or Awards granted under the Plan shall be
subject to restrictions on the transferability thereof or any other restrictions
affecting in any manner the optionee's or grantee's rights with respect thereto,
but any such restriction shall be contained in the agreement relating to any
such Option or Award.
SECTION 14. TEN PERCENT STOCKHOLDER RULE. Notwithstanding any other
provision in the Plan, if at the time an Option is otherwise to be granted
pursuant to the Plan to an optionee who owns, directly or indirectly (within the
meaning of Section 424(d) of the Code), Common Stock of the Company possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or its Parent or Subsidiary, if any, then any Incentive Stock Option to
be granted to such optionee pursuant to the Plan shall satisfy the requirements
of Section 422(c)(5) of the Code, and the exercise price of such Option shall be
not less than 110% of the Fair Market Value of the Common Stock, and such Option
by its terms shall not be exercisable after the expiration of five years from
the date such Option is granted.
SECTION 15. NON-TRANSFERABILITY. No Option or Award granted under the
Plan shall be transferable by an optionee or grantee, otherwise than by will or
the laws of descent or distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. Except as
otherwise provided in an Option or Award agreement, during the lifetime of an
optionee or grantee, the Option or Award shall be exercisable only by such
optionee or grantee.
SECTION 16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION OR
MERGER.
(a) In the event that the number of outstanding shares of Common Stock
is changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without consideration, the number of Shares available under this Plan and the
number of Shares subject to outstanding Options and Awards and the exercise
price per share of such
<PAGE> 10
Options and Awards shall be proportionately adjusted, subject to any required
action by the Board or stockholders of the Company and compliance with
applicable securities laws; provided however, that no certificate or scrip
representing fractional shares shall be issued upon exercise of any Option or
Award and any resulting fractions of a share shall be ignored. Such adjustment
shall be made by the Board, whose determination in that respect shall be final,
binding and conclusive.
(b) In the event of a dissolution or liquidation of the Company, a
merger in which the Company is not the surviving corporation, a transaction or
series of related transactions in which 51% of the then outstanding voting stock
is sold or otherwise transferred (including (i) a public announcement that any
person has acquired or has the right to acquire beneficial ownership of 51% or
more of the then outstanding shares of Common Stock (for this purpose, the terms
"person" and "beneficial ownership" shall have the meanings provided in Section
13(d) of the Exchange Act or related rules promulgated by the Securities
Exchange Commission) and (ii) the commencement of or public announcement of an
intention to make a tender or exchange offer for 51% or more of the then
outstanding shares of the Common Stock) or the sale of substantially all of the
assets of the Company, any and all outstanding Options and Awards shall,
notwithstanding any contrary terms of the written agreement governing any such
Option or Award, accelerate and become exercisable in full at least ten days
prior to (and shall expire on) the consummation of such dissolution,
liquidation, merger or sale of stock or sale of assets on such conditions as the
Board shall determine unless the successor corporation assumes the outstanding
Options and Awards or substitutes substantially equivalent options and awards as
determined by the Board. The acceleration of the outstanding Options and Awards
shall be conditioned on the actual occurrence of such a dissolution,
liquidation, merger or sale of stock or assets.
SECTION 17. AMENDMENT OR DISCONTINUANCE OF PLAN. The Board of Directors
may amend or discontinue the Plan at any time. Subject to the provisions of
Section 16, no amendment of the Plan shall without stockholder approval: (i)
increase the number of Shares authorized under the Plan as provided in Section 3
herein, (ii) decrease the minimum price provided in Section 6 herein, (iii)
extend the maximum term under Section 7, or (iv) modify the eligibility
requirements for participation in the Plan. In addition, to the extent necessary
and desirable to comply with Rule 16b-3 (or any other applicable law or
regulation), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required. The Committee, or the
Company's Chief Executive Officer as authorized by the Committee, may grant,
each year, Options and Awards for the number of Shares authorized by Section 3
herein without further amendment to the Plan increasing the number of Shares
authorized for distribution. The Board shall not alter or impair any Option or
Award theretofore granted under the Plan without the consent of the holder of
the Option or Award.
<PAGE> 11
SECTION 18. TIME OF GRANTING. Nothing contained in the Plan or in any
resolution adopted or to be adopted by the Board or by the stockholders of the
Company, and no action taken by the Committee, the Chief Executive Officer or
the Board (other than the execution and delivery of an Option or Award
agreement), shall constitute the granting of an Option or Award hereunder.
SECTION 19. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The Plan shall be effective upon approval by the affirmative vote
or written consent of the holders of a majority of the voting power of the
outstanding shares of capital stock of the Company.
(b) Unless the Plan shall have been discontinued as provided in Section
17 hereof, the Plan shall terminate on November 30, 2005. No Option or Award may
be granted after such termination, but termination of the Plan shall not,
without the consent of the optionee or grantee, alter or impair any rights or
obligations under any Option or Award theretofore granted.
<PAGE> 1
EXHIBIT 10.2
STOCKPOINT, INC.
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
SECTION 1. PURPOSE OF THE PLAN. The purpose of this Stockpoint, Inc..,
1995 Nonemployee Director Stock Option Plan is to promote the interests of the
Company by enhancing its ability to attract and retain the services of
experienced and knowledgeable independent directors and by providing additional
incentive for these directors to increase their interest in the Company's
long-term success and progress. None of the options granted hereunder shall be
"incentive stock options" within the meaning of Section 422 of the Code (as
hereinafter defined).
SECTION 2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a committee of two or more persons appointed
by the Board of Directors of the Company.
(d) "Common Stock" shall mean the Common Stock, $.01 par value, of the
Company.
(e) "Company" shall mean Stockpoint, Inc., a Delaware corporation.
(f) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.
(g) "Director" shall mean a member of the Board.
(h) "Employee" shall mean any person, including officers and Directors,
employed by the Company or any parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the
Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" the Fair Market Value of a Share shall be
determined by the Committee in its discretion; provided however,
that where there is a public market for the Common Stock, the fair
market value per Share
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shall be the closing price of the Common Stock in the
over-the-counter market on the date of grant, as reported in The
Wall Street Journal (or, if not so reported, as otherwise reported
by the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System or, in the event the Common Stock is
traded on the NASDAQ National Market System or listed on a stock
exchange, the fair market value per Share shall be the closing
price on such system or exchange on the date of grant of the
Option, as reported in The Wall Street Journal.
(k) "Option" shall mean a stock option granted pursuant to the Plan.
(l) "Optioned Stock" shall mean the Common Stock subject to an Option.
(m) "Optionee" shall mean an Outside Director who receives an Option.
(n) "Outside Director" shall mean a Director who is not an Employee.
(o) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(p) "Plan" shall mean this 1995 Nonemployee Director Stock Option Plan.
(q) "Shares" shall mean the shares of Common Stock subject to Options
under the Plan in accordance with Section 3 below, as adjusted in
accordance with Section 10 below.
(r) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 425(f) of the Code.
SECTION 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 10 below, the maximum aggregate number of Shares which may be optioned
and sold under the Plan is 75,000 shares of Common Stock. The Shares may be
authorized, but unissued, shares of Common Stock or shares of Common Stock which
have been reacquired by the Company. If an Option should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan. If Shares
which were acquired upon exercise of an Option are subsequently repurchased by
the Company, such Shares shall not in any event be returned to the Plan and
shall not become available for future grant under the Plan.
SECTION 4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
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<PAGE> 3
(a) Administrator. Except as otherwise required herein, the Plan shall
be administered by the Committee.
(b) Procedure for Grants. The provisions set forth in this Section 4(b)
shall not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an Option
(an "Initial Grant") to purchase 5,000 Shares upon the date on which such person
first becomes a Director, whether through election by the stockholders of the
Company or appointment by the Board of Directors to fill a vacancy. Options
granted under this Section 4(b)(iii) shall become exercisable in three equal
annual installments with the first one-third installment vesting on the first
anniversary of the date of the Initial Grant and the two remaining one-third
installments vesting on the second and third anniversary of the Initial Grant,
respectively.
(iii) Each Outside Director shall automatically receive, on the
date of each Annual Meeting of Stockholders, beginning with the Annual Meeting
of Stockholders held in 1996, an Option to purchase 5,000 Shares of the
Company's Common Stock, such Option to become exercisable one year subsequent to
the date of grant; provided however, that such Option shall only be granted to
Outside Directors who have served since the date of the last Annual Meeting of
Stockholders and will continue to serve after the date of grant of such Option.
(iv) The terms of an Option granted hereunder shall be as follows:
(A) The term of the Option shall be ten years.
(B) The exercise price per Share shall be 100% of
the Fair Market Value of a Share on the date of grant of the
Option.
(C) To the extent necessary to comply with the
applicable provisions of Rule 16b-3 promulgated under the
Exchange Act ("Rule 16b-3"), no Option will be exercisable
until a date more than six months subsequent to the date of
the grant of that Option.
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<PAGE> 4
(c) Powers of the Committee. Subject to the provisions and restrictions
of the Plan, the Committee shall have the authority, in its discretion, to: (i)
determine, upon review of relevant information and in accordance with the Plan,
the Fair Market Value of the Common Stock; (ii) determine the exercise price per
share of Options to be granted, which exercise price shall be determined in
accordance with Section 7(a) of the Plan; (iii) interpret the Plan; (iv)
prescribe, amend and rescind rules and regulations relating to the Plan; (v)
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted hereunder; and (vi) make
all other determinations deemed necessary or advisable for the administration of
the Plan.
(d) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
SECTION 5. ELIGIBILITY. Options may be granted only to Outside
Directors. All Options shall be automatically granted in accordance with the
terms set forth in Section 4(b) hereof. The Plan shall not confer upon any
Optionee any right with respect to continuation of service as a Director or
nomination to serve as a Director, nor shall it interfere in any way with any
rights which the Director or the Company may have to terminate his or her
directorship at any time.
SECTION 6. TERM OF PLAN. The Plan shall become effective upon its
approval by the stockholders of the Company as described in Section 16 of the
Plan. The Plan shall continue in effect for a term of ten years unless sooner
terminated under Section 12 of the Plan.
SECTION 7. EXERCISE PRICE AND CONSIDERATION.
(a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the Fair Market Value
per Share on the date of grant of the Option.
(b) Form of Consideration. Subject to compliance with applicable
provisions of Section 16(b) of the Exchange Act or other applicable law, the
consideration to be paid for the Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by the Committee and may
consist entirely of (i) cash, (ii) check, (iii) other shares of Common Stock
which (X) in the case of Shares acquired upon exercise of an Option, have been
owned by the Optionee for more than six months on the date of surrender, and (Y)
have a Fair Market Value on the date of exercise equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (iv)
authorization for the Company to retain from the total number of Shares as to
which the Option is exercised that number of Shares having a Fair Market Value
on the date of
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<PAGE> 5
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (v) delivery (including by facsimile) to the Company or
its designated agent of a properly executed irrevocable option exercise notice
together with irrevocable instructions to a broker-dealer to sell a sufficient
portion of the Shares and deliver the sale proceeds directly to the Company to
pay for the exercise price, (vi) by delivering an irrevocable subscription
agreement for the Shares which irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (vii) any combination of the foregoing methods of
payment or (viii) such other consideration and method of payment for the
issuance of Shares as may be permitted under applicable laws. In making any
determination as to the type of consideration to accept, the Committee shall
consider whether acceptance of such consideration may reasonably be expected to
benefit the Company.
SECTION 8. EXERCISE OF OPTION.
(a) Procedure for Exercise: Rights as a Stockholder. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4(b)
hereof. An Option may not be exercised for a fraction of a Share. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full payment may
consist of any consideration and method of payment allowable under Section 7(c)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. A share certificate
for the number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 10 of the Plan. Exercise of
an Option in any manner shall result in a decrease in the number of Shares which
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Status as a Director. If an Outside Director ceases
to serve as a Director, such Outside Director may exercise his/her Option to the
extent that he/she was entitled to exercise such Option at the date of such
termination. To the extent that such Outside Director was not entitled to
exercise an Option at the date of such termination, or if such Outside Director
does not exercise such Option (which he/she was entitled to exercise) within the
term of such Option, the Option shall terminate.
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<PAGE> 6
(c) Disability of Optionee. Notwithstanding the provisions of Section
8(b) above, in the event an Optionee is unable to continue service as a Director
with the Company as a result of such Optionee's total and permanent disability
(as defined in Section 22(e)(3) of the Code), such Optionee may exercise his/her
Option to the extent entitled to exercise such Option at the date of such
termination. To the extent that such Optionee was not entitled to exercise the
Option at the date of such termination, or if such Optionee does not exercise
such Option (which he/she was entitled to exercise) within the term of such
Option, the Option shall terminate.
(d) Death of Optionee. Notwithstanding the provisions of Section 8(b)
above, if an Optionee dies during the term of an Option:
(i) if the Optionee was at the time of death serving as a
Director of the Company and had been in Continuous Status as a Director since
the date of grant of the Option, then the Option may be exercised by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as a Director for six months after the date of death; or
(ii) if the Optionee's death occurred within 30 days after
the termination of the Optionee's Continuous Status as a Director, then the
Option may be exercised by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination of
Continuous Status as a Director.
SECTION 9. NON-TRANSFERABILITY OF OPTIONS. An Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder. An Option may be exercised, during the lifetime of the Optionee,
only by the Optionee.
SECTION 10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION OR
MERGER.
(a) In the event that the number of outstanding shares of Common Stock
is changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without consideration, the number of Shares available under this Plan and the
number of Shares subject to outstanding Options and the exercise price per Share
of such Options shall be proportionately adjusted, subject to any required
action by the Board or stockholders of
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<PAGE> 7
the Company and compliance with applicable securities laws; provided however,
that no certificate or scrip representing fractional shares shall be issued upon
exercise of any Option and any resulting fractions of a share shall be ignored.
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive.
(b) In the event of a dissolution or liquidation of the Company, a
merger in which the Company is not the surviving corporation, a transaction or
series of related transactions in which 51% of the then outstanding voting stock
is sold or otherwise transferred (including (i) a public announcement that any
person has acquired or has the right to acquire beneficial ownership of 51% or
more of the then outstanding shares of Common Stock (for this purpose, the terms
"person" and "beneficial ownership" shall have the meanings provided in Section
13(d) of the Exchange Act or related rules promulgated by the Securities
Exchange Commission) and (ii) the commencement of or public announcement of an
intention to make a tender or exchange offer for 51% or more of the then
outstanding shares of the Common Stock) or the sale of substantially all of the
assets of the Company, any and all outstanding Options shall, notwithstanding
any contrary terms of the written agreement governing any such Option,
accelerate and become exercisable in full at least ten days prior to (and shall
expire on) the consummation of such dissolution, liquidation, merger or sale of
stock or sale of assets on such conditions as the Board shall determine unless
the successor corporation assumes the outstanding Options or substitutes
substantially equivalent options as determined by the Board. The acceleration of
the outstanding Options shall be conditioned on the actual occurrence of such a
dissolution, liquidation, merger or sale of stock or assets.
SECTION 11. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the determination shall be given to each Outside Director to
whom an Option is so granted within a reasonable time after the date of such
grant.
SECTION 12. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuance shall be made which would impair the rights of any Optionee under
any grant theretofore made, without his or her consent. In addition, to the
extent necessary and desirable to comply with Rule 16b-3 (or any other
applicable law or regulation), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall
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<PAGE> 8
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
SECTION 13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Common Stock may then be listed or quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
SECTION 14. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of the Shares
available for issuance pursuant to this Plan as shall be sufficient to satisfy
the requirements of the Plan.
SECTION 15. OPTION AGREEMENT. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
SECTION 16. STOCKHOLDER APPROVAL. The Plan shall be subject to approval
by the affirmative vote or written consent of the holders of a majority of the
voting power of the outstanding shares of capital stock of the Company.
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<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on December 20, 1999 (the "Effective
Time"), by and between William E. Staib, an individual resident of the State of
Iowa ("Executive"), and Stockpoint, Inc., a Delaware corporation ("Company").
WHEREAS, Executive has heretofore been employed as the Chief Executive
Officer of the Company; and
WHEREAS, the Company desires to continue to have the benefit of the
Executive's services as a corporate officer of the Company;
WHEREAS, certain guarantors of borrowings of the Company have required,
as a condition to their guarantees, that the Company execute an employment
agreement with Executive and
WHEREAS, the proceeds from such borrowings are necessary for the
Company's operations and will benefit the Company and the Executive.
NOW, THEREFORE, in consideration of the premises, the respective
undertakings of the Company and Executive set forth below, the Company and
Executive agree as follows:
1. Employment. The Company hereby agrees to employ Executive, and
Executive accepts such employment and agrees to perform services for the
Company, upon the other terms and conditions set forth in this Agreement.
2. Term. The term of this agreement is one year and renews annually,
unless either party provides written notification 90 days prior to the renewal.
See section 8 below for Termination definitions and remedies.
3. Positions, Duties and Reporting.
3.01 Service with Company. During the term of this Agreement,
Executive agrees to perform such reasonable employment duties consistent with
the role of Chief Executive Officer as the Company shall assign to him/her from
time to time.
3.02 Performance of Duties. Executive agrees to serve the
Company faithfully and to the best of his/her ability and to devote his/her full
time, attention, and efforts to the business and affairs of the Company during
the term of this Agreement. Executive represents to the Company that he/she is
under no contractual commitments inconsistent with his/her obligations set forth
in this Agreement, and that during the term of this Agreement, he/she will not
render or perform services for any other corporation, firm, entity or person
which are inconsistent with the provisions of this Agreement.
3.03 Reporting. This position will report to the Board of
Directors of the Company.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement during the first year of the term of
this Agreement, the Company shall pay to Executive a base salary at a rate of
$130,000 per year, which salary shall be paid on a twice-monthly basis in
accordance with the Company's normal payroll procedures and policies. The salary
payable to Executive during each subsequent year during the term of this
Agreement shall be established by the Company and Executive, but in no event
shall the salary for any subsequent year be less than the base salary in effect
for the prior year. Upon the completion of an initial public offering of the
Company's common stock or another strategic transaction that satisfies the
Company's present obligations to the Northern Trust Company in full, the base
salary payable to the Executive will be increased to at least $180,000 per year.
4.02 Participation in Benefit Plans. During the term of this
Agreement, Executive shall be entitled to receive such medical and
hospitalization insurance and other fringe benefits as are being provided
<PAGE> 2
to the Company's other executive level employees from time to time to the extent
that Executive's age, position or other factors qualify him/her for such fringe
benefits.
4.03 Expenses. The Company will pay or reimburse Executive for
all reasonable and necessary out-of-pocket expenses incurred by him/her in the
performance of his/her duties under this Agreement, subject to the presentment
of appropriate vouchers in accordance with the Company's normal policies for
expense verification.
4.04 Incentive for completion of an initial public offering.
Upon the completion of an initial public offering of the Company's common stock,
the Company will also pay Executive an IPO cash bonus of $60,000, which is due
and payable, immediately upon the close.
4.05 Annual Incentive Compensation. The Company shall formulate
and deliver to Executive by January 31, 2000 with respect to the remainder of
fiscal 2000, and by January 1 with respect to each succeeding fiscal year during
the term of this Agreement, and the Company and Executive shall use their best
efforts to negotiate and agree to, an annual incentive compensation plan for
Executive.
4.06 Vesting of Stock Options.
On September 15, 1999, the Company issued to the Executive an
additional option ("September 1999 Option") grant to purchase up to 200,000
shares of Company Common Stock at a price of $7.20 per share pursuant to the
Company's 1995 Stock Incentive Plan (the "Plan"). Such option shall become
exercisable with respect to 20% of the shares immediately upon execution of this
Agreement and the balance shall vest monthly at a rate of 1/60 of the total
September 1999 Option grant over the balance of the term. Such option shall
expire 10 years from the date of the grant and shall contain such other
provisions as are contained in the form of stock option agreement used by
Company under the Plan.
In the event that this Agreement is terminated as a result of the "Constructive
Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in
Section 8.01(1)) of the Executive, the September 1999 Option will vest with
respect to 40% of the shares subject thereto immediately. In addition, the
Company will permit the Executive to exercise all of his/her vested options for
a period of 12 months, commencing from the date of termination.
Vesting of all options granted to Executive will be accelerated with respect to
100% of the shares subject thereto in the event of a "Change in Control" of the
Company. For such purposes, a "Change in Control" shall mean any of the
following:
(i) A sale of all or substantially all of the assets of the Company;
(ii) The acquisition of more than 50% of the then outstanding Company
Common Stock by any person or group of persons acting in concert;
(iii) Any change that results in the Continuing Directors constituting
less than a majority of the Board of Directors;
(iv) A reorganization or, a merger of Company with another company
after which the holders of common stock of the Company
immediately prior to the merger or reorganization hold less than
50% of the voting power of the resulting corporations, or any
other transaction in which the Company (other than as the parent
corporation) is consolidated for federal income tax purposes or
is eligible to be consolidated for federal income tax purposes
with another corporation; or
(v) In the event that the Company Common Stock is traded on an
established securities market: a public announcement that any
person has acquired beneficial ownership of more than 25% of the
then outstanding Company Common Stock and for this purpose the
terms "person" and "beneficial ownership" shall have the meanings
provided in Section 13(d) of the Securities and Exchange Act of
1934 or related rules promulgated by the Securities and Exchange
Commission or; the commencement of or public announcement of an
intention to make a tender offer for more than 50% of the then
outstanding Company Common Stock.
<PAGE> 3
For purposes of this Section 4.06, "Continuing Directors" shall include only
those directors of the Company on the date hereof and those directors, as of a
date 30 days prior to an event that would otherwise be considered a "Change in
Control," who were nominated by Continuing Directors and duly elected by
shareholders at an annual meeting thereof or nominated and elected by directors
who were "Continuing Directors."
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter, Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with or will acquire or become
acquainted with during the period of his/her employment by the Company, whether
developed by himself/herself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans, devices or material
(whether or not patented or patentable) directly or indirectly useful in any
aspect of the business of the Company, any confidential or secret development or
research work of the Company, or any other confidential information or secret
aspects of the business of the Company. Executive expressly acknowledges that,
in addition to the Company's proprietary software and technical know-how, the
Company's customer lists and the form (including, without limitation, payment
terms) of the Company's relationships with its customers is not publicly known
and that the disclosure or use of such information for any purpose other than
for the benefit of the Company could cause substantial damage the Company and
would place the Company at a competitive disadvantage. Executive acknowledges
that the above-described knowledge or information constitutes a unique and
valuable asset of the Company and that any disclosure or other use of such
knowledge or information other than the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company. The foregoing
obligations of confidentiality shall not apply to any knowledge or information
which is now published, which subsequently becomes generally publicly known,
other than as a direct or indirect result of the breach of this Agreement by
Executive, or which was known to the Executive prior to the term of his/her
employment with the Company. Executive agrees to notify any person or entity
with which Executive is employed or for which Executive provides services of the
requirements of this Section 5 and to notify the Company of the identity of any
such person or entity with which Executive is employed during the One year after
termination of this Agreement.
6. Employee Solicitation. During employment, and for a period of
nine months thereafter, Executive shall not (i) directly or indirectly solicit
any employee of the Company or any of Company's affiliates to leave the employ
of any such entity or in any way interfere adversely with the relationship
between any such employee and any such entity, (ii) directly or indirectly
solicit any employee of the Company or any affiliates to work for, render
services or provide advice to or supply confidential business information or
trade secrets of any such entity to any third person, firm or corporation, or
(iii) directly or indirectly solicit any existing customers and potential
customers that have an unexpired written proposals under consideration. For
purposes of the foregoing, solicitation shall not include solicitation of
employees, vendors or customers (i) who first solicit employment or a
relationship from Executive, or (ii) who are solicited (A) by advertising in
periodicals of general circulation or by general circulation Internet
advertising, or (B) by a search or consulting firm on behalf of Executive or
Executive's affiliates, so long as Executive or such affiliates did not direct
or encourage such firm to solicit such employee, vendor or customer of the
Company. If any restriction set forth in this paragraph is held to be
unreasonable, then Executive and the Company agree, and hereby submit, to the
reduction and limitation of such prohibition to such area or period as shall be
deemed reasonable.
7. Patent and Related Matter.
7.01 Disclosure and Assignment. Executive will promptly disclose
in writing to the Company complete information concerning each and every
invention, discovery, improvement, work of authorship, device, design,
apparatus, practice, process, method or product whether patentable or not, made,
developed, authored, perfected, devised, conceived or first reduced to practice
by Executive, either solely or in collaboration with others, during the term of
this Agreement, whether or not during regular working hours, relating to the
Business of the Company (hereinafter referred to as "Developments"). Executive,
to the extent that he/she has the legal right to do so, hereby acknowledges that
any and all of said Developments are the property of the Company and hereby
assigns and agrees to assign to the Company any and all of Executive's right,
title and interest in and to any and all of such Developments.
<PAGE> 4
7.02 Limitation on Section 7.01. The provisions of section 7.01
shall not apply to any Development meeting the following conditions:
(a) such Development was developed entirely on
Executive's own time; and
(b) such Development was made without the use of any
Company equipment, supplies, facility or trade
secret information, excluding Executives laptop;
and
(c) such Development does not relate (I) directly to
the Business of the Company, or (ii) to the
Company's actual or demonstrably anticipated
research or development; and
(d) such Development does not result from any work
performed by Executive for the Company.
7.03 Assistance of Executive. Upon request and without further
compensation therefor, but at no expense to Executive, and whether during the
term of this Agreement or thereafter, Executive will do all lawful acts,
including, but not limited to, the execution of papers and lawful oaths and the
giving of testimony, that in the opinion of the Company, its successors and
assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign patents and/or registrations
including, but not limited to, design patents, on any and all of such
Developments (other than those described in 7.02), and for perfecting affirming
and recording the Company's complete ownership and title thereto, and to
cooperate otherwise in all proceedings and matters relating thereto.
7.04 Obligations, Restrictions and Limitations. Executive
understands that the Company may enter into agreements or arrangements with
agencies of the United States Government, and that the Company may be subject to
laws and regulations which impose obligations, restrictions and limitations on
it with respect to inventions and patents which may be acquired by it or which
may be conceived, authored or developed by employees, consultants or other
agents rendering services to it. Executive agrees that he/she shall be bound by
all such obligations, restrictions and limitations applicable to any such
invention or work of authorship conceived, authored or developed by him/her
during the term of this Agreement and shall take any and all further action
which may be required to discharge such obligations and to comply with such
obligations and to comply with such restrictions and limitations.
8. Termination
8.01 Grounds for Termination. This Agreement may be terminated:
(a) by the Company, if Executive dies, or
(b) by the Executive, if Executive becomes disabled
(as defined below), or
(c) by the Company, if the Executive has engaged in
conduct constituting cause for his/her termination
and the Company notifies Executive in writing of
such election, or
(d) by the Company without cause upon notice to the
Executive in writing of such election, provided
that such termination may only occur by unanimous
decision of the Board of Directors if there are
then three or fewer Directors or by a majority
decision of the Board of Directors if there are
then four or more Directors.
(e) by the Executive, if the Executive is
constructively terminated, as defined in paragraph
8.01(2) herein and the Executive has notified the
Company of his/her election to terminate for
Constructive Termination, or
(f) by the Executive upon notice to the Company in
writing of such election.
If this Agreement is terminated pursuant to subsection (a), (b), (c),
(e) or (f) of this section 8.01, such termination shall be effective
immediately. If this Agreement is terminated pursuant to subsection (d)
<PAGE> 5
of this section 8.01, such termination shall be effective thirty (30)
days after delivery of the notice of termination.
(1) "Cause" Defined. "Cause" means:
(a) The Employee has breached the provisions of
Section 5, 6 or 7 of this Agreement in any material
respect,
(b) The Executive has engaged in willful and
material misconduct, including willful and material failure
to perform the Employee's duties as an officer or employee
of the Company and has failed to cure such default within
30 days after receipt of written notice of default from the
Company,
(c) The Executive has committed fraud,
misappropriation or embezzlement in connection with the
Company's business, or
(d) Executive has been convicted or has pleaded
nolo contendere to criminal misconduct that is detrimental
to the Company's reputation or that calls into question, in
the judgement of the Board, Executive's integrity in
fulfilling his/her duties under this Agreement.
In the event the Company terminates Executive's employment
for "cause" pursuant to subsection 8.01 and Executive objects in
writing to the Board's determination that there was proper "cause" for
such termination within (30) days after Executive is notified of such
termination, the matter shall be resolved by arbitration in accordance
with the provisions of section 10.01. If Executive fails to object to
any such determination of "cause" in writing within such thirty (30)
day period, he/she shall be deemed to have waived his/her right to
object to that determination. If such arbitration determines that there
was not proper "cause" for termination, such termination shall be
deemed to be a termination pursuant to subsection 8.01(d).
(2) "Constructive Termination" defined. Constructive
Termination means termination by Executive after written notice to the
Company that Executive deems such termination by Executive as a result
of Constructive Termination, and only after:
(a) A material breach by the Company of a material
obligation of the Company under this Agreement
after the Executive has given the Company written
notice of the breach and the Company has not
remedied the breach within 30 days;
(b) A failure of the Company to pay when due to the
Executive any annual base salary, annual bonus or
other earned bonus or awards referred to in this
Agreement;
(c) The relocation of the Executive's principal place
of employment to a location not within a 30 mile
radius of such place of employment on the
Effective Date;
(d) A material reduction by the Company of the
Executive's duties or responsibilities;
(e) The failure of the Company to obtain an agreement
reasonably satisfactory to the Executive from any
successor to assume and agree to perform this
Agreement , or, if the business for which the
Executive's services are principally performed is
sold or transferred, the failure of the Company to
obtain such an agreement from the purchaser or
transferee of such business; or
(f) The Company becomes insolvent or bankrupt where
executive can no longer perform his/her duties as
outlined above.
<PAGE> 6
In the event the Executive terminates Executive's
employment for "Constructive Termination" pursuant to subsection
8.01 and the Company objects in writing to the Executive's
determination that there was Constructive Termination within (30)
days after Executive has notified the Company of the same, the
matter shall be resolved by arbitration in accordance with the
provisions of section 10.01. If the Company fails to object to
any such determination of "Constructive Termination" in writing
within such thirty (30) day period, it shall be deemed to have
waived its right to object to that determination. If such
arbitration determines that there was not proper "Constructive
Termination", such termination shall be deemed to be a
termination pursuant to subsection 8.01(c).
8.02 "Disability" Defined. For purposes of this Agreement, the
term "disabled" means any mental or physical condition which renders Executive
unable to perform the essential functions of his/her positions, with or without
reasonable accommodation, for a period of more than ninety (90) days during any
consecutive one hundred twenty (120) day period.
8.03 Surrender of Records and Property. Upon termination of
his/her employment with the Company, Executive shall deliver promptly to the
Company all records, manual, book, blank forms, document, letters, memoranda,
notes, notebooks, reports, data, tables, calculations or copies thereof, which
are the property of the Company or which relate in any way to the business,
products, practices or techniques of the Company, and all other property, trade
secrets and confidential information of the Company, including, but not limited
to, all documents which in whole or case are in his/her possession or under
his/her control.
8.04 Wage and Benefit Continuation. If Executive's employment by
the Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the
Company shall continue to pay to Executive his/her base salary and shall
continue to provide health insurance benefits for Executive for a period 9
months after termination. In the event of a "Change in Control" as defined in
Section 4.07, if Executive's employment is terminated by "Constructive
Termination" as defined in Section 8.01(2)or without "Cause" as defined in as
defined in Section 8.01(1) within 12 months after the effective date of a
"Change in Control," the severance compensation package defined in this Section
will be doubled to 18 months. Notwithstanding anything else in this Section
8.04, Executive shall not be entitled under this Section 8.04 or any other
provision of this Agreement to receive any cash compensation pursuant to this
Agreement which constitutes an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended, or any successor
provision or regulations promulgated.
If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or
8.01 (f), Executive's right to base salary and benefits shall immediately
terminate except as may otherwise be required by applicable law.
If Executive's employment is terminated by the Company
pursuant to subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall
also be entitled to receive any bonus payment that as of the time of termination
would have been payable to him/her pursuant to any incentive plan then in
effect.
9. Indemnification and Directors & Officers Insurance
9.01 Indemnification. The Company will provide Executive
indemnification, exculpation and expense advancement, to the fullest extent of
the law, including, without limitation, entering into an indemnification
agreement with Executive in at least as beneficial a form to Executive as the
Company has entered into with any other officer or director of the Company.
9.02 Directors and Officers Insurance. The Company will provide,
at its expense, Directors and Officers (D&O) insurance in an amount deemed
appropriate by its Board of Directors and Officers. If the Company shall show
any employee as a named insured under such policy, the Executive shall be a
named insured under such policy.
10. Settlement of Disputes.
10.01 Arbitration. Except as provided in section 10.02 any claims
or disputes of any nature between the Company and Executive arising from or
related to the performance, breach, termination,
<PAGE> 7
expiration, application, or meaning of this Agreement or any related matter
relating to Executive's employment and the termination of that employment by the
Company shall be resolved exclusively by arbitration in Minneapolis, MN, in
accordance with the then applicable rules of the American Arbitration
Association. Any such arbitration shall be conducted by an arbitrator with said
Rules, who has at least ten (10) years experience as an attorney in executive
compensation and employment law. The fees of the arbitrator (s) and other cost,
including attorney fees, incurred by Executive and the Company in connection
with such arbitration shall be paid by the party who is unsuccessful in such
arbitration, as determined by the arbitrator. The decision if the arbitrator(s)
shall be final and binding upon both parties. Judgement of the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. In
the event of submission of any dispute to arbitration, each party shall, not
later than thirty (30) days prior to the date set forth hearing, provide to the
other party and to the arbitrator(s) a copy of all exhibits upon which the party
intends to rely at the hearing and a list of all persons each party intends to
call at the hearing.
10.02 Resolution of Certain Claims- Injunctive Relief. Section
10.01 shall have no application to claims by the Company asserting a violation
of section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise,
the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the
Company in a lawsuit subject to the terms of section 10.03. Executive agrees
that, in addition to, but not to the exclusion of any other available remedy,
the Company shall have the right to enforce the provisions of sections 5, 6, 7
and 8.03 by applying for and obtaining temporary and permanent restraining
orders injunctions from a court of competent jurisdiction without the necessity
of filing a bond therefor and without the necessity of proving actual damages,
and the Company shall be entitled to recover from the Employee its reasonable
attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and
8.03.
10.03 Venue. Any action at law, suit in equity, or judicial
proceeding arising directly or indirectly, or otherwise in connection with, out
of, related to or from this Agreement or any provisions hereof shall be
litigated only in the courts of the State of Iowa. Executive waives any right
the Executive may have to transfer or change the venue of any litigation brought
against Executive by the Company.
10.04 Severability. To the extent any provisions of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provisions and if this Agreement shall be
unaffected and shall continue in full force and effect. In furtherance and not
in limitation of the foregoing, should the duration or geographical extent of,
or business activities covered by, any provisions of this Agreement be in excess
of that which is valid and enforceable under applicable law, then such
provisions shall be construed to cover only that duration, extent or activities
which may validly and enforceably be covered. Executive acknowledges the
uncertainty of the law in respect and expressly stipulates that this Agreement
be given the construction which renders its provisions valid and enforceable to
the maximum extent (not exceeding its express terms) possible under applicable
law.
11 Miscellaneous.
11.01 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of Iowa.
11.02 Prior Agreements. Except as set forth in Section 1, this
Agreement contains the entire agreement of the parties relating to the
employment of Executive by the Company and the ancillary matters discussed
herein and supersedes all prior agreements and undertakings with respect to such
matters, and the parties hereto made no arrangements, representations or
warranties relating to such employment or ancillary matters which are not set
forth herein.
11.03 Withholding Taxes. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes
shall be required pursuant to any law governmental regulation, or ruling or any
other amount owed to the Company.
11.04 Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by the both
Executive and Company.
11.05 No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to specific
<PAGE> 8
term or condition waived and shall not constitute a waiver of such term or
condition for the future or as to any act other than that specifically waived.
11.06 Assignment. This Agreement shall not be assignable, in
whole or in part, by either party without the written consent of the other
party, except that the Company may, without the consent of the Executive, assign
its rights and obligations under this Agreement to any corporation, firm or
other business entity with or into which the Company may merge or consolidate,
or to which the Company may sell or transfer all or substantially all of its
assets, or of which 50% or more of the equity investment and of the voting
control is owned, directly or indirectly, by, or is under common ownership with,
the Company; provided, however, that no such assignment will relieve Company of
any of its obligations hereunder. After any such assignee shall thereafter be
deemed to be the Company for the purposes of all provisions of this Agreement
including section 9. .
11.07 Counterparts. This Agreement may be simultaneously executed
in any number of counterparts, and such counterparts executed and delivered,
each as an original, shall constitute but the same instrument.
11.08 Notices. All notices, demands and other communications to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have given when personally delivered or
three days after being mailed, if mailed, by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Company and the Executive will, unless another address is specified in writing ,
be sent to the address indicated below:
Notices to Company: Notice to Executive:
------------------- --------------------
Stockpoint, Inc. William Staib
2600 Crosspark Road 1916 Brown Deer Road
Coralville, Iowa 52241 Coralville, IA 52241
Attn: President
11.09 Captions and Headings. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
11.10 Effect of Termination. It is expressly understood that
neither the Company nor the Executive shall have any continuing obligation under
this agreement upon termination hereof, except in respect of the matters
referenced in Sections 5, 6, 7 and 8.03.
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of date set forth herein.
Stockpoint, Inc.
By: /s/ Scott Porter
---------------------
Its CFO
---------------------
EXECUTIVE
/s/ William E. Staib
------------------------
William E. Staib
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on December 20, 1999 (the "Effective
Time"), by and between Timothy S. Yamauchi, an individual resident of the State
of California ("Executive"), and Stockpoint, Inc., a Delaware corporation
("Company").
WHEREAS, Executive has heretofore been employed as the Chief Operating
Officer of the Company; and
WHEREAS, the Company desires to continue to have the benefit of the
Executives services as a corporate officer of the Company;
WHEREAS, certain guarantors of borrowings of the Company have required,
as a condition to their guarantees, that the Company execute an employment
agreement with Executive and
WHEREAS, the proceeds from such borrowings are necessary for the
Company's operations and will benefit the Company and the Executive.
NOW, THEREFORE, in consideration of the premises, the respective
undertakings of the Company and Executive set forth below, the Company and
Executive agree as follows:
1. Employment. The Company hereby agrees to employ Executive, and
Executive accepts such employment and agrees to perform services for the
Company, upon the other terms and conditions set forth in this Agreement.
2. Term. The term of this agreement is one year and renews annually,
unless either party provides written notification 90 days prior to the renewal.
See section 8 below for Termination definitions and remedies.
3. Positions, Duties and Reporting.
3.01 Service with Company. During the term of this Agreement,
Executive agrees to perform such reasonable employment duties consistent with
the role of Chief Operating Officer, as the Company shall assign to him from
time to time. These duties shall include but not limited to, management and
oversight of the following functions/departments: Sales, Marketing,
Infrastructure, Quality Assurance, Client Services, CFS Development and New
Product Development.
3.02 Performance of Duties. Executive agrees to serve the
Company faithfully and to the best of his ability and to devote his full time,
attention, and efforts to the business and affairs of the Company during the
term of this Agreement. Executive represents to the Company that he is under no
contractual commitments inconsistent with his obligations set forth in this
Agreement, and that during the term of this Agreement, he will not render or
perform services for any other corporation, firm, entity or person which are
inconsistent with the provisions of this Agreement.
3.03 Reporting. This position will report to the Chief Executive
Officer of the Company.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement during the first year of the term of
this Agreement, the Company shall pay to Executive a base salary at a rate of
$150,000 per year, which salary shall be paid on a twice-monthly basis in
accordance with the Company's normal payroll procedures and policies. The salary
payable to Executive during each subsequent year during the term of this
Agreement shall be established by the Company and Executive, but in no event
shall the salary for any subsequent year be less than the base salary in effect
for the prior year.
4.02 Participation in Benefit Plans. During the term of this
Agreement, Executive shall be entitled to receive such medical and
hospitalization insurance and other fringe benefits as are being provided
<PAGE> 2
to the Company's other executive level employees from time to time to the extent
that Executive's age, position or other factors qualify him/her for such fringe
benefits.
4.03 Expenses. The Company will pay or reimburse Executive for
all reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the presentment of
appropriate vouchers in accordance with the Company's normal policies for
expense verification.
4.04 Incentive for 1st Half of 1999. The Company agrees to pay
Executive, an incentive bonus for the first half of 1999 performance of $17,800
upon the signing of this document. In consideration for performance in the
second half of 1999, the Company has granted an additional stock options as
described in Section 4.07.
4.05 Incentive for completion of an initial public offering.
Upon the completion of an initial public offering of the Company's common stock,
the Company will also pay Executive an IPO cash bonus of $45,000, which is due
and payable, immediately upon the close.
4.06 Annual Incentive Compensation. The Company shall formulate
and deliver to Executive by January 31, 2000 with respect to the remainder of
fiscal 2000, and by January 1 with respect to each succeeding fiscal year during
the term of this Agreement, and the Company and Executive shall use their best
efforts to negotiate and agree to, an annual incentive compensation plan for
Executive.
4.07 Vesting of Stock Options.
On September 15, 1999, the Company issued to the Executive an
additional option ("September 1999 Option") grant to purchase up to 60,000
shares of Company Common Stock at a price of $7.20 per share pursuant to the
Company's 1995 Stock Incentive Plan (the "Plan"). Such option shall become
exercisable with respect to 20% of the shares immediately upon execution of this
Agreement and the balance shall vest monthly at a rate of 1/60 of the total
September 1999 Option grant over the balance of the term. Such option shall
expire 10 years from the date of the grant and shall contain such other
provisions as are contained in the form of stock option agreement used by
Company under the Plan.
In the event that this Agreement is terminated as a result of the "Constructive
Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in
Section 8.01(1)) of the Executive, the September 1999 Option will vest with
respect to 40% of the shares subject thereto immediately. In addition, the
Company will permit the Executive to exercise all of his/her vested options for
a period of 12 months, commencing from the date of termination.
Vesting of all options granted to Executive will be accelerated with respect to
100% of the shares subject thereto in the event of a "Change in Control" of the
Company. For such purposes, a "Change in Control" shall mean any of the
following:
(i) A sale of all or substantially all of the assets of the Company;
(ii) The acquisition of more than 50% of the then outstanding Company
Common Stock by any person or group of persons acting in concert;
(iii) Any change that results in the Continuing Directors constituting
less than a majority of the Board of Directors;
(iv) A reorganization or, a merger of Company with another company
after which the holders of common stock of the Company
immediately prior to the merger or reorganization hold less than
50% of the voting power of the resulting corporations, or any
other transaction in which the Company (other than as the parent
corporation) is consolidated for federal income tax purposes or
is eligible to be consolidated for federal income tax purposes
with another corporation; or
<PAGE> 3
(v) In the event that the Company Common Stock is traded on an
established securities market: a public announcement that any
person has acquired beneficial ownership of more than 25% of the
then outstanding Company Common Stock and for this purpose the
terms "person" and "beneficial ownership" shall have the meanings
provided in Section 13(d) of the Securities and Exchange Act of
1934 or related rules promulgated by the Securities and Exchange
Commission or; the commencement of or public announcement of an
intention to make a tender offer for more than 50% of the then
outstanding Company Common Stock.
For purposes of this Section 4.07, "Continuing Directors" shall include only
those directors of the Company on the date hereof and those directors, as of a
date 30 days prior to an event that would otherwise be considered a "Change in
Control," who were nominated by Continuing Directors and duly elected by
shareholders at an annual meeting thereof or nominated and elected by directors
who were "Continuing Directors."
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter, Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with or will acquire or become
acquainted with during the period of his employment by the Company, whether
developed by himself or by others, concerning any trade secrets, confidential or
secret designs, processes, formulae, plans, devices or material (whether or not
patented or patentable) directly or indirectly useful in any aspect of the
business of the Company, any confidential or secret development or research work
of the Company, or any other confidential information or secret aspects of the
business of the Company. Executive expressly acknowledges that, in addition to
the Company's proprietary software and technical know-how, the Company's
customer lists and the form (including, without limitation, payment terms) of
the Company's relationships with its customers is not publicly known and that
the disclosure or use of such information for any purpose other than for the
benefit of the Company could cause substantial damage the Company and would
place the Company at a competitive disadvantage. Executive acknowledges that the
above-described knowledge or information constitutes a unique and valuable asset
of the Company and that any disclosure or other use of such knowledge or
information other than the sole benefit of the Company would be wrongful and
would cause irreparable harm to the Company. The foregoing obligations of
confidentiality shall not apply to any knowledge or information which is now
published, which subsequently becomes generally publicly known, other than as a
direct or indirect result of the breach of this Agreement by Executive, or which
was known to the Executive prior to the term of his employment with the Company.
Executive agrees to notify any person or entity with which Executive is employed
or for which Executive provides services of the requirements of this Section 5
and to notify the Company of the identity of any such person or entity with
which Executive is employed during the One year after termination of this
Agreement.
6. Employee Solicitation. During employment, and for a period of
nine months thereafter, Executive shall not (i) directly or indirectly solicit
any employee of the Company or any of Company's affiliates to leave the employ
of any such entity or in any way interfere adversely with the relationship
between any such employee and any such entity, (ii) directly or indirectly
solicit any employee of the Company or any affiliates to work for, render
services or provide advice to or supply confidential business information or
trade secrets of any such entity to any third person, firm or corporation, or
(iii) directly or indirectly solicit any existing customers and potential
customers that have an unexpired written proposals under consideration. For
purposes of the foregoing, solicitation shall not include solicitation of
employees, vendors or customers (i) who first solicit employment or a
relationship from Executive, or (ii) who are solicited (A) by advertising in
periodicals of general circulation or by general circulation Internet
advertising, or (B) by a search or consulting firm on behalf of Executive or
Executive's affiliates, so long as Executive or such affiliates did not direct
or encourage such firm to solicit such employee, vendor or customer of the
Company. If any restriction set forth in this paragraph is held to be
unreasonable, then Executive and the Company agree, and hereby submit, to the
reduction and limitation of such prohibition to such area or period as shall be
deemed reasonable.
7. Patent and Related Matter.
7.01 Disclosure and Assignment. Executive will promptly disclose
in writing to the Company complete information concerning each and every
invention, discovery, improvement, work of authorship, device, design,
apparatus, practice, process, method or product whether patentable or not, made,
<PAGE> 4
developed, authored, perfected, devised, conceived or first reduced to practice
by Executive, either solely or in collaboration with others, during the term of
this Agreement, whether or not during regular working hours, relating to the
Business of the Company (hereinafter referred to as "Developments"). Executive,
to the extent that he has the legal right to do so, hereby acknowledges that any
and all of said Developments are the property of the Company and hereby assigns
and agrees to assign to the Company any and all of Executive's right, title and
interest in and to any and all of such Developments.
7.02 Limitation on Section 7.01. The provisions of section 7.01
shall not apply to any Development meeting the following conditions:
(a) such Development was developed entirely on
Executive's own time; and
(b) such Development was made without the use of any
Company equipment, supplies, facility or trade
secret information, excluding Executives laptop;
and
(c) such Development does not relate (I) directly to
the Business of the Company, or (ii) to the
Company's actual or demonstrably anticipated
research or development; and
(d) such Development does not result from any work
performed by Executive for the Company.
7.03 Assistance of Executive. Upon request and without further
compensation therefor, but at no expense to Executive, and whether during the
term of this Agreement or thereafter, Executive will do all lawful acts,
including, but not limited to, the execution of papers and lawful oaths and the
giving of testimony, that in the opinion of the Company, its successors and
assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign patents and/or registrations
including, but not limited to, design patents, on any and all of such
Developments (other than those described in 7.02), and for perfecting affirming
and recording the Company's complete ownership and title thereto, and to
cooperate otherwise in all proceedings and matters relating thereto.
7.04 Obligations, Restrictions and Limitations. Executive
understands that the Company may enter into agreements or arrangements with
agencies of the United States Government, and that the Company may be subject to
laws and regulations which impose obligations, restrictions and limitations on
it with respect to inventions and patents which may be acquired by it or which
may be conceived, authored or developed by employees, consultants or other
agents rendering services to it. Executive agrees that he shall be bound by all
such obligations, restrictions and limitations applicable to any such invention
or work of authorship conceived, authored or developed by him during the term of
this Agreement and shall take any and all further action which may be required
to discharge such obligations and to comply with such obligations and to comply
with such restrictions and limitations.
8. Termination
8.01 Grounds for Termination. This Agreement may be terminated:
(a) by the Company, if Executive dies, or
(b) by the Executive, if Executive becomes disabled
(as defined below), or
(c) by the Company, if the Executive has engaged in
conduct constituting cause for his termination and
the Company notifies Executive in writing of such
election, or
(d) by the Company without cause upon notice to the
Executive in writing of such election, provided
that such termination may only occur by unanimous
decision of the Board of Directors if there are
then three or fewer Directors or by a majority
decision of the Board of Directors if there are
then four or more Directors.
<PAGE> 5
(e) by the Executive, if the Executive is
constructively terminated, as defined in paragraph
8.01(2) herein and the Executive has notified the
Company of his election to terminate for
Constructive Termination, or
(f) by the Executive upon notice to the Company in
writing of such election.
If this Agreement is terminated pursuant to subsection (a), (b), (c),
(e) or (f) of this section 8.01, such termination shall be effective
immediately. If this Agreement is terminated pursuant to subsection (d)
of this section 8.01, such termination shall be effective thirty (30)
days after delivery of the notice of termination.
(1) "Cause" Defined. "Cause" means:
(a) The Employee has breached the provisions of
Section 5, 6 or 7 of this Agreement in any material respect,
(b) The Executive has engaged in willful and material
misconduct, including willful and material failure to perform the
Employee's duties as an officer or employee of the Company and
has failed to cure such default within 30 days after receipt of
written notice of default from the Company,
(c) The Executive has committed fraud,
misappropriation or embezzlement in connection with the Company's
business, or
(d) Executive has been convicted or has pleaded nolo
contendere to criminal misconduct that is detrimental to the
Company's reputation or that calls into question, in the
judgement of the Board, Executive's integrity in fulfilling his
duties under this Agreement.
In the event the Company terminates Executive's employment for
"cause" pursuant to subsection 8.01 and Executive objects in writing to
the Board's determination that there was proper "cause" for such
termination within (30) days after Executive is notified of such
termination, the matter shall be resolved by arbitration in accordance
with the provisions of section 10.01. If Executive fails to object to
any such determination of "cause" in writing within such thirty (30)
day period, he shall be deemed to have waived his right to object to
that determination. If such arbitration determines that there was not
proper "cause" for termination, such termination shall be deemed to be
a termination pursuant to subsection 8.01(d).
(2) "Constructive Termination" defined. Constructive
Termination means termination by Executive after written notice to the
Company that Executive deems such termination by Executive as a result
of Constructive Termination, and only after:
(a) A material breach by the Company of a material
obligation of the Company under this Agreement
after the Executive has given the Company written
notice of the breach and the Company has not
remedied the breach within 30 days;
(b) A failure of the Company to pay when due to the
Executive any annual base salary, annual bonus or
other earned bonus or awards referred to in this
Agreement;
(c) The relocation of the Executive's principal place
of employment to a location not within a 30 mile
radius of such place of employment on the
Effective Date;
(d) A material reduction by the Company of the
Executive's duties or responsibilities;
<PAGE> 6
(e) The failure of the Company to obtain an agreement
reasonably satisfactory to the Executive from any
successor to assume and agree to perform this
Agreement , or, if the business for which the
Executive's services are principally performed is
sold or transferred, the failure of the Company to
obtain such an agreement from the purchaser or
transferee of such business; or
(f) The Company becomes insolvent or bankrupt where
executive can no longer perform his duties as
outlined above.
In the event the Executive terminates Executive's employment for
"Constructive Termination" pursuant to subsection 8.01 and the Company objects
in writing to the Executive's determination that there was Constructive
Termination within (30) days after Executive has notified the Company of the
same, the matter shall be resolved by arbitration in accordance with the
provisions of section 10.01. If the Company fails to object to any such
determination of "Constructive Termination" in writing within such thirty (30)
day period, it shall be deemed to have waived its right to object to that
determination. If such arbitration determines that there was not proper
"Constructive Termination", such termination shall be deemed to be a termination
pursuant to subsection 8.01(c).
8.02 "Disability" Defined. For purposes of this Agreement, the
term "disabled" means any mental or physical condition which renders Executive
unable to perform the essential functions of his positions, with or without
reasonable accommodation, for a period of more than ninety (90) days during any
consecutive one hundred twenty (120) day period.
8.03 Surrender of Records and Property. Upon termination of his
employment with the Company, Executive shall deliver promptly to the Company all
records, manual, book, blank forms, document, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company or which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or case are in his possession or under his control.
8.04 Wage and Benefit Continuation. If Executive's employment by
the Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the
Company shall continue to pay to Executive his base salary and shall continue to
provide health insurance benefits for Executive for a period 9 months after
termination. In the event of a "Change in Control" as defined in Section 4.07,
if Executive's employment is terminated by "Constructive Termination" as defined
in Section 8.01(2) or without "Cause" as defined in as defined in Section
8.01(1) within 12 months after the effective date of a "Change in Control," the
severance compensation package defined in this Section will be doubled to 18
months. Notwithstanding anything else in this Section 8.04, Executive shall not
be entitled under this Section 8.04 or any other provision of this Agreement to
receive any cash compensation pursuant to this Agreement which constitutes an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, or any successor provision or regulations
promulgated.
If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or
8.01 (f), Executive's right to base salary and benefits shall immediately
terminate except as may otherwise be required by applicable law.
If Executive's employment is terminated by the Company pursuant
to subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall also be
entitled to receive any pro rata bonus payment that as of the time of
termination would have been payable to him/her pursuant to any incentive plan
then in effect.
9. Indemnification and Directors & Officers Insurance
9.01 Indemnification. The Company will provide Executive
indemnification, exculpation and expense advancement, to the fullest extent of
the law, including, without limitation, entering into an indemnification
agreement with Executive in at least as beneficial a form to Executive as the
Company has entered into with any other officer or director of the Company.
<PAGE> 7
9.02 Directors and Officers Insurance. The Company will provide,
at its expense, Directors and Officers (D&O) insurance in an amount deemed
appropriate by its Board of Directors and Officers. If the Company shall show
any employee as a named insured under such policy, then the Executive shall be a
named insured under such policy.
10. Settlement of Disputes.
10.01 Arbitration. Except as provided in section 10.02 any claims
or disputes of any nature between the Company and Executive arising from or
related to the performance, breach, termination, expiration, application, or
meaning of this Agreement or any related matter relating to Executive's
employment and the termination of that employment by the Company shall be
resolved exclusively by arbitration in Denver, CO, in accordance with the then
applicable rules of the American Arbitration Association. Any such arbitration
shall be conducted by an arbitrator with said Rules, who has at least ten (10)
years experience as an attorney in executive compensation and employment law.
The fees of the arbitrator (s) and other cost, including attorney fees, incurred
by Executive and the Company in connection with such arbitration shall be paid
by the party who is unsuccessful in such arbitration, as determined by the
arbitrator. The decision if the arbitrator(s) shall be final and binding upon
both parties. Judgement of the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. In the event of submission of
any dispute to arbitration, each party shall, not later than thirty (30) days
prior to the date set forth hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at the
hearing and a list of all persons each party intends to call at the hearing.
10.02 Resolution of Certain Claims- Injunctive Relief. Section
10.01 shall have no application to claims by the Company asserting a violation
of section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise,
the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the
Company in a lawsuit subject to the terms of section 10.03. Executive agrees
that, in addition to, but not to the exclusion of any other available remedy,
the Company shall have the right to enforce the provisions of sections 5, 6, 7
and 8.03 by applying for and obtaining temporary and permanent restraining
orders injunctions from a court of competent jurisdiction without the necessity
of filing a bond therefor and without the necessity of proving actual damages,
and the Company shall be entitled to recover from the Employee its reasonable
attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and
8.03.
10.03 Venue. Any action at law, suit in equity, or judicial
proceeding arising directly or indirectly, or otherwise in connection with, out
of, related to or from this Agreement or any provisions hereof shall be
litigated only in the courts of the State of California. Executive waives any
right the Executive may have to transfer or change the venue of any litigation
brought against Executive by the Company.
10.04 Severability. To the extent any provisions of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provisions and if this Agreement shall be
unaffected and shall continue in full force and effect. In furtherance and not
in limitation of the foregoing, should the duration or geographical extent of,
or business activities covered by, any provisions of this Agreement be in excess
of that which is valid and enforceable under applicable law, then such
provisions shall be construed to cover only that duration, extent or activities
which may validly and enforceably be covered. Executive acknowledges the
uncertainty of the law in respect and expressly stipulates that this Agreement
be given the construction which renders its provisions valid and enforceable to
the maximum extent (not exceeding its express terms) possible under applicable
law.
11 Miscellaneous.
11.01 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of
California.
11.02 Prior Agreements. Except as set forth in Section 1, this
Agreement contains the entire agreement of the parties relating to the
employment of Executive by the Company and the ancillary matters discussed
herein and supersedes all prior agreements and undertakings with respect to such
matters, and the parties hereto made no arrangements, representations or
warranties relating to such employment or ancillary matters which are not set
forth herein.
<PAGE> 8
11.03 Withholding Taxes. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes
shall be required pursuant to any law governmental regulation, or ruling or any
other amount owed to the Company.
11.04 Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by the both
Executive and Company.
11.05 No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
11.06 Assignment. This Agreement shall not be assignable, in
whole or in part, by either party without the written consent of the other
party, except that the Company may, without the consent of the Executive, assign
its rights and obligations under this Agreement to any corporation, firm or
other business entity with or into which the Company may merge or consolidate,
or to which the Company may sell or transfer all or substantially all of its
assets, or of which 50% or more of the equity investment and of the voting
control is owned, directly or indirectly, by, or is under common ownership with,
the Company; provided, however, that no such assignment will relieve Company of
any of its obligations hereunder. After any such assignee shall thereafter be
deemed to be the Company for the purposes of all provisions of this Agreement
including section 9.
11.07 Legal Fees. The company agrees to provide Executive a legal
fee allowance of $3,000 for the preparation of this employment agreement.
11.08 Counterparts. This Agreement may be simultaneously executed
in any number of counterparts, and such counterparts executed and delivered,
each as an original, shall constitute but the same instrument.
11.09 Notices. All notices, demands and other communications to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have given when personally delivered or
three days after being mailed, if mailed, by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Company and the Executive will, unless another address is specified in writing ,
be sent to the address indicated below:
Notices to Company: Notice to Executive:
------------------- --------------------
Stockpoint, Inc.
2600 Crosspark Road ----------------
Coralville, Iowa 52241 ----------------
Attn: President ----------------
11.10 Captions and Headings. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
11.11 Effect of Termination. It is expressly understood that
neither the Company nor the Executive shall have any continuing obligation under
this agreement upon termination hereof, except in respect of the matters
referenced in Sections 5, 6, 7 and 8.03.
<PAGE> 9
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of date set forth herein.
Stockpoint, Inc.
By: /s/ William E. Staib
-----------------------
Its CEO
-----------------------
EXECUTIVE
/s/ Timothy S. Yamauchi
--------------------------
Timothy S. Yamauchi
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on December 20, 1999 (the "Effective
Time"), by and between Luan Cox, an individual resident of the State of
California ("Executive"), and Stockpoint, Inc., a Delaware corporation
("Company").
WHEREAS, Executive has heretofore been employed as the Executive Vice
President of Sales of the Company; and
WHEREAS, the Company desires to continue to have the benefit of the
Executives services as a corporate officer of the Company;
WHEREAS, certain guarantors of borrowings of the Company have required,
as a condition to their guarantees, that the Company execute an employment
agreement with Executive and
WHEREAS, the proceeds from such borrowings are necessary for the
Company's operations and will benefit the Company and the Executive.
NOW, THEREFORE, in consideration of the premises, the respective
undertakings of the Company and Executive set forth below, the Company and
Executive agree as follows:
1. Employment. The Company hereby agrees to employ Executive, and
Executive accepts such employment and agrees to perform services for the
Company, upon the other terms and conditions set forth in this Agreement.
2. Term. The term of this agreement is one year and renews annually,
unless either party provides written notification 90 days prior to the renewal.
See section 8 below for Termination definitions and remedies.
3. Positions, Duties and Reporting.
3.01 Service with Company. During the term of this Agreement,
Executive agrees to perform such reasonable employment duties consistent with
the role of Executive Vice President of Sales, as the Company shall assign to
him/her from time to time. These duties shall include: overseeing and directing
domestic and global expansion of the sales efforts; developing sales systems and
processes; and implementing sales strategies for the Company.
3.02 Performance of Duties. Executive agrees to serve the Company
faithfully and to the best of his/her ability and to devote his/her full time,
attention, and efforts to the business and affairs of the Company during the
term of this Agreement. Executive represents to the Company that he/she is under
no contractual commitments inconsistent with his/her obligations set forth in
this Agreement, and that during the term of this Agreement, he/she will not
render or perform services for any other corporation, firm, entity or person
which are inconsistent with the provisions of this Agreement.
3.03 Reporting. This position will report to the Chief Operating
Officer of the Company.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement during the first year of the term of
this Agreement, the Company shall pay to Executive a base salary at a rate of
$150,000 per year, which salary shall be paid on a twice-monthly basis in
accordance with the Company's normal payroll procedures and policies. The salary
payable to Executive during each subsequent year during the term of this
Agreement shall be established by the Company and Executive, but in no event
shall the salary for any subsequent year be less than the base salary in effect
for the prior year.
4.02 Participation in Benefit Plans. During the term of this
Agreement, Executive shall be entitled to receive such medical and
hospitalization insurance and other fringe benefits as are being provided
<PAGE> 2
to the Company's other executive level employees from time to time to the extent
that Executive's age, position or other factors qualify him/her for such fringe
benefits.
4.03 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him/her in the
performance of his/her duties under this Agreement, subject to the presentment
of appropriate vouchers in accordance with the Company's normal policies for
expense verification.
4.04 Sales Commission Plan. Prior to December 31, 1999, Executive
shall be paid commission based on Executive's existing commission plan. The
Executive's existing commission plan, payable upon receipt of invoice payment,
is as follows: 2% of all sales revenue generated by Company; 7% of personal
sales up to monthly quota and 10% of personal sales exceeding monthly quota;
Executive's Personal Monthly Quota equals $75,000 of annualized revenue.
Although the Executive and the Company have not finalized terms of the
year 2000 sales commission plan, both parties agree that the
Executive's year 2000 commission plan will be set such that the sum of
base salary and the expected sales commissions will be equal $500,000
during the year 2000 if the Company achieves its year 2000 sales goals.
Sales closed is defined, for purposes of this agreement, as a License
Agreement which has been executed.
4.05 Incentive for completion of an initial public offering. Upon the
completion of an initial public offering of the Company's common stock, the
Company will also pay Executive an IPO cash bonus of $30,000, which is due and
payable, immediately upon the close.
4.06 Vesting of Stock Options.
On September 15, 1999, the Company issued to the Executive an
additional option ("September 1999 Option") to purchase up to 130,000 shares of
Company Common Stock at a price of $7.20 per share pursuant to the Company's
1995 Stock Incentive Plan (the "Plan"). Such option shall become exercisable
with respect to 20% of the shares immediately upon execution of this Agreement
and the balance shall vest monthly at a rate of 1/60 of the total September 1999
Option grant over the balance of the term. Such option shall expire 10 years
from the date of the grant and shall contain such other provisions as are
contained in the form of stock option agreement used by Company under the Plan.
In the event that this Agreement is terminated as a result of the "Constructive
Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in
Section 8.01(1)) of the Executive, the September 1999 Option will vest with
respect to 40% of the shares subject thereto. In addition, the Company will
permit the Executive to exercise all of his/her vested options for a period of
12 months, commencing from the date of termination.
Vesting of all options granted to Executive will be accelerated with respect to
100% of the shares subject thereto in the event of a "Change in Control" of the
Company. For such purposes, a "Change in Control" shall mean any of the
following:
(i) A sale of all or substantially all of the assets of the Company;
(ii) The acquisition of more than 50% of the then outstanding Company
Common Stock by any person or group of persons acting in concert;
(iii) Any change that results in the Continuing Directors constituting
less than a majority of the Board of Directors;
(iv) A reorganization or, a merger of Company with another company
after which the holders of common stock of the Company
immediately prior to the merger or reorganization hold less than
50% of the voting power of the resulting corporations, or any
other transaction in which the Company (other than as the parent
corporation) is consolidated for federal income tax
<PAGE> 3
purposes or is eligible to be consolidated for federal income tax
purposes with another corporation; or
(v) In the event that the Company Common Stock is traded on an
established securities market: a public announcement that any
person has acquired beneficial ownership of more than 25% of the
then outstanding Company Common Stock and for this purpose the
terms "person" and "beneficial ownership" shall have the meanings
provided in Section 13(d) of the Securities and Exchange Act of
1934 or related rules promulgated by the Securities and Exchange
Commission or; the commencement of or public announcement of an
intention to make a tender offer for more than 50% of the then
outstanding Company Common Stock.
For purposes of this Section 4.06, "Continuing Directors" shall include only
those directors of the Company on the date hereof and those directors, as of a
date 30 days prior to an event that would otherwise be considered a "Change in
Control," who were nominated by Continuing Directors and duly elected by
shareholders at an annual meeting thereof or nominated and elected by directors
who were "Continuing Directors."
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter, Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with or will acquire or become
acquainted with during the period of his/her employment by the Company, whether
developed by himself/herself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans, devices or material
(whether or not patented or patentable) directly or indirectly useful in any
aspect of the business of the Company, any confidential or secret development or
research work of the Company, or any other confidential information or secret
aspects of the business of the Company. Executive expressly acknowledges that,
in addition to the Company's proprietary software and technical know-how, the
Company's customer lists and the form (including, without limitation, payment
terms) of the Company's relationships with its customers is not publicly known
and that the disclosure or use of such information for any purpose other than
for the benefit of the Company could cause substantial damage the Company and
would place the Company at a competitive disadvantage. Executive acknowledges
that the above-described knowledge or information constitutes a unique and
valuable asset of the Company and that any disclosure or other use of such
knowledge or information other than the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company. The foregoing
obligations of confidentiality shall not apply to any knowledge or information
which is now published, which subsequently becomes generally publicly known,
other than as a direct or indirect result of the breach of this Agreement by
Executive, or which was known to the Executive prior to the term of his/her
employment with the Company. Executive agrees to notify any person or entity
with which Executive is employed or for which Executive provides services of the
requirements of this Section 5 and to notify the Company of the identity of any
such person or entity with which Executive is employed during the One year after
termination of this Agreement.
6. Employee Solicitation. During employment, and for a period of nine months
thereafter, Executive shall not (i) directly or indirectly solicit any employee
of the Company or any of Company's affiliates to leave the employ of any such
entity or in any way interfere adversely with the relationship between any such
employee and any such entity, (ii) directly or indirectly solicit any employee
of the Company or any affiliates to work for, render services or provide advice
to or supply confidential business information or trade secrets of any such
entity to any third person, firm or corporation, or (iii) directly or indirectly
solicit any existing customers and potential customers that have an unexpired
written proposals under consideration. For purposes of the foregoing,
solicitation shall not include solicitation of employees, vendors or customers
(i) who first solicit employment or a relationship from Executive, or (ii) who
are solicited (A) by advertising in periodicals of general circulation or by
general circulation Internet advertising, or (B) by a search or consulting firm
on behalf of Executive or Executive's affiliates, so long as Executive or such
affiliates did not direct or encourage such firm to solicit such employee,
vendor or customer of the Company. If any restriction set forth in this
paragraph is held to be unreasonable, then Executive and the Company agree, and
hereby submit, to the reduction and limitation of such prohibition to such area
or period as shall be deemed reasonable.
<PAGE> 4
7. Patent and Related Matter.
7.01 Disclosure and Assignment. Executive will promptly disclose in
writing to the Company complete information concerning each and every
invention, discovery, improvement, work of authorship, device, design,
apparatus, practice, process, method or product whether patentable or
not, made, developed, authored, perfected, devised, conceived or first
reduced to practice by Executive, either solely or in collaboration
with others, during the term of this Agreement, whether or not during
regular working hours, relating to the Business of the Company
(hereinafter referred to as "Developments"). Executive, to the extent
that he/she has the legal right to do so, hereby acknowledges that any
and all of said Developments are the property of the Company and hereby
assigns and agrees to assign to the Company any and all of Executive's
right, title and interest in and to any and all of such Developments.
7.02 Limitation on Section 7.01. The provisions of section 7.01
shall not apply to any Development meeting the following conditions:
(a) such Development was developed entirely on
Executive's own time; and
(b) such Development was made without the use of
any Company equipment, supplies, facility or
trade secret information, excluding Executives
laptop; and
(c) such Development does not relate (I) directly
to the Business of the Company, or (ii) to the
Company's actual or demonstrably anticipated
research or development; and
(d) such Development does not result from any work
performed by Executive for the Company.
7.03 Assistance of Executive. Upon request and without further
compensation therefor, but at no expense to Executive, and whether during the
term of this Agreement or thereafter, Executive will do all lawful acts,
including, but not limited to, the execution of papers and lawful oaths and the
giving of testimony, that in the opinion of the Company, its successors and
assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign patents and/or registrations
including, but not limited to, design patents, on any and all of such
Developments (other than those described in 7.02), and for perfecting affirming
and recording the Company's complete ownership and title thereto, and to
cooperate otherwise in all proceedings and matters relating thereto.
7.04 Obligations, Restrictions and Limitations. Executive understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived, authored or developed by employees, consultants or other agents
rendering services to it. Executive agrees that he/she shall be bound by all
such obligations, restrictions and limitations applicable to any such invention
or work of authorship conceived, authored or developed by him/her during the
term of this Agreement and shall take any and all further action which may be
required to discharge such obligations and to comply with such obligations and
to comply with such restrictions and limitations.
8. Termination
8.01 Grounds for Termination. This Agreement may be
terminated:
(a) by the Company, if Executive dies, or
(b) by the Executive, if Executive becomes disabled
(as defined below), or
(c) by the Company, if the Executive has engaged in
conduct constituting cause for his/her
termination and the Company notifies Executive
in writing of such election, or
<PAGE> 5
(d) by the Company without cause upon notice to the
Executive in writing of such election, provided
that such termination may only occur by
unanimous decision of the Board of Directors if
there are then three or fewer Directors or by a
majority decision of the Board of Directors if
there are then four or more Directors.
(e) by the Executive, if the Executive is
constructively terminated, as defined in
paragraph 8.01(2) herein and the Executive has
notified the Company of his/her election to
terminate for Constructive Termination, or
(f) by the Executive upon notice to the Company in
writing of such election.
If this Agreement is terminated pursuant to subsection (a), (b), (c),
(e) or (f) of this section 8.01, such termination shall be effective
immediately. If this Agreement is terminated pursuant to subsection (d)
of this section 8.01, such termination shall be effective thirty (30)
days after delivery of the notice of termination.
(1) "Cause" Defined. "Cause" means:
(a) The Employee has breached the provisions of
Section 5, 6 or 7 of this Agreement in any material respect,
(b) The Executive has engaged in willful and
material misconduct, including willful and material failure to
perform the Employee's duties as an officer or employee of the
Company and has failed to cure such default within 30 days
after receipt of written notice of default from the Company,
(c) The Executive has committed fraud,
misappropriation or embezzlement in connection with the
Company's business, or
(d) Executive has been convicted or has pleaded
nolo contendere to criminal misconduct that is detrimental to
the Company's reputation or that calls into question, in the
judgement of the Board, Executive's integrity in fulfilling
his/her duties under this Agreement.
In the event the Company terminates Executive's employment for
"cause" pursuant to subsection 8.01 and Executive objects in writing to
the Board's determination that there was proper "cause" for such
termination within (30) days after Executive is notified of such
termination, the matter shall be resolved by arbitration in accordance
with the provisions of section 10.01. If Executive fails to object to
any such determination of "cause" in writing within such thirty (30)
day period, he/she shall be deemed to have waived his/her right to
object to that determination. If such arbitration determines that there
was not proper "cause" for termination, such termination shall be
deemed to be a termination pursuant to subsection 8.01(d).
(2) "Constructive Termination" defined. Constructive
Termination means termination by Executive after written notice to the
Company that Executive deems such termination by Executive as a result
of Constructive Termination, and only after:
(a) A material breach by the Company of a material
obligation of the Company under this Agreement
after the Executive has given the Company
written notice of the breach and the Company
has not remedied the breach within 30 days;
(b) A failure of the Company to pay when due to the
Executive any annual base salary, annual bonus
or other earned bonus or awards or commissions
referred to in this Agreement;
<PAGE> 6
(c) The relocation of the Executive's principal
place of employment to a location not within a
30 mile radius of such place of employment on
the Effective Date;
(d) A material reduction by the Company of the
Executive's duties or responsibilities;
(e) The failure of the Company to obtain an
agreement reasonably satisfactory to the
Executive from any successor to assume and
agree to perform this Agreement , or, if the
business for which the Executive's services are
principally performed is sold or transferred,
the failure of the Company to obtain such an
agreement from the purchaser or transferee of
such business; or
(f) The Company becomes insolvent or bankrupt where
executive can no longer perform his/her duties
as outlined above.
In the event the Executive terminates Executive's employment
for "Constructive Termination" pursuant to subsection 8.01 and the
Company objects in writing to the Executive's determination that there
was Constructive Termination within (30) days after Executive has
notified the Company of the same, the matter shall be resolved by
arbitration in accordance with the provisions of section 10.01. If the
Company fails to object to any such determination of "Constructive
Termination" in writing within such thirty (30) day period, it shall be
deemed to have waived its right to object to that determination. If
such arbitration determines that there was not proper "Constructive
Termination", such termination shall be deemed to be a termination
pursuant to subsection 8.01(c).
8.02 "Disability" Defined. For purposes of this Agreement, the
term "disabled" means any mental or physical condition which
renders Executive unable to perform the essential functions of
his/her positions, with or without reasonable accommodation,
for a period of more than ninety (90) days during any
consecutive one hundred twenty (120) day period.
8.03 Surrender of Records and Property. Upon termination of
his/her employment with the Company, Executive shall deliver
promptly to the Company all records, manual, book, blank
forms, document, letters, memoranda, notes, notebooks,
reports, data, tables, calculations or copies thereof, which
are the property of the Company or which relate in any way to
the business, products, practices or techniques of the
Company, and all other property, trade secrets and
confidential information of the Company, including, but not
limited to, all documents which in whole or case are in
his/her possession or under his/her control.
8.04 Wage and Benefit Continuation. If Executive's employment by the
Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company
shall continue to pay to Executive a total compensation of $450,000 payable in
equal twice-monthly installments over a 9 month period after termination and
shall continue to provide health insurance benefits for Executive for a period 9
months after termination. Notwithstanding anything else in this Section 8.04,
Executive shall not be entitled under this Section 8.04 or any other provision
of this Agreement to receive any cash compensation pursuant to this Agreement
which constitutes an "excess parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended, or any successor
provision or regulations promulgated.
If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or
8.01 (f), Executive's right to base salary and benefits shall immediately
terminate except as may otherwise be required by applicable law.
9. Indemnification and Directors & Officers Insurance
9.01 Indemnification. The Company will provide Executive
indemnification, exculpation and expense advancement, to the fullest extent of
the law, including, without limitation, entering into an indemnification
agreement with Executive in at least as beneficial a form to Executive as the
Company has entered into with any other officer or director of the Company.
<PAGE> 7
9.02 Directors and Officers Insurance. The Company will provide, at
its expense, Directors and Officers (D&O) insurance in an amount deemed
appropriate by its Board of Directors and Officers. If the Company shall show
any employee as a named insured under such policy, the Executive shall be a
named insured under such policy.
10. Settlement of Disputes.
10.01 Arbitration. Except as provided in section 10.02 any claims or
disputes of any nature between the Company and Executive arising from or related
to the performance, breach, termination, expiration, application, or meaning of
this Agreement or any related matter relating to Executive's employment and the
termination of that employment by the Company shall be resolved exclusively by
arbitration in Denver, CO, in accordance with the then applicable rules of the
American Arbitration Association. Any such arbitration shall be conducted by an
arbitrator with said Rules, who has at least ten (10) years experience as an
attorney in executive compensation and employment law. The fees of the
arbitrator (s) and other cost, including attorney fees, incurred by Executive
and the Company in connection with such arbitration shall be paid by the party
who is unsuccessful in such arbitration, as determined by the arbitrator. The
decision if the arbitrator(s) shall be final and binding upon both parties.
Judgement of the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. In the event of submission of any dispute to
arbitration, each party shall, not later than thirty (30) days prior to the date
set forth hearing, provide to the other party and to the arbitrator(s) a copy of
all exhibits upon which the party intends to rely at the hearing and a list of
all persons each party intends to call at the hearing.
10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01
shall have no application to claims by the Company asserting a violation of
section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise, the
terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the Company
in a lawsuit subject to the terms of section 10.03. Executive agrees that, in
addition to, but not to the exclusion of any other available remedy, the Company
shall have the right to enforce the provisions of sections 5, 6, 7 and 8.03 by
applying for and obtaining temporary and permanent restraining orders
injunctions from a court of competent jurisdiction without the necessity of
filing a bond therefor and without the necessity of proving actual damages, and
the Company shall be entitled to recover from the Employee its reasonable
attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and
8.03.
10.03 Venue. Any action at law, suit in equity, or judicial proceeding
arising directly or indirectly, or otherwise in connection with, out of, related
to or from this Agreement or any provisions hereof shall be litigated only in
the courts of the State of California. Executive waives any right the Executive
may have to transfer or change the venue of any litigation brought against
Executive by the Company.
10.04 Severability. To the extent any provisions of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provisions and if this Agreement shall be unaffected and
shall continue in full force and effect. In furtherance and not in limitation of
the foregoing, should the duration or geographical extent of, or business
activities covered by, any provisions of this Agreement be in excess of that
which is valid and enforceable under applicable law, then such provisions shall
be construed to cover only that duration, extent or activities which may validly
and enforceably be covered. Executive acknowledges the uncertainty of the law in
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
11 Miscellaneous.
11.01 Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the laws of the State of California.
11.02 Prior Agreements. Except as set forth in Section 1, this
Agreement contains the entire agreement of the parties relating to the
employment of Executive by the Company and the ancillary matters discussed
herein and supersedes all prior agreements and undertakings with respect to such
matters, and the parties hereto made no arrangements, representations or
warranties relating to such employment or ancillary matters which are not set
forth herein.
<PAGE> 8
11.03 Withholding Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes shall be
required pursuant to any law governmental regulation, or ruling or any other
amount owed to the Company.
11.04 Amendments. No amendment or modification of this Agreement shall
be deemed effective unless made in writing and signed by the both Executive and
Company.
11.05 No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provisions
of this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
11.06 Assignment. This Agreement shall not be assignable, in whole or
in part, by either party without the written consent of the other party, except
that the Company may, without the consent of the Executive, assign its rights
and obligations under this Agreement to any corporation, firm or other business
entity with or into which the Company may merge or consolidate, or to which the
Company may sell or transfer all or substantially all of its assets, or of which
50% or more of the equity investment and of the voting control is owned,
directly or indirectly, by, or is under common ownership with, the Company;
provided, however, that no such assignment will relieve Company of any of its
obligations hereunder. After any such assignee shall thereafter be deemed to be
the Company for the purposes of all provisions of this Agreement including
section 9.
11.07 Counterparts. This Agreement may be simultaneously executed in
any number of counterparts, and such counterparts executed and delivered, each
as an original, shall constitute but the same instrument.
11.08 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have given when personally delivered or
three days after being mailed, if mailed, by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Company and the Executive will, unless another address is specified in writing ,
be sent to the address indicated below:
Notices to Company: Notice to Executive:
Stockpoint, Inc. ________________
2600 Crosspark Road ________________
Coralville, Iowa 52241 ________________
Attn: President
11.09 Captions and Headings. The captions and paragraph headings used
in this Agreement are for convenience of reference only, and shall not affect
the construction or interpretation of this Agreement or any of the provisions
hereof.
11.10 Effect of Termination. It is expressly understood that
neither the Company nor the Executive shall have any continuing obligation under
this agreement upon termination hereof, except in respect of the matters
referenced in Sections 5, 6, 7 and 8.03.
<PAGE> 9
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of date set forth herein.
Stockpoint, Inc.
By: /s/ William E. Staib
---------------------------
Its CEO
---------------------------
EXECUTIVE
/s/ Luan Cox
-----------------------------
Luan Cox
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on December 20, 1999 (the "Effective
Time"), by and between L. Christopher Dominguez, an individual resident of the
State of California ("Executive"), and Stockpoint, Inc., a Delaware corporation
("Company").
WHEREAS, Executive has heretofore been employed as the Executive Vice
President of the Company; and
WHEREAS, the Company desires to continue to have the benefit of the
Executive's services as a corporate officer of the Company;
WHEREAS, certain guarantors of borrowings of the Company have required,
as a condition to their guarantees, that the Company execute an employment
agreement with Executive and
WHEREAS, the proceeds from such borrowings are necessary for the
Company's operations and will benefit the Company and the Executive.
NOW, THEREFORE, in consideration of the premises, the respective
undertakings of the Company and Executive set forth below, the Company and
Executive agree as follows:
1. Employment. The Company hereby agrees to employ Executive, and
Executive accepts such employment and agrees to perform services for the
Company, upon the other terms and conditions set forth in this Agreement.
2. Term. The term of this agreement is one year and renews annually,
unless either party provides written notification 90 days prior to the renewal.
See section 8 below for Termination definitions and remedies.
3. Positions, Duties and Reporting.
3.01 Service with Company. During the term of this Agreement,
Executive agrees to perform such reasonable employment duties consistent with
the role of Executive Vice President as the Company shall assign to him/her from
time to time.
3.02 Performance of Duties. Executive agrees to serve the Company
faithfully and to the best of his/her ability and to devote his/her full time,
attention, and efforts to the business and affairs of the Company during the
term of this Agreement. Executive represents to the Company that he/she is under
no contractual commitments inconsistent with his/her obligations set forth in
this Agreement, and that during the term of this Agreement, he/she will not
render or perform services for any other corporation, firm, entity or person
which are inconsistent with the provisions of this Agreement.
3.03 Reporting. This position will report to the Chief Executive
Officer of the Company.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement during the first year of the term of
this Agreement, the Company shall pay to Executive a base salary at a rate of
$150,000 per year, which salary shall be paid on a twice-monthly basis in
accordance with the Company's normal payroll procedures and policies. The salary
payable to Executive during each subsequent year during the term of this
Agreement shall be established by the Company and Executive, but in no event
shall the salary for any subsequent year be less than the base salary in effect
for the prior year.
4.02 Participation in Benefit Plans. During the term of this
Agreement, Executive shall be entitled to receive such medical and
hospitalization insurance and other fringe benefits as are being provided to the
Company's other executive level employees from time to time to the extent that
Executive's age, position or other factors qualify him/her for such fringe
benefits.
<PAGE> 2
4.03 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him/her in the
performance of his/her duties under this Agreement, subject to the presentment
of appropriate vouchers in accordance with the Company's normal policies for
expense verification.
4.04 Incentive for completion of an initial public offering. Upon
the completion of an initial public offering of the Company's common stock, the
Company will also pay Executive an IPO cash bonus of $30,000, which is due and
payable, immediately upon the close.
4.05 Annual Incentive Compensation. The Company shall formulate
and deliver to Executive by January 31, 2000 with respect to the remainder of
fiscal 2000, and by January 1 with respect to each succeeding fiscal year during
the term of this Agreement, and the Company and Executive shall use their best
efforts to negotiate and agree to, an annual incentive compensation plan for
Executive.
4.06 Vesting of Stock Options.
On September 15, 1999, the Company issued to the Executive an
additional option ("September 1999 Option") grant to purchase up to 40,000
shares of Company Common Stock at a price of $7.20 per share pursuant to the
Company's 1995 Stock Incentive Plan (the "Plan"). Such option shall become
exercisable with respect to 20% of the shares immediately upon execution of this
Agreement and the balance shall vest monthly at a rate of 1/60 of the total
September 1999 Option grant over the balance of the term. Such option shall
expire 10 years from the date of the grant and shall contain such other
provisions as are contained in the form of stock option agreement used by
Company under the Plan.
In the event that this Agreement is terminated as a result of the "Constructive
Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in
Section 8.01(1)) of the Executive, the September 1999 Option will vest with
respect to 40% of the shares subject thereto immediately. In addition, the
Company will permit the Executive to exercise all of his/her vested options for
a period of 12 months, commencing from the date of termination.
Vesting of all options granted to Executive will be accelerated with respect to
100% of the shares subject thereto in the event of a "Change in Control" of the
Company. For such purposes, a "Change in Control" shall mean any of the
following:
(i) A sale of all or substantially all of the assets of the Company;
(ii) The acquisition of more than 50% of the then outstanding Company
Common Stock by any person or group of persons acting in concert;
(iii) Any change that results in the Continuing Directors constituting
less than a majority of the Board of Directors;
(iv) A reorganization or, a merger of Company with another company
after which the holders of common stock of the Company
immediately prior to the merger or reorganization hold less than
50% of the voting power of the resulting corporations, or any
other transaction in which the Company (other than as the parent
corporation) is consolidated for federal income tax purposes or
is eligible to be consolidated for federal income tax purposes
with another corporation; or
(v) In the event that the Company Common Stock is traded on an
established securities market: a public announcement that any
person has acquired beneficial ownership of more than 25% of the
then outstanding Company Common Stock and for this purpose the
terms "person" and "beneficial ownership" shall have the meanings
provided in Section 13(d) of the Securities and Exchange Act of
1934 or related rules promulgated by the Securities and Exchange
Commission or; the commencement of or public announcement of an
intention to make a tender offer for more than 50% of the then
outstanding Company Common Stock.
<PAGE> 3
For purposes of this Section 4.06, "Continuing Directors" shall include only
those directors of the Company on the date hereof and those directors, as of a
date 30 days prior to an event that would otherwise be considered a "Change in
Control," who were nominated by Continuing Directors and duly elected by
shareholders at an annual meeting thereof or nominated and elected by directors
who were "Continuing Directors."
On March 6, 1997, as part of its acquisition of Ethos Corporation ("the
Acquisition"), the Company issued to the Executive an option to purchase 15,000
shares of Company Common Stock ("March 1997 Option") at a price of $1.50 per
share pursuant to the Company's 1995 Stock Incentive Plan. The Company reaffirms
that as per agreement at the time of the Acquisition, the March 1997 Option
shall become accelerated with respect to 100% of the shares subject thereto of
the effective date of a registration statement filed by the Company for the
underwritten public offering of its common stock.
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter, Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with or will acquire or become
acquainted with during the period of his/her employment by the Company, whether
developed by himself/herself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans, devices or material
(whether or not patented or patentable) directly or indirectly useful in any
aspect of the business of the Company, any confidential or secret development or
research work of the Company, or any other confidential information or secret
aspects of the business of the Company. Executive expressly acknowledges that,
in addition to the Company's proprietary software and technical know-how, the
Company's customer lists and the form (including, without limitation, payment
terms) of the Company's relationships with its customers is not publicly known
and that the disclosure or use of such information for any purpose other than
for the benefit of the Company could cause substantial damage the Company and
would place the Company at a competitive disadvantage. Executive acknowledges
that the above-described knowledge or information constitutes a unique and
valuable asset of the Company and that any disclosure or other use of such
knowledge or information other than the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company. The foregoing
obligations of confidentiality shall not apply to any knowledge or information
which is now published, which subsequently becomes generally publicly known,
other than as a direct or indirect result of the breach of this Agreement by
Executive, or which was known to the Executive prior to the term of his/her
employment with the Company. Executive agrees to notify any person or entity
with which Executive is employed or for which Executive provides services of the
requirements of this Section 5 and to notify the Company of the identity of any
such person or entity with which Executive is employed during the One year after
termination of this Agreement.
6. Employee Solicitation. During employment, and for a period of nine
months thereafter, Executive shall not (i) directly or indirectly solicit any
employee of the Company or any of Company's affiliates to leave the employ of
any such entity or in any way interfere adversely with the relationship between
any such employee and any such entity, (ii) directly or indirectly solicit any
employee of the Company or any affiliates to work for, render services or
provide advice to or supply confidential business information or trade secrets
of any such entity to any third person, firm or corporation, or (iii) directly
or indirectly solicit any existing customers and potential customers that have
an unexpired written proposals under consideration. For purposes of the
foregoing, solicitation shall not include solicitation of employees, vendors or
customers (i) who first solicit employment or a relationship from Executive, or
(ii) who are solicited (A) by advertising in periodicals of general circulation
or by general circulation Internet advertising, or (B) by a search or consulting
firm on behalf of Executive or Executive's affiliates, so long as Executive or
such affiliates did not direct or encourage such firm to solicit such employee,
vendor or customer of the Company. If any restriction set forth in this
paragraph is held to be unreasonable, then Executive and the Company agree, and
hereby submit, to the reduction and limitation of such prohibition to such area
or period as shall be deemed reasonable.
7. Patent and Related Matter.
7.01 Disclosure and Assignment. Executive will promptly disclose in
writing to the Company complete information concerning each and every invention,
discovery, improvement, work of authorship, device, design, apparatus, practice,
process, method or product whether patentable or not, made, developed, authored,
perfected, devised, conceived or first reduced to practice by Executive, either
solely or in collaboration with others, during the term of this Agreement,
whether or not during regular working hours,
<PAGE> 4
relating to the Business of the Company (hereinafter referred to as
"Developments"). Executive, to the extent that he/she has the legal right to do
so, hereby acknowledges that any and all of said Developments are the property
of the Company and hereby assigns and agrees to assign to the Company any and
all of Executive's right, title and interest in and to any and all of such
Developments.
7.02 Limitation on Section 7.01. The provisions of section 7.01 shall
not apply to any Development meeting the following conditions:
(a) such Development was developed entirely on Executive's
own time; and
(b) such Development was made without the use of any
Company equipment, supplies, facility or trade secret
information, excluding Executives laptop; and
(c) such Development does not relate (I) directly to the
Business of the Company, or (ii) to the Company's
actual or demonstrably anticipated research or
development; and
(d) such Development does not result from any work
performed by Executive for the Company.
7.03 Assistance of Executive. Upon request and without further
compensation therefor, but at no expense to Executive, and whether during the
term of this Agreement or thereafter, Executive will do all lawful acts,
including, but not limited to, the execution of papers and lawful oaths and the
giving of testimony, that in the opinion of the Company, its successors and
assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign patents and/or registrations
including, but not limited to, design patents, on any and all of such
Developments (other than those described in 7.02), and for perfecting affirming
and recording the Company's complete ownership and title thereto, and to
cooperate otherwise in all proceedings and matters relating thereto.
7.04 Obligations, Restrictions and Limitations. Executive understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived, authored or developed by employees, consultants or other agents
rendering services to it. Executive agrees that he/she shall be bound by all
such obligations, restrictions and limitations applicable to any such invention
or work of authorship conceived, authored or developed by him/her during the
term of this Agreement and shall take any and all further action which may be
required to discharge such obligations and to comply with such obligations and
to comply with such restrictions and limitations.
8. Termination
8.01 Grounds for Termination. This Agreement may be terminated:
(a) by the Company, if Executive dies, or
(b) by the Executive, if Executive becomes disabled (as
defined below), or
(c) by the Company, if the Executive has engaged in conduct
constituting cause for his/her termination and the
Company notifies Executive in writing of such election,
or
(d) by the Company without cause upon notice to the
Executive in writing of such election, provided that
such termination may only occur by unanimous decision
of the Board of Directors if there are then three or
fewer Directors or by a majority decision of the Board
of Directors if there are then four or more Directors.
<PAGE> 5
(e) by the Executive, if the Executive is constructively
terminated, as defined in paragraph 8.01(2) herein and
the Executive has notified the Company of his/her
election to terminate for Constructive Termination, or
(f) by the Executive upon notice to the Company in writing
of such election.
If this Agreement is terminated pursuant to subsection (a), (b), (c), (e) or (f)
of this section 8.01, such termination shall be effective immediately. If this
Agreement is terminated pursuant to subsection (d) of this section 8.01, such
termination shall be effective thirty (30) days after delivery of the notice of
termination.
(1) "Cause" Defined. "Cause" means:
(a) The Employee has breached the provisions of Section 5, 6
or 7 of this Agreement in any material respect,
(b) The Executive has engaged in willful and material
misconduct, including willful and material failure to perform the
Employee's duties as an officer or employee of the Company and has
failed to cure such default within 30 days after receipt of written
notice of default from the Company,
(c) The Executive has committed fraud, misappropriation or
embezzlement in connection with the Company's business, or
(d) Executive has been convicted or has pleaded nolo
contendere to criminal misconduct that is detrimental to the Company's
reputation or that calls into question, in the judgement of the Board,
Executive's integrity in fulfilling his/her duties under this
Agreement.
In the event the Company terminates Executive's employment for "cause"
pursuant to subsection 8.01 and Executive objects in writing to the Board's
determination that there was proper "cause" for such termination within (30)
days after Executive is notified of such termination, the matter shall be
resolved by arbitration in accordance with the provisions of section 10.01. If
Executive fails to object to any such determination of "cause" in writing within
such thirty (30) day period, he/she shall be deemed to have waived his/her right
to object to that determination. If such arbitration determines that there was
not proper "cause" for termination, such termination shall be deemed to be a
termination pursuant to subsection 8.01(d).
(2) "Constructive Termination" defined. Constructive Termination means
termination by Executive after written notice to the Company that Executive
deems such termination by Executive as a result of Constructive Termination, and
only after:
(a) A material breach by the Company of a material
obligation of the Company under this Agreement after
the Executive has given the Company written notice of
the breach and the Company has not remedied the breach
within 30 days;
(b) A failure of the Company to pay when due to the
Executive any annual base salary, annual bonus or other
earned bonus or awards referred to in this Agreement;
(c) The relocation of the Executive's principal place of
employment to a location not within a 30 mile radius of
such place of employment on the Effective Date;
(d) A material reduction by the Company of the Executive's
duties or responsibilities;
<PAGE> 6
(e) The failure of the Company to obtain an agreement
reasonably satisfactory to the Executive from any
successor to assume and agree to perform this
Agreement, or, if the business for which the
Executive's services are principally performed is sold
or transferred, the failure of the Company to obtain
such an agreement from the purchaser or transferee of
such business; or
(f) The Company becomes insolvent or bankrupt where
executive can no longer perform his/her duties as
outlined above.
In the event the Executive terminates Executive's employment for
"Constructive Termination" pursuant to subsection 8.01 and the Company
objects in writing to the Executive's determination that there was
Constructive Termination within (30) days after Executive has notified
the Company of the same, the matter shall be resolved by arbitration in
accordance with the provisions of section 10.01. If the Company fails
to object to any such determination of "Constructive Termination" in
writing within such thirty (30) day period, it shall be deemed to have
waived its right to object to that determination. If such arbitration
determines that there was not proper "Constructive Termination", such
termination shall be deemed to be a termination pursuant to subsection
8.01(c).
8.02 "Disability" Defined. For purposes of this Agreement, the term
"disabled" means any mental or physical condition which renders Executive unable
to perform the essential functions of his/her positions, with or without
reasonable accommodation, for a period of more than ninety (90) days during any
consecutive one hundred twenty (120) day period.
8.03 Surrender of Records and Property. Upon termination of his/her
employment with the Company, Executive shall deliver promptly to the Company all
records, manual, book, blank forms, document, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company or which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or case are in his/her possession or under his/her
control.
8.04 Wage and Benefit Continuation. If Executive's employment by the
Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company
shall continue to pay to Executive his/her base salary and shall continue to
provide health insurance benefits for Executive for a period 9 months after
termination. Change in Control" as defined in Section 4.07, if Executive's
employment is terminated by "Constructive Termination" as defined in Section
8.01(2) or without "Cause" as defined in as defined in Section 8.01(1) within 12
months after the effective date of a "Change in Control," the severance
compensation package defined in this Section will be doubled to 18 months.
Notwithstanding anything else in this Section 8.04, Executive shall not be
entitled under this Section 8.04 or any other provision of this Agreement to
receive any cash compensation pursuant to this Agreement which constitutes an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, or any successor provision or regulations
promulgated.
If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or
8.01 (f), Executive's right to base salary and benefits shall immediately
terminate except as may otherwise be required by applicable law.
If Executive's employment is terminated by the Company pursuant to
subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall also be
entitled to receive any bonus payment that as of the time of termination would
have been payable to him/her pursuant to any incentive plan then in effect.
9. Indemnification and Directors & Officers Insurance
9.01 Indemnification. The Company will provide Executive
indemnification, exculpation and expense advancement, to the fullest extent of
the law, including, without limitation, entering into an indemnification
agreement with Executive in at least as beneficial a form to Executive as the
Company has entered into with any other officer or director of the Company.
<PAGE> 7
9.02 Directors and Officers Insurance. The Company will provide, at
its expense, Directors and Officers (D&O) insurance in an amount deemed
appropriate by its Board of Directors and Officers. If the Company shall show
any employee as a named insured under such policy, then the Executive shall be a
named insured under such policy.
10. Settlement of Disputes.
10.01 Arbitration. Except as provided in section 10.02 any claims or
disputes of any nature between the Company and Executive arising from or related
to the performance, breach, termination, expiration, application, or meaning of
this Agreement or any related matter relating to Executive's employment and the
termination of that employment by the Company shall be resolved exclusively by
arbitration in Denver, CO, in accordance with the then applicable rules of the
American Arbitration Association. Any such arbitration shall be conducted by an
arbitrator with said Rules, who has at least ten (10) years experience as an
attorney in executive compensation and employment law. The fees of the
arbitrator (s) and other cost, including attorney fees, incurred by Executive
and the Company in connection with such arbitration shall be paid by the party
who is unsuccessful in such arbitration, as determined by the arbitrator. The
decision if the arbitrator(s) shall be final and binding upon both parties.
Judgement of the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. In the event of submission of any dispute to
arbitration, each party shall, not later than thirty (30) days prior to the date
set forth hearing, provide to the other party and to the arbitrator(s) a copy of
all exhibits upon which the party intends to rely at the hearing and a list of
all persons each party intends to call at the hearing.
10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01
shall have no application to claims by the Company asserting a violation of
section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise, the
terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the Company
in a lawsuit subject to the terms of section 10.03. Executive agrees that, in
addition to, but not to the exclusion of any other available remedy, the Company
shall have the right to enforce the provisions of sections 5, 6, 7 and 8.03 by
applying for and obtaining temporary and permanent restraining orders
injunctions from a court of competent jurisdiction without the necessity of
filing a bond therefor and without the necessity of proving actual damages, and
the Company shall be entitled to recover from the Employee its reasonable
attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and
8.03.
10.03 Venue. Any action at law, suit in equity, or judicial proceeding
arising directly or indirectly, or otherwise in connection with, out of, related
to or from this Agreement or any provisions hereof shall be litigated only in
the courts of the State of California. Executive waives any right the Executive
may have to transfer or change the venue of any litigation brought against
Executive by the Company.
10.04 Severability. To the extent any provisions of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provisions and if this Agreement shall be unaffected and
shall continue in full force and effect. In furtherance and not in limitation of
the foregoing, should the duration or geographical extent of, or business
activities covered by, any provisions of this Agreement be in excess of that
which is valid and enforceable under applicable law, then such provisions shall
be construed to cover only that duration, extent or activities which may validly
and enforceably be covered. Executive acknowledges the uncertainty of the law in
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
11 Miscellaneous.
11.01 Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the laws of the State of California.
11.02 Prior Agreements. Except as set forth in Section 1, this
Agreement contains the entire agreement of the parties relating to the
employment of Executive by the Company and the ancillary matters discussed
herein and supersedes all prior agreements and undertakings with respect to such
matters, and the parties hereto made no arrangements, representations or
warranties relating to such employment or ancillary matters which are not set
forth herein.
<PAGE> 8
11.03 Withholding Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes shall be
required pursuant to any law governmental regulation, or ruling or any other
amount owed to the Company.
11.04 Amendments. No amendment or modification of this Agreement shall
be deemed effective unless made in writing and signed by the both Executive and
Company.
11.05 No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provisions
of this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
11.06 Assignment. This Agreement shall not be assignable, in whole or
in part, by either party without the written consent of the other party, except
that the Company may, without the consent of the Executive, assign its rights
and obligations under this Agreement to any corporation, firm or other business
entity with or into which the Company may merge or consolidate, or to which the
Company may sell or transfer all or substantially all of its assets, or of which
50% or more of the equity investment and of the voting control is owned,
directly or indirectly, by, or is under common ownership with, the Company;
provided, however, that no such assignment will relieve Company of any of its
obligations hereunder. After any such assignee shall thereafter be deemed to be
the Company for the purposes of all provisions of this Agreement including
section 9.
11.07 Counterparts. This Agreement may be simultaneously executed in
any number of counterparts, and such counterparts executed and delivered, each
as an original, shall constitute but the same instrument.
11.08 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have given when personally delivered or
three days after being mailed, if mailed, by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Company and the Executive will, unless another address is specified in writing,
be sent to the address indicated below:
Notices to Company: Notice to Executive:
------------------- --------------------
Stockpoint, Inc.
2600 Crosspark Road --------------------
Coralville, Iowa 52241 --------------------
Attn: President --------------------
11.09 Captions and Headings. The captions and paragraph headings used
in this Agreement are for convenience of reference only, and shall not affect
the construction or interpretation of this Agreement or any of the provisions
hereof.
11.10 Effect of Termination. It is expressly understood that neither
the Company nor the Executive shall have any continuing obligation under this
agreement upon termination hereof, except in respect of the matters referenced
in Sections 5, 6, 7 and 8.03.
<PAGE> 9
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of date set forth herein.
Stockpoint, Inc.
By: /s/ William E. Staib
----------------------------
Its CEO
----------------------------
EXECUTIVE
/s/ L. Christopher Dominguez
-------------------------------
L. Christopher Dominguez
<PAGE> 1
EXHIBIT 10.7
SUBLEASE
THIS SUBLEASE (this "Sublease") is made and entered as of the 24th day
of May, 1999, by and between Neural Applications Corporation, a Delaware
corporation having an office at 2600 Crosspark Road, Coralville, Iowa 52241
("Sublessor"), and Systems Alternatives International LLC, a Delaware limited
liability company having an office at 1705 Indian Wood Circle, Suite 100,
Maumee, Ohio 43537 ("Sublessee").
BACKGROUND INFORMATION
A. Pursuant to the terms and conditions of a certain land lease dated
November 2, 1993, between University of Iowa Research Park Corporation
("University') and Liberty Growth, L.C., an Iowa limited liability company
("Liberty") (the "Land Lease", the terms of which, as limited and modified
herein, are hereby made a part hereof and a copy of which is attached hereto as
Exhibit A), Liberty has leased from the University that certain premises and
related fixtures and equipment more particularly described in the Land Lease,
which premises the University has leased from the Iowa State Board of Regents
pursuant to a ground lease dated March 1, 1989 (the "Ground Lease"), and
B. Pursuant to the terms and conditions of a certain lease dated
October 7, 1993 between Liberty and Sublessor (the "Prime Lease," the terms of
which, as limited and modified herein, are hereby made a part hereof and a copy
of which is attached hereto as Exhibit B), Sublessor has leased from Liberty
that certain premises and related fixtures and equipment more particularly
described in the Prime Lease (the "Prime Lease Premises"), and
C. Sublessee wishes to sublease from Sublessor and Sublessor desires
to sublet to Sublessee, a portion of the Prime Lease Premises described as
approximately _________ square feet on the first floor of the building located
at 2600 Crosspark Road, Coralville, Iowa as depicted on Exhibit C attached
hereto and incorporated herein upon the terms and conditions set forth herein
(the "Subleased Premises").
D. In addition to the Subleased Premises, Sublessor desires to sublet
to Sublessee, the personal property listed on Schedule 1 attached hereto and
incorporated herein (the "Subleased Personal Property').
STATEMENT OF AGREEMENT
In consideration of the foregoing and of the promises and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sublessor and Sublessee do hereby
agree as follows:
1. Demise. Sublessor does hereby demise and sublease to Sublessee,
and Sublessee does hereby sublease and hire from Sublessor, upon the terms,
covenants and conditions set forth herein, the Subleased Premises and the
Subleased Personal Property, subject to the Prime Lease and the Land Lease.
1
<PAGE> 2
2. Term. The term of this Sublease (the "Term") shall be for a term
of eighteen (18) months commencing on the date hereof (the "Commencement Date")
and terminating at 11:59 p.m. on October 31, 2000.
3. Early Termination. At any time after October 25, 1999, Sublessee
may terminate this Sublease upon thirty (30) days prior written notice to
Sublessor.
4. Gross Rent. Commencing on the Commencement Date and during the
Term, Sublessee shall pay to Sublessor at the address above or at such other
address as Sublessor may, from time to time, designate in writing the gross rent
in the amount of Seven Thousand Two Hundred and no/100 Dollars ($7,200.00) on or
before the fist (1st) day of each month (collectively, "Rent").
5. Use; Laws. Sublessee shall use and occupy the Subleased Premises
in compliance with the use restrictions contained in Article 3 of the Land Lease
and Sublessee agrees to be bound by all of the terms, conditions, covenants,
provisions and agreements of the Prime Lease and the Land Lease, including the
University of Iowa Oakdale Research Park Covenants, Conditions and Restrictions
which contain the Design Guidelines. Sublessee shall not violate any applicable
governmental laws, codes, ordinances, rules or regulations in connection with
its use and occupancy of the Subleased Premises.
6. Maintenance. Sublessor shall keep the Subleased Premises clean and
orderly and shall perform all repairs to the .Subleased Premises which is
required of Sublessor under the Prime Lease; Sublessor shall maintain the
Subleased Premises in accordance with the same high standards of janitorial
maintenance and cleanliness as Sublessor maintains in connection with the
remaining portion of the Prime Lease Premises.
7. Indemnification. To the extent the following are caused by the
negligence or willful misconduct of Sublessee, its agents, employees and
invitees, Sublessee shall pay all costs, losses or damages resulting from or
arising out of (i) any breach of this Sublease, (ii) the use and occupancy of
the Subleased Premises and any property of Sublessor or Liberty, or (iii) the
injury to any persons. Sublessee shall indemnify, protect and save Sublessor
harmless, and defend with counsel satisfactory to Sublessor, from and against
any and all losses, damages or liabilities thereby or therefor and from and
against any and all expenses, costs, attorneys' fees and costs of suit incurred
in connection therewith.
To the extent the following are caused by the negligence or willful
misconduct of Sublessor, its agents, employees and invitees, Sublessor shall pay
all costs, losses or damages resulting from or arising out of: (i) any breach of
this Sublease, (ii) the use and occupancy of the Subleased Premises and any
property of Sublessee or Liberty, or (iii) the injury to any persons. Sublessor
shall indemnify, protect and save Sublessee harmless, and defend with counsel
satisfactory to Sublessee, from and against any and all losses, damages or
liabilities thereby or therefor and from and against any and all expenses,
costs, attorneys' fees and costs of suit incurred in connection therewith.
2
<PAGE> 3
8. Alterations and Signs. Sublessee may, with Sublessor's prior
written approval, which approval shall not be unreasonably withheld or delayed,
make minor alterations and/or erect or display signs on the Premises as
permitted under the University of Iowa Research Park regulations, the Land Lease
and the Prime Lease.
9. Utilities and Other Services. Sublessor shall secure and pay for
all utilities and other services used in, on or about the Subleased Premises. To
the extent that utilities and services are not provided by Liberty, Sublessor
shall contract directly with the applicable utility company or service provider.
10. Real Estate Taxes. All real estate taxes levied or assessed
against the Subleased Premises shall be timely paid by Sublessor.
11. Compliance with Prime Lease and Land Lease. The obligations of
Sublessee and Sublessor hereunder are contingent upon Liberty's written consent
hereto and the consent of the University. If Liberty and/or the University have
not consented to this Sublease on or before June 30, 1999, this Sublease shall
terminate and Sublessor and Sublessee shall be released from all obligations
hereunder.
12. Access to Subleased Premises. Sublessor has the right of access to
certain portions of the Subleased Premises as indicated on the floor plan
attached hereto as Exhibit C. In order to maintain Sublessee's security and
privacy, Sublessor shall, at its expense; expand its current key-card security
system to include an electronic lock and secured card key swipe system at the
location marked as Area " 3.2" on Exhibit C.
13. Default. If Sublessee shall fail to pay Rent within ten (10) days
after Sublessor has delivered written notice to Sublessee that the same is due
and payable, or if Sublessee shall fail to perform any other term, covenant or
condition of this Sublease and such failure shall continue for a period of ten
(10) days after Sublessor delivers written notice of such failure to Sublessee,
then, in any such event Sublessor shall have the right to pursue the remedies
against Sublessee which Liberty has against Sublessor for a breach of the Prime
Lease. If Sublessor shall be in default in the performance of any of its
obligations under this Sublease or under the Prime Lease, including, but not
limited to, its obligations to repair and maintain the Subleased Premises and
its obligation to pay rent, Sublessee may (but shall not be required to) (i)
cure such default on behalf of Sublessor, and the amount of the reasonable cost
to Sublessee of curing any such default shall be paid by Sublessor to Sublessee
on demand, or deducted by Sublessee from its rent obligations under this
Sublease, together with interest thereon at the rate of 12% per annum or (ii)
terminate this Sublease.
14. Assignment and Subletting. Sublessee shall not assign, mortgage,
hypothecate or otherwise transfer all or any part of its interest in this
Sublease, nor sublet the Subleased Premises or any part thereof without first
procuring the written consent of Sublessor, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the provisions of this Section
14 to the contrary, Sublessee may assign this Lease or sublet all or any part of
the Subleased Premises to an affiliate, subsidiary or company under the common
control of
3
<PAGE> 4
Sublessee without Sublessor's consent, provided that the use of the Subleased
Premises does not materially change.
15. Sublessee's Insurance. During the Term, Sublessee shall carry and
maintain with responsible insurers licensed to transact insurance business in
the State of Iowa, for the benefit of Sublessee, the following insurance:
(a) Public Liability Insurance. Sublessee shall, at Sublessee's
sole expense, keep in full force and effect a policy of general comprehensive
public liability insurance with minimum limits of $2,000,000 on account of
bodily injuries to or death of one or more persons as the result of any one
accident or disaster and $500,000 on account of damage to property.
(b) Personal Property Insurance. Sublessee shall maintain
insurance on its furniture, furnishings, trade fixtures, inventory, equipment
and other items of personal property located on the Subleased Premises in the
amount of the full replacement value thereof.
16. Sublessor's Insurance. During the Term, Sublessor shall carry and
maintain fire, extended coverage and all risks insurance on the improvements
located on the Subleased Premises and the Prime Lease Premises in the amount
required under the Prime Lease and any other type or types of insurance required
of Sublessor under the Prime Lease.
17. Damage to Subleased Premises. If the Subleased Premises is
destroyed by fire or other casualty; either in whole or in part, Sublessee may
terminate this Sublease upon ten (10) days written notice to Sublessor. If
Sublessee does not elect to terminate this Sublease, then Sublessor shall repair
such damage within fifteen (15) days of its occurrence (unless such repairs are
prevented by causes beyond Sublessor's control), and Sublessee's rent shall be
abated proportionately.
18. Waiver of Subrogation. Sublessor and Sublessee agree that in the
event the Subleased Premises, or any part thereof or the fixtures or equipment
therein is damaged or destroyed by fire or casualty and the Subleased Premises,
or part thereof or fixtures or equipment therein, or injury to a person is
covered by the insurance, or would be covered by the insurance required under
this Sublease, Sublessor or Sublessee, or the sublessees, assignees or
transferees of Sublessor or Sublessee regardless of cause or origin (including
negligence), then, in such event, the rights, if any, of any party against the
other, or against the employees, agents or licensees of any party, with respect
to such damage or destruction and with respect to any loss resulting therefrom
(including the interruption of the business of any of the parties) are hereby
waived to the extent of said insurance. All policies of insurance required under
this Sublease shall contain a waiver of subrogation substantially equivalent to
the terms of this Section.
19. Eminent Domain. If all or part of the Subleased Premises are taken
under the power of eminent domain by any public authority, or deeded to such
public authority in lieu thereof, and such taking, in Sublessee's discretion,
interferes with Sublessee's use of the Subleased Premises, this Lease shall
terminate and expire as of the date possession is taken by the public authority
and the payment of Rents shall be prorated as of the termination date. Sublessee
shall have the right to receive compensation or damages to which it is entitled
at law.
4
<PAGE> 5
20. Quiet Enjoyment. So long as Sublessee shall perform and observe
all of the terms, covenants and conditions contained herein, Sublessee shall
peaceably and quietly have and hold the Subleased Premises during the Term
without hindrance by Sublessor or any person lawfully claiming through
Sublessor, subject to the terms of this Sublease and the Prime Lease.
21. Surrender of Subleased Premises. Upon the termination of this
Sublease, Sublessee shall surrender possession of the Subleased Premises in good
and clean condition, ordinary wear and tear, casualty, and damage caused by fire
or the elements excepted. Sublessee may remove any equipment or fixtures which
Sublessee has installed in the Subleased Premises provided Sublessee repairs any
and all damage caused by such removal.
22. Sublessor's Representation and Warranties. Sublessor represents
and warrants to Sublessee that (i) the Prime Lease is in full force and effect
and in good standing with the Liberty; (ii) there is no default thereunder in
existence; (iii) Sublessor has fully paid all rent due thereunder and met all of
its obligations owing to Liberty thereunder; (iv) Sublessor will maintain the
Prime Lease in such condition during the Term; and (v) subject to Liberty's
consent, has authority under the Prime Lease to enter into this Sublease.
23. Successors and Assigns. This Sublease shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns.
24. Applicable Law. This Sublease shall be construed in accordance
with the laws of the State of Iowa.
25. Brokers. Each party shall defend and indemnify the other party
from any commissions or finders fees as a result of this Sublease which may be
due to any person claiming through the indemnifying party.
26. Notices. Any notice required to be given under this Sublease shall
be hand delivered or sent by U.S. certified mail, return receipt requested,
postage prepaid, and shall be deemed delivered on actual receipt or refusal of
such notice with all such notices sent to the address specified on page 1
hereof, unless otherwise specified in writing by either party.
27. Sublessor Default. In the event that Sublessor is in default under
the terms of the Prime Lease, Liberty agrees that it shall not exercise its
remedies thereunder or terminate the Prime Lease until Liberty has given
Sublessor and Sublessee notice of such default as set forth in the Prime Lease.
If Sublessee performs Sublessor's obligations under the Prime Lease, Liberty
agrees to accept performance by Sublessee. Liberty shall not terminate the Prime
Lease so long as Sublessee and/or Sublessor performs the obligations of
Sublessor under the Prime Lease. All amounts expended by Sublessee under this
paragraph to cure a default of Sublessor under the Prime Lease shall be
reimbursed by Sublessor within ten (10) days after written notice from Sublessee
to Sublessor, and any amount not paid within such ten (10) day period may be
deducted by Sublessee from the amounts due to Sublessor under this Sublease.
26. Telecopy Counterpart. This Sublease may be executed and
delivered by telecopy and a telecopy counterpart of this Sublease executed by
any party shall constitute, for all
5
<PAGE> 6
purposes, an original document; any party executing this Sublease by telecopy
agrees promptly to deliver an executed counterpart of this Sublease but the
failure of such party to deliver or of any other party to account for or
produce such counterpart shall not affect the binding and enforceable nature of
the telecopy counterpart and the telecopy counterpart shall continue to be an
original, binding agreement.
[signature pages to follow]
6
<PAGE> 7
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease
to be executed by their duly authorized representatives as of the day and year
first written above.
<TABLE>
<CAPTION>
<S> <C>
Signed and Acknowledged in the Presence of: SUBLESSOR:
NEURAL APPLICATIONS CORPORATION
/s/ [illegible] By: /s/ Robert A. Squires
- -------------------------------------------- ------------------------------------------
(Signature Witness #1) Robert A. Squires, President
/s/ [illegible]
- --------------------------------------------
(Print Name Witness #1)
/s/ [illegible]
- --------------------------------------------
(Signature Witness #2)
/s/ George L. Jenkins
- --------------------------------------------
(Print Name Witness #2)
Signed and Acknowledged in the Presence of: SUBLESSEE:
SYSTEMS ALTERNATIVES
INTERNATIONAL LLC
/s/ [illegible] By: /s/ John W. Underwood
- -------------------------------------------- ------------------------------------------
(Signature Witness #1) John W. Underwood, President
/s/ [illegible]
- --------------------------------------------
(Print Name Witness #1)
/s/ [illegible]
- --------------------------------------------
(Signature Witness #2)
/s/ George L. Jenkins
- --------------------------------------------
(Print Name Witness #2)
</TABLE>
7
<PAGE> 8
STATE OF OHIO
SS:
COUNTY OF FRANKLIN
The foregoing instrument was acknowledged before me this ______ day of
May, 1999, by ROBERT A. SQUIRES, the PRESIDENT of Neural Applications
Corporation, a Delaware corporation, on behalf of the corporation.
----------------------------------------
Notary Public
STATE OF OHIO
SS:
COUNTY OF FRANKLIN
The foregoing instrument was acknowledged before me this ______ day of
May, 1999, by JOHN W. UNDERWOOD, the PRESIDENT of Systems Alternatives
International LLC, a Delaware limited liability company, on behalf of the
limited liability company.
----------------------------------------
Notary Public
8
<PAGE> 9
CONSENT OF LANDLORD UNDER PRIME LEASE
Liberty Growth, L.C., an Iowa limited liability company, as owner and
"Landlord" under the Prime Lease, hereby consents to the Sublease attached
hereto between Neural Applications Corporation, a Delaware corporation, as
"Sublessor", and Systems Alternatives International LLC, a Delaware limited
liability company, as "Sublessee", of even date herewith. Except as specifically
set forth in the Sublease, the consent to the Sublease shall not be deemed
Liberty's consent to any future sublease of the Premises by Sublessor or
Sublessee or the assignment of the Prime Lease or the Sublease to any other
person and in no event shall Sublessee or Sublessor sublease the Subleased
Premises or assign the Prime Lease or the Sublease without seeking Liberty's
consent as set forth in the Prime Lease.
In the event that the Prime Lease terminates for any reason, this
Sublease shall not terminate and shall thereafter be a direct lease for a term
of sixty (60) days upon the terms and conditions set forth in this Sublease and
the Prime Lease, as the context requires. At the expiration of such 60-day
period, this Sublease and all Sublessee's rights in and to the Subleased
Premises shall terminate between Liberty and Sublessee with respect to the
Subleased Premises.
IN WITNESS WHEREOF, Liberty has caused this Consent to be executed as
of the day of May 21,1999.
<TABLE>
<CAPTION>
<S> <C>
Signed and Acknowledged in the Presence of: LANDLORD:
LIBERTY GROWTH, L.C., an Iowa limited
liability company
By:
- -------------------------------------------- ------------------------------------------
(Signature Witness #1) James W. Peterson (Print Name)
Barbara J. Fry Title: Member
- -------------------------------------------- ---------------------------------------
(Print Name Witness #1)
- --------------------------------------------
(Signature Witness #2)
Staci E. Haynes
- --------------------------------------------
(Print Name Witness #2)
STATE OF IOWA
--------------
SS:
COUNTY OF JOHNSON
--------------
</TABLE>
The foregoing instrument was acknowledged before me this 21st day of
May, 1999, by James W. Peterson, the Member of Liberty Growth L.C., an Iowa
limited liability company, on behalf of the company.
----------------------------------------
Notary Public, Robert N. Downer
9
<PAGE> 10
CONSENT OE LANDLORD UNDER LAND LEASE
University of Iowa Reseaxch Park Corporation, an Iowa non-profit
corporation, as owner and "Lessor" under its Land Lease dated November 2, 1993
with Liberty Growth, L.C., ("Lessee" under said Land Lease and "Landlord" under
the Prime Lease) hereby consents to tile Sublease attached hereto between Neural
Applications Corporation, a Delaware corporation, as "Sublessor", and Systems
Alternatives International LLC, a Delaware limited liability company, as
"Sublessee". Except as specifically set forth in the Sublease, the consent to
the Sublease shall not be deemed University of Iowa Research Park Corporation's
consent to any future sublease of the Premises by Sublessor or Sublessee or the
assignment of the Land Lease, Prime Lease or the Sublease to any other person
and in no event shall Sublessee or Sublessor sublease the Subleased Premises or
assign the Land Lease, Prime Lease or the Sublease without seeking University of
Iowa Research Park Corporation's consent as set forth in the Land Lease.
IN WITNESS WHEREOF, the University of Iowa. Research Park Corporation
has caused this Consent to be executed as of the 21 day of May 1999.
<TABLE>
<S> <C>
Signed and Acknowledged in the Presence of: University of Iowa Research Park Corporation
By:
- -------------------------------------------- ------------------------------------------
(Signature Witness #1) W. Bruce Wheaton (Print Name)
Diana L. Pavelka Title: Director, UI Oakdale Research Park
- -------------------------------------------- ---------------------------------------
(Print Name Witness #1)
- --------------------------------------------
(Signature Witness #2)
Debra S. Eckhoff
- --------------------------------------------
(Print Name Witness #2)
STATE OF IOWA
---------------
SS:
COUNTY OF JOHNSON
---------------
</TABLE>
The foregoing instrument was acknowledged before me this 21st day of
May, 1999, by Bruce Wheaton, the Director of University of Iowa Research Park
Corporation, an Iowa non-profit corporation, on behalf of the corporation.
----------------------------------------
Notary Public
10
<PAGE> 1
EXHIBIT 10.8
THE ROBERT DOLLAR BUILDING
311 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA
OFFICE LEASE
BASIC LEASE INFORMATION
DATE: September 30, 1999
LANDLORD: The Robert Dollar Building Associates, Ltd., a California
limited partnership
TENANT: Stockpoint, Inc., a Delaware corporation
TENANT'S ADDRESS FOR NOTICE:
BEFORE COMMENCEMENT DATE:
475 Sansome Street, 8th Floor
San Francisco, CA 94111
AFTER COMMENCEMENT DATE:
The Robert Dollar Building.
311 California Street, Suite 200
San Francisco, CA 94104
LANDLORD'S ADDRESS FOR NOTICES: The Robert Dollar Building Associates, Ltd.
c/o Woodmont Real Estate Services
1050 Ralston Avenue
Belmont, California 94002
Attn: Stephen M. Hlebasko
LEASED PREMISES: Suite 200, The Robert Dollar Building
NET RENTABLE AREA OF PREMISES: 8,906 square feet
INITIAL TERM: Eighteen (18) months
COMMENCEMENT DATE: October 18, 1999
EXPIRATION DATE: Eighteen (18) months after Commencement Date
MONTHLY BASE RENT: $30,400.00
BASE YEAR FOR TAXES AND EXPENSES: 2000
TENANT'S PRORATA SHARE: 10.77%
EXHIBITS: EXHIBIT A - PREMISES
EXHIBIT B - WORK AGREEMENT
EXHIBIT C - RULES
EXHIBIT D - ESTOPPEL CERTIFICATE
LETTER OF CREDIT
EACH REFERENCE TO BASIC LEASE INFORMATION IN THE PROVISIONS OF THE
LEASE SHALL INCORPORATE THE APPLICABLE BASIC LEASE INFORMATION SPECIFIED HEREIN.
IN THE EVENT OF ANY CONFLICT BETWEEN ANY BASIC LEASE INFORMATION AND THE LEASE,
THE LEASE SHALL CONTROL.
<PAGE> 2
OFFICE BUILDING LEASE
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1.........................................................................................................1
Premises and Term..............................................................................................1
ARTICLE 2.........................................................................................................1
Base Rent......................................................................................................1
ARTICLE 3.........................................................................................................1
Additional Rent................................................................................................1
ARTICLE 4.........................................................................................................3
Commencement of Term...........................................................................................3
ARTICLE 5.........................................................................................................4
Condition of Premises..........................................................................................4
ARTICLE 6.........................................................................................................4
Use and Rules..................................................................................................4
ARTICLE 7.........................................................................................................5
Services and Utilities.........................................................................................5
ARTICLE 8.........................................................................................................6
Alterations and Liens..........................................................................................6
ARTICLE 9.........................................................................................................7
Repairs........................................................................................................7
ARTICLE 10........................................................................................................8
Casualty Damage................................................................................................8
ARTICLE 11........................................................................................................8
Insurance, Subrogation, and Waiver of Claims...................................................................8
ARTICLE 12........................................................................................................9
Condemnation...................................................................................................9
ARTICLE 13........................................................................................................9
Return of Possession...........................................................................................9
ARTICLE 14.......................................................................................................10
Holding Over..................................................................................................10
ARTICLE 15.......................................................................................................10
No Waiver.....................................................................................................10
ARTICLE 16.......................................................................................................10
Attorneys' Fees and Jury Trial................................................................................10
ARTICLE 17.......................................................................................................10
Personal Property Taxes, Rent Taxes and Other Taxes...........................................................10
ARTICLE 18.......................................................................................................11
Approvals.....................................................................................................11
ARTICLE 19.......................................................................................................11
Subordination, Attainment and Mortgagee Protection............................................................11
ARTICLE 20.......................................................................................................12
Estoppel Certificate..........................................................................................12
ARTICLE 21.......................................................................................................12
Assignment and Subletting.....................................................................................12
ARTICLE 22.......................................................................................................14
Rights Reserved by Landlord...................................................................................14
ARTICLE 23.......................................................................................................15
Landlord's Remedies...........................................................................................15
ARTICLE 24.......................................................................................................17
Landlord's Right to Cure......................................................................................17
ARTICLE 25.......................................................................................................17
Captions, Definitions and Severability........................................................................17
ARTICLE 26.......................................................................................................20
Conveyance by Landlord and Liability..........................................................................20
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 27.......................................................................................................20
Indemnification...............................................................................................20
ARTICLE 28.......................................................................................................21
Safety and Security Devices, Services and Programs............................................................21
ARTICLE 29.......................................................................................................21
Communications and Computer Lines.............................................................................21
ARTICLE 30.......................................................................................................22
Hazardous Materials...........................................................................................22
ARTICLE 31.......................................................................................................23
Miscellaneous.................................................................................................23
ARTICLE 32.......................................................................................................24
[Intentionally omitted].......................................................................................24
ARTICLE 33.......................................................................................................24
Notices.......................................................................................................24
ARTICLE 34.......................................................................................................24
Real Estate Brokers...........................................................................................24
ARTICLE 35.......................................................................................................24
[Intentionally Omitted].......................................................................................24
ARTICLE 36.......................................................................................................24
Entire Agreement..............................................................................................24
EXHIBIT A........................................................................................................ 1
PREMISES...................................................................................................... 1
EXHIBIT B........................................................................................................ 1
WORK AGREEMENT................................................................................................ 1
EXHIBIT C........................................................................................................ C
RULES......................................................................................................... C
EXHIBIT D
LETTER OF CREDIT
</TABLE>
ii
<PAGE> 4
OFFICE LEASE
THIS LEASE made as of the 30th day of September, 1999, between THE
ROBERT DOLLAR BUILDING ASSOCIATES, LTD., a California limited partnership and
STOCKPOINT, INC., a Delaware corporation ("Tenant").
ARTICLE 1
PREMISES AND TERM
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
that certain space known as Suite 200 ("Premises") described or shown on EXHIBIT
A attached hereto, in the building known as THE ROBERT DOLLAR BUILDING
("Building") located at 311 California Street, San Francisco, California
("Property", as further described in Article 25), subject to the provisions
herein contained. The term ("Term") of this Lease shall commence on the 18th day
of October, 1999 ("Commencement Date"), and end on the 17th day of April, 2001
("Expiration Date"), unless sooner terminated as provided herein. The
Commencement Date shall be subject to adjustment as provided in Article 4.
Landlord and Tenant agree that for purposes of this Lease the net rentable area
of the Premises is 8,906 square feet and the net rentable area of the Property
is 82,699 square feet. Notwithstanding the foregoing, and provided no Default
exists or is continuing, both on the date notice is given and on the date such
notice is effective, Tenant, upon nine (9) months written notice: (a) may
terminate this lease, but in no event prior to October 31, 2000; and (b) may
extend, with one or more notices, the Expiration Date, but in no event beyond
October 31, 2004.
ARTICLE 2
BASE RENT
Tenant shall pay Landlord monthly Base Rent of Thirty Thousand Four
Hundred and No/100 Dollars ($30,400.00) in advance on or before the first day of
each calendar month during the Term, except that Base Rent for the first full
calendar month of the Term shall be paid when Tenant executes this Lease. If the
Term commences on a day other than the first day of a calendar month, or ends on
a day other than the last day of a calendar month, then the Base Rent for any
such partial month shall be prorated on the basis of 1/30th of the monthly Base
Rent for each day of such month.
ARTICLE 3
ADDITIONAL RENT
(A) TAXES. Tenant shall pay Landlord an amount equal to Tenant's
Prorata Share of Taxes in excess of the amount of Taxes paid
by Landlord during the calendar year 2000 ("Base Year"). The
terms "Taxes" and "Tenant's Prorata Share" shall have the
meanings specified therefor in Article 25.
(B) OPERATING EXPENSES. Tenant shall pay Landlord an amount equal
to Tenant's Prorata Share of Operating Expenses in excess of
the amount of Operating Expenses paid by Landlord during the
Base Year. The terms "Operating Expenses" and "Tenant's
Prorata Share" shall have the meanings specified therefor in
Article 25.
(C) MANNER OF PAYMENT. Taxes and Operating Expenses shall be paid
in the following manner:
(i) Landlord may reasonably estimate in advance the amounts
Tenant shall owe for Taxes and Operating Expenses for any full or partial
calendar year of the Term. In such event, Tenant shall pay such estimated
amounts, on a monthly basis, on or before the first day of each calendar month,
together with Tenant's payment of Base Rent. Such estimate may be reasonably
adjusted from time to time by Landlord.
(ii) Within 120 days after the end of each calendar year, or
as soon thereafter as practicable, Landlord shall provide a statement (the
"Statement") to Tenant showing: (a) the amount of actual Taxes and Operating
Expenses for such calendar year, with a listing of amounts for major categories
of Operating Expenses, and such amounts for the Base Years, (b) any amount paid
by Tenant towards Taxes and Operating Expenses during
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<PAGE> 5
such calendar year on an estimated basis, and (c) any revised estimate of
Tenant's obligations for Taxes and Operating Expenses for the current calendar
year.
(iii) If the Statement shows that Tenant's estimated payments
were less than Tenant's actual obligations for Taxes and Operating Expenses,
Tenant shall pay the difference. If the Statement shows an increase in Tenant's
estimated payments for the current calendar year, Tenant shall pay the
difference between the new and former estimates, for the period from January 1
of the current calendar year through the month in which the Statement is sent.
Tenant shall make such payments within thirty (30) days after Landlord sends the
Statement.
(iv) If the Statement shows that Tenant's estimated payments
exceeded Tenant's actual obligations for Taxes and Operating Expenses, Tenant
shall receive a credit for the difference against payments of Rent next due. If
the Term shall have expired and no further Rent shall be due, Tenant shall
receive a refund of such difference within thirty (30) days after Landlord sends
the Statement.
(v) So long as Tenant's obligations hereunder are not
materially adversely affected thereby, the Landlord reserves the right to
reasonably change, from time to time, the manner or timing of the foregoing
payments. In lieu of providing one Statement covering Taxes and Operating
Expenses, Landlord may provide separate statements, at the same or different
times. No delay by Landlord in providing the Statement (or separate statements)
shall be deemed a default by Landlord or a waiver of Landlord's right to require
payment of Tenant's obligations for actual or estimated Taxes or Operating
Expenses. In no event shall a decrease in Taxes or Operating Expenses below the
Base Year amounts ever decrease the monthly Base Rent or give rise to a credit
in favor of Tenant.
(D) PRORATION. If the Term commences other than on January 1, or ends
other than on December 31, Tenant's obligations to pay estimated and actual
amounts towards Taxes and Operating Expenses for such first or final calendar
years shall be prorated to reflect the portion of such years included in the
Term. Such proration shall be made by multiplying the total estimated or actual
(as the case may be) Taxes and Operating Expenses, for such calendar years, as
well as the Base Year amounts, by a fraction, the numerator of which shall be
the number of days of the Term during such calendar year, and the denominator of
which shall be 365.
(E) LANDLORD'S RECORDS. Landlord shall maintain records respecting
Taxes and Operating Expenses and determine the same in accordance with sound
accounting and management practices, consistently applied. Although this Lease
contemplates the computation of Taxes and Operating Expenses on a cash basis,
Landlord shall make reasonable and appropriate accrual adjustments to ensure
that each calendar year, including the Base Years, includes substantially the
same recurring items. Landlord reserves the right to change to a full accrual
system of accounting so long as the same is consistently applied and Tenant's
obligations are not material adversely affected. Tenant or its representative
shall have the right to examine such records upon reasonable prior notice
specifying such records Tenant desires to examine, during normal business hours
at the place or places where such records are normally kept by sending such
notice no later than forty-five (45) days following the furnishing of the
Statement. Tenant may take exception to matters included in Taxes or Operating
Expenses, or Landlord's computation of Tenant's Prorata Share of either, by
sending notice specifying such exception and the reasons therefor to Landlord no
later than thirty (30) days after Landlord makes such records available for
examination. Such Statement shall be considered final, except as to matters to
which exception is taken after examination of Landlord's records in the
foregoing manner and within the foregoing times. Tenant acknowledges that
Landlord's ability to budget and incur expenses depends on the finality of such
Statement, and accordingly agrees that time is of the essence of this Paragraph.
If Tenant takes exception to any matter contained in the Statement as provided
herein, Landlord shall refer the matter to an independent certified public
accountant, whose certification as to the proper amount shall be final and
conclusive as between Landlord and Tenant. Tenant shall promptly pay the cost of
such certification unless such certification determines that Tenant was
overbilled by more than five percent (5%). Pending resolution of any such
exceptions in the foregoing manner, Tenant shall continue paying Tenant's
Prorata Share of Taxes and Operating Expenses in the amounts determined by
Landlord, subject to adjustment after any such exceptions are so resolved.
(F) RENT AND OTHER CHARGES. Base Rent, Taxes, Operating Expenses,
and any other amounts which Tenants is or becomes obligated to
pay Landlord under this Lease or other agreement entered in
connection herewith, are sometimes herein referred to
collectively as "Rent," and all remedies
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<PAGE> 6
applicable to the non-payment of Rent shall be applicable
thereto. Rent shall be paid in the lawful currency of the
United State of America, to Landlord, in care of Woodmont Real
Estate Services, 1050 Ralston Avenue, Belmont, CA 94002, Attn:
Tom Robertson, or at such other place as Landlord may
designate. Rent shall be paid without any prior demand or
notice therefor (except as expressly provided herein) and
shall in all events be paid without any deduction, set-off or
counterclaim (including, without limitation, the provisions of
California Civil Code Sections 1941 and 1942 or any other Law
now or hereafter in effect which would give Tenant the right
to make repairs at the expense of Landlord or in lieu thereof
to vacate the Premises, which rights Tenant expressly waives
hereby) and without relief from any valuation or appraisement
laws. Landlord and Tenant agree that it would be impossible or
extremely impracticable to determine the actual amount of
damages Landlord would sustain in the event Tenant fails to
pay Rent or additional charges due hereunder within the times
required hereunder. Therefore, Landlord and Tenant agree that
if Tenant shall fail to pay any Rent or additional charges
payable by Tenant hereunder within five (5) days after the due
date, Tenant shall pay to Landlord, as liquidated damage to
compensate Landlord for its administrative costs resulting
from such failure, a late payment charge equal to ten percent
(10%) of such unpaid amounts. In addition to such late charge,
any Rent not paid more than fifteen (15) days after due shall
accrue interest from the due date at the Default Rate, until
payment is received by Landlord. Such late payment charge and
interest payments shall not be deemed consent by Landlord to
late payments, nor a waiver of Landlord's right to insist upon
timely payments at any time, nor a waiver of any remedies to
which Landlord is entitled as a result of the late payment of
Rent. Landlord may apply payments received form Tenant to any
obligations of Tenant then accrued, without regard to such
obligations as may be designated by Tenant.
ARTICLE 4
COMMENCEMENT OF TERM
The Commencement Date set forth in Article 1 shall be delayed and Rent
shall be abated to the extent that Landlord fails: (i) after October 7, 1999, to
provide Tenant eight (8) hours per day access to the Premises for Tenant to
install its telephone and LAN wires, only as to the number of days from October
8, 1999 through October 17, 1999 that such access was not provided, or (ii) to
deliver possession of the Premises for any other reason, including but not
limited to holding over by prior occupants, except to the extent that Tenant,
its contractors, agents or employees in any way contribute to either such
failures. If Landlord so fails for a thirty (30) day initial grace period,
Tenant shall have the right to terminate this Lease by written notice to
Landlord any time thereafter. Any such delay in the Commencement Date shall not
subject Landlord to liability for loss or damage resulting therefrom, and
Tenant's sole recourse with respect thereto shall be the abatement of Rent and
right to terminate this Lease as described above. Upon any such termination,
Landlord and Tenant shall be entirely relieved of their obligations hereunder,
and any Security Deposit (as defined in Article 35) and Rent payments shall be
returned to Tenant. During any period that Tenant shall be permitted to enter
the Premises prior to the Commencement Date other than to occupy the same (e.g.,
to perform alterations or improvements), Tenant shall comply with all terms and
provisions of this Lease, except those provisions requiring the payment of Rent.
Landlord shall permit early entry, provided the Premises are legally available
and Landlord has completed any work required under Exhibit B hereto.
During such period prior to the Commencement Date that Tenant is
provided access to the Premises, Tenant shall use all reasonable efforts to
follow the instructions of the existing tenant thereof and to minimize
interference with said tenant's business and employees. If such existing tenant
shall direct Tenant to leave the Premises, Tenant shall so leave. If Landlord
indemnifies said existing tenant for losses and damages, including lost
business, due to Tenant's actions or inactions during such early access, and
Landlord actually pays such losses and damages, then Tenant shall reimburse
Landlord therefor, and such obligation shall constitute Rent hereunder. If the
existing tenant does not permit such access, this Lease shall remain in full
force and effect, such failure shall operate only to defer the Commencement Date
as set forth above, and shall not constitute a default on Landlord's part under
this Lease.
This lease is conditioned upon Tenant delivering to Landlord: (a) By
Noon, October 1, 1999, a letter of comfort from Wells Fargo Bank ("WFB")
regarding the Letter of Credit; and (b) By 5:00 p.m., October 5, 1999, the
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<PAGE> 7
Letter of Credit in the form attached hereto, expiring no less than one (1)
year after issuance, from a bank reasonably acceptable to Landlord. Landlord
accepts WFB. Tenant will use its best efforts to satisfy said conditions.
ARTICLE 5
CONDITION OF PREMISES
Tenant has inspected the Premises, Property, Systems and Equipment (as
defined in Article 25), or has had an opportunity to do so, and agrees to accept
the same "as is" without any agreement, representations, understandings or
obligations on the part of Landlord to perform any alterations, repairs or
improvements.
ARTICLE 6
USE AND RULES
(A) Tenant shall use the Premises for offices (the "Permitted Use") and
no other purpose whatsoever, in compliance with all applicable Laws, and without
disturbing or interfering with any other tenant or occupant of the Property.
Tenant shall not use the Premises in any manner so as to cause a cancellation of
Landlord's insurance policies, or an increase in the premiums thereunder. Tenant
shall comply with all rules set forth in EXHIBIT C attached hereto (the
"Rules"). Landlord shall have the right to reasonably amend such Rules and
supplement the same with other reasonable Rules (not expressly inconsistent with
this Lease) relating to the Property, or the promotion of safety, care
cleanliness or good order therein, and all such amendments or new Rules shall be
binding upon Tenant after five (5) days' notice thereof to Tenant. All Rules
shall be applied on a non-discriminatory basis, but nothing herein shall be
construed to give Tenant or any other Person (as defined in Article 25) any
claim, demand or cause of action against Landlord arising out of the violation
of such Rules by any other tenant, occupant, or visitor of the Property, or out
of the enforcement or waiver of the Rules by Landlord in any particular
instance.
(B) Landlord shall have the right at any time and from time to time to
change, add to, subtract from, or alter any part of the Property, to dedicate
portions of the Property for governmental purposes and to convey portions to
others, so long as such changes do not materially adversely affect the character
of the Building as a whole. Landlord shall not be subject to liability nor shall
Tenant be entitled to compensation or diminution or abatement of Rent because of
such changes. Landlord shall use reasonable efforts not to interfere
unreasonably with the normal business operations of Tenant, but Landlord shall
not be liable to Tenant for interference or inconvenience caused by any action
of Landlord under the provisions of this Paragraph. Landlord reserves the right,
from time to time, to utilize and reserve portions of the Property for kiosks,
displays or other uses.
(C) Tenant shall be open for business during the entire Term of this
Lease and shall conduct its business in a first class and reputable manner.
Tenant shall furnish, install and maintain in the Premises all equipment and
facilities properly necessary for Tenant's Permitted Use of the Premises.
Tenant, at its sole cost and expense, shall comply with all Laws and with
requirements of Landlord's insurance underwriters, applicable fire rating
bureaus or similar bodies, now or hereafter in effect pertaining to the Premises
or Tenant's use or occupancy of the Premises or the acts or omissions of Tenant
in the Premises, irrespective of whether such Laws or requirements are foreseen,
unforeseen, ordinary, extraordinary or substantial, or whether such compliance
is required because of changes in Laws or by expansion and/or modifications of
the Premises or the Building or necessitates structural changes or improvements
or interferes with the use and enjoyment of the Premises. Landlord makes no
representation that Tenant's proposed Permitted Use of the Premises will comply
with applicable zoning requirements or other Laws. Tenant, at its sole cost and
expense, shall promptly comply with all requirements of all municipal, state,
and federal authorities not in force, or which may hereafter be in force
relating to, or affecting the condition, use or occupancy of, the Premises. The
parties agree that Tenant shall be solely responsible for obtaining, at Tenant's
sole cost and expense, a certificate of occupancy and any other governmental
approvals as may be imposed or required to enable Tenant to lawfully conduct its
business pursuant to Tenant's Permitted Use. Tenant shall have no right, nor
shall Landlord have any obligation, to apply for any variances, special use
permits, request for zoning change, or any other modification or alteration that
would otherwise affect Landlord or alter in any way Landlord's current and
permitted use of the Property. Tenant shall conform its Permitted Use so as to
not cause any change in occupancy category or group under any applicable
building codes or necessitate any alteration or modification of any portion of
the Property (whether or not structural in nature).
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(D) Without limiting the generality of the other provisions of this
Article 6, Tenant shall not (1) use the Premises for the preparation in any
manner of any food or beverages (except as may be permitted in the Rules); (2)
cause, maintain, or allow any waste or nuisance in, on or about the Premises;
(3) permit on the Premises a substance or material which presents a fire,
explosion or other hazard; (4) sell lottery tickets in or from the Premises; (5)
conduct sales in or from the Premises unless otherwise so provided under
Tenant's Permitted Use; (6) disturb the quiet enjoyment of the Building by
another tenant or occupant, or obstruct or interfere with the rights of others;
(7) allow the Premises to be used for improper, immoral or objectionable
purposes; (8) do any act tending to injure the reputation of the Building; (9)
permit noise or odors in the Premises which are objected to by Landlord or by a
tenant or an occupant of the Building; or allow noise, vibrations or odors to
carry outside the Premises; (10) permit the operation of coin-operated or
vending machines or pay telephones on the Premises, other than in areas reserved
solely for the use of Tenant's employees; (11) use areas outside the Premises
for storage or for any other purpose not otherwise permitted under this Lease;
(12) permit the use of the Premises as sleeping or living quarters, or lodging
rooms; (13) install radios, televisions or other devices exterior to the
Premises or erect an aerial on the roof or exterior walls of the Building; (14)
do, omit, or permit to be done or omitted anything which shall cause insurance
premiums with respect to all or part of the Building or the Premises to be
incurred or insurance coverage to be increased or insurance coverage to be
cancelled (Landlord agrees that Tenant's Permitted Use of the Premises pursuant
to this Article 6, if in strict conformity with the provisions of the Lease,
shall not constitute a violation of this subsection); (15) receive, deliver or
remove merchandise, supplies or equipment, or remove or store refuse, other than
in areas approved in advance in writing by Landlord; (16) use the Premises or
permit anything to be done in, on, or about the Premises which will in any way
conflict with any Laws now in force or which may hereafter be enacted or
promulgated; or (17) bring into the Premises any chemicals or other items that
are included in any list or definition of hazardous chemicals, materials or
waste published by any federal, state or local governing or regulatory body, or
any such chemicals, materials or waste which would trigger any employee
"right-to-know" or notification provisions adopted by any such bodies.
ARTICLE 7
SERVICES AND UTILITIES
Landlord shall provide during Normal Business Hours (as defined in
Article 25) the following services and utilities (the cost of which shall be
included in Operating Expenses unless otherwise stated herein or in any separate
rider hereto):
(A) Electricity for standard building office lighting fixtures, and
equipment and accessories customary for offices (up to 215 hours per month)
where: (1) the connected electrical load of all the same does not exceed an
average of 4 watts per square foot of the Premises (or such lesser amount as may
be available, based on the safe and lawful capacity of the existing electrical
circuit(s) and facilities serving the Premises), (2) the electricity will be at
nominal 120 volts, single phase (or 110 volts, depending on available service in
the Building), and (3) the safe and lawful capacity of the existing electrical
circuit(s) serving the Premises is not exceeded.
(B) Heat to provide a temperature required, in Landlord's reasonable
opinion and in accordance with applicable law, for occupancy of the Premises
during Normal Business Hours, except on Holidays (as defined in Article 25).
Landlord shall not be responsible for inadequate ventilation to the extent the
same occurs because Tenant uses any item of equipment consuming more than 500
watts at rated capacity without providing adequate ventilation therefor.
(C) Water for drinking, lavatory and toilet purposes at those points of
supply provided for the nonexclusive general use of Tenant with other tenants at
the Property.
(D) Customary office cleaning and trash removal service Monday through
Friday (or Sunday through Thursday) in and about the Premises.
(E) Operatorless passenger elevator service and freight elevator
service (subject to scheduling by Landlord) in common with Landlord and other
tenants and their contractors, agents and visitors.
(F) In the event any municipal, state, federal or other regulatory body
(whether judicial, executive or legislative) imposes mandatory controls on
Landlord or the Property (including the common areas) relating to the
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use or conservation of energy or water, gas, light or electricity or the
reduction of automobile use or automobile or other emissions, or in the event
such a body requests voluntary cutbacks or conservation, or suggests voluntary
guidelines for the use of energy or water, gas, light or electricity usage or
the reduction of automobile use or automobile or other emissions and Landlord
(in its absolute discretion) deems it advisable, appropriate or necessary to
comply with such voluntary cutbacks, conservation or guidelines, Landlord may
comply with such mandatory or voluntary controls to the extent it can control
the use of energy or light, gas, water or electricity at the Property (including
the common areas) or the reduction of automobile use or automobile or other
emissions. No such compliance shall in any event constitute a partial or
complete eviction of Tenant hereunder, nor shall it entitle Tenant to any
abatement or mitigation of Rent or other charges, nor shall Landlord in any way
be liable for damages or injury caused thereby to Tenant's property, employees,
customers, or suppliers. In the event the local trash removal authority requires
separation of trash for recycling, Tenant shall comply with all such
requirements.
Landlord may install and operate meters or any other reasonable system
for monitoring or estimating any services or utilities used by Tenant in excess
of those required to be provided by Landlord under this Article (including a
system for Landlord's engineer to reasonably estimate any such excess usage). If
such system indicates such excess services or utilities, Tenant shall pay
Landlord's reasonable charges for installing and operating such system and any
supplementary ventilation, heat, electrical or other systems or equipment (or
adjustments or modifications to the existing Systems and Equipment), and
Landlord's reasonable charges for the amount of excess services or utilities
used by Tenant.
Landlord does not warrant that any services or utilities will be free
from shortages, failures, variations, or interruptions caused by repairs,
maintenance, replacements, improvements, alterations, changes of service,
strikes, lockouts, labor controversies, accidents, inability to obtain services,
fuel, steam, water or supplies, governmental requirements or requests, or other
causes beyond Landlord's reasonable control. None of the same shall be deemed an
eviction or disturbance of Tenant's use and possession of the Premises or any
part thereof, or render Landlord liable to Tenant for abatement of Rent, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of loss of profits,
business interruption or other consequential damages.
ARTICLE 8
ALTERATIONS AND LIENS
Tenant shall make no additions, changes, alterations or improvements
(the "Work") to the Premises or the Systems and Equipment (as defined in Article
25) pertaining to the Premises without the prior written consent of Landlord.
Landlord may impose reasonable requirements as a condition of such consent
including without limitation the submission of plans and specifications for
Landlord's prior written approval, obtaining necessary permits, posting bonds,
obtaining insurance, prior approval of contractors, subcontractors and
suppliers, prior receipt of copies of all contracts and subcontracts, contractor
and subcontractor lien waivers, affidavits listing all contractors,
subcontractors and suppliers, use of union labor (if Landlord uses union labor),
affidavits from engineers acceptable to Landlord stating that the Work will not
adversely affect the Systems and Equipment or the structure of the Property, and
requirements as to the manner and times in which such Work shall be done. All
Work shall be performed in a good and workmanlike manner and all materials used
shall be of a quality comparable to or better than those in the Premises and
Property and shall be in accordance with plans and specifications approved by
Landlord, and Landlord may require that all such Work be performed under
Landlord's supervision. In all cases, other than for painting and carpeting,
Tenant shall pay Landlord a reasonable fee equal to five percent (5%) of the
total cost of the proposed Work to cover Landlord's overhead in reviewing
Tenant's plans and specifications and performing any supervision of the Work. If
Landlord consents to or supervises the Work, such consent and/or supervision
shall not be deemed a warranty as to the adequacy of the design, workmanship or
quality of materials, and Landlord hereby expressly disclaims any responsibility
or liability for the same. Landlord shall under no circumstances have any
obligation to repair, maintain or replace any portion of the Work.
Tenant shall keep the Property and Premises free from any mechanic's,
materialman's or similar liens or other such encumbrances in connection with any
Work on or respecting the Premises not performed by or at the request of
Landlord, and shall indemnify and hold Landlord harmless from and against any
claims, liabilities, judgments, or costs (including attorneys' fees) arising out
of the same or in connection therewith. Tenant shall give Landlord notice at
least twenty (20) days prior to the commencement of any Work on the Premises (or
such
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additional time as may be necessary under applicable Laws), to afford Landlord
the opportunity of posting and recording appropriate notices of
non-responsibility. Tenant shall remove any such lien or encumbrance by bond or
otherwise within thirty (30) days after written notice by Landlord, and if
Tenant shall fail to do so, Landlord may pay the amount necessary to remove such
lien or encumbrance, without being responsible for investigating the validity
thereof. The amount so paid shall be deemed additional Rent under this Lease
payable upon demand, without limitation as to other remedies available to
Landlord under this Lease. Nothing contained in this Lease shall authorize
Tenant to do any act which shall subject Landlord's title to the Property or
Premises to any liens or encumbrances whether claimed by Operation of law or
express or implied contract. Any claim to a lien or encumbrance upon the
Property or Premises arising in connection with any Work on or respecting the
Premises not performed by or at the request of Landlord shall be null and void
or, at Landlord's option, shall attach only against Tenant's interest in the
Premises and shall in all respects be subordinate to Landlord's title to the
Property and Premises.
ARTICLE 9
REPAIRS
(A) Except for customary cleaning and trash removal provided by
Landlord under Article 7, and damage covered under Article 10, Tenant shall keep
the Premises in good and sanitary condition, working order and repair (Including
without limitation, carpet, wall-covering, doors, plumbing and other fixtures,
equipment, alterations and improvements whether installed by Landlord or
Tenant). In the event that any repairs, maintenance or replacements are
required, Tenant shall promptly arrange for the same either through Landlord for
such reasonable charges as Landlord may from time to time establish, or such
contractors as Landlord generally uses at the Property, or such other
contractors as Landlord shall first approve in writing. Any such repairs or
maintenance shall be performed in a first class, workmanlike manner and such
repairs, maintenance and replacements shall be of a quality and class equal to
or better than the original work or item, subject to approval by Landlord in
advance in writing. If Tenant does not promptly make such arrangements and
complete such repairs or maintenance in a manner and quality acceptable to
Landlord, Landlord may, but need not, make such repairs, maintenance and
replacements, and the costs paid or incurred by Landlord therefor shall be
reimbursed by Tenant promptly after request by Landlord. Tenant shall indemnify
Landlord and pay for any repairs, maintenance and replacements to areas of the
Property outside the Premises, caused, in whole or in part, as a result of
moving any furniture, fixtures, or other property to or from the Premises, or by
Tenant or its employees, agents, contractors, or visitors (notwithstanding
anything to the contrary contained in this Lease). Except as provided in the
preceding sentence or for damage covered under Article 10, Landlord shall keep
the common areas of the Property in good and sanitary condition, working order
and repair (the cost of which shall be included in Operating Expenses, as
described in Article 25, except as limited therein).
(B) Except as otherwise provided in Article 10 relating to destruction
or Article 12 relating to a taking by power of eminent domain, there shall be no
allowance, abatement or offset of Rent or other charges payable hereunder, or
liability to Tenant for diminution of rental value or interference with Tenant's
business and no claim by Tenant for eviction from the Premises by reason of
inconvenience, annoyance or injury to Tenant arising from any repairs,
alterations, replacements or improvements made to the Premises, the Building,
the common areas, the Property or any portion thereof by Landlord, its agents,
employees or contractors, or by Landlord's mortgagee or by a beneficiary under a
deed of trust covering the Premises. To the extent Landlord may be responsible
for repairs under this Lease, Landlord shall not be liable to Tenant for failure
to make repairs to the Premises, the Building, the common areas, the Property or
any portion thereof, unless Landlord has received from Tenant written notice of
the need for such repairs and has failed to commence and diligently proceeded to
complete such repairs within a reasonably practicable time thereafter. In no
event shall Tenant be entitled to make such repairs itself and deduct or offset
the cost thereof against the Rent or other charges payable hereunder. Tenant
hereby waives all rights to make repairs at the expense of Landlord as provided
by any law, statute or ordinance now or hereafter in effect, including, but
without limitation, the provisions of Sections 1941 and 1942 of the California
Civil Code.
(C) Landlord has no obligation and has made no promise to alter,
remodel, improve, repair, decorate or paint the Premises or any part thereof
except as may be specified in Exhibit B hereto.
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ARTICLE 10
CASUALTY DAMAGE
If the Premises or any common areas of the Property providing access
thereto shall be damaged by fire or other casualty, Landlord shall use available
insurance proceeds to restore the same. Such restoration shall be to
substantially the same condition as existed prior to the casualty, except for
modifications required by zoning and building codes and other Laws or by any
Holder (as defined in Article 25), or any other modifications to the common
areas deemed desirable by Landlord (provided access to the Premises is not
materially impaired), and except that Landlord shall not be required to repair
or replace any of Tenant's furniture, furnishings, fixtures or equipment.
Landlord shall not be liable for any inconvenience or annoyance to Tenant or its
visitors, or injury to Tenant's business resulting in any way from such damage
or the repair thereof. However, Landlord shall allow Tenant a proportionate
abatement of Rent during the time and to the extent the Premises are unfit for
occupancy for the purposes permitted under this Lease and not occupied by Tenant
as a result thereof (unless Tenant or its employees or agents caused the
damage). Notwithstanding the foregoing to the contrary, Landlord may elect to
terminate this Lease by notifying Tenant in writing of such termination within
sixty (60) days after the date of damage (such termination notice to include a
termination date providing at least ninety (90) days for Tenant to vacate the
Premises), if the Property shall be materially damaged by Tenant or its
employees or agents, or if the Property shall be damaged by fire or other
casualty or cause such that: (a) repairs to the Premises and access thereto
cannot reasonably be completed within 120 days after the casualty without the
payment of overtime or other premiums, (b) more than 25% of the Premises is
affected by the damage, and fewer than 24 months remain in the Term, or any
material damage occurs to the Premises during the last 12 months of the Term,
(c) any Holder (as defined in Article 25) shall require that the insurance
proceeds or any portion thereof be used to retire the Mortgage debt (or shall
terminate the ground lease, as the case may be), or the damage is not fully
covered by Landlord's insurance policies, or (d) the cost of the repairs,
alterations, restoration or improvement work would exceed 25% of the replacement
value of the Building, or the nature of such work would make termination of this
Lease necessary or convenient. Tenant agrees that Landlord's obligation to
restore, and the abatement of Rent provided herein, shall be Tenant's sole
recourse in the event of such damage, and waives any other rights Tenant may
have under any applicable Law to terminate the Lease by reason of damage to the
Premises or Property, including all rights under California Civil Code, Sections
1932(2), 1933(4), and 1942, as the same may be modified or replaced hereafter.
Tenant acknowledges that this Article represents the entire agreement between
the parties respecting damage to the Premises or Property.
ARTICLE 11
INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
(A) Tenant shall maintain during the Term comprehensive (or commercial)
general liability insurance, with limits of not less than Two Million Dollars
($2,000,000) combined single limit for personal injury, bodily injury or death,
or property damage or destruction (including loss of use thereof) for any one
occurrence. Such insurance shall be on an occurrence basis, shall name Landlord,
San Francisco Property Company-Pacific, and Trans-Pacific Partners Company as
additional insureds and shall include endorsements for Tenant's indemnity
obligations hereunder. Tenant shall also maintain during the Term workers'
compensation insurance as required by statute, and primary, noncontributory,
"all-risk" property damage insurance covering Tenant's personal property,
business records, fixtures and equipment, for damage or other loss caused by
fire or other casualty or cause including, but not limited to, vandalism and
malicious mischief, theft, water damage of any type (including sprinkler
leakage, bursting or stoppage of pipes), explosion, business interruption (in an
amount sufficient to pay at least twelve (12) months Rent), and other insurable
risks in amounts not less than the full insurable replacement value of such
property and full insurable value of such other interests of Tenant (subject to
reasonable deductible amounts of not more than Five Thousand Dollars ($5,000)).
(B) Tenant shall provide Landlord with certificates evidencing such
coverage (and, with respect to liability coverage, showing Landlord, San
Francisco Property Company-Pacific, and Trans-Pacific Partners Company as
additional insureds) prior to the Commencement Date, which shall state that such
insurance coverage may not be changed or cancelled without at least thirty (30)
days' prior written notice to Landlord, and Tenant shall provide renewal
certificates to Landlord at least thirty (30) days prior to expiration of such
policies. Landlord may periodically, but not more often than every five (5)
years, require that Tenant reasonably increase the aforementioned coverage.
Except as provided to the contrary herein, any insurance carried by Landlord or
Tenant
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shall be for the sole benefit of the party carrying such insurance. Any
insurance policies hereunder may be "blanket policies." All insurance required
hereunder shall be provided by responsible insurers and Tenant's insurer shall
be reasonably acceptable to Landlord. By this Article, Landlord and Tenant
intend that their respective property loss risks shall be borne by their
respective insurance carriers to the extent above provided, and Landlord and
Tenant hereby agree to look solely to, and seek recovery only from, their
respective insurance carriers in the event of a property loss to the extent that
such coverage is agreed to be provided hereunder. The parties each hereby waive
all rights and claims against each other for such losses, and waive all rights
of subrogation of their respective insurers, provided such waiver of subrogation
shall not affect the right of the insured to recover thereunder. The parties
agree that their respective insurance policies are now, or shall be, endorsed
such that said waiver of subrogation shall not affect the right of the insured
to recover thereunder, so long as no material additional premium is charged
therefor.
ARTICLE 12
CONDEMNATION
If the whole or any material part of the Premises or Property shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises or Property, or if Landlord shall grant a deed or other instrument
in lieu of such taking by eminent domain or condemnation, Landlord shall have
the option to terminate this Lease upon ninety (90) days' written notice,
provided such notice is given no later than one hundred eighty (180) days after
the date of such taking, condemnation, reconfiguration, vacation, deed or other
instrument. Tenant shall have reciprocal termination rights if the whole or any
material part of the Premises is permanently taken, or if access to the Premises
is permanently materially impaired. Landlord shall be entitled to receive the
entire award or payment in connection therewith, except that Tenant shall have
the right to file any separate claim available to Tenant for any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Term, and for moving expenses (so long as such
claim does not diminish or delay the award available to Landlord or any Holder,
and such claim is payable separately to Tenant). All Rent shall be apportioned
as of the date of such termination, or the date of such taking, whichever shall
first occur. If any part of the Premises shall be taken, and this Lease shall
not be so terminated, the Rent shall be proportionately abated.
ARTICLE 13
RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant's
right of possession, Tenant shall surrender possession of the Premises in the
condition required under Article 9, ordinary wear and tear excepted, and shall
surrender all keys, any key cards, and any parking stickers or cards, to
Landlord, and advise Landlord as to the combination of any locks or vaults then
remaining in the Premises, and shall remove all trade fixtures and personal
property. All obligations or rights of either party arising during or
attributable to the period ending upon expiration or earlier termination of this
Lease (including, without limitation, the indemnity obligations in Article 27),
and all obligations or rights of either party hereunder expressly arising on or
following such expiration or earlier termination (including without limitation
the provisions of this Article), shall survive such expiration or earlier
termination. All improvements, fixtures, and other items in or upon the Premises
(except trade fixtures and personal property belonging to Tenant), whether
installed by Tenant or Landlord, shall be Landlord's property and shall remain
upon the Premises, all without compensation, allowance or credit to Tenant.
However, if prior to such termination or within ten (10) days thereafter
Landlord so directs by written notice, Tenant shall promptly remove such of the
foregoing items as are designated in such notice and restore the Premises to the
condition in which it existed prior to the installation of such items. If Tenant
shall fail to perform any repairs or restoration, or fail to remove any items
from the Premises required hereunder, Landlord may do so, and Tenant shall pay
Landlord the cost thereof upon demand. All property removed from the Premises by
Landlord pursuant to any provisions of this Lease or any Law may be handled or
stored by Landlord at Tenant's expense, and Landlord shall in no event be
responsible for the value, preservation or safekeeping thereof. All property not
removed from the Premises or retaken from storage by Tenant within thirty (30)
days after expiration or earlier termination of this Lease or Tenant's right to
possession shall, at Landlord's option, be conclusively deemed to have been
conveyed by Tenant to Landlord as if by bill of sale without payment by
Landlord. Unless prohibited by applicable Law, Landlord shall have a lien
against such property for the costs incurred in removing and storing the same.
Notwithstanding anything to the contrary contained in this Lease (but subject to
any obligation of Tenant under this Lease to repair damage
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caused by the removal of Tenant's fixtures, equipment or other property as
provided for herein), Tenant shall surrender the Premises in broom clean
condition subject to normal wear and tear and to damage caused by casualty.
ARTICLE 14
HOLDING OVER
Unless Landlord expressly agrees otherwise in writing, Tenant shall pay
Landlord one hundred fifty percent (150%) of the amount of Rent then applicable,
or the highest amount permitted by Law, whichever shall be less, for each month
(and the full such monthly amount for any partial month) Tenant shall retain
possession of the Premises or any part thereof after expiration or earlier
termination of this Lease, together with all damages sustained by Landlord on
account thereof. The foregoing provisions shall not serve as permission for
Tenant to hold-over, nor serve to extend the Term (although Tenant shall remain
bound to comply with all provisions of this Lease until Tenant vacates the
Premises, and shall be subject to the provisions of Article 13). Notwithstanding
the foregoing to the contrary, at any time before or after expiration or earlier
termination of the Lease, Landlord may serve written notice to Tenant, advising
Tenant of the amount of Rent and other terms required should Tenant desire to
enter a month-to-month tenancy. If Tenant shall hold over more than one (1) full
calendar month after such notice, Tenant shall thereafter be deemed a
month-to-month tenant, on the terms and provisions of this Lease then in effect,
as modified by Landlord's notice (except that Tenant shall not be entitled to
any renewal or expansion rights contained in this Lease or any amendments
hereto).
ARTICLE 15
NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent or approval respecting any action by Tenant shall not
constitute a waiver of the requirement for obtaining Landlord's consent or
approval respecting any subsequent action. Acceptance of Rent by Landlord shall
not constitute a waiver of any breach by Tenant of any term or provisions of
this Lease. No acceptance of a lesser amount than the Rent herein stipulated
shall be deemed a waiver of Landlord's right to receive the full amount due, nor
shall any endorsement or statement on any check or payment or any letter
accompanying such check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the full amount due. The acceptance of Rent or of the performance of
any other term or provision from any Person other than Tenant, including any
Transferee (as defined in Article 21), shall not constitute a waiver of
Landlord's right to approve any Transfer (as defined in Article 21).
ARTICLE 16
ATTORNEYS' FEES AND JURY TRIAL
In the event of any litigation between the parties, the prevailing
party shall be entitled to obtain, as part of the judgment, all reasonable
attorneys' fees, costs and expenses incurred in connection with such litigation,
except as may be limited by applicable Law. In the interest of obtaining a
speedier and less costly hearing of any dispute, the parties hereby each
irrevocably waive the right to trial by jury.
ARTICLE 17
PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES
Tenant shall pay prior to delinquency all taxes, assessments, license
fees, charges or other governmental impositions assessed against or levied or
imposed upon Tenant's business operations, or upon Tenant's leasehold interest,
or Tenant's fixtures, furnishings, equipment and personal property located in
the Premises, and any Work to the Premises under Article 8 or the Work
Agreement. Whenever possible, Tenant shall cause all such items to be assessed
and billed separately from the Property of Landlord. In the event any such items
shall be assessed and billed with the property of Landlord, Tenant shall pay
Landlord its share of such taxes, charges or other governmental impositions
within thirty (30) days after Landlord delivers a statement and a copy of the
assessment or other documentation showing the amount of such impositions
applicable to Tenant's property. Tenant shall pay any
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rent tax or sales tax, service tax, transfer tax or value added tax, or any
other applicable tax on the Rent or services herein or otherwise respecting this
Lease.
ARTICLE 18
APPROVALS
Unless expressly provided in this Lease to the contrary (and except for
matters affecting the structure, safety or security of the Property, or the
appearance of the Property from any common or public areas), whenever Landlord's
approval or consent is expressly required under this Lease (including Article
21) or any other agreement between the parties, Landlord shall not unreasonably
withhold or delay such approval or consent (reasonableness shall be a condition
to Landlord's enforcement of such consent or approval requirement, and not a
covenant). If Tenant believes Landlord has unreasonably withheld or delayed
giving such approval or consent, Tenant's sole and exclusive remedy shall be to
request a court of competent jurisdiction to grant injunctive relief to compel
Landlord to grant such approval or consent, and Tenant expressly waives any and
all rights it may have, now or in the future, to bring an action or make a claim
for any other relief, including without limitation declaratory judgment, damages
or other monetary relief including, but not limited to, punitive damages.
ARTICLE 19
SUBORDINATION, ATTAINMENT AND MORTGAGEE PROTECTION
(A) SUBORDINATION AND ATTORNMENT. This Lease is subject and subordinate
to all Mortgages (as defined in Article 25) now or hereafter placed upon the
Property, and all other encumbrances and matters of public record applicable to
the Property. If any foreclosure proceedings are initiated by any Holder (as
defined in Article 25) or a deed in lieu of such foreclosure is granted, Tenant
agrees, upon written request of any such Holder, purchaser at foreclosure sale
or grantee of a deed in lieu of foreclosure, to attorn and pay Rent to such
party and to execute and deliver any instruments necessary or appropriate to
evidence or effectuate such attornment (provided such Holder or purchaser or
grantee shall agree to accept this Lease and not disturb Tenant's occupancy, and
so long as Tenant does not default and fail to cure within the time permitted
hereunder). However, in the event of attornment, no Holder, purchaser at
foreclosure sale or grantee of a deed in lieu of foreclosure shall be: (i)
liable for any act or omission of Landlord or subject to any offsets or defenses
which Tenant might have against Landlord (prior to such party becoming Landlord
under such attornment), (ii) liable for any security deposit or bound by any
prepaid Rent, in excess of Rent for the month in which such party becomes
Landlord under such attornment, not actually received by such party, or (iii)
bound by any future modification of this Lease not consented to by such party.
Any Holder may elect to make this Lease prior to the lien of its Mortgage by
giving written notice to Tenant, and if the Holder of any prior Mortgage shall
require, this Lease shall be prior to any subordinate Mortgage.
(B) MORTGAGEE PROTECTION. Notwithstanding anything herein to the
contrary, Tenant shall not have any duty to send any notice referred to in
Paragraphs (i) and (ii) of this Article 19, Section (B) to any Holder who does
not by written notice to Tenant specify the address to which copies are to be
sent. All notices and copies of notices required to be sent or delivered
pursuant to Paragraphs (i) and (ii) of this Article 19, Section (B) shall be
sent in the same manner as notices otherwise are to be sent under the terms of
this Lease. Any Holder's address for receipt of notices may be changed by
written notice to Tenant.
(i) Tenant shall send to all Holders a copy of all notices of
default sent by Tenant to Landlord.
(ii) Notwithstanding anything to the contrary contained in the
Lease and subject to any limitation on Tenant's rights to terminate the Lease
otherwise contained in the Lease, Tenant may seek to terminate the Lease
pursuant to any express provision therein contained only after Tenant has sent
to each Holder a written notice specifying the reason for such purported
termination and:
(a) In the event such reason constitutes a failure by
Landlord to pay any funds to Tenant or to any other party, no such Holder cures
such failure within thirty (30) days after receipt by all Holders of the written
notice of default from Tenant;
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(b) In the event of any other reason which may be
specified in the Lease susceptible of being cured by any Holder, no Holder
commences within thirty (30) days after receipt by all Holders of written notice
of such reason from Tenant the work of curing such matter and carries the same
to completion with all reasonable dispatch. So long as any Holder is proceeding
diligently pursuant to any of the provisions of this Paragraph (ii) or is
otherwise attempting to remedy the situation giving rise to Tenant's right to
terminate the Lease, Tenant's rights so to terminate the Lease shall be
suspended. Once the Holder has so proceeded, Tenant may not commence any
proceeding or other efforts to terminate the Lease without prior written notice
to all Holders.
(iii) Any Holder shall have the right to perform any
obligations of Landlord under the Lease, and Tenant shall accept such
performance by or at the instance of any Holder as if the same had been made by
Landlord. Subject to the provisions of Paragraph (ii) above, no default shall be
deemed to exist under the Lease if proceedings shall in good faith have been
commenced promptly to rectify the same and prosecuted to completion with
diligence.
(iv) Nothing herein contained shall be deemed to require any
Holder to continue with any foreclosure or any other proceedings against
Landlord's interest or with efforts to obtain a deed in lieu of foreclosure or,
once having obtained possession of the premises, to continue in possession
thereof.
(v) Landlord and Tenant shall cooperate and agree to include
in the Lease by suitable amendment from time to time any provision which may
reasonably be requested by any proposed Holder for purposes of implementing the
lender protection provisions herein contained.
ARTICLE 20
ESTOPPEL CERTIFICATE
Tenant shall from time to time, within ten (10) days after written
request from Landlord, execute, acknowledge and deliver a statement in the form
of Exhibit D attached hereto (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 (or,
if this Lease is claimed not be in force and effect, specifying the grounds
therefor) and any dates to which the Rent has been paid in advance, and the
amount of any Security Deposit, (ii) acknowledging that there are not any
uncured defaults on the part of Landlord hereunder (or specifying such defaults
if any are claimed), and (iii) certifying such other matters as Landlord may
reasonably request, or as may be requested by Landlord's current or prospective
Holders, insurance carriers, auditors, or prospective purchasers. Any such
statement may be relied upon by any such parties. If Tenant shall fail to
execute and return such statement within the time required herein, Landlord
acting in good faith shall be authorized as Tenant's attorney-in-fact to execute
such statement on behalf of Tenant, and Tenant shall be deemed to have agreed
with the matters set forth therein.
ARTICLE 21
ASSIGNMENT AND SUBLETTING
(A) TRANSFERS. Tenant shall not, without the prior written consent of
Landlord, which consent shall be given only upon the satisfaction of the
conditions contained in this Article 21 as set forth below: (i) assign,
mortgage, pledge, hypothecate, encumber, permit any lien to attach to, or
otherwise transfer, this Lease or any interest hereunder, by operation of law or
otherwise, (ii) sublet the Premises or any part thereof, or (iii) permit the use
of the Premises by any Persons (as defined in Article 25) other than Tenant and
its employees (all of the foregoing are hereinafter sometimes referred to
collectively as "Transfers" and any Person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "Transferee"). If
Tenant shall desire Landlord's consent to any Transfer, Tenant shall notify
Landlord in writing, which notice shall include: (a) the proposed effective date
(which shall not be less than fifteen (15) business days nor more than one
hundred eighty (180) days after Tenant's notice), (b) the portion of the
Premises to be Transferred (herein called the "Subject Space"), (c) the terms of
the proposed Transfer and the consideration therefor, the name and address of
the proposed Transferee, and a copy of all documentation pertaining to the
proposed Transfer, (d) current, audited financial statements of the proposed
Transferee certified by an officer, partner or owner thereof, and any other
information to enable Landlord to determine the financial responsibility,
character, and reputation of the proposed Transferee, nature of such
Transferee's business and prior experience in owning and operating other
businesses, (e), the proposed use of the
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Subject Space by the proposed Transferee, and (f) such other information as
Landlord may reasonably require. Any Transfer made without complying with this
Article shall, at Landlord's option, be null, void and of no effect (unless
waived in writing by Landlord), or shall constitute a Default under this Lease.
Whether or not Landlord shall consent to the Transfer and to the Transferee,
Tenant shall pay: (i) Five Hundred Dollars ($500) towards Landlord's review and
processing expenses at such time as the request is made, and (ii) any reasonable
legal fees incurred by Landlord, within thirty (30) days after written request
by Landlord.
(B) APPROVAL. Landlord will not unreasonably withhold its consent to
any proposed Transfer of the Subject Space to the Transferee on the terms
specified in Tenant's notice, provided that the following conditions are
satisfied: (i) Transferee is of a character or reputation or engaged in a
business which is consistent with the quality of the Property and would not be a
significantly less prestigious occupant of the Property than Tenant, (ii)
Transferee intends to use the Subject Space for purposes which are permitted
under this Lease, (iii) the Subject Space is not less than the entire area of
the Premises; provided, however, that Landlord may in its sole and absolute
discretion permit a Transfer of less than all of the Premises subject to such
conditions Landlord deems applicable, including without limitation the condition
that the Subject Space be regular in shape with appropriate means of ingress and
egress suitable for normal renting purposes, (iv) Transferee is not a
governmental agency or instrumentality, or a Person with whom Landlord or any
agent of Landlord has solicited or is negotiating with as a potential tenant at
the Property, (v) Transferee has a reasonable financial condition in relation to
the obligations to be assumed in connection with the Transfer, (vi) Tenant is
not in Default hereunder either at the time Tenant requests consent to the
proposed Transfer or on the effective date of the Transfer, and (vii) Tenant and
Transferee execute documentation concerning the Transfer which is reasonably
acceptable to Landlord, including without limitation a sublease or assignment
and a Landlord's consent on Landlord's form, all of which shall be delivered to
Landlord prior to the Transfer. Subject to the satisfaction of the foregoing
conditions, Landlord's consent to any Transfer shall not be unreasonably
withheld.
(C) TRANSFER PREMIUM. If Landlord consents to a Transfer and as a
condition thereto which the parties hereby agree is reasonable, Tenant shall pay
Landlord fifty percent (50%) of any Transfer Premium derived by Tenant from such
Transfer. "Transfer Premium" shall mean all rent, additional rent or other
consideration paid by such Transferee in excess of the Rent payable by Tenant
under this Lease (on a monthly basis during the Term, and on a per rentable
square foot basis, if less than all of the Premises is transferred), after
deducting the reasonable expenses incurred by Tenant for any changes,
alterations and improvements to the Premises, any other economic concessions or
services provided to Transferee, and any customary brokerage commissions paid in
connection with the Transfer. If part of the consideration for such Transfer
shall be payable other than in cash, Landlord's share of such non-cash
consideration shall be in such form as is reasonably satisfactory to Landlord.
The percentage of the Transfer Premium due Landlord hereunder shall be paid
within ten (10) days after Tenant receives any Transfer Premium from the
Transferee.
(D) RECAPTURE. Notwithstanding anything to the contrary contained in
this Article, Landlord shall have the option, by giving written notice to Tenant
within fifteen (15) business days after receipt of Tenant's notice of any
proposed Transfer, to recapture the Subject Space. Such recapture notice shall
cancel and terminate this Lease with respect to the Subject Space as of the date
stated in Tenant's notice as the effective date of the proposed Transfer (or, at
Landlord's option, shall caused the Transfer to be made to Landlord or its
agent, in which case the parties shall execute the Transfer documentation
promptly thereafter). If this Lease shall be cancelled with respect to less than
the entire Premises, the Rent reserved herein shall be prorated on the basis of
the number of rentable square feet retained by Tenant in proportion to the
number of rentable square feet contained in the Premises, this Lease as so
amended shall continue thereafter in full force and effect and, upon request of
either party, the parties shall execute written confirmation of the same.
(E) TERMS OF CONSENT. If Landlord consents to a Transfer: (i) the terms
and conditions of this Lease, including among other things Tenant's liability
for the Subject Space, shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) no Transferee shall succeed to any
rights provided in this Lease or any amendment hereto to extend the Term of this
Lease, expand the Premises, or lease additional space, any such rights being
deemed personal to Tenant, (iv) Tenant shall deliver to Landlord promptly after
execution, an original executed copy of all documentation pertaining to the
Transfer in form reasonably acceptable to Landlord, and (v) Tenant shall
furnish, upon Landlord's request, a complete statement certified by an
independent certified public accountant, or Tenant's
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chief financial officer, setting forth in detail the computation of any Transfer
Premium Tenant has derived and shall derive from such Transfer. Landlord or its
authorized representatives shall have the right at all reasonable times to audit
the books, records and papers of Tenant relating to any Transfer and shall have
the right to make copies thereof. If the Transfer Premium respecting any
Transfer shall be found understated, Tenant shall within thirty (30) days after
demand pay the deficiency, and if understated by more than two percent (2%),
Tenant shall pay Landlord's costs of such audit. Any sublease hereunder shall be
subordinate and subject to the provisions of this Lease, and if this Lease shall
be terminated during the term of any sublease, Landlord shall have the right to:
(aa) treat such sublease as cancelled and repossess the Subject Space by any
lawful means, or (bb) require that such subtenant attorn to and recognize
Landlord as its landlord under any such sublease. If Tenant shall Default and
fail to cure within the time permitted for cure under Article 23(A), Landlord is
hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct
any Transferee to make all payments under or in connection with the Transfer
directly to Landlord (which Landlord shall apply towards Tenant's obligations
under this Lease) until such Default is cured.
(F) CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer"
shall also include (i) if Tenant is a partnership, the withdrawal or change
(voluntary, involuntary or by operation of law) of a majority of the partners,
or a transfer of a majority of partnership interests, within a twelve (12) month
period, or the dissolution of the partnership, or (ii) if Tenant is a closely
held corporation (i.e., whose stock is not publicly held and not traded through
an exchange or over the counter), the dissolution, merger, consolidation or
other reorganization of Tenant, or (iii) within a twelve (12) month period: (aa)
the sale or other transfer of more than an aggregate of fifty percent (50%) of
the voting shares of Tenant (other than to immediate family members by reason of
gift of death or (bb) the sale, mortgage, hypothecation or pledge of more than
an aggregate of fifty percent (50%) of Tenant's net assets.
ARTICLE 22
RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full
rights to control the Property (which rights may be exercised without subjecting
Landlord to claims for constructive eviction, abatement of Rent, damages or
other claims of any kind), including without limitation the following rights:
(A) To change the name or street address of the Property; install and
maintain signs on the exterior and interior of the Property; retain at all
times, and use in appropriate instances, keys to all doors within and into the
Premises; grant to any Person the right to conduct any business or render any
service at the Property, whether or not it is the same or similar to Tenant's
Permitted Use; and have access for Landlord and other tenants of the Property to
any mail chutes located on the Premises according to the rules of the United
States Postal Service.
(B) To enter the Premises at reasonable hours for reasonable purposes,
including inspection and the supplying of cleaning service or other services to
be provided Tenant hereunder; to show the Premises to current and prospective
mortgage lenders, ground lessors, insurers, and prospective purchasers, tenants
and brokers, at reasonable hours; and, if Tenant shall abandon the Premises at
any time, or shall vacate the same during the last six (6) months of the Term,
to decorate, remodel, repair, or alter the Premises.
(C) To limit or prevent access to the Property, shut down elevator
service, activate elevator emergency controls, or otherwise take such action or
preventative measure deemed necessary by Landlord for the safety of tenants or
other occupants of the Property or the protection of the Property and other
property located thereon or therein, in case of fire, invasion, insurrection,
riot, civil disorder, public excitement or other dangerous condition, or threat
thereof.
(D) To decorate and to make alterations, additions and improvements,
structural or otherwise, in or to the Property or any part thereof, and any
adjacent building, structure, parking facility, land, street or alley (including
without limitation changes and reductions in corridors, lobbies, parking
facilities and other public areas and the installation of kiosks, planters,
sculptures, displays, escalators, mezzanines, and other structures, facilities,
amenities and features therein, and changes for the purpose of connection with
or entrance into or use of the Property in conjunction with any adjoining or
adjacent building or buildings, now existing or hereafter constructed). In
connection with such matters, or with any other repairs, maintenance,
improvements or alterations in or about the Property, Landlord may erect
scaffolding and other structures reasonably required, and during such operations
may
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enter upon the Premises and take into and upon or through the Premises all
materials required to make such repairs, maintenance, alterations or
improvements, and may close public entry ways, other public areas, restrooms,
stairways or corridors.
(E) To substitute for the Premises other premises (herein referred to
as the "new premises") at the Property provided: (i) the new premises shall be
similar to the Premises in area, (ii) Landlord shall give Tenant at least thirty
(30) days' written notice before making such change, and the parties shall
execute an amendment to the Lease confirming the change within thirty (30) days
after either party shall request the same; and (iii) if Tenant shall already
have taken possession of the Premises: (aa) Landlord shall pay the direct,
out-of-pocket, reasonable expenses of Tenant in moving from the Premises to the
new premises and improving the new premises so that they are substantially
similar to the Premises, and, (bb) such move shall be made during evenings,
weekends, or otherwise so as to incur the least inconvenience to Tenant.
In connection with entering the Premises to exercise any of the
foregoing rights, Landlord shall (i) provide reasonable advance written or oral
notice to Tenant's on-site manager or other appropriate person (except in
emergencies, or for routine cleaning or other routine matters), and (ii) take
reasonable steps to minimize any interference with Tenant's business.
ARTICLE 23
LANDLORD'S REMEDIES
(A) DEFAULT. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant which, if not cured within any applicable
time permitted for cure below, shall give rise to Landlord's remedies set forth
in Paragraph (B) below: (i) failure by Tenant to make when due any payment of
Rent; (ii) failure by Tenant to observe or perform any of the terms or
conditions of this Lease to be observed or performed by Tenant (other than the
payment of Rent) unless such failure is cured within thirty (30) days after
written notice by Landlord to Tenant (or such shorter period expressly provided
elsewhere in this Lease); (iii) failure by Tenant to comply with the Rules,
unless such failure is cured within five (5) days after notice; (iv) vacation of
all or a substantial portion of the Premises for more than thirty (30)
consecutive days or the failure to take possession of the Premises within sixty
(60) days after the Commencement Date; (v) either (aa) making by Tenant or any
guarantor of this Lease ("Guarantor") of any general assignment for the benefit
of creditors, or (bb) filing by or against Tenant or any Guarantor of a petition
to have Tenant or such Guarantor 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 or such Guarantor, the same is
dismissed within sixty (60) days), or (cc) appointment of a trustee or receiver
to take possession of substantially all of Tenant's assets located on the
Premises or of Tenant's interest in this Lease (unless possession is restored to
Tenant within thirty (30) days), or (cc) appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located on the Premises
or of Tenant's interest in this Lease (unless possession is restored to Tenant
within thirty (30) days), or (dd) attachment, execution or other judicial
seizure of substantially all of Tenant's assets located on the Premises or of
Tenant's interest in this Lease, or (ee) Tenant's or any Guarantor's convening
of a meeting of its creditors or any class thereof for the purpose of effecting
a moratorium upon or composition of its debts, or (ff) Tenant's or any
Guarantor's insolvency or admission of an inability to pay its debts as they
mature; (vi) any material misrepresentation herein, or material
misrepresentation or omission in any financial statements or other materials
provided by Tenant or any Guarantor in connection with negotiating or entering
this Lease or in connection with any Transfer under Article 21; (vii) Tenant's
failure to deliver, within thirty (30) days of then extant expiration date, a
one (1) year extension to the Letter of Credit; or (viii) failure by Tenant to
cure within any applicable times permitted thereunder any default under any
other lease for space at the Property, now or hereafter entered into by Tenant
(and any Default hereunder not cured within the times permitted for cure herein
shall, at Landlord's election, constitute a default under any such other lease
or leases). Failure by Tenant to comply with the same term or condition of this
Lease on three (3) occasions during any twelve (12) month period shall cause any
failure to comply with such term or condition during the succeeding twelve (12)
month period, at Landlord's option, to constitute an incurable Default, if
Landlord has given Tenant notice of each such failure within ten (10) days after
each such failure occurs. The notice and cure periods provided herein are in
lieu of, and not in addition to, any notice and cure periods provided by Law.
(B) REMEDIES. In the event of any Default by Tenant as provided in
Article 23(A) above, Landlord may, at any time thereafter, with or without
notice or demand and without limiting Landlord in the exercise of a
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right or remedy which Landlord may have by reason of such Default and in
addition to any other right or remedy Landlord may have at law or in equity (all
of which remedies shall whenever possible be deemed to be cumulative and not
exclusive) exercise any or all of the following remedies:
(i) Terminate this Lease and recover damages as provided by
California Civil Code Section 1951.2, including without limitation all Costs of
Reletting (as defined in Paragraph (D) below) and recovery of 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 Rent loss for the same period that
the Tenant proves could have been reasonably avoided, as computed pursuant to
subsection (b) of California Civil Code Section 1951.2.
(ii) Continue this Lease in effect even though Tenant has
breached the Lease and abandoned the Premises and enforce all of Landlord's
rights and remedies under this Lease, as provided by California Civil Code
Section 1951.4, including the right to recover Rent as it becomes due for so
long as Landlord does not terminate Tenant's right to possession. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver upon Landlord's initiative to protect its interest under this
Lease shall not constitute a termination of Tenant's right to possession.
(iii) Following Tenant's vacation or abandonment of the
Premises or issuance of a court order or judgment giving Landlord the right to
possession of the Premises, enter the Premises and remove therefrom all persons
not claiming rights as tenants and all property, and store such property in a
public warehouse or elsewhere at the cost and expense of and for the account of
Tenant. In the event that Tenant shall not immediately pay the cost of storage
of such property after the same has been stored for a period of thirty (30) days
or more, Landlord may sell any or all such property as a public or private sale
in such manner and at such times and places as Landlord may deem proper, without
notice to or demand upon Tenant, and apply the proceeds therefrom pursuant to
applicable California law.
(iv) Have a receiver appointed for Tenant, upon application by
Landlord: (aa) to take possession of the Premises; (bb) to apply any Rent
collected from the Premises first to the costs of such receivership, then to all
amounts (other than Rent) owing under this Lease, and then to Rent owing under
this Lease; and (cc) to exercise all other rights and remedies granted to
Landlord pursuant to Article 23(B)(iii) above.
The remedies set forth in this Article 23(B) shall be subject to
applicable law including, but not limited to, the unlawful detainer statutes of
the State of California.
(C) SPECIFIC PERFORMANCE AND COLLECTION OF RENT. Landlord shall at all
times have the rights and remedies (which shall be cumulative with each other
and cumulative and in addition to those rights and remedies available under
Paragraph (B) above or any Law or other provision of this Lease), without prior
demand or notice except as required by applicable Law: (i) to seek any
declaratory, injunctive or other equitable relief, and specifically enforce this
Lease, or restrain or enjoin a violation or breach of any provision hereof, and
(ii) to sue for and collect any unpaid Rent which has accrued as provided in
Paragraph (B) above.
(D) CERTAIN DEFINITIONS. "Costs of Re-Letting" shall include, without
limitation, all reasonable costs and expenses incurred by Landlord for any
repairs, maintenance, changes, alterations and improvements to the Premises,
brokerage commissions, advertising costs, attorneys' fees, any customary free
rent periods or credits, tenant improvement allowances, take-over lease
obligations and other customary, necessary or appropriate economic incentives
required to enter leases with Replacement Tenants, and costs of collecting rent
from Replacement Tenants. "Replacement Tenants" shall mean any Persons (as
defined in Article 25) to whom Landlord relets the Premises or any portion
thereof pursuant to this Article.
(E) OTHER MATTERS. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, acceptance of keys from Tenant, or any
other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or accept a
surrender of the Premises, nor shall the same operate to release the Tenant in
whole or in part from any of Tenant's obligations hereunder, unless express
written notice of such intention is sent by Landlord or its agent to Tenant. To
the fullest extent permitted by Law, all rent and other consideration paid by
any Replacement Tenants shall be applied: first, to the Costs of Re-Letting,
second, to the payment of any Rent theretofore accrued, and the residue, if any,
shall be held by Landlord and
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applied to the payment of other obligations of Tenant to Landlord as the same
become due (with any remaining residue to be retained by Landlord). Rent shall
be paid without any prior demand or notice therefor (except as expressly
provided herein) and without any deduction, set-off or counterclaim, or relief
from any valuation or appraisement laws. Landlord may apply payments received
from Tenant to any obligations of Tenant then accrued, without regard to such
obligations as may be designated by Tenant. Landlord shall be under no
obligation to observe or perform any provision of this Lease on its part to be
observed or performed which accrues after the date of any Default by Tenant
hereunder unless and until the Default has been cured within the times permitted
hereunder. The times set forth herein for the curing of Defaults by Tenant are
of the essence of this Lease. Tenant hereby irrevocably waives any right
otherwise available under any Law to redeem or reinstate this Lease.
(F) LETTER OF CREDIT. If Landlord draws against the Letter of Credit,
Landlord shall, immediately upon final determination of its full remedies and
damages hereunder, return the excess, if any, of such drawn amount over said
remedies and damages.
ARTICLE 24
LANDLORD'S RIGHT TO CURE
If Landlord shall fail to perform any term or provision under this
Lease required to be performed by Landlord, Landlord shall not be deemed to be
in default hereunder nor subject to any claims for damages of any kind, unless
such failure shall have continued for a period of thirty (30) days after Tenant
delivers written notice thereof to Landlord; provided, however, if the nature of
Landlord's failure is such that more than thirty (30) days are reasonably
required in order to cure, Landlord shall not be in default if Landlord
commences to cure such default within such thirty (30) day period, and
thereafter reasonably seeks to cure such default to completion. The
aforementioned periods of time permitted for Landlord to cure shall be extended
for any period of time during which Landlord is delayed in, or prevented from,
curing due to fire or other casualty, strikes, lock-outs or other labor
troubles, shortages of equipment or materials, governmental requirements, power
shortages or outages, acts or omissions by Tenant or other Persons, and other
causes beyond Landlord's reasonable control. If Landlord shall fail to cure
within the times permitted for cure herein, Landlord shall be subject to such
remedies as may be available to Tenant (subject to the other provisions of this
Lease); provided, however, in recognition that Landlord must receive timely
payments of Rent and operate the Property, Tenant shall have no right of
self-help to perform repairs or any other obligation of Landlord, and shall have
no right to withhold, set-off, or abate Rent, nor claim an actual or
constructive eviction or disturbance of Tenant's use or possession of the
Premises, unless, until and only to the extent that Tenant shall have obtained a
valid judgment by a court of competent jurisdiction.
ARTICLE 25
CAPTIONS, DEFINITIONS AND SEVERABILITY
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this Lease
shall be found invalid, void, illegal, or unenforceable with respect to any
particular Person by a court of competent jurisdiction, it shall not affect,
impair or invalidate any other terms of provisions hereof, or its enforceability
with respect to any other Person, the parties hereto agreeing that they would
have entered into the remaining portion of this Lease notwithstanding the
omission of the portion or portions adjudged invalid, void, illegal, or
unenforceable with respect to such Person.
(A) "Building" shall mean the structure identified in Article I of this
Lease.
(B) "Default Rate" shall mean eighteen percent (18%) per annum, or the
highest rate permitted by applicable Law, whichever shall be less.
(C) "Holder" shall mean the holder of any Mortgage (including without
limitation the beneficiary of a deed of trust) at the time in question, and
where such Mortgage is a ground lease, such term shall refer to the ground
lessor.
(D) "Holidays" shall mean all federally observed holidays, including
New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day,
Veterans' Day, Thanksgiving Day, Christmas Day and, to the
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extent of utilities or services provided by union members engaged at the
Property, such other holiday observed by such unions.
(E) "Landlord" and "Tenant" shall be applicable to one or more Persons
as the case may be, and the singular shall include the plural, and the neuter
shall include the masculine and feminine; and if there by more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, agents, affiliates,
successors and assigns, and the word "Tenant" shall include Tenant's assignees,
subtenants, concessionaires, licensees and other Transferees (as defined in
Article 21(A)) or as the context may require.
(F) "Law" shall mean all federal, state, county and local governmental
and municipal laws, statutes, ordinances, rules, regulations, codes, decrees,
orders and other such requirements, applicable equitable remedies and decisions
by courts in cases where such decisions are considered binding precedents in the
state in which the Property is located, and decisions of federal courts applying
the Laws of such State.
(G) "Letter of Credit" shall mean a letter of credit, in the form
attached to this Lease, in the amount of $300,000.00. If, at the end of this
Lease, no Default has occurred or is continuing, the Letter of Credit shall be
returned to the Tenant.
(H) "Mortgage" shall mean all mortgages, deeds of trust, ground leases
and other such encumbrances now or hereafter placed upon the Property or
Building, or any part thereof, and all renewals, modifications, consolidations,
replacements or extensions thereof, and all indebtedness nor or hereafter
secured thereby and all interest thereon.
(I) "Normal Business Hours" shall mean Monday through Friday, 8:00 a.m.
to 6:00 p.m., excluding Holidays, subject to reasonable revision from time to
time by Landlord.
(J) "Operating Expenses" shall mean all expenses, costs and amounts
(other than Taxes) of every kind and nature which Landlord shall pay during any
calendar year any portion of which occurs during the Term, because of or in
connection with the ownership, management, repair, maintenance, restoration and
operation of the Property including, without limitation, any amounts paid for:
(a) utilities for the Property, including but not limited to electricity, power,
gas, steam, oil or other fuel, water, sewer, lighting, heating and ventilating,
(b) permits, licenses and certificates necessary to operate, manage and lease
the Property, (c) insurance applicable to the Property, not limited to the
amount of coverage Landlord is required to provide under this Landlord, (d)
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Property, (e) accounting, legal, inspection, consulting,
concierge and other services, (f) any equipment rental (or installment equipment
purchase or equipment financing agreements), or management agreements (including
the cost of any management fee actually paid thereunder and the fair rental
value of any office space provided thereunder, up to customary and reasonable
amounts), (g) wages, salaries and other compensation and benefits (including the
fair value of any parking privileges provided) for all persons engaged in the
operation, maintenance or security of the Property, and employer's Social
Security taxes, unemployment taxes or insurance, and any other taxes which may
be levied on such wages, salaries, compensation and benefits, (h) payments under
any easement, operating agreement, declaration, restrictive covenant, or
instrument pertaining to the sharing of costs in any planned development, and
(i) operation, repair, and maintenance of all Systems and Equipment and
components thereof (including replacement of components), janitorial service,
alarm and security service, window cleaning, trash removal, elevator
maintenance, cleaning of walks, parking facilities and building walls, removal
of ice and snow, replacement of wall and floor coverings, ceiling tiles and
fixtures in lobbies, corridors, restrooms and other common or public areas or
facilities, maintenance and replacement of shrubs, trees, grass, sod and other
landscaped items, irrigation systems, drainage facilities, fences, curbs and
walkways, re-paving and re-striping parking facilities, and roof repairs. If the
Property is not fully occupied during all or a portion of any calendar year,
Landlord may, in accordance with sound accounting and management practices,
determine the amount of variable Operating Expenses (i.e., those items which
vary according to occupancy levels) that would have been paid had the Property
been fully occupied, and the amount so determined shall be deemed to have been
the amount of variable Operating Expenses for such year. If Landlord makes such
an adjustment, Landlord shall make a comparable adjustment for the Base Year.
Notwithstanding the foregoing, Operating Expenses shall not, however, include:
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(i) depreciation, interest and amortization on Mortgages, and
other debt costs or ground lease payments, if any; legal fees in connection with
leasing, tenant disputes or enforcement of leases; real estate brokers' leasing
commissions; improvements or alterations to tenant spaces; the cost of providing
any service directly to and paid directly by, any tenant; any costs expressly
excluded from Operating Expenses elsewhere in this Lease; costs of any items to
the extent Landlord receives reimbursement from insurance proceeds or from a
third party (such proceeds to be deducted from Operating Expenses in the year in
which received); and
(ii) capital expenditures, except those: (a) made primarily to
reduce Operating Expenses, or to comply with any Laws or other governmental
requirements, or (b) for replacements (as opposed to additions or new
improvements) of non-structural items located in the common areas of the
Property required to keep such areas in good condition; provided, all such
permitted capital expenditures (together with reasonable financing charges)
shall be amortized for purposes of this Lease over the shorter of: (i) their
useful lives, (ii) the period during which the reasonably estimated savings in
Operating Expenses equals the expenditures, or (iii) three (3) years.
(K) "Person" shall mean an individual, trust, partnership, joint
venture, association, corporation, and any other entity.
(L) "Property" shall mean the Building, and any common or public areas
or facilities, easements, corridors, lobbies, sidewalks, loading areas,
driveways, landscaped areas, skywalk, parking garages and lots, and any and all
other structures or facilities operated or maintained in connection with or for
the benefit of the Building, and all parcels or tracts of land on which all or
any portion of the Building or any of the other foregoing items are located, and
any fixtures, machinery, equipment, apparatus, Systems and Equipment, furniture
and other personal property located thereon or therein and used in connection
therewith, whether title is held by Landlord or its affiliates. Possession of
areas necessary for utilities, services, safety and operation of the Property,
including the Systems and Equipment (as defined in this Article), fire
stairways, perimeter walls, space between the finished ceiling of the Premises
and the slab of the floor or roof of the Property thereabove, and the use
thereof together with the right to install, maintain, operate, repair and
replace the Systems and Equipment, including any of the same in, through, under
or above the Premises in locations that will not materially interfere with
Tenant's use of the Premises, are hereby excepted and reserved by Landlord, and
not demised to Tenant.
(M) "Rent" shall have the meaning given in Article 3(F).
(N) "Systems and Equipment" shall mean any plant, machinery,
transformers, duct work, cable wires, and other equipment, facilities, and
systems designed to supply heat, ventilation, and humidity or any other services
or utilities, or comprising or serving as any component or portion of the
electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or
fire/life/safety systems or equipment, or any other mechanical, electrical,
electronic, computer or other systems or equipment for the Property.
(O) "Taxes" shall mean all federal, state, county, or local
governmental or municipal taxes, fees, charges, or other impositions of every
kind and nature, whether general, special, ordinary or extraordinary including,
without limitation, real estate taxes, general and special assessments, transit
taxes, water and sewer rents, taxes based upon the receipt of rent including
gross receipts or sales taxes applicable to the receipt of rent or service or
value added taxes (unless required to be paid by Tenant under Article 17),
personal property taxes imposed upon the fixtures, machinery, equipment,
apparatus, Systems and Equipment, appurtenances, furniture and other personal
property used in connection with the Property which are payable during any
calendar year, any portion of which occurs during the Term (without regard to
any different fiscal year used by such government or municipal authority)
because of or in connection with the ownership, leasing and operation of the
Property. Notwithstanding the foregoing, there shall be excluded from Taxes all
excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes
and other taxes to the extent applicable to Landlord's general or net income (as
opposed to rents, receipts or income attributable to operations at the
Property). If the method of taxation of real estate prevailing at the time of
execution hereof shall be, or has been, altered so as to cause the whole or any
part of the Taxes now, hereafter or heretofore levied, assessed or imposed on
real estate to be levied, assessed or imposed on Landlord, wholly or partially,
as a capital levy or otherwise, or on or measured by the rents received
therefrom, then such new or altered taxes attributable to the Property shall be
included within the term "Taxes," except that the same shall not include any
enhancement of said tax attributable to
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other income of Landlord. Any expenses incurred by Landlord in attempting to
protest, reduce or minimize Taxes shall be included in Taxes in the calendar
year such expenses are paid. Tax refunds shall be deducted from Taxes in the
year they are received by Landlord, but if such refund shall relate to Taxes
paid in a prior year of the Term, and the Lease shall have expired, Landlord
shall mail Tenant's Prorata Share of such net refund (after deducting expenses
and attorneys' fees and up to the amount Tenant paid towards Taxes during such
year), to Tenant's last known address. If Taxes for the Base Year are adjusted
as the result of protest or by means of agreement, Tenant shall pay Landlord
within thirty (30) days after written notice any additional amount required by
such adjustment for any such years or portions thereof that have theretofore
occurred. If Taxes for any period during the Term or any extension thereof shall
be increased after payment thereof by Landlord, for any reason including without
limitation error or reassessment by applicable governmental or municipal
authorities, Tenant shall pay Landlord upon demand Tenant's Prorata Share of
such increased Taxes. Tenant shall pay increased Taxes whether Taxes are
increased as a result of increases in the assessment or valuation of the
Property (whether based on a sale, change in ownership or refinancing of the
Property or otherwise), increases in the tax rates, reduction or elimination of
any rollbacks or other deductions available under current law, scheduled
reductions of any tax abatement, or the elimination, invalidity or withdrawal of
any tax abatement, or for any other cause whatsoever. Notwithstanding the
foregoing, if any Taxes shall be paid based on assessments or bills by a
governmental or municipal authority using a fiscal year other than a calendar
year, Landlord may elect to average the assessments or bills for the subject
calendar year, based on the number of months of such calendar year included in
each such assessment or bill.
(P) "Tenant's Prorata Share" of Taxes and Operating Expenses shall be
the percentage set forth in the Basic Lease Information. If, after the
Commencement Date, the Rentable Area of the Premises or the Building changes,
Tenant's Prorata Share shall be appropriately adjusted.
ARTICLE 26
CONVEYANCE BY LANDLORD AND LIABILITY
In case Landlord or any successor owner of the Property or the Building
shall convey or otherwise dispose of any portion thereof in which the Premises
is located to another Person (and nothing herein shall be construed to restrict
or prevent such conveyance or disposition), such other Person shall thereupon be
and become landlord hereunder and shall be deemed to have fully assumed and be
liable for all obligations of this Lease to be performed by Landlord which first
arise on or after the date of conveyance, including the return of any Security
Deposit, and Tenant shall attorn to such other Person, and Landlord or such
successor owner shall, from and after the date of conveyance, be free of all
liabilities and obligations hereunder not then incurred. The liability of
Landlord to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration, or any other matter relating to the Property or the
Premises, shall be limited to the interest of Landlord in the Property (and the
rental proceeds thereof). Tenant agrees to look solely to Landlord's interest in
the Property (and the rental proceeds thereof) for the recovery of any judgment
against Landlord, and Landlord shall not be personally liable for any such
judgment or deficiency after execution thereon. The limitations of liability
contained in this Article shall apply equally and inure to the benefit of
Landlord's present and future partners, beneficiaries, officers, directors,
trustees, shareholders, agents and employees, and their respective partners,
heirs, successors and assigns. Under no circumstances shall any present or
future general or limited partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have
any liability for the performance of Landlord's obligations under this Lease.
Notwithstanding the foregoing to the contrary, Landlord shall have personal
liability for insured claims, beyond Landlord's interest in the Property (and
rental proceeds thereof), to the extent of Landlord's liability insurance
coverage available for such claims.
ARTICLE 27
INDEMNIFICATION
(A) Tenant, as a material part of the consideration to be rendered to
Landlord, waives any and all claims against Landlord for damages by reason of
any death of or injury to any person or persons, including Tenant, Tenant's
agents, servants, and employees, or third persons in or about the Premises or
the Property or any injury to property of any kind whatsoever and to whomsoever
belonging, including property of Tenant, arising at any time and from any cause
other than by reason of the gross negligence or willful misconduct of Landlord,
its employees or agents, while in, upon, or in any way connected with the
Premises, the Property or the area adjacent thereto.
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<PAGE> 24
(B) Except to the extent arising from the gross negligence or willful
misconduct of Landlord, its employees or agents, Tenant shall defend, indemnify
and hold harmless Landlord from and against any and all claims, demands,
liabilities, damages, judgments, orders, decrees, actions, proceedings, fines,
penalties, costs and expenses, including without limitation, court costs and
attorneys' fees arising from or relating to any loss of life, damage or injury
to person, property or business occurring in or from the Premises, or caused by
or in connection with any violation of this Lease or use of the Premises or
Property by, or any other act or omission of, Tenant, any other occupant of the
Premises, or any of their respective agents, employees, contractors or guests.
Without limiting the generality of the foregoing, Tenant specifically
acknowledges that the indemnity undertaking herein shall apply to claims in
connection with or arising out of any "Work" as described in Article 8, the
installation, maintenance, use or removal of any "Lines" located in or serving
the Premises as described in Article 29, and the transportation, use, storage,
maintenance, generation, manufacturing, handling, disposal, release, or
discharge of any "Hazardous Material" as described in Article 30 (whether or not
any of such matters shall have been theretofore approved by Landlord), except to
the extent that any of the same arises from the intentional or grossly negligent
acts of Landlord or Landlord's agents or employees.
(C) The foregoing indemnity obligation of Tenant shall include all
reasonable costs and expenses incurred by Landlord from the first notice that
any claim or demand is to be made or may be made. The provisions of this Article
27 shall survive the termination of this Lease with respect to any damage,
injury or death occurring prior to such termination.
ARTICLE 28
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
The parties acknowledge that safety and security devices, services and
programs provided by Landlord, if any, while intended to deter crime and ensure
safety, may not in given instances prevent theft or other criminal acts, or
ensure safety of persons or property. The risk that any safety or security
device, service or program may not be effective, or may malfunction, or be
circumvented by a criminal, is assumed by Tenant with respect to Tenant's
property and interests, and Tenant shall obtain insurance coverage to the extent
Tenant desires protection against such criminal acts and other losses, as
further described in Article 11. Tenant agrees to cooperate in any reasonable
safety or security program developed by Landlord or required by Law.
ARTICLE 29
COMMUNICATIONS AND COMPUTER LINES
(A) Tenant may install, maintain, replace, remove or use any
communications or computer wires, cables and related devices (collectively, the
"Lines") at the Property in or serving the Premises, provided: (a) Tenant shall
obtain Landlord's prior written consent, use an experienced and qualified
contractor approved in writing by Landlord, and comply with all of the other
provisions of Article 8, (b) any such installation, maintenance, replacement,
removal or use shall comply with all Laws applicable thereto and good work
practices, and shall not interfere with the use of any then existing Lines at
the Property, (c) an acceptable number of spare Lines and space for additional
Lines shall be maintained for existing and future occupants of the Property, as
determined in Landlord's reasonable opinion, (d) if Tenant at any time uses any
equipment that may create an electromagnetic field exceeding the normal
insulation ratings of ordinary twisted pair riser cable or cause a radiation
higher than normal background radiation, the Lines therefor (including riser
cables) shall be appropriately insulated (at Tenant's sole cost and expense) to
prevent such excessive electromagnetic fields or radiation, (e) as a condition
to permitting the installation of new Lines, Landlord may require that Tenant
remove existing Lines located in or serving the Premises, (f) Tenant's rights
shall be subject to the rights of any regulated telephone company, and (g)
Tenant shall pay all costs in connection therewith. Landlord reserves the right
to require that Tenant remove any Lines located in or serving the Premises which
(i) are installed in violation of these provisions, or (ii) are at any time in
violation of any Laws or (iii) represent a dangerous or potentially dangerous
condition (whether such Lines were installed by Tenant or any other party),
within three (3) days after written notice.
(B) Landlord may (but shall not have the obligation to): (i) install
new Lines at the Property, (ii) create additional space for Lines at the
Property, and (iii) reasonably direct, monitor and/or supervise the
installation, maintenance, replacement and removal of, the allocation and
periodic re-allocation of available space (if
21
<PAGE> 25
any) for, and the allocation of excess capacity (if any) on, any Lines now or
hereafter installed at the Property by Landlord, Tenant or any other party (but
Landlord shall have no right to monitor or control the information transmitted
through such Lines). Such rights shall not be in limitation of other rights that
may be available to Landlord by Law or otherwise. If Landlord exercises any such
rights, Landlord may charge Tenant for the costs attributable to Tenant, or may
include those costs and all other costs in Operating Expenses (including,
without limitation, costs for acquiring and installing Lines and risers to
accommodate new Lines and spare Lines, any associated computerized system and
software for maintaining records of Line connections, and the fees of any
consulting engineers and other experts); provided, any capital expenditures
included in Operating Expenses hereunder shall be amortized (together with
reasonable finance charges) over the period of time prescribed in Article 25.
(C) Notwithstanding anything to the contrary contained in Article 13,
Landlord reserves the right to require that Tenant remove any or all Lines
installed by or for Tenant within or serving the Premises upon termination of
this Lease, provided Landlord notified Tenant prior to or within thirty (30)
days following such termination. Any Lines not required to be removed pursuant
to this Article shall, at Landlord's option, become the property of Landlord
(without payment by Landlord). If Tenant fails to remove such Lines as required
by Landlord, or violates any other provision of this Article, Landlord may,
after twenty (20) days' written notice to Tenant, remove such Lines or remedy
such other violation, at Tenant's expense (without limiting Landlord's other
remedies available under this Lease or applicable Law). Tenant shall not,
without the prior written consent of Landlord in each instance, grant to any
third party a security interest or lien in or on the Lines, and any such
security interest or lien granted without Landlord's written consent shall be
null and void. Except to the extent arising from the gross negligence or willful
misconduct of Landlord, its agents or employees, Landlord shall have no
liability for damages arising from, and Landlord does not warrant that the
Tenant's use of any Lines will be free from, the following (collectively called
"Line Problems"): (i) any eavesdropping or wire-tapping by unauthorized parties,
(ii) any failure of any Lines to satisfy Tenant's requirements, or (iii) any
shortages, failures, variations, interruptions, disconnections, loss or damage
caused by the installation, maintenance, replacement, use or removal of Lines by
or for other tenants or occupants at the Property, by any failure of the
environmental conditions or the power supply for the Property to conform to any
requirements for the Lines or any associated equipment, or any other problems
associated with any Lines by any other cause. Under no circumstances shall any
Line Problems be deemed an actual or constructive eviction of Tenant, render
Landlord liable to Tenant for abatement of Rent, or relieve Tenant from
performance of Tenant's obligations under this Lease. In no event shall Landlord
be liable for damages by reason of loss of profits, business interruption or
other consequential damage arising from any Line Problems.
ARTICLE 30
HAZARDOUS MATERIALS
(A) Tenant shall not transport, use, store, maintain, generate,
manufacture, handle, dispose, release or discharge any "Hazardous Material" (as
defined below) upon or about the Property, nor permit Tenant's employees,
agents, contractors, and other occupants of the Premises to engage in such
activities upon or about the Property. However, the foregoing provisions shall
not prohibit the transportation to and from, and use, storage, maintenance and
handling within, the Premises of substances customarily used in offices (or such
other business or activity expressly permitted to be undertaken in the Premises
under Article 6), provided: (i) such substances shall be used and maintained
only in such quantities as are reasonably necessary for such permitted use of
the Premises, strictly in accordance with applicable Law and the manufacturers'
instructions therefor, (ii) such substances shall not be disposed of, released
or discharged on the Property, and shall be transported to and from the Premises
in compliance with all applicable Laws and as Landlord shall reasonably require,
(iii) if any applicable Law or Landlord's trash removal contractor requires that
any such substances be disposed of separately from ordinary trash, Tenant shall
make arrangements at Tenant's expense for such disposal directly with a
qualified and licensed disposal company at a lawful disposal site (subject to
scheduling and approval by Landlord), and shall ensure that disposal occurs
frequently enough to prevent unnecessary storage of such substances in the
Premises, and (iv) any remaining such substances shall be completely, properly
and lawfully removed from the Property upon expiration or earlier termination of
this Lease.
(B) Tenant shall promptly notify Landlord of: (i) any enforcement,
cleanup or other regulatory action taken or threatened by any governmental or
regulatory authority with respect to the presence of any Hazardous Material on
the Premises or the migration thereof from or to other property, (ii) any
demands or claims made or threatened by any party against Tenant or the Premises
relating to any loss or injury resulting from any Hazardous
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Material on or from the Premises, and (iii) any matters where Tenant is required
by Law to give a notice to any governmental or regulatory authority respecting
any Hazardous Material on the Premises. Landlord shall have the right (but not
the obligation) to join and participate, as a party, in any legal proceedings or
actions affecting the Premises initiated in connection with any environmental,
health or safety Law. At such times as Landlord may reasonably request, Tenant
shall provide Landlord with a written list identifying any Hazardous Material
then used, stored, or maintained upon the Premises, the use and approximate
quantity of each such material, a copy of any material safety data sheet
("MSDS") issued by the manufacturer thereof, written information concerning the
removal, transportation and disposal of the same, and such other information as
Landlord may reasonably require or as may be required by Law. The term
"Hazardous Material" for purposes hereof shall mean any chemical, substance,
material or waste or component thereof which is now or hereafter listed, defined
or regulated as a hazardous or toxic chemical, substance, material or waste or
component thereof by any federal, state or local governing or regulatory body
having jurisdiction, or which would trigger any employee or community
"right-to-know" requirements adopted by any such body, or for which any such
body has adopted any requirements for the preparation or distribution of an
MSDS.
(C) If any Hazardous Material is released, discharged or disposed of
by Tenant or any other occupant of the Premises, or their employees, agents or
contractors, on or about the Property in violation of the foregoing provisions,
Tenant shall immediately, properly and in compliance with applicable Laws clean
up and remove the Hazardous Material from the Property and any other affected
property and clean or replace any affected personal property (whether or not
owned by Landlord), at Tenant's expense. Such clean up and removal work shall be
subject to Landlord's prior written approval and direction (except in
emergencies), and shall include, without limitation, any testing, investigation,
and the preparation and implementation of any remedial action plan required by
any governmental body having jurisdiction or reasonably required by Landlord. If
Tenant shall fail to comply with the provisions of this Article within five (5)
days after written notice by Landlord, or such shorter time as may be required
by Law or in order to minimize any hazard to Persons or property, Landlord may
(but shall not be obligated to) arrange for such compliance directly or as
Tenant's agent through contractors or other parties selected by Landlord, at
Tenant's expense (without limiting Landlord's other remedies under this Lease or
applicable Law). If any Hazardous Material is released, discharged or disposed
of on or about the Property and such release, discharge or disposal is not
caused by Tenant or other occupants of the Premises, or their employees, agents
or contractors, such release, discharge or disposal shall be deemed casualty
damage under Article 10 to the extent that the Premises or common areas serving
the Premises are affected thereby; in such case, Landlord and Tenant shall have
the obligations and rights respecting such casualty damage provided under
Article 10.
(D) Notwithstanding anything to the contrary, Landlord shall not be
obligated to request, review, approve, act upon or provide any information or
precautions referred to in this Article 30 and any failure by Landlord to do so
shall not be deemed approval or authorization by Landlord of the actions of
Tenant.
ARTICLE 31
MISCELLANEOUS
(A) BINDING. Each of the terms and provisions of this Lease shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, executors, administrators, guardians, custodians, successors and assigns,
subject to the provisions of Article 21 respecting Transfers.
(B) RECORDATION. Neither this Lease nor any memorandum of lease or
short form lease shall be recorded by Tenant.
(C) GOVERNING LAW. This Lease shall be construed in accordance with
the Laws of California.
(D) SURVIVAL. All obligations or rights of either party arising
during or attributable to the period ending upon expiration or earlier
termination of this Lease shall survive such expiration or earlier termination.
(E) QUIET ENJOYMENT. Landlord agrees that, if Tenant timely pays the
Rent and performs the terms and provisions hereunder, and subject to all other
terms and provisions of this Lease, Tenant shall hold and enjoy the Premises
during the Term, free of lawful claims by any Person acting by or through
Landlord.
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(F) LIGHT/AIR EASEMENTS. This Lease does not grant any legal rights
to "light and air" outside the Premises nor any particular view or cityscape
visible from the Premises.
(G) FORCE MAJEURE.
(i) Landlord shall not be chargeable with, liable for, or
responsible to Tenant or any other Person for any delay in the performance of
any act required hereunder when such delay is caused by fire, earthquake,
explosion, flood, hurricane, the elements, acts of any Person, acts of God or
the public enemy, action or interference of governmental authorities or agents,
failure to obtain governmental permits or approvals, war, invasions,
insurrection, rebellion, riots, materials shortages, strikes or lockouts or any
other cause of like nature not the fault of Landlord, and any delay due to said
causes or any of them shall not be deemed a breach of or default in the
performance of this Lease, it being specifically agreed that any time limit for
Landlord's performance contained in this Lease shall be extended for the same
period of time lost by causes hereinabove set forth.
(ii) If the Commencement Date is delayed in accordance with
Article 4 for more than one year, Landlord may declare this Lease null and void,
and if the Commencement Date is so delayed for more than seven years, this Lease
shall thereupon become null and void without further action by either party.
ARTICLE 32
[INTENTIONALLY OMITTED]
ARTICLE 33
NOTICES
Except as expressly provided to the contrary in this Lease, every
notice or other communication to be given by either party to the other with
respect hereto or to the Premises or Property shall be in writing and shall not
be effective for any purposes unless the same shall be served personally or by
national air courier service, or United States certified mail, return receipt
requested, postage prepaid, addressed, if to Tenant, at the address first set
forth in the Lease, until the Commencement Date, and thereafter to the Tenant at
the Premises, and if to Landlord, in care of Woodmont Real Estate Services, 1050
Ralston Avenue, Belmont, CA 94002, Attn: Tom Robertson, or such other address or
addresses as Landlord may from time to time designate by notice given as above
provided. Every notice or other communication hereunder shall be deemed to have
been given as of the third business day following the date of such mailing (or
as of any earlier date evidenced by a receipt from such national air courier
service or United States Postal Service) or immediately if personally delivered.
Notices not sent in accordance with the foregoing shall be of no force or effect
until received by the foregoing parties at such addresses required herein.
ARTICLE 34
REAL ESTATE BROKERS
Tenant represents that Tenant has dealt only with Colliers
International (whose commission, if any shall be paid by Landlord pursuant to
separate agreement) as broker, agent or finder in connection with this Lease and
agrees to indemnify and hold Landlord harmless from all damages, judgments,
liabilities and expenses (including reasonable attorneys' fees) arising from any
claims or demands of any other broker, agent or finder with whom Tenant has
dealt for any commission or fee alleged to be due in connection with its
participation in the procurement of Tenant or the negotiation with Tenant of
this Lease.
ARTICLE 35
[INTENTIONALLY OMITTED]
ARTICLE 36
ENTIRE AGREEMENT
This Lease, together with the Addendum (if any) and Exhibits A through
D (which collectively are hereby incorporated where referred to herein and made
a part hereof as though fully set forth), contains all the terms and provisions
between Landlord and Tenant relating to the matters set forth herein and no
prior or contemporaneous
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<PAGE> 28
agreement or understanding pertaining to the same shall be of any force or
effect. Without limitation as to the generality of the foregoing, Tenant hereby
acknowledges and agrees that Landlord's leasing agents and field personnel are
only authorized to show the Premises and negotiate terms and conditions for
leases subject to Landlord's final approval, and are not authorized to make any
agreements, representations, understandings or obligations binding upon
Landlord, respecting the condition of the Premises or Property, suitability of
the same for Tenant's business, or any other matter, and no such agreements,
representations, understandings or obligations not expressly contained herein or
in any contemporaneous agreement shall be of any force or effect. Neither this
Lease, nor any Addendum, nor the Exhibits referred to above may be modified,
except in writing by both parties.
LANDLORD:
THE ROBERT DOLLAR BUILDING ASSOCIATES, LTD.,
A California limited partnership
BY: WOODMONT REAL ESTATE SERVICES
a California corporation, its authorized agent
By:
------------------------------------------
Its:
------------------------------------------
TENANT:
STOCKPOINT, INC.,
a Delaware corporation
By:
------------------------------------------
Its:
------------------------------------------
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CERTIFICATE
(IF TENANT IS A CORPORATION)
I, , Secretary of Stockpoint, Inc., Tenant, hereby
certify that the officer(s) executing the foregoing Lease on behalf of Tenant
was/were duly authorized to act in his/their capacities as and
, and his/their action(s) are the action of Tenant.
(Corporate Seal) ------------------
Secretary
26
<PAGE> 30
EXHIBIT A
PREMISES
A-1
<PAGE> 31
EXHIBIT B
WORK AGREEMENT
1. Tenant's Work.
(a) Any items or work for which Tenant contracts separately (i.e., "Tenant's
Work), shall be subject to, Landlord's policies and schedules and shall be
conducted in such a way as not to hinder, cause any disharmony with or delay
work of improvements in the Building. To this end, Tenant's Work shall conform
with a schedule determined by Landlord. Tenant's contractors shall employ only
such labor as will not result in jurisdictional disputes or strikes or cause
disharmony with other workers employed in the Building. In no event shall work
involving the sprinkler, plumbing, mechanical, electrical, power, lighting or
fire safety systems of the Building be performed by people other than Landlord's
approved subcontractors and all telecommunications and other special electrical
equipment shall be installed under the supervision of Landlord's electrical
subcontractor. Tenant's Work shall comply with all Laws.
(b) Tenant's contractors shall carry (a) workers compensation insurance
covering all of their employees in the statutory amount, (b) employer's
liability insurance in the amount of at least Two Million Dollars ($2,000,000)
per occurrence, and (c) comprehensive general liability insurance of at least
Three Million Dollars ($3,000,000) combined single limit for bodily injury,
death, or property damage; and the policies therefor shall cover Landlord, San
Francisco Property Company-Pacific, Trans-Pacific Partners Company and all of
their agents, and Tenant as additional insureds. Builder's all risk insurance
coverage shall be carried by Tenant, in amounts sufficient to cover the
guaranteed maximum price of Tenant's Work. All insurance carriers hereunder
shall be rated at least A and X in Best's Insurance Guide. Tenant shall deliver
to Landlord certificates for all such insurance required to be carried by it (or
Tenant's contractors) hereunder before the commencement of Tenant's Work, or
before any equipment used in connection with Tenant's Work is moved onto the
Property, Building or Premises. All policies of insurance required hereunder
must require that the carrier give the Landlord and Tenant thirty (30) days
advance written notice of any cancellation or reduction in the amounts of
insurance.
(c) Not less than twenty (20) days prior to the date Tenant desires to
commence Tenant's Work, it shall give a written request to Landlord setting
forth or accompanied by all of the following:
(1) A description and schedule for the work to be performed;
(2) The names and addresses of all contractors, subcontractors and
material suppliers who will perform Tenant's Work.
(3) The approximate number of individuals, itemized by trade, who will
be present on the Premises;
(4) Copies of all plans and specifications pertaining to that portion
of Tenant's Work;
(5) Copies of all licenses and permits which may be required in
connection with the performance of Tenant's Work;
(6) Certificates of insurance indicating compliance with the insurance
requirements set forth in Article 11 of the Lease and Paragraph 11(b) above;
(7) Payment and performance bonds in an amount not less than Landlord's
reasonable estimate of the total cost of such Tenant's Work; and, at Landlord's
request, evidence of the availability of funds sufficient to pay for all such
work.
All of the foregoing shall be subject to Landlord's approval, which approval
shall not unreasonably be withheld.
B-1
<PAGE> 32
(d) Tenant shall be responsible for any hoisting charges incurred in
connection with Tenant's Work and for any expenses incurred by Landlord due to
inadequate cleanup by those performing Tenant's Work.
(e) If, in Landlord's opinion, any supplier, contractor or workman
performing Tenant's Work hinders or delays, directly or indirectly, any other
work of improvement in the Building or performs any work which may or does
impair the quality, integrity or performance of any portion of the Building,
Landlord shall give notice to Tenant and immediately thereafter Tenant shall
cause such supplier, contractor or workman immediately to remove all of its
tools, equipment and materials and to cease working in the Building. As
additional Rent under the Lease, Tenant shall reimburse Landlord for any repairs
or corrections of Landlord's Work or of any portion of the Building or the cost
of any delays caused by or resulting from the actions or omissions of anyone
performing Tenant's Work.
(f) In no event shall the Commencement Date be postponed due to any
delay in completion of Tenant's Work or due to a Tenant Delay.
(g) Tenant shall, at Tenant's expense, deliver to Landlord a set of
"as-built" plans and specifications for Tenant's Work upon completion thereof.
(h) Tenant agrees diligently to commence and pursue to completion the
construction of Tenant's Work strictly in accordance with the approved Plans and
this Work Agreement.
(i) Tenant shall cause all of Tenant's Work to be done in a good and
workmanlike manner and in compliance with all Laws and insurers of the Building
or the Premises. Tenant shall utilize for all of Tenant's Work only first class
workmanship, materials, furnishings and fixtures, using only new equipment and
supplies. Landlord may inspect the work of Tenant at reasonable times. If
Landlord inspects Tenant's Work and gives Tenant written notice of observed
defects, Tenant will correct the defects promptly. Inspection of Tenant's Work
by Landlord or Landlord's agents shall not relieve Tenant of the foregoing
obligations, and Landlord has no responsibility for determining whether Tenant's
Work complies with the approved Plans, environmental requirements, or Rules.
(j) Tenant shall indemnify, defend and hold Landlord harmless from and
against any claims, demands, losses, damages, injuries, liabilities, expenses,
judgments, liens, encumbrances, orders and awards, together with reasonable
attorneys' fees and litigation expenses arising out of or in connection with any
portion of Tenant's Work performed hereunder, for Tenant's failure to comply
with the provisions hereof, and from any failure by Tenant's contractors,
subcontractors or employees to comply with the provisions hereof.
(k) Each of Tenant's contractors shall guarantee that the portion of
Tenant's Work for which they are responsible shall be free from any defects in
workmanship and materials for a period of not less than one (1) year from the
date of completion thereof. Tenant's contractors shall each be responsible for
the replacement or repair, without additional charge, of all Tenant's Work done
or furnished in accordance with their contracts which shall become defective
within one (1) year after completion thereof. The correction of Tenant's Work
shall include, without additional charge, all additional expenses and damages in
connection with such removal or replacement of all or any part of Tenant's Work
and/or the Premises and/or the Property which may be damaged or disturbed
thereby. All such warranties or guarantees as to materials or workmanship of or
with respect to Tenant's Work shall be contained in the contracts or
subcontracts of Tenant's contractors which shall be written such that said
warranties or guarantees shall inure to the benefit of both Landlord and Tenant,
as their respective interests may appear, and can be directly enforced by
either. Tenant shall provide Landlord with any assignment or other assurance
necessary to effect such rights of direct enforcement. Tenant shall furnish
Landlord with copies of all contracts and subcontracts entered into in
connection with Tenant's Work promptly after the same are entered.
(l) When Tenant's Work is completed, Tenant promptly shall: so notify
Landlord; record a Notice of Completion and furnish to Landlord waivers of liens
and/or sworn statements, satisfactory to Landlord, from all persons performing
labor and/or supplying materials or equipment in connection with Tenant's Work
showing that such persons have been compensated in full; deliver to Landlord a
detailed breakdown of the final, total costs of Tenant's Work and such
supporting data as Landlord reasonably may request; if required by Landlord,
assign to Landlord warranties for not less than one year against defects in
workmanship, materials and equipment incorporated into Tenant's Work; pay
Landlord the sums due Landlord hereunder; and deliver to Landlord a copy of a
Certificate of Occupancy or local equivalent covering the Premises, issued by
the applicable governmental agency.
B-2
<PAGE> 33
EXHIBIT C
RULES
1. The Landlord reserves the right to exclude from the Building between
the hours of 6 p.m. and 8 a.m. Mondays through Fridays and at all hours
on Saturdays, Sundays and Holidays, and such other hours as Landlord
shall determine from time to time, 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, to persons for
whom any Tenant requests the same in writing. Each Tenant shall be
responsible for all persons for whom he 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. Notwithstanding anything to the contrary in
this paragraph, access to the Property and/or to the passageways,
entrances, exits, shipping areas, halls, corridors, elevators or
stairways and other areas in the Property may be restricted and access
gained by use of a key to the outside doors of the Property, or
Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence in the judgment of
Landlord shall be construed to prevent such access to persons with whom
Tenant deals in the normal course of Tenant's business unless such
persons are engaged in activities which are illegal or violate these
Rules. No Tenant and no employee or invitee of Tenant shall enter into
areas reserved for the exclusive use of Landlord, its employees or
invitees. Tenant shall keep doors to corridors and lobbies closed
except when persons are entering or leaving.
2. Tenant shall not paint, display, inscribe, maintain or affix any sign,
placard, picture, advertisement, name notice, lettering or direction on
any part of the outside or inside of the Property, or on any part of
the inside of the Premises which can be seen from the outside of the
Premises without the prior written consent of Landlord, and then only
such name or names or matter and in such color, size, style, character
and material as may be first approved by Landlord in writing. Landlord
shall prescribe the suite number and identification sign for the
Premises (which shall be prepared and installed by Landlord at Tenant's
expense). Landlord reserves the right to remove, at Tenant's expense
and without prior notice to Tenant, all matter not so installed or
approved pursuant to this Rule or as otherwise provided in the Lease.
3. Tenant shall not in any manner use the name of the Property for any
purpose other than that of the business address of the Tenant, or use
any picture or likeness of the Property, in any letterheads, envelopes,
circulars, notices, advertisements, containers or wrapping material
without Landlord's express consent in writing.
4. Tenant shall not place anything or allow anything to be placed in the
Premises near the glass of any door, partition, wall or window which
may be unsightly from outside the Premises, and Tenant shall not place
or permit to be placed any article of any kind on any window ledge or
on the exterior walls. Blinds, shades, awnings or other forms of inside
or outside window ventilators or similar devices shall not be placed in
or about the outside windows of the Premises except to the extent, if
any, that the character, shape, color, material and make thereof is
first approved in writing by Landlord.
5. Furniture, freight and other large or heavy articles, and all other
deliveries may be brought into the Property only at times and in the
manner designated by Landlord, and always at the Tenant's sole
responsibility and risk. Landlord may impose reasonable charges for use
of freight elevators after or before normal business hours. All damage
done to the Property by moving or maintaining such furniture, freight
or articles shall be repaired by Landlord at Tenant's expense. Landlord
may inspect items brought into the Property or Premises with respect to
weight or dangerous nature. Landlord may require that all furniture,
equipment, cartons and similar articles removed from the Premises or
the Property be listed and a removal permit therefor first be obtained
from Landlord. Tenant shall not take or permit to be taken in or out of
other
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<PAGE> 34
entrances or elevators of the Property, any item normally taken, or
which Landlord otherwise reasonably requires to be taken, in or out
through service doors or on freight elevators. Tenant shall not allow
anything to remain in or obstruct in any way, any lobby, corridor,
sidewalk, passageway, entrance, exit, stall, stairway, shipping area or
other such area. Tenant shall move all supplies, furniture and
equipment as soon as received directly to the Premises, and shall move
all such items and waste (other than waste customarily removed by
Property employees) that are at any time being taken from the Premises
directly to the areas designated for disposal. Any hand-carts used at
the Property shall have rubber wheels.
6. Tenant shall not overload any floor or part thereof in the Premises, or
Property, including any public corridors or elevators therein by
bringing in or removing any large or heavy articles, and Landlord may
direct and control the location of safes and all other heavy articles
and require supplementary supports at Tenant's expense of such material
and dimensions as Landlord may deem necessary to properly distribute
the weight.
7. Tenant shall not attach or permit to be attached additional locks or
similar devices to any door or window, change existing locks or the
mechanism thereof, or make or permit to be made any keys for any door
other than those provided by Landlord. If more than two keys for one
lock are desired, Landlord will provide them upon payment therefor by
Tenant. Tenant, upon termination of its tenancy, shall deliver to the
Landlord all keys of offices, rooms and toilet rooms which have been
furnished Tenant or which the Tenant shall have had made, and in the
event of loss of any keys so furnished shall pay Landlord therefor.
8. If Tenant desires signal, communication, alarm or other utility or
similar service connections installed or changed, Tenant shall not
install or change the same without the prior written approval of
Landlord, and then only under Landlord's direction at Tenant's expense.
Tenant shall not install in the Premises any equipment which requires
more electrical current than Landlord is required to provide under this
Lease without Landlord's prior written approval, and Tenant shall
ascertain from Landlord the maximum amount of load or demand for or use
of electrical current which can safely be permitted in the Premises,
taking into account the capacity of electric wiring in the Property and
the Premises and the needs of other tenants of the Property, and shall
not in any event connect a greater load than such safe capacity.
9. Tenant shall not obtain for use upon the Premises ice, drinking water,
towels, janitorial and other similar services, except from Persons
approved by the Landlord. Any Person engaged by Tenant to provide
janitorial or other services shall be subject to direction by the
manager or security personnel of the Landlord.
10. The toilet rooms, urinals, wash bowls and other such apparatus shall
not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein and the expense of any breakage, stoppage or damage
resulting from the violation of this Rule shall be borne by the Tenant
who, or whose employees or invitees shall have, caused it.
11. The janitorial closets, utility closets, telephone closets, broom
closets, electrical closets, storage closets, and other such closets,
rooms and areas shall be used only for the purposes and in the manner
designated by Landlord, and may not be used by tenants, or their
contractors, agents, employees, or other parties without Landlord's
prior written consent.
12. Landlord reserves the right to exclude or expel from the Property any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in
violation of any of these Rules. Tenant shall not at any time
manufacture, sell, use or give away any spirituous, fermented,
intoxicating or alcoholic liquors on the Premises nor permit any of the
same to occur (except in connection with occasional social or business
events conducted in the Premises which do not violate any Laws or
bother or annoy any other tenants). Tenant shall not at any time sell,
purchase or give away food in any form by or to any of Tenant's agents
or employees or any other parties on the Premises,
C-2
<PAGE> 35
nor permit any of the same to occur (other than in lunch rooms or
kitchens for employees as may be permitted or installed by Landlord,
which does not violate any Laws or bother or annoy any other tenant).
13. Tenant shall not make any room-to-room canvass to solicit business or
information or to distribute any article or material to or from other
tenants or occupants of the Property and shall not exhibit, sell or
offer to sell, use, rent or exchange any products or services in or
from the Premises unless ordinarily embraced within the Tenant's use of
the Premises specified in the Lease.
14. Tenant shall not waste electricity, water, heat or other utilities or
services, and agrees to cooperate fully with Landlord to assure the
most effective and energy efficient operation of the Property and shall
not allow the adjustment (except by Landlord's authorized Property
personnel) of any controls. Tenant shall keep corridor doors closed and
shall not open any windows, except that windows which are operable may
be opened with Landlord's consent. As a condition to claiming any
deficiency in the ventilation services provided by Landlord, Tenant
shall close any blinds or drapes in the Premises or minimize direct
sunlight.
15. Tenant shall conduct no auction, fire or "going out of business sale"
or bankruptcy sale in or from the Premises, and such prohibition shall
apply to Tenant's creditors.
16. Tenant shall cooperate and comply with any reasonable safety or
security programs, including fire drills and air raid drills, and the
appointment of "fire wardens" developed by Landlord for the Property,
or required by Law. Before leaving the Premises unattended, Tenant
shall close and securely lock all doors or other means of entry to the
Premises and shut off all lights and water faucets in the Premises
(except heat to the extent necessary to prevent the freezing or
bursting of pipes).
17. Tenant will comply with all municipal, county, state, federal or other
government laws, statutes, codes, regulations and other requirements,
including without limitation, environmental, health, safety and police
requirements and regulations, respecting the Premises, now or
hereinafter in force, at its sole cost, and will not use the Premises
or Property for any immoral purposes.
18. Tenant shall not (i) carry on any business, activity or service except
those ordinarily embraced within the Permitted Use of the Premises
specified in the Lease and more particularly, but without limiting the
generality of the foregoing, shall not (ii) install or operate any
internal combustion engine, boiler, machinery, refrigerating, heating
or air conditioning equipment in or about the Premises, (iii) use the
Premises for housing, lodging or sleeping purposes or for the washing
of clothes, (iv) place any radio or television antennae other than
inside of the Premises, (v) operate or permit to be operated any
musical or sound producing instrument or device which may be heard
outside the Premises, (vi) use any source of power other than
electricity, (vii) operate any electrical or other device from which
may emanate electrical or other waves which may interfere with or
impair radio, television, microwave, or other broadcasting or reception
from or in the Property or elsewhere, (viii) bring or permit any
bicycle or other vehicle, or any dog (except a seeing-eye dog in the
company of a blind person or except where specifically permitted) or
other animal or bird in the Property, (ix) make or permit objectionable
noise or odor to emanate from the Premises, (x) do anything in or about
the Premises tending to create or maintain a nuisance or do any act
tending to injure the reputation of the Property, (xi) throw or permit
to be thrown or dropped any article from any window or other opening in
the Property, (xii) use or permit upon the Premises anything that will
invalidate or increase the rate of insurance on any policies of
insurance now or hereafter carried on the Property or violate the
certificates of occupancy issued for the Premises or the Property,
(xiii) use the Premises for any purpose, or permit upon the Premises
anything, that may be dangerous to persons or property (including but
not limited to flammable oils, fluids, paints, chemicals, firearms, or
any explosive articles or materials) nor (xiv) do or permit anything to
be done upon the Premises in any way tending to disturb any other
tenant at the Property or the occupants of neighboring property.
C-3
<PAGE> 1
EXHIBIT 10.9
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of
August 24, 1999 by and between Stockpoint, Inc. a Delaware corporation (the
"Company"), and Equity Dynamics, Inc. (the "Consultant").
WHERAS, the Company and Consultant desire to confirm the terms and
conditions pertaining to the rendering of services by Consultants for the
Company;
NOW, THEREFORE, the Company and Consultant agree as follows:
1. Term of the Agreement. The Company hereby retains the
services of Consultant hereby agrees to render services as a Consultant
for the Company for a one (1) year period commencing on the date hereof
and continuing until the date which is one (1) year from the date
hereof, subject, however, to prior termination as hereinafter provided
in Section 4.
2. Duties and Obligations.
a. For the term of the Agreement, Consultants shall
provide management and financial consulting and
advisory services to the Company and shall at times
report to and follow the instructions and wishes of
the President or Chief Executive Officer of the
Company.
b. Consultant agrees that to the best of Consultant's
ability and experience Consultant will at all times
loyally and conscientiously perform all of the duties
and obligations required of and from Consultant
pursuant to the express and implicit terms hereof, to
the reasonable satisfaction of the Company.
c. Consultant agrees to indemnify and hold the Company
harmless against any and all loss, liability, damage,
claims, demands or suits and related costs and
expenses that arise, directly or indirectly, from
Consultant's acts or omissions.
<PAGE> 2
3. Compensation. In connection wit this Agreement, Consultant agrees to
provide a minimum of 20 days per year of consulting services to the
Company. To compensate Consultant for Consultant's services during the
term of this Agreement, (i) the Company shall pay Consultant aggregate
compensation equal to $50,000, $4,167.00 of which shall be paid by the
Company to Consultant upon the execution of this Agreement and $4,67
per month thereafter (ii) upon execution of this Agreement the Company
will grant Consultant warrants to purchase 125,000 shares of Common
Stock, with an exercise price of $6.00 per share, pursuant to the terms
of the stock purchase Warrant attached hereto as Exhibit A. In
addition, the Company will reimburse Consultant for all out of pocket
expenses related to Consultant's activities with the Company. The
Consultant will supply the Company with invoices containing out of
pocket expense detail.
4. Termination of Agreement.
a. This Agreement may be terminated by the Company at
any time for any reason, with or without cause by
giving sixty (60) days written notice to Consultant:
such termination shall be effective sixty (60) days
after Consultant's receipt of such written notice. If
this Agreement is terminated without Good Cause (as
defined herein) by the Company, any unvested options
granted to Consultants shall immediately vest and
become exercisable upon the effective date of such
termination. No additional benefits, aside from
options fully vested at the date of termination and
any accrued compensation, shall be due upon such
termination.
b. This Agreement shall terminate if Consultant ceases
to function and exist due to bankruptcy or otherwise.
c. The Company may terminate this Agreement at any time
for Good Cause (as defined herein). For the purposes
of the Agreement, "Good Cause" includes but is not
limited to, gross misconduct, gross neglect of
duties, intentional acts or omission of Consultant of
such negative quality that they may be deemed to have
material and adverse effects on the Company's
business, breach of any representation, warranty
agreement or covenant made by Consultant in this
Agreement or any act or omission involving fraud,
embezzlement, or misappropriation of any property or
proprietary information of the Company.
d. Consultant may terminate this Agreement by giving
sixty (60) days written notice to the Company.
<PAGE> 3
5. Working Arrangement.
a. Consultant is an independent Consultant and is solely
responsible for all taxes, withholdings, and other
similar statutory obligations, including, but not
limited to Workers' Compensation Insurance; and
Consultant will defend, indemnify and hold Company
harmless from any and all claims made by any entity
on account of an alleged failure by Consultant to
satisfy any such tax or withholding obligations.
b. Consultant has no authority to act on behalf of or
enter into any Contract or incur any liability on
behalf of the Company.
c. Consultant's performance under this Agreement shall
be conducted in full compliance with the highest
standards of practice.
6. Miscellaneous.
a. Governing Law. This Agreement shall be interpreted,
construed, governed and enforced according to the
laws of the State of Iowa.
b. Arbitration. Any controversy between the parties
hereto involving The construction or application of
any terms, covenants or conditions to this Agreement,
will be submitted to and be settled by final and
binding arbitration in New York, New York or such
other place as the parties may mutually agree, in
accordance with the rules of the American Arbitration
Association then in effect, and judgment upon the
award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
c. Amendment. No amendment or modification of the terms
or Conditions of this Agreement shall be valid unless
in writing and signed by the parties hereto.
d. Severalbility. If one or more provisions of this
Agreement are held to be unenforceable under
applicable law, such provision shall be construed, if
possible, so as to be enforceable under applicable
law, else, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
e. Successors and Assigns. The rights and obligations of
the Company under this Agreement shall insure to the
benefits of and shall be binding upon the successors
and assigns of the Company.
<PAGE> 4
Consultant shall not be entitled to assign any of his
rights or obligations under this Agreement.
f. Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to
the employment of Consultant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Stockpoint, Inc.:
By:
--------------------------
Equity Dynamics, Inc.:
By:
--------------------------
John Pappajohn
President
<PAGE> 1
EXHIBIT 10.10
OBLIGOR FILE NAME OBLIGOR # OBLIGATION NUMBER OFFICER # AMOUNT
Neural Applications
Corporation 32162 $3,000,000.00
- --------------------------------------------------------------------------------
Chicago, Illinois
Dated as of November 28, 1997
----------- ----
MASTER NOTE
(CORPORATION, PARTNERSHIP, OR JOINT VENTURE)
This Note has been executed by Neural Applications Corporation, a corporation
formed under the laws of the State of Delaware ("Borrower"); if more than one
entity executes this Note, the term "Borrower" refers to each of them
individually and some or all of them collectively, and their obligations
hereunder shall be joint and several.* If a land trustee executes this Note,
"Borrower" as used in sections 6 and 7 below also includes any beneficiary(ies)
of the land trust.**
FOR VALUE RECEIVED, on or before November 2, 2002, the scheduled maturity
date hereof, Borrower promises to pay to the order of THE NORTHERN TRUST
COMPANY, an Illinois banking corporation (hereafter, together with any
subsequent holder hereof, called "Lender"), at its main banking office at 50
South LaSalle Street, Chicago, Illinois 60675, or at such other place as Lender
may direct, the aggregate unpaid principal balance of each advance (a "Loan"
and collectively the "Loans") made by Lender to Borrower hereunder. The total
principal amount of Loans outstanding at any one time hereunder shall not
exceed Three Million and 00/100 UNITED STATES DOLLARS ($3,000,000.00).
Lender is hereby authorized by Borrower at any time and from time to time
at Lender's sole option to attach a schedule (grid) to this Note and to endorse
thereon notations with respect to each Loan specifying the date and principal
amount thereof, the Interim Maturity Date (as defined below) (if applicable),
the applicable interest rate and rate option, and the date and amount of each
payment of principal and interest made by Borrower with respect to each such
Loan. Lender's endorsements as well as its records relating to Loans shall be
rebuttably presumptive evidence of the outstanding principal and interest on
the Loans, and, in the event of inconsistency, shall prevail over any records
of Borrower and any written confirmations of Loans given by Borrower.
If Borrower wishes to obtain a Loan under this Note, Borrower shall notify
Lender orally or in writing on a banking day. Any such notice shall be
irrevocable; if the notice is received after 10:00 AM Chicago time the Loan may
not be available until the next banking day. Additional procedures for "Bank
Offered Rate" Loans, if available, are set forth below.
Each request for a Loan shall be deemed to be a representation and
warranty by Borrower to Lender that: (i) no Event of Default or Unmatured Event
of Default (in each case as defined below) has occurred and is continuing as of
the date of such request or would result from the making of the Loan; and (ii)
Borrower's representations and warranties herein are true and correct as of
such date as though made on such date. Upon receipt of each Loan request Lender
in its sole discretion shall have the right to request that Borrower provide to
Lender, prior to Lender's funding of the Loan, a certificate executed by
Borrower's President, Treasurer, or Chief Financial Officer (if Borrower is a
corporation), or a general partner or joint venturer of Borrower (if Borrower is
a partnership or joint venture) to such effect.
1. INTEREST.
Borrower agrees to pay interest on the unpaid principal amount from time
to time outstanding hereunder at the following rate per year: [CHECK ONE ONLY]
[X] (i) The "Prime-Based Rate", which shall mean the Prime Rate plus one
percent (1.00%).
[N/A] ***(ii) The "Bank Offered Rate", which shall be equal to that rate of
interest offered by Lender and accepted by Borrower and fixed for
periods of up to one year ("Interest Period(s)") (the last day of any
Interest Period being referred to as an "Interim Maturity Date").
Other description_____________________________________________________
_____________________________________________________________________.
"Prime Rate" means that rate of interest announced from time to time by Lender
called its prime rate, which rate may not at any time be the lowest rate
charged by Lender. Changes in the rate of interest on the Loans resulting from
a change in the Prime Rate shall take effect on the date set forth in each
announcement of a change in the Prime Rate.
Without limiting Borrower's obligation to repay all outstanding Loans in
full on the scheduled maturity date, each Loan at the Bank Offered Rate shall
be due and payable in full on its Interim Maturity Date. After the maturity of
any Loan, whether by acceleration or otherwise, such Loan shall bear interest
until paid, at a rate equal to two percent (2%) in addition to the rate in
effect immediately prior to maturity (but not less than the Prime Rate in
effect at maturity).
If this Note bears interest at the Bank Offered Rate and Borrower requests
a Loan, Lender shall in its sole discretion offer or decline to offer a Bank
Offered Rate (and if it offers a Bank Offered Rate, the rate of such Bank
Offered Rate shall be in Lender's sole discretion), and Borrower shall
irrevocably accept or decline such particular Bank Offered Rate and the related
Loan and confirm such acceptance in writing by letter or other written
communication dated and sent the date of such borrowing. Any confirmation by
Lender of the rate and Interest Period for any Bank Offered Rate Loan shall be
conclusive in the absence of manifest error. Without limiting Borrower's
obligations under any other document or instrument, Lender may rely without
inquiry upon any person whom it reasonably believes to be a party authorized to
accept or decline such Bank Offered Rate and the related Loan. Lender has no
obligation to make a new Loan to Borrower when a Loan at the Bank Offered Rate
matures on its Interim Maturity Date.
Interest shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days, including the date a Loan is made and
excluding the date a Loan or any portion thereof is paid or prepaid. Interest
shall be due and payable as follows:
[X] Monthly, on the last day of each month, beginning December 31, 1997,
with all accrued but unpaid interest being due and payable in full
with the final principal payment due hereunder.
[N/A] Quarterly, on the ________ day of each ___________, ____________,
________________, and _____________________ in each year, beginning
____________________, with all accrued but unpaid interest being due
and payable in full with the final principal payment due hereunder.
[N/A] Other _______________________________________________________________.
*Insert "N/A" in any blank in this Note which is not applicable. **Land trustee
may not sign upon direction of individual beneficiary(ies) unless Loans are for
business purposes. ***Do not use if collateral includes real estate.
<PAGE> 2
In addition, if the Bank Offered Rate is available under this Note, interest on
any Loan at the Bank Offered Rate, if not otherwise previously due and payable
as indicated above, shall be due and payable in full on the last day of each
Interest Period. After maturity interest shall be payable on demand.
2. PREPAYMENTS.
Borrower may prepay without penalty or premium any principal bearing
interest at the Prime-Based Rate. If Borrower prepays any principal bearing
interest at the Bank Offered Rate in whole or in part, or if the maturity of any
such Bank Offered Rate principal is accelerated, then, to the fullest extent
permitted by law Borrower shall also pay Lender for all losses (including but
not limited to interest rate margin and any other losses of anticipated
profits) and expenses incurred by reason of the liquidation or re-employment of
deposits acquired by Lender to make the Loan or maintain principal outstanding
at the Bank Offered Rate. Upon Lender's demand in writing specifying such
losses and expenses, Borrower shall promptly pay them; Lender's specification
shall be deemed correct in the absence of manifest error. Each Loan bearing
interest at the Bank Offered Rate shall be conclusively deemed to have been
funded by or on behalf of Lender by the purchase of a deposit corresponding in
amount to such Loan and in maturity to the Interest Period specified by Lender.
3. REFERENCES TO PREVIOUS NOTES, FACILITY TYPE, COLLATERAL, GUARANTIES, LOAN
& OTHER AGREEMENTS. (CHECK AS APPLICABLE)
LINE OF CREDIT: This Note has been executed pursuant to a line of credit. At
the present time Lender intends to make available to Borrower credit as
outlined herein or in any related letter until the maturity day indicated above
unless in Lender's sole judgment there has occurred an adverse change in the
assets, condition or prospects of Borrower or any guarantor. THE LINE OF CREDIT
MAY BE CANCELLED OR REDUCED BY LENDER AT LENDER'S SOLE OPTION WITHOUT PRIOR
NOTICE TO BORROWER OR ANY OTHER PERSON OR ENTITY. THE LINE OF CREDIT IS
REVOCABLE NOTWITHSTANDING PAYMENT OF ANY FEES OR MAINTENANCE OF ANY ACCOUNT
BALANCES, AS AND IF PROVIDED IN ANY ACCOMPANYING LETTER OR OTHER DOCUMENT
PERTAINING TO SUCH FEES AND/OR BALANCES. Any such fees and/or balances shall be
deemed compensation to Lender for being prepared to respond to Borrower's
requests for credit under this Note.
[X] This Note amends, restates, renews and replaces in its entirety the note
dated October 1, 1997 in the amount of $7,000,000.00, and any previously
renewed note(s). Borrower hereby expressly confirms that all collateral and
guaranties given for such prior note(s) shall secure or guarantee this Note.
All amounts outstanding under such previous note(s) shall be deemed
automatically outstanding hereunder.
[X] This Note is secured without limitation as provided in the following
and all related documents, in each case as amended, modified, renewed, restated
or replaced from time to time:
[N/A] Security Agreement dated as of _________________________________.
[N/A] Mortgage dated as of ____________________________________________
on property all or part of which is commonly known as ___________
_________________________________________________________________
________________________________________________________________.
[X] Pledge Agreement dated as of 2/26/1996.
[N/A] Other (describe)_________________________________________________
________________________________________________________________.
[X] Payment of this Note has been unconditionally guaranteed by Robert B.
Staib (each individually and all collectively referred to as "guarantor") as
provided in separately executed guaranties.
[N/A] This Note has been executed pursuant to a __________ Agreement, dated
as of the date hereof, as amended, modified, restated, renewed, or replaced
from time to time, containing covenants and other terms, to which reference is
hereby made.
4. USE OF PROCEEDS. CHECK ONE:
[X] Borrower represents and warrants that the proceeds of this Note will
be used solely for business purposes, and not for personal, family or household
use, within the meaning of Federal Truth-in-Lending and similar state laws and
regulations.
[N/A] ****Borrower represents that the proceeds of this Note will be used
for personal, family or household use. IF THIS OPTION IS CHECKED, THE FIRST
LOAN MUST BE IN THE AMOUNT OF $25,001 OR MORE
If Loan proceeds will be used to purchase or refinance the purchase of any
property describe:
N/A
N/A
Notwithstanding any other provision hereof, if this Note is covered by
Regulation Z of the Federal Reserve Board (Truth in Lending) or any like
disclosure requirement, this Note shall be secured by collateral referenced
herein or in any other document only if disclosed in a related disclosure
statement.
5. REPRESENTATIONS.
Borrower hereby represents and warrants to Lender that:
(a) Borrower and any "Subsidiary" (as defined below) are existing and in
good standing under the laws of their state of formation, are duly
qualified, in good standing and authorized to do business in each
jurisdiction where failure to do so might have a material adverse impact on
the consolidated assets, condition or prospects of Borrower; the execution,
delivery and performance of this Note and all related documents and
instruments are within Borrower's powers and have been authorized by all
necessary corporate, partnership or joint venture action;
(b) the execution, delivery and performance of this Note and all related
documents and instruments have received any and all necessary governmental
approval, and do not and will not contravene or conflict with any provision
of law or of the partnership or joint venture or similar agreement, charter
or by-laws of Borrower or any agreement affecting Borrower or its property;
and
(c) there has been no material adverse change in the business, condition,
properties, assets, operations or prospects of Borrower or any guarantor
since the date of the latest financial statements provided on behalf of
Borrower or any guarantor to Lender prior to the execution of this Note.
"Subsidiary" means any corporation, partnership, joint venture, trust, or other
legal entity of which Borrower owns directly or indirectly fifty percent (50%)
or more of the outstanding voting stock or interest, or of which Borrower has
effective control, by contract or otherwise.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
(a) failure to pay, when and as due, any principal, interest or other
amounts payable hereunder; failure to comply with or perform any agreement or
covenant of Borrower contained herein; or failure to furnish (or caused to be
furnished to) Lender when and as requested by Lender (but not more often than
once every twelve months) fully completed personal financial statement(s) of
any individual guarantor on Lender's then-standard form together with such
supporting information as Lender may reasonably request; or
(b) any default, event of default, or similar event shall occur or
continue under any other instrument, document, note, agreement, or guaranty
delivered to Lender in connection with this Note, or any such instrument,
document, note, agreement, or guaranty shall not be, or shall cease to be,
enforceable in accordance with its terms; or
(c) there shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or both, or
any similar event, or any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Borrower,
any Subsidiary, any general partner or joint venturer of Borrower, or any
guarantor, or under the terms of any indenture, agreement, or instrument under
which any such evidence of indebtedness or other agreement is issued, assumed,
secured, or guaranteed, and such event shall continue beyond any applicable
period of grace; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or
any guarantor to Lender is false or misleading in any material respect on the
date as of which the facts therein set forth are stated or certified; or
(e) any guaranty of or pledge of collateral security for this Note shall
be repudiated or become unenforceable or incapable of performance; or
(f) Borrower or any Subsidiary shall fail to maintain their existence in
good standing in their state of formation or shall fail to be duly qualified,
in good standing and authorized to do business in each jurisdiction where
failure to do so might have a material adverse impact on the consolidated
assets, condition or prospects or Borrower; or
(g) Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor shall die, become incompetent, dissolve, liquidate,
merge, consolidate, or cease to be in existence for any reason; or any general
partner or joint venturer of Borrower shall withdraw or notify any partner or
joint venturer of Borrower of its or his/her intention to withdraw as a partner
or joint venturer (or to become a limited partner) of Borrower; or any general
or limited partner or joint venturer of Borrower shall fail to make any
contribution required by the partnership or joint venture agreement of Borrower
as and when due under such agreement; or there shall be any change in the
partnership or joint venture agreement of Borrower from that in force on the
date hereof which may have a material adverse impact on the ability of Borrower
to repay this Note; or
(h) any person or entity presently not in control of a corporate,
partnership or joint venture Borrower, any corporate general partner or joint
venturer of Borrower, or any guarantor, shall obtain control directly or
indirectly of Borrower, such a corporate general partner or joint venturer, or
any guarantor, whether by purchase or gift of stock or assets, by contract, or
otherwise; or
(i) any proceeding (judicial or administrative) shall be commenced against
Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or
any guarantor, or with respect to any assets of Borrower, any Subsidiary, any
general partner or joint venturer of Borrower, or any guarantor which shall
threaten to have a material and adverse effect on the assets, condition or
prospects of Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor; or final judgment(s) and/or settlement(s) in an
aggregate amount in excess of Ten Thousand and 00/100 UNITED STATES DOLLARS
($10,000.00) in excess of insurance for which the insurer has confirmed coverage
in writing, a copy of which writing has been furnished to Lender, shall be
entered or agreed to in any suit or action commenced against Borrower, any
Subsidiary, any general partner or joint venturer of Borrower, or any guarantor;
or
(j) Borrower shall grant or any person (other than Lender) shall obtain a
security interest in any collateral for this Note; Borrower or any other person
shall perfect (or attempt to perfect) such a security interest; a court shall
determine that Lender does not have a first-priority security interest in any of
the collateral for this Note enforceable in accordance with the terms of the
related documents; or any notice of a federal tax lien against Borrower or any
general partner or joint venturer of Borrower shall be filed with any public
recorder; or
****If this box is checked and a land trustee is signing the Note, do not take
real estate as collateral.
<PAGE> 3
(k) there shall be any material loss or depreciation in the value of any
collateral for this Note for any reason, or Lender shall otherwise reasonably
deem itself insecure; or, unless expressly permitted by the related documents,
all or any part of any collateral for this Note or any direct, indirect, legal,
equitable or beneficial interest therein is assigned, transferred or sold
without Lender's prior written consent; or
(l) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Borrower, any Subsidiary, any general partner or
joint venturer of Borrower, or any guarantor; or Borrower, any Subsidiary, any
general partner or joint venturer of Borrower, or any guarantor shall take any
steps toward, or to authorize, such a proceeding; or
(m) Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor shall become insolvent, generally shall fail or be
unable to pay its debts as they mature, shall admit in writing its inability to
pay its debts as they mature, shall make a general assignment for the benefit
of its creditors, shall enter into any composition or similar agreement, or
shall suspend the transaction of all or a substantial portion of its usual
business.
7. DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of Default
specified in Section 6(a)-(k), Lender at its option may declare this Note
(principal, interest and other amounts) immediately due and payable without
notice or demand of any kind. Upon the occurrence of any Event of Default
specified in Section 6(l)-(m), this Note (principal, interest and other
amounts) shall be immediately and automatically due and payable without action
of any kind on the part of Lender. Upon the occurrence and during the
continuance of any Event of Default, Lender may exercise any rights and
remedies under this Note, any related document or instrument (including without
limitation any pertaining to collateral), and at law or in equity.
(b) Lender may, by written notice to Borrower, at any time and from time
to time, waive any Event of Default or "Unmatured Event of Default" (as defined
below), which shall be for such period and subject to such conditions as shall
be specified in any such notice. In the case of any such waiver, Lender and
Borrower shall be restored to their former position and rights hereunder, and
any Event of Default or Unmatured Event of Default so waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to or impair any
subsequent or other Event of Default or Unmatured Event of Default. No failure
to exercise, and no delay in exercising, on the part of Lender of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of Lender herein provided are cumulative and not exclusive of any
rights or remedies provided by law. "Unmatured Event of Default" means any
event or condition which would become an Event of Default with notice or the
passage of time or both.
8. NO INTEREST OVER LEGAL RATE.
Borrower does not intend or expect to pay, nor does Lender intend or
expect to charge, accept or collect any interest which, when added to any fee
or other charge upon the principal which may legally be treated as interest,
shall be in excess of the highest lawful rate. If acceleration, prepayment or
any other charges upon the principal or any portion thereof, or any other
circumstance, result in the computation or earning of interest in excess of the
highest lawful rate, then any and all such excess is hereby waived and shall
be applied against the remaining principal balance. Without limiting the
generality of the foregoing, and notwithstanding anything to the contrary
contained herein or otherwise, no deposit of funds shall be required in
connection herewith which will, when deducted from the principal amount
outstanding hereunder, cause the rate of interest hereunder to exceed the
highest lawful rate.
9. PAYMENTS, ETC.
All payments hereunder shall be made in immediately available funds, and
shall be applied first to accrued interest and then to principal; however, if
an Event of Default occurs, Lender may, in its sole discretion, and in such
order as it may choose, apply any payment to interest, principal and/or lawful
charges and expenses then accrued. Borrower shall receive immediate credit on
payments received during Lender's normal banking hours if made in cash,
immediately available funds, or by debit to available balances in an account at
Lender; otherwise payments shall be credited after clearance through normal
banking channels. Borrower authorizes Lender to charge any account of Borrower
maintained with Lender for any amounts of principal, interest, taxes, duties,
or other charges or amounts due or payable hereunder, with the amount of such
payment subject to availability of collected balances in Lender's discretion;
unless Borrower instructs otherwise, all Loans shall be credited to an
account(s) of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE LOANS
HEREUNDER UPON TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED
TO RELY SOLELY UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO
MAKE TRANSFERS TO THIRD PARTIES, REASONABLY BELIEVED BY LENDER TO HAVE BEEN
GIVEN BY AN AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All
payments shall be made without deduction for or on account of any present or
future taxes, duties or other charges levied or imposed on this Note or the
proceeds, Lender or Borrower by any governmental or political subdivision
thereof, Borrower shall upon request of Lender pay all such taxes, duties or
other charges in addition to principal and interest, including without
limitation all documentary stamp and intangible taxes, but excluding income
taxes based solely on Lender's income.
10. SETOFF.
At any time and without notice of any kind, any account, deposit or other
indebtedness owing by Lender to Borrower, and any securities or other property
of Borrower delivered to or left in the possession of Lender or its nominee or
bailee, may be set off against and applied in payment of any obligation
hereunder, whether due or not.
11. NOTICES.
All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been given or made when deposited in the mail, postage
prepaid, addressed if to Lender to its main banking office indicated above
(Attention: Division Head, Private Banking Division), and if to Borrower to its
address set forth below, or to such other address as may be hereafter
designated in writing by the respective parties hereto or, as to Borrower, may
appear in Lender's records.
12. MISCELLANEOUS.
This Note and any document or instrument executed in connection herewith
shall be governed by and construed in accordance with the internal law of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the other. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof;
references herein to Sections or provisions without reference to the document in
which they are contained are references to this Note. This Note shall bind
Borrower, its heirs, trustees (including without limitation successor and
replacement trustees), executors, personal representatives, successors and
assigns, and shall inure to the benefit of Lender, its successors and assigns,
except that Borrower may not transfer or assign any of its rights or interest
hereunder without the prior written consent of Lender. Borrower agrees to pay
upon demand all expenses (including without limitation attorneys' fees, legal
costs and expenses, and time charges of attorneys who may be employees of
Lender, in each case whether in or out of court, in original or appellate
proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof in
connection with the enforcement or preservation of its rights hereunder or under
any document or instrument executed in connection herewith. Borrower expressly
and irrevocably waives notice of dishonor or default as well as presentment,
protest, demand and notice of any kind in connection herewith. If there shall
be more than one person or entity constituting Borrower, each of them shall be
primarily, jointly and severally liable for all obligations hereunder.
13. WAIVER OF JURY TRIAL, ETC.
BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND
ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO,
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT
EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING
SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR
CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
[X] See Rider attached hereto and incorporated herein by reference.
Lender is hereby authorized by Borrower without notice to Borrower to fill
in any blank spaces and dates and strike inapplicable terms herein or in any
related document to conform to the terms upon which the Loan(s) evidenced
hereby are or may be made, for which purpose Lender shall be deemed to have
been granted an irrevocable power of attorney coupled with an interest.
Address for Notices:
2600 Cross Park Road
----------------------------------------
Neural Applications Corporation Coralville, IA 52241
- ------------------------------------ ----------------------------------------
By: /s/ Robert B. Staib
-------------------------------- ----------------------------------------
Robert B. Staib
Title: Chairman and CEO Attention:
----------------------------- -----------------------------
<PAGE> 4
RIDER TO
MASTER NOTE (FORM 9601)
DATED AS OF November 28, 1997 EXECUTED BY Neural Applications Corporation
----------- ---- -------------------------------
(the "Borrower") IN FAVOR OF THE NORTHERN TRUST COMPANY (the "Lender")
(COMMITTED LINE OF CREDIT)
1. This Rider is attached to and forms and integral part of the above-
referenced Master Note (as amended, the "Note"). Capitalized terms defined in
the remainder of the Note and not otherwise defined in this Rider shall have the
same meaning in this Rider as in the remainder of the Note. Wherever possible
this Rider and the remainder of the Note shall be construed so as to be
consistent with each other; however, if and to the extent that the terms of this
Rider conflict or are inconsistent with the remainder of the Note, the terms of
this Rider shall prevail. Except as modified by this Rider the terms of the
remainder of the Note shall apply.
2. The first paragraph of Section 3 ("LINE OF CREDIT") is deleted and the
following is substituted.
"COMMITTED LINE OF CREDIT: This Note has been executed pursuant to a
committed line of credit. By its acceptance of this Rider to this Note,
Lender shall be deemed to have agreed to make available to Borrower Loans
as outlined herein or in any related letter until the maturity date
indicated above unless and until any 'Event of Default' (as defined
below) occurs, in which case Lender shall have no obligation whatsoever
to make any Loan hereunder or otherwise to extend credit to Borrower.
Lender shall have no obligation to give Borrower or any other person or
entity prior notice of the existence of any Event of Default or of any
decision not to make any Loan or otherwise extend credit to Borrower."
Dated as of November 28, 1997.
---------- ----
------------------------------------------
Type Name
---------------------------------
Neural Applications Corporation
------------------------------------------
By: /s/ Robert B. Staib
---------------------------------------
Robert B. Staib
Title: Chairman and CEO
------------------------------------
<PAGE> 1
EXHIBIT 10.11
OBLIGOR FILE NAME OBLIGOR # OBLIGATION NUMBER OFFICER # AMOUNT
NEURAL APPLICATIONS
CORPORATION 34786 $2,000,000.00
- --------------------------------------------------------------------------------
Chicago, Illinois
Dated as of September 14, 1998
------------ ----
MASTER NOTE
(CORPORATION, PARTNERSHIP, OR JOINT VENTURE)
This Note has been executed by Neural Applications Corporation, a corporation
formed under the laws of the State of Delaware ("Borrower"); if more than one
entity executes this Note, the term "Borrower" refers to each of them
individually and some or all of them collectively, and their obligations
hereunder shall be joint and several.* If a land trustee executes this Note,
"Borrower" as used in sections 6 and 7 below also includes any beneficiary(ies)
of the land trust.**
FOR VALUE RECEIVED, on or before September 30, 1999, the scheduled maturity
date hereof, Borrower promises to pay to the order of THE NORTHERN TRUST
COMPANY, an Illinois banking corporation (hereafter, together with any
subsequent holder hereof, called "Lender"), at its main banking office at 50
South LaSalle Street, Chicago, Illinois 60675, or at such other place as Lender
may direct, the aggregate unpaid principal balance of each advance (a "Loan"
and collectively the "Loans") made by Lender to Borrower hereunder. The total
principal amount of Loans outstanding at any one time hereunder shall not
exceed Two Million UNITED STATES DOLLARS ($2,000,000.00).
Lender is hereby authorized by Borrower at any time and from time to time
at Lender's sole option to attach a schedule (grid) to this Note and to endorse
thereon notations with respect to each Loan specifying the date and principal
amount thereof, the Interim Maturity Date (as defined below) (if applicable),
the applicable interest rate and rate option, and the date and amount of each
payment of principal and interest made by Borrower with respect to each such
Loan. Lender's endorsements as well as its records relating to Loans shall be
rebuttably presumptive evidence of the outstanding principal and interest on
the Loans, and, in the event of inconsistency, shall prevail over any records
of Borrower and any written confirmations of Loans given by Borrower.
If Borrower wishes to obtain a Loan under this Note, Borrower shall notify
Lender orally or in writing on a banking day. Any such notice shall be
irrevocable; if the notice is received after 10:00 AM Chicago time the Loan may
not be available until the next banking day. Additional procedures for "Bank
Offered Rate" Loans, if available, are set forth below.
Each request for a Loan shall be deemed to be a representation and
warranty by Borrower to Lender that: (i) no Event of Default or Unmatured Event
of Default (in each case as defined below) has occurred and is continuing as of
the date of such request or would result from the making of the Loan; and (ii)
Borrower's representations and warranties herein are true and correct as of
such date as though made on such date. Upon receipt of each Loan request Lender
in its sole discretion shall have the right to request that Borrower provide to
Lender, prior to Lender's funding of the Loan, a certificate executed by
Borrower's President, Treasurer, or Chief Financial Officer (if Borrower is a
corporation), or a general partner or joint venturer of Borrower (if Borrower is
a partnership or joint venture) to such effect.
1. INTEREST.
Borrower agrees to pay interest on the unpaid principal amount from time
to time outstanding hereunder at the following rate per year: [CHECK ONE ONLY]
[XXXX] (i) The "Prime-Based Rate", which shall mean the Prime Rate plus minus
one and one-half percent (1.500%).
[N/A] ***(ii) The "Bank Offered Rate", which shall be equal to that rate of
interest offered by Lender and accepted by Borrower and fixed for
periods of up to one year ("Interest Period(s)") (the last day of any
Interest Period being referred to as an "Interim Maturity Date").
Other description_____________________________________________________
______________________________________________________________________
"Prime Rate" means that rate of interest announced from time to time by Lender
called its prime rate, which rate may not at any time be the lowest rate
charged by Lender. Changes in the rate of interest on the Loans resulting from
a change in the Prime Rate shall take effect on the date set forth in each
announcement of a change in the Prime Rate.
Without limiting Borrower's obligation to repay all outstanding Loans in
full on the scheduled maturity date, each Loan at the Bank Offered Rate shall
be due and payable in full on its Interim Maturity Date. After the maturity of
any Loan, whether by acceleration or otherwise, such Loan shall bear interest
until paid, at a rate equal to two percent (2%) in addition to the rate in
effect immediately prior to maturity (but not less than the Prime Rate in
effect at maturity).
If this Note bears interest at the Bank Offered Rate and Borrower requests
a Loan, Lender shall in its sole discretion offer or decline to offer a Bank
Offered Rate (and if it offers a Bank Offered Rate, the rate of such Bank
Offered Rate shall be in Lender's sole discretion), and Borrower shall
irrevocably accept or decline such particular Bank Offered Rate and the related
Loan and confirm such acceptance in writing by letter or other written
communication dated and sent the date of such borrowing. Any confirmation by
Lender of the rate and Interest Period for any Bank Offered Rate Loan shall be
conclusive in the absence of manifest error. Without limiting Borrower's
obligations under any other document or instrument, Lender may rely without
inquiry upon any person whom it reasonably believes to be a party authorized to
accept or decline such Bank Offered Rate and the related Loan. Lender has no
obligation to make a new Loan to Borrower when a Loan at the Bank Offered Rate
matures on its Interim Maturity Date.
Interest shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days, including the date a Loan is made and
excluding the date a Loan or any portion thereof is paid or prepaid. Interest
shall be due and payable as follows:
[X] Monthly, on the LAST day of each month, beginning September 30, 1998
with all accrued but unpaid interest being due and payable in full
with the final principal payment due hereunder.
[N/A] Quarterly, on the ________ day of each ___________, ____________,
________________, and _____________________ in each year, beginning
____________________, with all accrued but unpaid interest being due
and payable in full with the final principal payment due hereunder.
[N/A] Other _______________________________________________________________.
*Insert "N/A" in any blank in this Note which is not applicable. **Land trustee
may not sign upon direction of individual beneficiary(ies) unless Loans are for
business purposes. ***Do not use if collateral includes real estate.
<PAGE> 2
In addition, if the Bank Offered Rate is available under this Note, interest on
any Loan at the Bank Offered Rate, if not otherwise previously due and payable
as indicated above, shall be due and payable in full on the last day of each
Interest Period. After maturity interest shall be payable on demand.
2. PREPAYMENTS.
Borrower may prepay without penalty or premium any principal bearing
interest at the Prime-Based Rate. If Borrower prepays any principal bearing
interest at the Bank Offered Rate in whole or in part, or if the maturity of any
such Bank Offered Rate principal is accelerated, then, to the fullest extent
permitted by law Borrower shall also pay Lender for all losses (including but
not limited to interest rate margin and any other losses of anticipated
profits) and expenses incurred by reason of the liquidation or re-employment of
deposits acquired by Lender to make the Loan or maintain principal outstanding
at the Bank Offered Rate. Upon Lender's demand in writing specifying such
losses and expenses, Borrower shall promptly pay them; Lender's specification
shall be deemed correct in the absence of manifest error. Each Loan bearing
interest at the Bank Offered Rate shall be conclusively deemed to have been
funded by or on behalf of Lender by the purchase of a deposit corresponding in
amount to such Loan and in maturity to the Interest Period specified by Lender.
3. REFERENCES TO PREVIOUS NOTES, FACILITY TYPE, COLLATERAL, GUARANTIES, LOAN
& OTHER AGREEMENTS. (CHECK AS APPLICABLE)
LINE OF CREDIT: This Note has been executed pursuant to a line of credit. At
the present time Lender intends to make available to Borrower credit as
outlined herein or in any related letter until the maturity day indicated above
unless in Lender's sole judgment there has occurred an adverse change in the
assets, condition or prospects of Borrower or any guarantor. THE LINE OF CREDIT
MAY BE CANCELLED OR REDUCED BY LENDER AT LENDER'S SOLE OPTION WITHOUT PRIOR
NOTICE TO BORROWER OR ANY OTHER PERSON OR ENTITY. THE LINE OF CREDIT IS
REVOCABLE NOTWITHSTANDING PAYMENT OF ANY FEES OR MAINTENANCE OF ANY ACCOUNT
BALANCES, AS AND IF PROVIDED IN ANY ACCOMPANYING LETTER OR OTHER DOCUMENT
PERTAINING TO SUCH FEES AND/OR BALANCES. Any such fees and/or balances shall be
deemed compensation to Lender for being prepared to respond to Borrower's
requests for credit under this Note.
[N/A] This Note amends, restates, renews and replaces in its entirety the
note dated _________________ in the amount of $____________, and any previously
renewed note(s). Borrower hereby expressly confirms that all collateral and
guaranties given for such prior note(s) shall secure or guarantee this Note. All
amounts outstanding under such previous note(s) shall be deemed automatically
outstanding hereunder.
[X] This Note is secured without limitation as provided in the following
and all related documents, in each case as amended, modified, renewed, restated
or replaced from time to time.
[N/A] Security Agreement dated as of _________________________________.
[N/A] Mortgage dated as of ____________________________________________
on property all or part of which is commonly known as ___________
_________________________________________________________________
________________________________________________________________.
[X] Pledge Agreement dated as of September 14, 1998.
[N/A] Other (describe)_________________________________________________
________________________________________________________________.
[X] Payment of this Note has been unconditionally guaranteed by Robert B.
Staib (each individually and all collectively referred to as "guarantor") as
provided in separately executed guaranties.
[N/A] This Note has been executed pursuant to a __________ Agreement, dated
as of the date hereof, as amended, modified, restated, renewed, or replaced
from time to time, containing covenants and other terms, to which reference is
hereby made.
4. USE OF PROCEEDS. CHECK ONE:
[X] Borrower represents and warrants that the proceeds of this Note will
be used solely for business purposes, and not for personal, family or household
use, within the meaning of Federal Truth-in-Lending and similar state laws and
regulations.
[N/A] ****Borrower represents that the proceeds of this Note will be used
for personal, family or household use. IF THIS OPTION IS CHECKED, THE FIRST
LOAN MUST BE IN THE AMOUNT OF $25,001 OR MORE
If Loan proceeds will be used to purchase or refinance the purchase of any
property describe:
_______________________________________________________________________________
_______________________________________________________________________________.
Notwithstanding any other provision hereof, if this Note is covered by
Regulation Z of the Federal Reserve Board (Truth in Lending) or any like
disclosure requirement, this Note shall be secured by collateral referenced
herein or in any other document only if disclosed in a related disclosure
statement.
5. REPRESENTATIONS.
Borrower hereby represents and warrants to Lender that:
(a) Borrower and any "Subsidiary" (as defined below) are existing and in
good standing under the laws of their state of formation, are duly
qualified, in good standing and authorized to do business in each
jurisdiction where failure to do so might have a material adverse impact on
the consolidated assets, condition or prospects of Borrower; the execution,
delivery and performance of this Note and all related documents and
instruments are within Borrower's powers and have been authorized by all
necessary corporate, partnership or joint venture action;
(b) the execution, delivery and performance of this Note and all related
documents and instruments have received any and all necessary governmental
approval, and do not and will not contravene or conflict with any provision
of law or of the partnership or joint venture or similar agreement, charter
or by-laws of Borrower or any agreement affecting Borrower or its property;
and
(c) there has been no material adverse change in the business, condition,
properties, assets, operations or prospects of Borrower or any guarantor
since the date of the latest financial statements provided on behalf of
Borrower or any guarantor to Lender prior to the execution of this Note.
"Subsidiary" means any corporation, partnership, joint venture, trust, or other
legal entity of which Borrower owns directly or indirectly fifty percent (50%)
or more of the outstanding voting stock or interest, or of which Borrower has
effective control, by contract or otherwise.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
(a) failure to pay, when and as due, any principal, interest or other
amounts payable hereunder; failure to comply with or perform any agreement or
covenant of Borrower contained herein; or failure to furnish (or caused to be
furnished to) Lender when and as requested by Lender (but not more often than
once every twelve months) fully completed personal financial statement(s) of
any individual guarantor on Lender's then-standard form together with such
supporting information as Lender may reasonably request; or
(b) any default, event of default, or similar event shall occur or
continue under any other instrument, document, note, agreement, or guaranty
delivered to Lender in connection with this Note, or any such instrument,
document, note, agreement, or guaranty shall not be, or shall cease to be,
enforceable in accordance with its terms; or
(c) there shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or both, or
any similar event, or any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Borrower,
any Subsidiary, any general partner or joint venturer of Borrower, or any
guarantor, or under the terms of any indenture, agreement, or instrument under
which any such evidence of indebtedness or other agreement is issued, assumed,
secured, or guaranteed, and such event shall continue beyond any applicable
period of grace; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, any Subsidiary, any general partner or joint venture of Borrower, or
any guarantor to Lender is false or misleading in any material respect on the
date as of which the facts therein set forth are stated or certified; or
(e) any guaranty of or pledge of collateral security for this Note shall
be repudiated or become unenforceable or incapable of performance; or
(f) Borrower or any Subsidiary shall fail to maintain their existence in
good standing in their state of formation or shall fail to be duly qualified,
in good standing and authorized to do business in each jurisdiction where
failure to do so might have a material adverse impact on the consolidated
assets, condition or prospects of Borrower; or
(g) Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor shall die, become incompetent, dissolve, liquidate,
merge, consolidate, or cease to be in existence for any reason; or any general
partner or joint venturer of Borrower shall withdraw or notify any partner or
joint venturer of Borrower of its or his/her intention to withdraw as a partner
or joint venturer (or to become a limited partner) of Borrower; or any general
or limited partner or joint venturer of Borrower shall fail to make any
contribution required by the partnership or joint venture agreement of Borrower
as and when due under such agreement; or there shall be any change in the
partnership or joint venture agreement of Borrower from that in force on the
date hereof which may have a material adverse impact on the ability of Borrower
to repay this Note; or
(h) any person or entity presently not in control of a corporate,
partnership or joint venture Borrower, any corporate general partner or joint
venturer of Borrower, or any guarantor, shall obtain control directly or
indirectly of Borrower, such a corporate general partner or joint venturer, or
any guarantor, whether by purchase or gift of stock or assets, by contract, or
otherwise; or
(i) any proceeding (judicial or administrative) shall be commenced against
Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or
any guarantor, or with respect to any assets of Borrower, any Subsidiary, any
general partner or joint venturer of Borrower, or any guarantor which shall
threaten to have a material and adverse effect on the assets, condition or
prospects of Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor; or final judgment(s) and/or settlement(s) in an
aggregate amount in excess of Two Hundred Fifty Thousand UNITED STATES DOLLARS
($250,000.00) in excess of insurance for which the insurer has confirmed
coverage in writing, a copy of which writing has been furnished to Lender, shall
be entered or agreed to in any suit or action commenced against Borrower, any
Subsidiary, any general partner or joint venturer of Borrower, or any guarantor;
or
(j) Borrower shall grant or any person (other than Lender) shall obtain a
security interest in any collateral for this Note; Borrower or any other person
shall perfect (or attempt to perfect) such a security interest; a court shall
determine that Lender does not have a first-priority security interest in any
of the collateral for this Note enforceable in accordance with the terms of the
related documents; or any notice of a federal tax lien against Borrower or any
general partner or joint venturer of Borrower shall be filed with any public
recorder; or
****If this box is checked and a land trustee is signing the Note, do not take
real estate as collateral.
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<PAGE> 3
(k) there shall be any material loss or depreciation in the value of any
collateral for this Note for any reason, or Lender shall otherwise reasonably
deem itself insecure; or, unless expressly permitted by the related documents,
all or any part of any collateral for this Note or any direct, indirect, legal,
equitable or beneficial interest therein is assigned, transferred or sold
without Lender's prior written consent; or
(l) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Borrower, any Subsidiary, any general partner or
joint venturer of Borrower, or any guarantor; or Borrower, any Subsidiary, any
general partner or joint venturer of Borrower, or any guarantor shall take any
steps toward, or to authorize, such a proceeding; or
(m) Borrower, any Subsidiary, any general partner or joint venturer of
Borrower, or any guarantor shall become insolvent, generally shall fail or be
unable to pay its debts as they mature, shall admit in writing its inability to
pay its debts as they mature, shall make a general assignment for the benefit
of its creditors, shall enter into any composition or similar agreement, or
shall suspend the transaction of all or a substantial portion of its usual
business.
7. DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of Default
specified in Section 6(a)-(k), Lender at its option may declare this Note
(principal, interest and other amounts) immediately due and payable without
notice or demand of any kind. Upon the occurrence of any Event of Default
specified in Section 6(l)-(m), this Note (principal, interest and other
amounts) shall be immediately and automatically due and payable without action
of any kind on the part of Lender. Upon the occurrence and during the
continuance of any Event of Default, Lender may exercise any rights and
remedies under this Note, any related document or instrument (including without
limitation any pertaining to collateral), and at law or in equity.
(b) Lender may, by written notice to Borrower, at any time and from time
to time, waive any Event of Default or "Unmatured Event of Default" (as defined
below), which shall be for such period and subject to such conditions as shall
be specified in any such notice. In the case of any such waiver, Lender and
Borrower shall be restored to their former position and rights hereunder, and
any Event of Default or Unmatured Event of Default so waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to or impair any
subsequent or other Event of Default or Unmatured Event of Default. No failure
to exercise, and no delay in exercising, on the part of Lender of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of Lender herein provided are cumulative and not exclusive of any
rights or remedies provided by law. "Unmatured Event of Default" means any
event or condition which would become an Event of Default with notice or the
passage of time or both.
8. NO INTEREST OVER LEGAL RATE.
Borrower does not intend or expect to pay, nor does Lender intend or
expect to charge, accept or collect any interest which, when added to any fee
or other charge upon the principal which may legally be treated as interest,
shall be in excess of the highest lawful rate. If acceleration, prepayment or
any other charges upon the principal or any portion thereof, or any other
circumstance, result in the computation or earning of interest in excess of the
highest lawful rate, then any and all such excess is hereby waived and shall
be applied against the remaining principal balance. Without limiting the
generality of the foregoing, and notwithstanding anything to the contrary
contained herein or otherwise, no deposit of funds shall be required in
connection herewith which will, when deducted from the principal amount
outstanding hereunder, cause the rate of interest hereunder to exceed the
highest lawful rate.
9. PAYMENTS, ETC.
All payments hereunder shall be made in immediately available funds, and
shall be applied first to accrued interest and then to principal; however, if
an Event of Default occurs, Lender may, in its sole discretion, and in such
order as it may choose, apply any payment to interest, principal and/or lawful
charges and expenses then accrued. Borrower shall receive immediate credit on
payments received during Lender's normal banking hours if made in cash,
immediately available funds, or by debit to available balances in an account at
Lender; otherwise payments shall be credited after clearance through normal
banking channels. Borrower authorizes Lender to charge any account of Borrower
maintained with Lender for any amounts of principal, interest, taxes, duties,
or other charges or amounts due or payable hereunder, with the amount of such
payment subject to availability of collected balances in Lender's discretion;
unless Borrower instructs otherwise, all Loans shall be credited to an
account(s) of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE LOANS
HEREUNDER UPON TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED
TO RELY SOLELY UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO
MAKE TRANSFERS TO THIRD PARTIES, REASONABLY BELIEVED BY LENDER TO HAVE BEEN
GIVEN BY AN AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All
payments shall be made without deduction for or on account of any present or
future taxes, duties or other charges levied or imposed on this Note or the
proceeds, Lender or Borrower by any government or political subdivision
thereof. Borrower shall upon request of Lender pay all such taxes, duties or
other charges in addition to principal and interest, including without
limitation all documentary stamp and intangible taxes, but excluding income
taxes based solely on Lender's income.
10. SETOFF.
At any time and without notice of any kind, any account, deposit or other
indebtedness owing by Lender to Borrower, and any securities or other property
of Borrower delivered to or left in the possession of Lender or its nominee or
bailee, may be set off against and applied in payment of any obligation
hereunder, whether due or not.
11. NOTICES.
All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been given or made when deposited in the mail, postage
prepaid, addressed if to Lender to its main banking office indicated above
(Attention: Division Head, Private Banking Division), and if to Borrower to its
address set forth below, or to such other address as may be hereafter
designated in writing by the respective parties hereto or, as to Borrower, may
appear in Lender's records.
12. MISCELLANEOUS
This Note and any document or instrument executed in connection herewith
shall be governed by and construed in accordance with the internal law of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the other. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof;
references herein to Sections or provisions without reference to the document in
which they are contained are references to this Note. This Note shall bind
Borrower, its heirs, trustees (including without limitation successor and
replacement trustees), executors, personal representatives, successors and
assigns, and shall inure to the benefit of Lender, its successors and assigns,
except that Borrower may not transfer or assign any of its rights or interest
hereunder without the prior written consent of Lender. Borrower agrees to pay
upon demand all expenses (including without limitation attorneys' fees, legal
costs and expenses, and time charges of attorneys who may be employees of
Lender, in each case whether in or out of court, in original or appellate
proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof in
connection with the enforcement or preservation of its rights hereunder or under
any document or instrument executed in connection herewith. Borrower expressly
and irrevocably waives notice of dishonor or default as well as presentment,
protest, demand and notice of any kind in connection herewith. If there shall
be more than one person or entity constituting Borrower, each of them shall be
primarily, jointly and severally liable for all obligations hereunder.
13. WAIVER OF JURY TRIAL, ETC.
BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND
ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO,
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT
EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING
SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR
CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
[X] See Rider attached hereto and incorporated herein by reference.
Lender is hereby authorized by Borrower without notice to Borrower to fill
in any blank spaces and dates and strike inapplicable terms herein or in any
related document to conform to the terms upon which the Loan(s) evidenced
hereby are or may be made, for which purpose Lender shall be deemed to have
been granted an irrevocable power of attorney coupled with an interest.
Address for Notices:
2600 Crosspark Road
----------------------------------------
NEURAL APPLICATIONS CORPORATION Corallville, IA 52241
- ------------------------------------ ----------------------------------------
By: /s/ Robert B. Staib
--------------------------------- ----------------------------------------
Title: Robert B. Staib Attention:
----------------------------- -----------------------------
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<PAGE> 4
PLEDGE AGREEMENT
(Multiple Collateral Options)
(Loans to Debtor and/or Third Party)
Dated as of September 14, 1998
This Pledge Agreement (as modified from time to time, the "Agreement") has been
executed by Robert B. Staib*, an individual ("Debtor"), as debtor, in favor of
THE NORTHERN TRUST COMPANY, an Illinois banking corporation, as secured party
and pledgee (together with any successor, assign or subsequent holder, "Secured
Party"), with its main banking office at 50 South LaSalle Street, Chicago,
Illinois 60675. If more than one person or entity executes this Agreement, the
term "Debtor" refers to each of them individually and some or all of them
collectively, and their obligations hereunder shall be joint and several. If
any party comprising "Debtor" is a trustee(s), "Trust Agreement" means the
governing trust agreement and/or instruments governing the trust, as modified
from time to time, and all related documents and instruments, and "Debtor" also
refers to the trustee(s) as such and the trust individually and collectively.
In consideration of Secured Party's making loans and extensions of credit
and/or considering making loans or extensions of credit, to Debtor and/or Neural
Applications Corporation, a Delaware corporation (Debtor and such individuals or
entities being collectively referred to as the "Borrower(s)"), and other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor agrees as follows:
1. DEFINITIONS. As used in this Agreement:
(a) Unless otherwise defined herein, all terms that are defined in the
Uniform Commercial Code of the State in which the main banking office of
Secured Party is located shall have the same meanings herein as in such Code.
(b) "Guarantor" means any person or entity, or any persons or entities
severally, now or hereafter guarantying payment or collection of all or any
part of the "Liabilities" (as hereinafter defined).
(c) "Prime Rate" means that floating rate of interest per year announced
from time to time by Secured Party called its prime rate, which at any time
may not be the lowest rate charged by Secured Party, computed for the actual
number of days elapsed on the basis of a year of 360 days.
(d) "Subsidiary" means any corporation, partnership, joint venture, trust,
or other legal entity of which Borrower or Debtor owns directly or indirectly
50% or more of the outstanding voting stock or interest, or of which Borrower
or Debtor has effective control, by contract or otherwise.
2. PLEDGE. Debtor hereby assigns, pledges, hypothecates, delivers, sets over
and transfers to Secured Party and grants to Secured Party a continuing security
interest in the following, in each case whether certificated or uncertificated,
whether now owned or hereafter acquired, wherever located (any or all of such,
the "Collateral"):
(a) CHECK AS MANY AS APPLY
STOCKS AND/OR BONDS. The securities (stocks and/or bonds) listed on
Exhibit A.
N/A U.S. GOVERNMENT SECURITIES. The marketable obligations and securities
issued, guaranteed or insured by the United States, or for which the full faith
and credit of the United States is pledged for the repayment of principal and
interest thereof, or marketable obligations issued, guaranteed, or insured by
any agency, instrumentality, or corporation of the United States for which the
credit of such agency, instrumentality or corporation is pledged for the
repayment of principal and interest thereof, as described in Exhibit A attached
hereto.
N/A SECURITIES ACCOUNT. Account No. in the name of Debtor with (name of
securities account firm), now located at (hereafter referred to as the
"Bailee"), any successor and/or replacement account, and any and all securities,
security entitlements, financial assets, investment property, commodity
contracts, money, instruments, documents, goods, chattel paper, accounts,
general intangibles, deposit accounts, partnership and limited liability company
interests, and other property and rights of any nature now or hereafter held in
or constituting part of such account(s)(such account and any successor and/or
replacement account, the "Securities Account"). (ALSO EXECUTE DIRECTION LETTER
IN FORM OF EXHIBIT B AND UCC FORM)
N/A SPECIFIED SECURITIES IN SECURITIES ACCOUNT & RELATED RIGHTS. The securities
listed in Exhibit A attached hereto which are presently held in Account No.
in the name of Debtor with (name of securities account firm),
now located at (hereafter referred to as the "Bailee"), and (without
limiting any restrictions set forth herein) as may be held hereafter in any
successor and/or replacement account or by Secured Party, together with any and
all replacements and substitutions thereof or thereto and Debtor's security
entitlements and other rights under and pursuant to such account(s) in
connection with such securities, replacements and substitutions (such account
and any successor and/or replacement account, the "Securities Account"). (ALSO
EXECUTE DIRECTION LETTER IN FORM OF EXHIBIT C AND UCC FORM)
N/A PERCENTAGE OF BALANCE IN SECURITIES ACCOUNT & RELATED RIGHTS. percent
( %) (according to market value of principal balance) of the securities
held in Account No. in the name of Debtor with
*Insert "N/A" in any blank which is not applicable. EXHIBITS REFERRED TO IN THE
TEXT WHICH DO NOT PERTAIN TO THE PARTICULAR COLLATERAL PLEDGED NEED NOT BE
ATTACHED.
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<PAGE> 5
(name of securities account firm), now located at
(hereafter referred to as the "Bailee") and (without limiting any restrictions
set forth herein) as may be held hereafter in any successor and/or replacement
account or by Secured Party, together with any and all replacements and
substitutions thereof or thereto and Debtor's security entitlements and other
rights under and pursuant to such account(s) in connection with such securities,
replacements and substitutions (such account and any successor and/or
replacement account, the "Securities Account"). Secured Party shall have the
right at any time and from time to time in its sole discretion to designate
which securities in the Securities Account or which may be held by Secured Party
shall constitute Collateral. (ALSO EXECUTE DIRECTION LETTER IN FORM OF EXHIBIT
D AND UCC FORM)
N/[A] BANK DEPOSITS. Deposit account and/or certificate of deposit
number in the name of Debtor in the amount of $
(the "Deposit") held by Secured Party or
[name & address of other
institution where deposit is held] (Secured Party or other institution in its
capacity as issuer of the Deposit, the "Bailee"), as well as each renewal,
replacement and substitution of, interest credited to and all sums due or to
become due on, the Deposit (including without limitation any increase in the
amount of the Deposit from any source whatsoever). (IF DEPOSIT IS ISSUED BY
ANYONE OTHER THAN SECURED PARTY, ALSO EXECUTE DIRECTION LETTER IN FORM OF
EXHIBIT E)
(IF MORE THAN ONE "DEPOSIT," "SECURITIES ACCOUNT" OR "BAILEE" IS INDICATED,
SUCH TERMS AS USED IN THIS AGREEMENT APPLY TO EACH SUCH DEPOSIT, SECURITIES
ACCOUNT OR BAILEE.)
(b) With respect to any Collateral referred to in (a), but without limiting (a):
(i) all stock and bond powers, certificates and instruments;
(ii) all replacements, substitutions, interest, cash and stock dividends,
warrants, options, and other rights and amounts paid, accrued, received,
receivable, or distributed with respect thereto from time to time.
(c) With respect to the foregoing, all products and proceeds thereof, including
without limitation insurance proceeds and payments under the Securities Investor
Protection Act of 1970, as amended.
3. LIABILITIES. The Collateral shall secure the payment and performance of the
following (collectively referred to as the "Liability(ies)"): (a) all
obligations and liabilities of Borrower or Debtor to Secured Party howsoever
created, evidenced or arising, whether direct or indirect, absolute or
contingent, now due or to become due, or now existing or hereafter arising,
including without limitation future advances and letters of credit issued for
the account of or at the request of Borrower or Debtor; (b) any guaranty by
Debtor of any obligations of Borrower to Secured Party, and any obligation of
Debtor as co-signer, endorser, or the like with respect to any note or other
obligation of Borrower; (c) all liabilities and obligations of Debtor under this
Agreement or in connection herewith; and (d) all agreements relating to any of
the foregoing. This Agreement shall continue and remain in effect
notwithstanding that at any particular time there may be no Liabilities
outstanding. Notwithstanding the foregoing the Collateral shall not secure any
Liabilities subject to Regulation Z of the Federal Reserve Board or any
equivalent state disclosure requirement unless disclosed in a disclosure
statement pertaining to such Liabilities.
4. REPRESENTATIONS.
(a) Debtor hereby represents and warrants to Secured Party that:
(i) [APPLICABLE IF DEBTOR IS A CORPORATION, PARTNERSHIP, JOINT VENTURE OR
TRUST] Debtor and any Subsidiary are existing and in good standing under the
laws of their state of formation, are duly qualified, in good standing and
authorized to do business in each jurisdiction where failure to do so might have
a material adverse impact on the consolidated assets, condition or prospects of
Debtor; the execution, delivery and performance of this Agreement and all
related documents and instruments are within Debtor's powers (including without
limitation, if Debtor is a trust, Debtor's powers as trustee pursuant to the
Trust Agreement and applicable law) and have been authorized by all necessary
corporate, partnership, joint venture, and/or trust action.
(ii) [APPLICABLE IF DEBTOR IS AN INDIVIDUAL] Debtor has capacity to enter
into and perform its obligations hereunder.
(iii) The execution, delivery and performance of this Agreement have
received any and all necessary governmental approval, and do not and will not
contravene or conflict with any provision of law or of the partnership or joint
venture or similar agreement, charter or by-laws of Debtor or any agreement
affecting Debtor or its property, including without limitation (if applicable)
the Trust Agreement.
(iv) There has been no material adverse change in the business, condition,
properties, assets, operations or prospects of Debtor, Borrower or any Guarantor
since the date of the latest financial statements provided on behalf of Debtor,
Borrower or any Guarantor to Secured Party.
(v) Debtor does not do business, nor has it done business during the five
(5) years and six months prior to the date of this Agreement, under any name
except as shown above.
(vi) The Collateral is duly and validly authorized and issued,
non-assessable, fully paid and paid for, issued and outstanding, and Debtor is
the legal and equitable owner of the Collateral, with the right (including
without limitation, if applicable, under the Trust Agreement) to pledge, assign
and deliver the Collateral to secure the Liabilities and do or cause to be done
all other actions provided for or referenced in this Agreement or any related
document or instrument, free and clear of all liens, claims, encumbrances and
security interests of any nature except any in favor of Secured Party.
(vii) TO THE EXTENT THE COLLATERAL INCLUDES UNCERTIFICATED SECURITIES OR
DEPOSITS, DEBTOR HAS REQUESTED THE ISSUER THEREOF TO MARK ITS BOOKS TO REFLECT
THIS PLEDGE TO THE SECURED PARTY.
(viii) Sale of the Collateral by Secured Party is not prohibited or
regulated by any federal or state law or regulation or any agreement binding
upon Debtor, including without limitation (if applicable) the Trust Agreement,
and requires no registration or filing with, or consent or approval of, any
governmental body, regulatory authority or securities exchange.
(ix) No financing statement, notice of judgment, or any similar instrument
(unless filed on behalf of Secured Party) covering any of the Collateral is on
file in any public office.
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<PAGE> 6
(b) The request or application by Borrower or Debtor for any Liability secured
hereby shall be a representation and warranty by Debtor as of the date of such
request or application that: (i) no Event of Default or Unmatured Event of
Default (in each case as defined herein) has occurred or is continuing as of
such date; and (ii) Debtor's representations and warranties herein are true
and correct as of such date as though made on such date.
5. DEPOSITORIES. Without limiting any other provision hereof, Secured Party
may at its option from time to time transfer, or cause any Bailee to transfer,
the Collateral into a "pledge position" at any depository now or hereafter
holding the Collateral, and do or cause to be done, execute (or cause to be
executed) such other documents, and take (or cause to be taken) such other
actions as Secured Party may deem necessary or appropriate in connection
therewith.
6. APPOINTMENT OF SUB-AGENTS; REGISTRATION IN NOMINEE NAME.
(a) The Secured Party shall have the right to appoint one or more
sub-agents for the purpose of retaining physical possession of any certificates
or instruments representing or evidencing the Collateral, which may be held (in
the discretion of Secured Party) in the name of Secured Party or any nominee or
nominees of Secured Party or a sub-agent appointed by Secured Party. In
addition, Secured Party shall at all times have the right to exchange
certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations for any purpose
consistent with its performance of this Agreement.
(b) For the better perfection of Secured Party's rights in and to the
Collateral and to facilitate implementation of such rights, Debtor shall, upon
written request of Secured Party, cause all the certificates, notes, documents
and other instruments evidencing, representing or otherwise comprising the
Collateral to be registered or otherwise put into the name of Secured Party or a
nominee or nominees of Secured Party subject only to the revocable voting rights
specified herein.
(c) Debtor hereby consents and agrees that the issuers of, or any
depository, registrar, transfer agent or similar party for any of, the
Collateral shall be entitled to accept the provisions hereof as conclusive
evidence of the right of Secured Party to effect any transfer pursuant hereto,
notwithstanding any notice or direction to the contrary heretofore or hereafter
given by Debtor or any other person to any such issuer or any such depository,
registrar, transfer agent or similar party.
7. VOTING RIGHTS. Upon the occurrence and during the continuance of an Event
of Default, any and all voting or similar rights with respect to the Collateral
shall be exercisable only by Secured Party.
8. COVENANTS OF PLEDGOR. Debtor agrees that so long as this Agreement
remains in effect, it will:
(a) Promptly deliver any cash, securities or other property received with
respect to the Collateral, whether as proceeds of the disposition thereof,
dividends with respect thereto, or otherwise, to be held by Secured Party
as Collateral. NOTWITHSTANDING THE FOREGOING, UNTIL SECURED PARTY NOTIFIES
DEBTOR TO THE CONTRARY OR AN EVENT OF DEFAULT (AS DEFINED BELOW) OCCURS,
DEBTOR MAY CONTINUE TO RECEIVE REGULAR CASH DIVIDENDS AND INTEREST PAYMENTS
ON THE COLLATERAL.
(b) Defend the Collateral against the claims and demands of all persons
other than Secured Party and promptly pay all taxes, assessments, and
charges upon the Collateral, and not sign (or permit to be signed) any
documents creating or perfecting a lien upon or a security interest in any
of the Collateral except in favor of Secured Party, or otherwise create,
suffer, or permit to exist any liens or security interests upon any
Collateral other than in favor of Secured Party.
(c) Keep at its address for notices set forth under or opposite its
signature hereto its records concerning the Collateral, which records shall
be of such character as will enable Secured Party to determine at any time
the status of the Collateral; furnish to Secured Party such information
concerning the Collateral as Secured Party may from time to time reasonably
request; and permit Secured Party from time to time to inspect, audit, and
make copies of, and extracts from, all records and all other papers in the
possession of Debtor pertaining to the Collateral.
(d) Make appropriate entries upon its financial statements and its books
and records disclosing Secured Party's security interest in the Collateral.
(e) Provide to Secured Party from time to time such financial statements of
and other information concerning the Collateral, Debtor (including without
limitation, if applicable, the trust under the Trust Agreement) and any
general partner or joint venturer of Debtor (audited, if requested by
Secured Party) as Secured Party shall reasonably request.
(f) Except if and to the extent specifically permitted by this Agreement,
not sell, transfer, grant an option or similar right with respect to, or
otherwise dispose of, or agree to dispose of, any Collateral or any
interest therein.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
(a) failure to pay, when and as due, any principal, interest or other
amounts payable hereunder or in connection with any of the Liabilities, or
failure to comply with or perform any agreement or covenant of Debtor contained
herein; or
(b) any default, event of default, or similar event shall occur or continue
under any other instrument, document, note, agreement, or guaranty delivered to
Secured Party in connection with this Agreement, or any such instrument,
document, note, agreement, or guaranty shall not be, or shall cease to be,
enforceable in accordance with its terms; or
(c) there shall occur any default or event of default, or any event that
might become such with notice or the passage of time or both, or any similar
event, or any event that requires the prepayment of borrowed money or the
acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Borrower,
Debtor, any Subsidiary, any general partner or joint venturer of Borrower or
Debtor, or any Guarantor, or under the terms of any indenture, agreement, or
instrument under which any such evidence of indebtedness or other agreement is
issued, assumed, secured, or guaranteed, and such event shall continue beyond
any applicable period of grace; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, Debtor, any Subsidiary, any general partner or joint venturer of
Borrower or Debtor, or any Guarantor to Secured Party is false or misleading in
any material respect on the date as of which the facts therein set forth are
stated or certified; or
(e) any guaranty of or pledge of collateral security for the Liabilities,
including without limitation this Agreement, shall be repudiated or become
unenforceable or incapable of performance; or
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<PAGE> 7
(f) Debtor, Borrower or any Subsidiary shall fail to maintain their
existence in good standing in their state of formation or shall fail to be
authorized, licensed, or qualified to do business in each jurisdiction where
failure to do so might have a material adverse impact on the consolidated
assets, condition or prospects of Borrower or Debtor; or
(g) Borrower, Debtor, any general partner or joint venturer of Debtor or
Borrower, or any Guarantor shall die, become incompetent, dissolve, liquidate,
merge, consolidate, or cease to be in existence for any reason, or any general
partner or joint venturer of Debtor or Borrower shall withdraw or notify any
partner or joint venturer of Borrower or Debtor of its or his/her intention to
withdraw as a partner or joint venturer (or to become a limited partner) of
Borrower or Debtor; or any general or limited partner or joint venturer of
Debtor or Borrower shall fail to make any contribution required by the
partnership or joint venture agreement of Debtor or Borrower as and when due
under such agreement; or there shall be any change in the partnership or joint
venture agreement of Debtor or Borrower from that in force on the date hereof
which may have a material adverse impact on the ability of Borrower to repay the
Liabilities; or the trust under the Trust Agreement shall terminate in whole or
in part or be the subject of a distribution of other than income; or
(h) any person or entity presently not in control of a corporate,
partnership or joint venture Debtor or Borrower, any corporate general partner
or joint venturer of Debtor or Borrower, or any Guarantor, shall obtain control
directly or indirectly of Debtor or Borrower, such a general partner or joint
venturer, or any Guarantor, whether by purchase or gift of stock or assets, by
contract, or otherwise; or
(i) any proceeding (judicial or administrative) shall be commenced against
Borrower, Debtor, any Subsidiary, any general partner or joint venturer of
Debtor or Borrower, or any Guarantor, or with respect to any assets of Borrower,
Debtor, any Subsidiary, any general partner or joint venturer of Borrower or
Debtor, or any Guarantor, which shall threaten to have a material and adverse
effect on the future operations or financial condition of Borrower, Debtor, any
Subsidiary, any general partner or joint venturer of Debtor or Borrower, or any
Guarantor; or final judgment(s) and/or settlement(s) in an aggregate amount in
excess of Two Hundred Fifty thousand UNITED STATES DOLLARS ($250000 in excess of
insurance for which the insurer has confirmed coverage in writing, a copy of
which writing has been furnished to Secured Party, shall be entered in any suit
or action commenced against Debtor, Borrower, any Subsidiary, any general
partner or joint venturer of Debtor or Borrower, or any Guarantor; or
(j) Debtor shall grant or any person (other than Secured Party) shall
obtain a security interest in any Collateral; Debtor or any other person shall
perfect (or attempt to perfect) such a security interest; a court shall
determine that Secured Party does not have a first-priority security interest in
any of the Collateral enforceable in accordance with the terms hereof; or any
notice of a federal tax lien against Borrower or Debtor or any general partner
or joint venturer of Borrower or Debtor shall be filed with any public recorder;
or
(k) there shall be any material loss or depreciation in the value of the
Collateral for any reason, or Secured Party shall otherwise reasonably deem
itself insecure; or there shall be any levy, judicial seizure, or attachment of
any of the Collateral; or
(l) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Borrower, Debtor, any Subsidiary, any general partner
or joint venturer of Borrower or Debtor, or any Guarantor; or Borrower, Debtor,
any Subsidiary, any general partner or joint venturer of Borrower, or Debtor, or
any Guarantor shall take any steps toward, or to authorize, such a proceeding;
or
(m) Borrower, Debtor, any Subsidiary, any general partner or joint venturer
of Debtor or Borrower, or any Guarantor shall become insolvent, generally shall
fail or be unable to pay its (his)(her) debts as they mature, shall admit in
writing its (his)(her) inability to pay its (his)(her) debts as they mature,
shall make a general assignment for the benefit of its (his)(her) creditors,
shall enter into any composition or similar agreement, or shall suspend the
transaction of all or a substantial portion of its (his)(her) usual business.
10. DEFAULT REMEDIES.
(a) Notwithstanding any provision of any document or instrument evidencing
or relating to any Liability: (i) upon the occurrence and during the continuance
of any Event of Default specified in Section 9(a)-(k), Secured Party at its
option may declare the Liabilities immediately due and payable without notice or
demand of any kind; and (ii) upon the occurrence of any Event of Default
specified in Section 9(l)-(m), the Liabilities shall be immediately and
automatically due and payable without action of any kind on the part of Secured
Party. Upon the occurrence and during the continuance of any Event of Default,
Secured Party may exercise any rights and remedies under this Agreement, any
related document or instrument (including without limitation any pertaining to
Collateral), and at law or in equity.
(b) If any Event of Default shall have occurred and be continuing, then, in
addition to having the right to exercise any rights and remedies of a secured
party upon default under the Uniform Commercial Code in effect in the State
where the main banking office of Secured Party or any Collateral is
located, Secured Party may, in its sole discretion:
(i) without being required to give any prior notice to Debtor apply the
cash (if any) then held by it hereunder, toward the Liabilities in such order as
Secured Party shall determine in its sole discretion; and
(ii) if there shall be no such cash or the cash so applied shall be
insufficient to pay all obligations in full, sell the Collateral, or any part
thereof, at any public or private sale, for cash, upon credit or for future
delivery, as Secured Party shall deem appropriate. The Secured Party shall be
authorized at any such sale (to the extent it deems it advisable to do so, in
its sole discretion) to restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing the Collateral
then being sold for their own account for investment and not with a view to the
distribution or resale thereof, and upon consummation of any such sale Secured
Party shall have the right to assign, transfer and deliver to the purchaser(s)
thereof the Collateral so sold. Each such purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of Debtor,
and Debtor hereby waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
To the extent that notice of sale shall be required to be given by law, Secured
Party shall give Debtor at least ten days; written notice of Secured Party's
intention to make any such public or private sale or sales. Secured Party
shall not be obligated to make any sale of Collateral if it shall determine not
to do so, regardless of the fact that notice of sale of Collateral may have been
given. Secured Party may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case sale
of all or any part of the Collateral is made on credit or for future delivery,
the Collateral so sold may be retained by Secured Party until the sale price is
paid by the purchaser thereof, but Secured Party shall not incur any liability
in case any such purchaser shall fail to take up and pay for the
Page 4
<PAGE> 8
Collateral so sold; in the case of any such failure, such Collateral may be
sold again upon like notice. As an alternative to exercising the power of
sale herein conferred upon it, Secured Party may proceed by a suit at law
or in equity to foreclose this Agreement and to sell the Collateral, or any
portion thereof, pursuant to a judgment or decree of a court of competent
jurisdiction. The proceeds of sale of Collateral sold pursuant hereto shall
be applied by Secured Party in such order as it shall determine.
(c) Secured Party may, by written notice to Debtor, at any time and from
time to time, waive any Event of Default or "Unmatured Event of Default" (as
defined below), which shall be for such period and subject to such conditions
as shall be specified in any such notice. In the case of any such waiver,
Secured Party and Debtor shall be restored to their former position and rights
hereunder, and any Event of Default or Unmatured Event of Default so waived
shall be deemed to be cured and not continuing; but no such waiver shall extend
to or impair any subsequent or other Event of Default or Unmatured Event of
Default. No failure to exercise, and no delay in exercising, on the part of
Secured Party of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies of Secured Party herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
"Unmatured Event of Default" means any event or condition which would become an
Event of Default with notice or the passage of time or both.
11. POWERS OF SECURED PARTY. Secured Party may, from time to time, at its
option (but shall have no duty to):
(a) perform any agreement of Debtor hereunder that Debtor shall have
failed to perform;
(b) take any other action which Secured Party deems necessary or desirable
for the preservation of the Collateral or Secured Party's interest therein
and the carrying out of this Agreement, including without limiting the
generality of the foregoing: (i) any action to collect or realize upon the
Collateral; (ii) the discharge of taxes, liens, security interests or other
encumbrances at any time levied or placed on the Collateral; or (iii) the
discharge or keeping current of any obligation of Debtor having effect on
the Collateral; or (iv) receiving, endorsing and collecting all checks and
other orders for the payment of money made payable to Debtor representing
any dividend, interest payment or other distribution payable or
distributable in respect of the Collateral or any part thereof, and to give
full discharge for the same;
(c) file, or cause to be filed, photocopies or carbon copies of any
financing statement respecting any right of Secured Party in the
Collateral, and any such photocopy or carbon copy of the signature of
Debtor on such photocopy or carbon copy shall be deemed an original for
purposes of such filing. Debtor hereby authorizes Secured Party to sign
financing statements on Debtor's behalf to be filed in all jurisdictions in
which such authorization is permitted; and
(d) (without limiting any other provision hereof) in its discretion request
that any uncertificated securities or deposits constituting Collateral
hereunder be delivered to it in definitive form. Upon receipt of such
request from Secured Party, Debtor will immediately take all steps
(including, without limitation, the payment by Debtor of all costs and
expenses of issuance and transfer) required to cause such uncertificated
securities or deposits to be issued and delivered in definitive form to
Secured Party, together with any and all documents (executed in blank)
required to effect the transfer of definitive securities or deposits in
definitive form to Secured Party. The parties expressly agree that such
securities or deposits when issued in definitive form shall continue to
constitute Collateral for purposes of this Agreement.
Debtor hereby appoints Secured Party as Debtor's attorney-in-fact, which
appointment is and shall be deemed to be irrevocable and coupled with an
interest, for purposes of performing acts and signing and delivering any
agreement, document, or instrument, on behalf of Debtor in accordance with this
Section. Debtor immediately will reimburse Secured Party for all expenses so
incurred by Secured Party, together with interest thereon at 3% in addition to
the Prime Rate.
12. FURTHER ASSURANCES. Debtor agrees to do (or cause to be done) such further
acts and things, and to execute and deliver (or cause to be executed and
delivered) such additional conveyances, assignments, agreements, and
instruments, as Secured Party may at any time request in connection with the
administration or enforcement of this Agreement or related to the Collateral or
any part thereof or in order better to assure and confirm unto Secured Party
its rights, powers and remedies hereunder.
13. ADDITIONAL PROVISIONS RE SECURITIES ACCOUNT AND DEPOSIT PLEDGE. The
following additional provisions pertaining to the Bailee do not limit any of
Secured Party's rights or powers under other provisions hereof:
(a) Debtor agrees to cause Bailee to hold the Collateral as bailee and
agent for Secured Party; Debtor hereby acknowledges that Bailee does and shall
hold such property as bailee and agent of Secured Party. Debtor agrees to
execute a direction letter to Bailee in the form attached hereto as Exhibit
B (whole Securities Account), Exhibit C (specified securities in Securities
Account), Exhibit D (percentage of Securities Account, with Secured Party having
right to designate specified securities from time to time in its sole
discretion), and/or (unless Secured Party is also the issuer of the deposit)
Exhibit E (deposit), as applicable. All terms of the direction letter,
including without limitation the agreement and acknowledgment of Bailee, are
incorporated into this Agreement as agreements of Debtor, and Debtor agrees to
cause Bailee to comply with its agreements and obligations under such letter,
and to agree to and acknowledge such letter as provided therein. Upon the
execution of the direction letter by Debtor, Bailee and Secured Party, as
provided therein, the direction letter shall constitute an agreement among
Debtor, Bailee and Secured Party.
(b) Except as otherwise specified herein or in any direction letter, Bailee
shall act or not act with respect to the Collateral solely in accord with
entitlement orders and instructions (including without limitation instructions
to sell or otherwise dispose of any Collateral, to designate securities as
Collateral (if applicable), and to deliver any Collateral to Secured Party)
given from time to time by Secured Party. If applicable (see Exhibit D),
securities designated by Secured Party shall be and be deemed Collateral, and a
security interest as provided in Section 2 above shall be deemed granted
therein, but without limiting Secured Party's security interest in the
percentage of the Account. Secured Party may exercise any rights and powers
hereunder or in connection with this Agreement or the direction letter,
including without limitation the agreement and acknowledgement of Bailee,
without the consent of Debtor.
(c)[APPLICABLE IF THIS AGREEMENT INCLUDES A PLEDGE OF AN ENTIRE SECURITIES
ACCOUNT OR A PERCENTAGE OF A SECURITIES ACCOUNT: APPLICABLE ONLY TO SUCH
COLLATERAL] Notwithstanding the foregoing, until Secured Party notifies Bailee
in writing to the contrary, Bailee shall permit withdrawals from the Securities
Account so long as the total market value of the assets in the Securities
Account all times equals or exceeds $ N/A (the "Minimum Account Balance") (this
figure refers to the entire Securities Account, even if a percentage of the
Securities
Page 5
<PAGE> 9
Account is pledged). Debtor agrees to take all steps, including without
limitation placing additional assets in the above-referenced Securities Account,
to ensure that the value of the assets in the Securities Account at all times
equals or exceeds the Minimum Account Balance as determined by Secured Party.
(d) Debtor hereby directs and authorizes Bailee, as agent with respect to
the Securities Account, to effect replacements and substitutions of Collateral
on behalf of Debtor. Without limiting any other provision hereof, all such
replacements and substitutions shall be conclusively deemed to be Collateral and
Debtor shall be deemed to have granted a security interest in such items and
assigned such items to Secured Party, as more fully provided in Section 2 above.
All substitutions and replacements shall be satisfactory to Secured Party in its
sole discretion, and (without limiting any other provision hereof or of any
direction letter) if Secured Party so requests no substitution or replacement
may be made except with the prior consent of Secured Party.
14. OBLIGATIONS UNCONDITIONAL; WAIVER OF DEFENSES. Debtor irrevocably agrees
that no fact or circumstance whatsoever which might at law or in equity
constitute a discharge or release of, or defense to the obligations of, a
guarantor or surety shall limit or affect any obligations of Debtor under this
Agreement or any document or instrument executed in connection herewith. Without
limiting the generality of the foregoing.
(a) Secured Party may at any time and from time to time, without notice to
Debtor, take any or all of the following actions without affecting or impairing
the liability of Debtor on this Agreement:
(i) renew or extend time of payment of the Liabilities;
(ii) accept, substitute, release or surrender any security for the
Liabilities; and
(iii) release any person primarily or secondarily liable on the Liabilities
(including without limitation Borrower, any indorser, and any Guarantor).
(b) No delay in enforcing payment of the Liabilities, nor any amendment,
waiver, change, or modification of any terms of any document or instrument which
evidences or is given in connection with the Liabilities, shall release Debtor
from any obligation hereunder. The obligations of Debtor under this Agreement
are and shall be primary, continuing, unconditional and absolute
(notwithstanding that at any time or from time to time all of the Liabilities
may have been paid in full), irrespective of the value, genuineness, regularity,
validity or enforceability of any documents or instruments respecting or
evidencing the Liabilities. In order to hold Debtor liable or exercise rights or
remedies hereunder, there shall be no obligation on the part of Secured Party,
at any time, to resort for payment to Borrower or any Guarantor or to any other
security for the Liabilities. Secured Party shall have the right to enforce this
Agreement irrespective of whether or not other proceedings or steps are being
taken against any other property securing the Liabilities or any other party
primarily or secondarily liable on any of the Liabilities.
(c) Debtor irrevocably waives presentment, protest, demand, notice of
dishonor or default, notice of acceptance of this Agreement, notice of any loans
made, extensions granted or other action taken in reliance hereon, and all
demands and notices of any kind in connection with this Agreement or the
Liabilities.
(d) So long as this Agreement remains in effect or any Liabilities are
outstanding, Debtor waives any claim or other right which Debtor might now have
or hereafter acquire against Borrower or any other person primarily or
contingently liable on the Liabilities (including without limitation any maker,
indorser or Guarantor) or that arises from the existence or performance of
Debtor's obligations under this Agreement, including without limitation any
right of subrogation, reimbursement, exoneration, contribution, indemnification,
or participation in any claim or remedy of Secured Party against Borrower or any
other collateral security for the Liabilities, which Secured Party now has or
hereafter acquires, however arising.
15. SECURED PARTY MAY ALSO BE BAILEE OR TRUSTEE. Debtor hereby irrevocably
waives, releases and forever relinquishes any claim or right of any nature
whatsoever based upon the fact that Bailee or a trustee of any Debtor, Borrower
or Guarantor which is a trust is or may be Secured Party itself or a direct or
indirect parent, subsidiary or affiliate of Secured Party, and hereby
irrevocably consents to any such circumstance. The rights and powers of Secured
Party shall not in any way be restricted by reason of any such present or future
circumstance
16. NOTICES. All notices, requests and demands to or upon the respective
parties hereto shall be deemed to have been given or made when deposited in the
mail, postage prepaid, addressed if to Secured Party to its main banking office
indicated above (Attention: Division Head, ***), and if to Debtor to its address
set forth below, or to such other address as may be hereafter designated in
writing by the respective parties hereto or, as to Debtor, may appear in Secured
Party's records.
***Private Banking
17. MISCELLANEOUS. This Agreement and any document or instrument executed
in connection herewith shall be governed by and construed in accordance with the
internal law of the State of Illinois, and shall be deemed to have been executed
in such State. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the others. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof;
references herein to Sections or provisions without reference to the document in
which they are contained are references to this Agreement. This Agreement shall
bind Debtor, its (his) (her) heirs, trustees (including without limitation
successor and replacement trustees), executors, personal representatives,
successors and assigns, and shall inure to the benefit of Secured Party, its
successors and assigns, except that Debtor may not transfer or assign any of its
(his) (her) rights or interest hereunder without the prior written consent of
Secured Party. Debtor agrees to pay upon demand all expenses (including without
limitation attorneys' fees, legal costs and expenses, and time charges of
attorneys who may be employees of Secured Party, in each case whether in or out
of court, in original or appellate proceedings or in bankruptcy) incurred or
paid by Secured Party or any holder hereof in connection with the enforcement or
preservation of its rights hereunder or under any document or instrument
executed in connection herewith. If there shall be more than one person or
entity constituting Debtor, each of them shall be primarily, jointly and
severally liable for all obligations hereunder.
18. WAIVER OF JURY TRIAL, ECT. DEBTOR HEREBY IRREVOCABLY AGREES THAT,
SUBJECT TO SECURED PARTY'S SOLE AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR
OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE
SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER COOK
COUNTY, ILLINOIS. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING JURISDICTION OVER SUCH
COUNTY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT SHE (HE) (IT) MAY HAVE TO
REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT,
ACTION OR OTHER PROCEEDING BROUGHT BY SECURED PARTY IN ACCORDANCE WITH THIS
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EXHIBIT A TO PLEDGE AGREEMENT
Listing of Pledged Stocks and Bonds
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1. 2. 3. 4. 5. 6. 7.
No. of
Name of Issuer Class/Series Certificate No. CUSIP No. Units/Shares CUSIP No. Par Value
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
UAL Common Stock 63500
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
N/A See Rider attached hereto and incorporated herein by reference.
- --------------------------------------------
Type Name Robert B. Staib
----------------------------------
- --------------------------------------------
By: -----------------------------------------
Title:
--------------------------------------
Secured Party is hereby authorized by Debtor without notice to Debtor to fill
in any blank spaces and dates and strike inapplicable terms herein or in any
related document to conform to the terms of the transaction and/or
understanding evidenced hereby, for which purpose Secured Party shall be deemed
to have been granted an irrevocable power of attorney coupled with an interest.
By:
-----------------------------------------
Title:
--------------------------------------
Address for notices:
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
Attention:
----------------------------------
Page 7
<PAGE> 12
RIDER TO
MASTER NOTE (FORM 9601)
DATED AS OF September 14, 1998 EXECUTED BY Neural Applications Corporation (the
"Borrower") IN FAVOR OF THE NORTHERN TRUST COMPANY (the "Lender")
(COMMITTED LINE OF CREDIT)
1. This Rider is attached to and forms an integral part of the
above-referenced Master Note (as amended, the "Note"). Capitalized terms defined
in the remainder of the Note and not otherwise defined in this Rider shall have
the same meaning in this Rider as in the remainder of the Note. Wherever
possible this Rider and the remainder of the Note shall be construed so as to
be consistent with each other; however, if and to the extent that the terms of
this Rider conflict or are inconsistent with the remainder of the Note, the
terms of this Rider shall prevail. Except as modified by this Rider the terms of
the remainder of the Note shall apply.
2. The first paragraph of Section 3 ("LINE OF CREDIT") is deleted and the
following is substituted.
"COMMITTED LINE OF CREDIT: This Note has been executed pursuant to a
committed line of credit. By its acceptance of this Rider to this Note,
Lender shall be deemed to have agreed to make available to Borrower Loans
as outlined herein or in any related letter until the maturity date
indicated above unless and until any 'Event of Default' (as defined below)
occurs, in which case Lender shall have no obligation whatsoever to make
any Loan hereunder or otherwise to extend credit to Borrower. Lender shall
have no obligation to give Borrower or any other person or entity prior
notice of the existence of any Event of Default or any decision not to make
any Loan or otherwise extend credit to Borrower."
Dated as of September 14, 1998.
------------ ----
--------------------------------------------
Type Name NEURAL APPLICATIONS CORPORATION
----------------------------------
--------------------------------------------
By: Robert B. Staib
-----------------------------------------
Title:
--------------------------------------
<PAGE> 1
EXHIBIT 10.12
REIMBURSEMENT AND SUBORDINATION AGREEMENT
This Reimbursement and Subordination Agreement (the "Agreement") is
made as of August 1, 1997, by and between Robert B. Staib, an individual
resident of Iowa ("Staib"), and Neural Applications Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Company proposes to issue up to $6,000,000 principal
amount of Senior Secured Debentures, subject to increase by not more than
$3,000,000 principal amount (the "Debentures"), which are to be secured by an
irrevocable standby letter of credit (the "Letter of Credit") from The Northern
Trust Company ("Northern Trust") in an amount equal to one hundred seven percent
(107%) of the initial principal amount of Debentures. (Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in the
Letter of Credit.)
WHEREAS, Northern Trust has requested that Staib guarantee the Letter
of Credit by means of a pledge agreement with Northern Trust (the "Pledge
Agreement"), which will require Staib to maintain a collateral account
containing marketable securities or other collateral to secure the obligation of
Northern Trust under the Letter of Credit.
WHEREAS, to induce Staib to enter into the Pledge Agreement, the
Company has agreed to (a) issue Staib warrants to purchase 500,000 shares of the
Company's Common Stock, $.01 par value (the "Common Stock"), (b) make a one-time
cash payment of $50,000 and (c) undertake to reimburse Staib to the extent that
Northern Trust exercises its remedy under the Pledge Agreement to sell or
liquidate all or a part of the Collateral pledged by Staib.
NOW THEREFORE, in consideration of the premises, the respective
covenants and commitments set forth in this Agreement, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and Staib hereby agree as follows:
SECTION 1. AGREEMENT TO ENTER INTO PLEDGE AGREEMENT. Staib agrees to
enter into the Pledge Agreement.
SECTION 2. CONSIDERATION FOR ENTERING INTO PLEDGE AGREEMENT. The
Company agrees that:
(a) upon execution of the Pledge Agreement it shall promptly
thereafter make a one-time cash payment of $50,000 to Staib; and
(b) at the Initial Closing it shall grant to Staib warrants to
purchase an aggregate of 500,000 shares of the Common Stock, which
warrants shall (i) have an exercise price of $8.00 per share, (ii) be
immediately exercisable, (iii) expire on September 30, 2002 and (iv) in
all other material respects have the same terms
<PAGE> 2
as the warrants granted by the Company to Staib in connection with past
transactions.
SECTION 3. AGREEMENT TO REIMBURSE. The Company further agrees that, in
the event that Northern Trust honors a draft on the Letter of Credit by the
Trustee, which draft is not reimbursed by the Company to Northern Trust in
accordance with the Reimbursement Agreement such that an Event of Default occurs
and is continuing under the Reimbursement Agreement, and Northern Trust
exercises its remedy under the Pledge Agreement to sell or liquidate all or a
part of the Collateral pledged by Staib in order to pay or satisfy the
Obligations of the Company under the Reimbursement Agreement, then the Company
shall reimburse Staib for Northern Trust's realization of such Collateral in an
amount equal to the amount of the sale proceeds realized by Northern Trust from
the sale of such Collateral; provided, however, that in the event the proceeds
of the sale or liquidation of all or any part of the Collateral continues to be
held by Northern Trust in a cash collateral account that is subject to the
Pledge Agreement to secure the Company's Obligations under the Reimbursement
Agreement, then the Company shall only be obligated to reimburse Staib hereunder
after such time as Northern Trust realizes on such cash collateral and then only
in the amount of the cash collateral so realized.
SECTION 4. SUBORDINATION; LIQUIDATION OF COMPANY. Staib acknowledges
and agrees that his rights to reimbursement under Section 3 shall in all events
be subordinated to the rights of the holders of the Debentures to receive
payments of principal and interest on the Debentures and shall also, in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, be subordinated to the rights of the holders of the
Company's Convertible Series A Voting Preferred Stock (the "Series A Stock"),
Convertible Series B Voting Preferred Stock (the "Series B Stock") and
Convertible Series C Voting Preferred Stock (the "Series C Stock") to receive
any and all amounts due to such holders under the terms of each such series of
stock upon such liquidation, dissolution or winding up of the Company.
SECTION 5. AMENDMENTS; NO WAIVER. No amendment or modification of this
Agreement shall be deemed effective unless made in writing and signed by all the
parties hereto. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel to enforce any provisions of this
Agreement, except by a statement in writing signed by the party against whom
enforcement of the waiver or estoppel is sought. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
SECTION 6. BINDING EFFECT; THIRD PARTY BENEFICIARIES. This Agreement
shall constitute a valid and binding Agreement between the parties hereto, and
the rights and obligations of the parties hereunder shall inure to benefit of,
and be binding upon,
-2-
<PAGE> 3
their respective successors, assigns and legal representatives. The holders of
the Debentures, the Series A Stock, the Series B Stock and the Series C Stock
are intended to be third party beneficiaries of Section 4 of this Agreement and
shall be entitled to enforce their rights under Section 4 by an action at law or
in equity.
SECTION 7. COMPLETE AGREEMENT. This Agreement contains the complete
agreement between the parties and supersede any prior understandings, agreements
or representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
SECTION 8. CAPTIONS AND HEADINGS. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
SECTION 9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
SECTION 10. GOVERNING LAW. All questions concerning this Agreement
shall be governed by and interpreted in accordance with the internal law, not
including the law of conflicts, of the State of Iowa.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth in the first paragraph.
/s/ Robert B. Staib
-------------------------------
Robert B. Staib
Neural Applications Corporation
By: /s/ Robert A. Squires
----------------------------
Name:
-----------------------
Title:
----------------------
-3-
<PAGE> 1
EXHIBIT 10.13
INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
This Indemnification and Hold Harmless Agreement is entered into on the
27 day of February, 1996, by and between Neural Applications Corporation, a
Delaware corporation with offices located at 2600 Crosspark Road, Coralville,
Iowa (hereinafter "Neural") and Robert B. Staib of Coralville, Iowa (hereinafter
"Guarantor").
RECITALS
1. On or about February 27, 1996, Neural will be granted a $2,000,000
Line of Credit from The Northern Trust of Chicago, Illinois, through an
agreement arranged by Iowa State Bank & Trust Company of Iowa City, Iowa ("Line
of Credit").
2. The Line of Credit to be granted to Neural will be unsecured by
Neural but will be given in consideration of Guarantor's personal guarantee
("Guarantee") and Guarantor's pledge of personal assets to secure the Line of
Credit.
3. Neural, in consideration of and as an inducement to Guarantor to
guarantee and secure Neural's obligations under the Line of Credit to The
Northern Trust, has agreed to:
A Give to Guarantor an Indemnification and Hold Harmless
for any principal, interest, damages, costs, attorney fees, or other expenses
that Guarantor may pay or incur as a result of Neural's failure to pay any
obligation under the Line of Credit to The Northern Trust.
B. Pledge business assets to Guarantor, subject to certain
previously existing security agreements, as security for Neural's obligation to
indemnify and hold Guarantor harmless.
C. Grant to Guarantor a Warrant for 400,000 shares of
common stock in Neural.
4. Neural and Guarantor wish to specify the terms and conditions of
Neural's agreement to indemnify and hold Guarantor harmless.
TERMS AND CONDITIONS
In consideration of the foregoing recitals, of the following terms and
conditions, and other good and valuable consideration it is agreed as follows:
1. Guarantor shall personally guarantee and pledge collateral to
secure Neural's obligations under the Line of Credit from The Northern Trust.
2. Neural agrees to indemnify and hold Guarantor harmless from any
and all amounts that Guarantor may pay to The Northern Trust under the terms and
conditions of Guarantor's Guarantee of Neural's $2,000,000 Line of Credit.
Neural's obligation to indemnify and hold Guarantor harmless includes, but is
not limited to, all principal, interest, costs, expenses, attorney fees, court
costs, damages or any other amounts paid by Guarantor or realized from any
collateral pledged by Guarantor to secure the Guarantee. Guarantor shall have no
obligation whatsoever to defend or to resist any request, demand or claim of The
Northern Trust to make payment arising from Neural's default or failure to pay
and Guarantor may rely upon the representations of The Northern Trust as to any
and all amounts claimed to be due under the guarantee as a result of Neural's
default of and/or failure to pay its obligations under the Line of Credit.
<PAGE> 2
3. Neural shall at all times comply with all of the terms and
conditions of the Line of Credit and shall pay all principal, interest and other
obligations to The Northern Trust when due and before default.
4. Neural shall pay all obligations due under The Northern Trust Line
of Credit upon the earlier to occur of April 1, 1997 or the completion by Neural
of its next public financing of equity.
5. This Indemnification and Hold Harmless is secured by Neural's
assets as set forth in the Security Agreement of even date herewith. Iowa State
Bank & Trust Company, the Iowa Department of Economic Development and Kirkwood
Community College have claimed senior security interest in the assets of the
company. In the event of default and foreclosure, the secured debt owed to such
prior secured parties by Neural shall be paid from the collateral or otherwise
before payment is made to Guarantor under this Indemnification and Hold Harmless
Agreement or the Security Agreement.
6. Neural represents and Guarantor acknowledges that Neural currently
has the following outstanding debts:
A. Iowa State Bank & Trust Company as evidenced by notes
dated October 26, 1995 and December 29, 1995 in the aggregate principal amount
of $3,500,000. Upon the obtaining of the Line of Credit, $500,000 of this debt
is to be repaid.
B. Iowa Department of Economic Development and the City of
Coralville, Iowa, as evidenced by promissory notes dated May 20, 1993 in the
aggregate principal amount of $250,000.
C. Kirkwood Community College under the Industrial New Job
Training Agreement dated June 30, 1994 in the aggregate principal amount not to
exceed $200,000.
Guarantor acknowledges that he will receive payments from Neural under this
Indemnification and Hold Harmless Agreement only to the extent that Neural is
current on the described obligations to Iowa State Bank & Trust Company, Iowa
Department of Economic Development and the City of Coralville, and Kirkwood
Community College. Provided, however, that this priority of payment shall not
otherwise limit or impair Neural's obligations to Guarantor hereunder or
Guarantor's security interests in Neural's business assets.
7. Guarantor and John Pappajohn have previously guaranteed certain of
the outstanding debts and obligations of Neural. The relative priority of the
Guarantor and such other guarantor in receiving payments from Neural and the
priority of their security interests in Neural's assets shall be established by
an Intercreditor Agreement between Guarantor and such other guarantor.
8. No act or omission or commission of the Guarantor, including
specifically any failure to exercise any right, remedy or recourse, shall be
deemed a waiver or release of the same, such waiver or release to be effective
only as set forth in a written document executed by the Guarantor and only to
the extent specifically recited therein. A waiver or release with reference to
one event shall not be construed as continuing as a bar to or a waiver or
release of any subsequent right, remedy or recourse as to any subsequent event.
9. Any and all amounts due to Guarantor from Neural under this
Indemnification and Hold Harmless Agreement shall become immediately due and
payable upon Guarantor's written demand to Neural specifying the amounts paid or
incurred under Guarantor's guarantee of Neural's indebtedness to The Northern
Trust. If any amount due under this Indemnification and Hold Harmless Agreement
is not paid when due, or is collected or attempted to be collected by the
initiation or prosecution of any suit
2
<PAGE> 3
before any Bankruptcy Court or any other judicial proceeding, or is placed in
the hands of an attorney for collection, then the Guarantor shall be entitled to
collect, in addition to all other amounts owing him hereunder, all court costs
and reasonable attorney fees incurred by the Guarantor. Neural further agrees to
pay Guarantor interest at the rate of 18% per annum on all amounts, damages,
expenses or costs paid or incurred by Guarantor as a result of Neural's default
of and/or failure to pay its obligations under the Line of Credit.
10. Neural hereby waives demand, presentment for payment, notice of
non-payment, protest and all other notice, filing of suit and diligence in
collecting under this Indemnification and Hold Harmless Agreement other than the
written demand for payment specified in paragraph 9. Neural consents to any
extension, rearrangement, renewal or postponement of the time for payment under
this Indemnification and Hold Harmless and to any other indulgence with respect
thereto without notice, consent or consideration to any of them.
11. This Indemnification and Hold Harmless Agreement shall be binding
upon the successors and assigns of the parties.
12. This Indemnification and Hold Harmless Agreement shall be governed
by and construed in all respects according to the laws of the state of Iowa.
IN WITNESS WHEREOF each party, intending to be legally bound hereby,
does duly execute this Indemnification and Hold Harmless.
NEURAL APPLICATIONS CORPORATION
By /s/ Robert A. Squires
--------------------------------
Its President
GUARANTOR
/s/ Robert B. Staib
- ----------------------------------
Robert B. Staib
3
<PAGE> 1
EXHIBIT 10.14
AMENDMENT
TO
INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
This Amendment, dated as of August 1, 1997 (the "Amendment"), to
Indemnification and Hold Harmless Agreement dated February 27, 1996 (the
"Agreement"), is entered into by and between Robert B. Staib, an individual
resident of Iowa ("Staib"), and Neural Applications Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Company and Staib are parties to the Agreement.
(Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to them in the Agreement.)
WHEREAS, the Company proposes to issue up to 120 Units, subject to
increase by not more than 60 additional Units (the "Units"), each consisting of
$50,000 principal amount of the Company's Senior Secured Debentures (the
"Debentures") and 6,553 shares of the Company's Convertible Series C Voting
Preferred Stock (the "Series C Stock"), at a purchase price of $100,000 per
Unit.
WHEREAS, Staib, as a stockholder of the Company, will benefit from the
issuance and sale of the Units.
WHEREAS, the Placement Agent and the Financial Advisor to the Company
in connection with the issuance and sale of the Units have requested that Staib
subordinate his rights under the Agreement to certain rights of the holders of
the Debentures, the Company's Convertible Series A Voting Preferred Stock (the
"Series A Stock"), the Company's Convertible Series B Voting Preferred Stock
(the "Series B Stock") and the Series C Stock.
WHEREAS, Staib desires to subordinate his rights under the Agreement as
requested.
NOW THEREFORE, in consideration of the premises, the respective
covenants and commitments set forth in this Amendment, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and Staib hereby agree that the Agreement shall be
amended as follows:
SECTION 1. MODIFIED PROVISIONS. The following provisions of the
Agreement shall be modified as described:
(a) All references to the "Line of Credit" in the Agreement
shall be amended to refer to the $6,000,000 line of credit with The
Northern Trust Company ("Northern Trust") as issued on June 18, 1997,
which line of credit
<PAGE> 2
will automatically renew for $3,000,000 with a maturity of September
30, 2002, conditioned upon the close of the sale of the minimum number
of Units offered, as such line of credit may be amended from time to
time.
(b) Section 4 of the Agreement is hereby amended by deleting
"April 1, 1997" and replacing it with "September 30, 2002."
SECTION 2. DELETED PROVISIONS. Sections 5, 6 and 7 of the Agreement
are hereby deleted.
SECTION 3. SUBORDINATION; LIQUIDATION OF COMPANY. Staib hereby
acknowledges and agrees that his rights to under the Agreement shall in all
events be subordinated to the rights of the holders of the Debentures to receive
payments of principal and interest on the Debentures and shall also, in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, be subordinated to the rights of the holders of the
Series A Stock, the Series B Stock and the Series C Stock to receive any and all
amounts due to such holders under the terms of each such series of stock upon
such liquidation, dissolution or winding up of the Company.
SECTION 4. OTHER PROVISIONS. Except as expressly amended hereby, the
Agreement is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth in the first paragraph.
/S/ Robert B. Staib
---------------------------------
Robert B. Staib
Neural Applications Corporation
By: /S/ Robert A. Squires
---------------------------------
Name:
----------------------
Title:
---------------------
-2-
<PAGE> 1
EXHIBIT 10.15
RESTRUCTURING AGREEMENT,
Dated as of December 3, 1999
among
STOCKPOINT, INC., formerly known as
NEURAL APPLICATIONS CORPORATION,
as the Borrower,
and
THE NORTHERN TRUST COMPANY,
and
IOWA STATE BANK & TRUST
<PAGE> 2
RESTRUCTURING AGREEMENT
Dated as of December 3, 1999
THIS RESTRUCTURING AGREEMENT, dated as of December 3, 1999 (as it may
be amended or modified from time to time, this "Agreement"), is entered into by
and among STOCKPOINT, INC., formerly known as NEURAL APPLICATIONS CORPORATION, a
corporation organized under the laws of the State of Delaware (the "Borrower"),
THE NORTHERN TRUST COMPANY, an Illinois banking corporation ("Northern"), as
lead bank (the "Lead Bank") and as a lender to the Borrower, and IOWA STATE BANK
& TRUST, as Northern's participant (together with Northern, the "Lenders").
R E C I T A L S :
A Northern extended a line of credit (the "November 28, 1997 Line of
Credit") to the Borrower in the maximum principal amount of THREE MILLION
DOLLARS ($3,000,000), the Borrower's obligations relating to which being
evidenced by a promissory note dated as of November 28, 1997 (the "November 28,
1997 Note"), of the Borrower in favor of Northern.
B. ISB has purchased a $1,000,000.00 participating interest in the
November 28, 1997 Line of Credit.
C. Northern issued letters of credit (collectively, the "Letters of
Credit") in the maximum aggregate amount of $6,313,000 for the account of the
Borrower to support the repayment of certain debentures issued by the Borrower
(the "Debentures"), the Borrower's reimbursement obligations relating to which
being set forth in accompanying reimbursement agreements (collectively the "L/C
Reimbursement Agreements").
D. Iowa State Bank & Trust ("ISB"), an Iowa banking corporation, has
purchased a $2,000,000.00 participating interest in Northern's obligations
relating to the Letters of Credit.
E. Northern extended another line of credit (the "September 14, 1998
Line of Credit") to the Borrower in the maximum principal amount of TWO MILLION
DOLLARS ($2,000,000), the Borrower's obligations relating to which being
evidenced by a promissory note, dated as of September 14, 1998 (the "September
14, 1998 Note"), of the Borrower in favor of Northern.
F. The Borrower's obligations under and in relation to the November
28, 1997 Line of Credit, the Letters of Credit, and the September 14, 1998 Line
of Credit were guaranteed by Robert B. Staib and the sole original collateral
for these obligations was to be shares of UAL Corporation stock to be pledged by
Mr. Staib to secure his obligations under such guarantees.
2
<PAGE> 3
Consistent with the foregoing, Mr. Staib ultimately delivered certificates to
Northern purporting to represent shares of UAL Corporation stock (the "Purported
UAL Stock Certificates").
G. Based on information obtained on December 1, 1998, the Lenders
believed and continue to believe that the Purported UAL Stock Certificates are
counterfeit. The Borrower states that its senior management (other than Mr.
Staib) first learned that the certificates were alleged to be counterfeit on
December 3, 1998. Mr. Staib has since become subject to an involuntary
bankruptcy petition. These constitute events of default under each promissory
note and the L/C Reimbursement Agreements, resulting, inter alia, in the
termination of the lines of credit.
H. The Borrower, Northern, ISB, and the Lead Bank have entered into
restructuring discussions regarding the existing events of default, particularly
in light of the Borrower's stated intent to provide for the payment in full of
all obligations owing to the Lenders through the consummation of a strategic
transaction such as an initial public offering of its common stock, and the
parties desire to amend the November 28, 1997 Note, the September 14, 1998 Note,
and the L/C Reimbursement Agreements to definitively reflect the terms of such a
restructuring, it being understood that the Lead Bank and the Lenders would not
have entered into such a restructuring in the absence of the Borrower's intent
(and its commitment to use its best efforts) to consummate such a strategic
transaction on or before June 30, 2001 and that, consequently, the Lead Bank and
the Lenders have materially relied thereupon in entering into this Agreement.
Therefore, the parties hereto agree, subject to the satisfaction of
the conditions precedent set forth in Section 11, to amend the November 28, 1997
Note, the September 14, 1997 Note, and the L/C Reimbursement Agreements as
follows:
1 SECTION ACKNOWLEDGMENTS OF AMOUNTS OWING
1.1 SECTION November 28, 1997 Line of Credit. Pursuant to the November 28, 1997
Note, Northern extended the November 28,1997 Line of Credit. The Borrower
acknowledges that the outstanding principal amount of such line of credit, as of
the date hereof, is $3,000,000.00 and that the accrued and unpaid interest on
such principal amount, as of November 30, 1999, is $218,969.52. The Borrower
further acknowledges that the November 27, 1997 Line of Credit has been
terminated and is no longer available to it.
1.2 SECTION September 14, 1998 Line of Credit. Pursuant to the September 14,
1998 Note, Northern extended the September 14, 1998 Line of Credit. The Borrower
acknowledges that the outstanding principal amount of such line of credit, as of
the date hereof, is $1,145,000.00 and that the accrued and unpaid interest on
such principal amount, as of November 30, 1999, is $79,412.17. The Borrower
further acknowledges that the September 14 1998 Line of Credit has been
terminated and is no longer available to it.
3
<PAGE> 4
1.3 SECTION Letter of Credit Fees. The Borrower acknowledges that the
aggregate face amount of the outstanding Letters of Credit is $6,313,000 and
that as of November 30, 1999, it owed an aggregate of $37,060.12 in fees
relating to the Letter of Credit.
1.4 SECTION Notes. The November 28, 1997 Note and the September 14, 1998
Note, as amended by the provisions of this Agreement, shall be collectively
referred to herein as the "Notes".
2 SECTION INTEREST AND FEES
2.1 SECTION Interest Rates. The unpaid principal amount of each Note from
time to time outstanding hereunder shall bear interest at the following rates
per year:
(a) before maturity, at the Prime Rate (as hereinafter defined); and
(b) after maturity, whether by acceleration or otherwise, until paid,
at a rate equal to two percent (2%) in addition to the Prime Rate.
"Prime Rate" shall mean that rate of interest per year announced from
time to time by Northern called its prime rate, which rate at any time may not
be the lowest rate charged by Northern. Changes in the rate of interest on the
Loans resulting from a change in the Prime Rate shall take effect on the date
set forth in each announcement for a change in the Prime Rate.
2.2 SECTION Payment. Absent maturity (whether by acceleration or
otherwise), interest and Letter of Credit fees shall be due and payable in
arrears on the last day of the calendar month. Consequently, after the payment
required pursuant to Section 11.5 hereof, the next regularly scheduled payment
of interest and Letter of Credit fees shall relate to the December, 1999
calendar month and shall be due and payable on December 31, 1999.
3 SECTION STATED MATURITY
3.1 SECTION Stated Maturity. The stated maturity of the September 14, 1998
Note shall be extended to June 30, 2001. The stated maturity of the November 28,
1997 Note shall remain November 2, 2002. The stated expiry of the Letters of
Credit shall remain November 29, 2002.
4 SECTION WAIVER OF EXISTING DEFAULTS
4.1 SECTION Waiver as to the Borrower Only. Upon the satisfaction of the
conditions of Section 11 hereof, and subject to the provisions of Section 12.2
hereof, the Lenders hereby waive, as to the Borrower only (and specifically not
as to any guarantor), any and all Events of Defaults or defaults existing as of
the date hereof under any of the Notes or the L/C Reimbursement Agreements;
provided, however, that such waiver shall under no circumstances
4
<PAGE> 5
nullify or otherwise affect the termination of the November 28, 1997 and
September 14, 1998 Lines of Credit, acknowledged in Sections 1.1 and 1.2,
respectively, of this Agreement. This waiver shall continue only until the
earlier to occur of its termination pursuant to Section 12.2 hereof and June 30,
2001.
4.2 SECTION No Waiver as to Robert B Staib. Without limiting the
generality of Section 4.1 hereof, the Lenders, in no manner whatsoever, waive
any of (but instead expressly reserve any and all) of their rights, claims,
powers or remedies against Robert B. Staib under any guaranty or other agreement
and/or under applicable law. Specifically, but without limiting the generality
of the foregoing, the Lenders expressly reserve the right to exercise, in their
sole and absolute discretion (including at times as they determine advisable in
their sole and absolute discretion), any and all of such rights, claims, powers
or remedies against Mr. Staib, whether in the context of his pending involuntary
bankruptcy case or otherwise, all as if the Lenders had not entered into this
Agreement (including, without limitation, as if the Lenders had not extended the
waiver of defaults set forth in Section 4.1 hereof).
5 SECTION PAYMENTS AND PREPAYMENTS
5
<PAGE> 6
5.1 SECTION Mandatory Prepayment and/or Cash Collateralization; Strategic
Transaction. If, at any time on or before June 30, 2001, the Borrower shall
enter into or otherwise consummate one of the following (each, a "Strategic
Transaction"): (i) an initial public offering of common stock of or other equity
security of Borrower; (ii) a sale of substantially, all of Borrower's assets;
(iii) any other strategic transaction (including a merger or a joint venture)
involving substantially all of borrower's assets or a major component of
Borrower's business; provided, however, that the sale of the stock in or any
assets of Neural, Inc., a wholly owned subsidiary of the Borrower, as it is
constituted as of the date hereof, shall not constitute a Strategic Transaction
and with respect to Neural, Inc. (as it is constituted as of the date hereof),
the Borrower without being in violation of this Agreement, may either sell the
stock of Neural, Inc. or cause the assets of Neural, Inc. to be sold after
sufficiently providing for the liabilities of Neural, Inc. to be satisfied or
assumed by the purchaser and use the net proceeds realized from such a
transaction to be used in the operation of the Borrower's business, including
first towards the satisfaction of the Bridge Financing, so long as such net
proceeds do not exceed Three Million Dollars ($3,000,000), and such net proceeds
(whether or not they exceed $3,000,000) shall be treated as provided in Section
10.6(c) hereof. Consistent with the foregoing, any transaction involving Neural,
Inc. where, prior to or in connection with such transaction, Neural Inc. is
reconstituted in any manner from its assets, liabilities, and business
operations as of the date hereof (as a result of the transfer of assets from the
Borrower or otherwise) shall constitute a Strategic Transaction within the
meaning of this Agreement. Contemporaneously with the consummation of a
Strategic Transaction, (a) the Notes (and all interest and expenses owing in
connection therewith) automatically shall be immediately due and owing and shall
be paid in full in cash, (b) the Borrower shall pay in full the Debentures or to
obtain the cancellation of the Letters of Credit (whether through procuring
replacement letters of credit (or otherwise), and (c) in the event that the
Borrower is unable either to pay in full the Debentures or to obtain replacement
letters of credit, the Borrower shall provide the Lead Bank with cash collateral
equal to 120% of the outstanding amount of the Letters of Credit.
6 SECTION BRIDGE FINANCING
6.1 SECTION Bridge Financing. The Borrower has informed the Lenders that
it will seek from individuals and/or financial institutions other than the
Lenders (the "Bridge Lenders") a line of credit in the amount of $2.5 million at
an interest rate not to exceed the greater of (a) the Prime Rate and (b) LIBOR
plus 1.75% per annum to be secured by a first priority security interest and
lien in, to, and on substantially all of the Borrower's assets and the assets of
its subsidiary, Neural, Inc. (the "Bridge Financing") and that one of the
conditions precedent to the Bridge Financing may be that the Lead Bank and the
Lenders acknowledge that all obligations of the Borrower in favor of the Lead
Bank or the Lenders are unsecured as of the date hereof and that they have no
contractual right to prevent the Borrower from granting the security interests
and liens in favor of the Bridge Lenders contemplated by the Bridge Financing.
The Lead Bank and the Lenders hereby commit to deliver such an acknowledgment
directly to the Bridge Lenders upon the satisfaction of the conditions of
Section 11 hereof.
6
<PAGE> 7
7 SECTION AGREEMENT AS TO PRE-CLOSING DATE
PROFESSIONAL FEES AND EXPENSES OF THE LENDERS
7.1 SECTION Pre-Closing Fees and Expenses. The Lenders estimate the
aggregate amount of professional fees and expenses as of the date of the
execution of this Agreement for which they are entitled to receive reimbursement
from the Borrower to be $240,644.51. Notwithstanding any other provision of this
Agreement to the contrary, the Lenders agree that they shall limit the amount of
professional fees and expenses for which they will seek reimbursement from the
Borrower for the period from November 30, 1998 to and through the date of the
execution and delivery of this Agreement to an aggregate of $204,547.83, and the
Borrower agrees that it shall reimburse the Lead Bank in such an aggregate
amount of $204,547.83 on the earlier to occur of: (i) the consummation of a
Strategic Transaction and (ii) June 30, 2001. However, consistent with the
provisions of Section 4.2 hereof, the Lead Bank and the Lenders in no manner
limit (but instead expressly reserve) their right to collect the balance of any
such fees and expenses (as well as any other fees and expenses, whether arising
in connection with the Notes, any other Loan Document, or any guaranty) from
Robert B. Staib, including the right to assert a claim therefor in his pending
involuntary bankruptcy case or in any subsequent proceeding.
8 SECTION UNDERTAKING TO DELIVER COVENANT
NOT TO SUE AND COMPLETE RELEASE
8.1 SECTION Covenant Not to Sue and Complete Release. Upon the payment in
full of all of the Borrowers' obligations under the Notes (as limited as to the
Borrower only by Section 7.1 hereof) and the L/C Reimbursement Agreements, and
subject to the provisions of Section 4.2 hereof and the last sentence of Section
7.1 hereof, (a) the Lead Bank and the Lenders shall deliver to the Borrower a
covenant not to sue relating to the Notes and the Letters of Credit
substantially in the form of Exhibit A hereto, and (b) the Borrower
contemporaneously shall deliver to the Lead Bank and the Lenders a complete
release substantially in the form of Exhibit B hereto.
9 SECTION REPRESENTATIONS AND WARRANTIES
To induce the Lenders, the Issuer and the Lead Bank to enter into this
Agreement, the Borrower represents and warrants unto the Lead Bank, and each
Lender that:
9.1 SECTION Organization. The Borrower is a corporation existing and in
good standing under the laws of the state indicated in the heading; any
Subsidiary is a corporation or partnership duly existing and in good standing
under the laws of the state of its formation as indicated on Schedule 9.5; the
Borrower and any Subsidiary are duly qualified, in good standing and authorized
to do business in each other jurisdiction where, because of the nature of their
activities or properties, such qualification is required and where the failure
to be so qualified may have a Material Adverse Effect; and the Borrower and any
Subsidiary have the power and authority to own their properties and to carry on
their businesses as now being conducted.
7
<PAGE> 8
9.2 SECTION Authorization; No Conflict. The execution and delivery of this
Agreement is within the Borrower's corporate powers, has been authorized by all
necessary corporate action, have received all necessary governmental approval
(if any shall be required) and do not and will not contravene or conflict with
any provision of law applicable to the Borrower or of the charter or by-laws of
the Borrower or any Subsidiary or of any agreement binding upon the Borrower or
any Subsidiary.
9.3 SECTION Taxes. Except in the case of state and local tax returns for
the fiscal year ended December 31, 1998 the Borrower and any Subsidiary have
filed or caused to be filed all federal, state and local tax returns which, to
the knowledge of the Borrower or any Subsidiary, are required to be filed, and
have paid or have caused to be paid all taxes as shown on such returns or on any
assessment received by them, to the extent that such taxes have become due
(except for current taxes not delinquent and taxes being contested in good faith
and by appropriate proceedings for which adequate reserves have been provided on
the books of the Borrower or the appropriate Subsidiary, and as to which no
foreclosure, distraint, sale or similar proceedings have been commenced).
Specifically, the Borrower is current in the filing of all of its federal income
tax returns, including for the calendar year ending December 31, 1998. The
Borrower and any Subsidiary have set up reserves which are adequate for the
payment of additional taxes for years which have not been audited by the
respective tax authorities.
9.4 SECTION Litigation and Contingent Liabilities. No litigation
(including derivative actions), arbitration proceedings or governmental
proceedings are pending or threatened against the Borrower which would (singly
or in the aggregate), if adversely determined, have a Material Adverse Effect,
except as set forth (including estimates of the dollar amounts involved) on
Schedule 9.4 hereto.
9.5 SECTION Subsidiaries. Attached hereto as Schedule 9.5 is a correct
and complete list of all Subsidiaries and Affiliates of the Borrower.
9.6 SECTION ERISA/Health. The Borrower does not maintain a Plan, but only
administers a 401(k) plan for its employees. The Borrower maintains a
self-funded health insurance plan, which represents a scheduled contingent
liability of no more than $100,000. Each of the foregoing complies in all
material respects with all applicable requirements of law and regulations.
9.7 SECTION Strategic Transaction Acknowledgment. The Borrower understands
and acknowledges that the Lead Bank and the Lenders would not have entered into
the restructuring set forth in this Agreement in the absence of the Borrower's
stated intent to use its best efforts to consummate a Strategic Transaction on
or before June 30, 2001 and that, consequently, the Lead Bank and the Lenders
have materially relied thereupon in entering into this Agreement; provided,
however, that the failure to actually consummate a Strategic Transaction on or
before such date shall not constitute an Event of Default.
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10 SECTION COVENANTS
Until all Letters of Credit have expired or have been earlier
terminated and all Obligations (other than those of the Obligations which
survive any termination of this Agreement) are paid and fulfilled in full, the
Borrower agrees that it shall, and shall cause any Subsidiary to, comply with
the following covenants, unless the Lead Bank consents otherwise in writing:
10.1 SECTION Corporate Existence, Mergers, Etc. The Borrower and any
Subsidiary shall preserve and maintain its corporate existence, rights,
franchises, licenses and privileges, and will not liquidate, dissolve, or merge,
or consolidate with or into any other corporation, or sell, lease, transfer or
otherwise dispose of all or a substantial part of its assets, except that:
(a) Any Subsidiary may merge or consolidate with or into the Borrower
or any one or more wholly-owned Subsidiaries; and
(b) Any Subsidiary may sell, lease, transfer or otherwise dispose of
any of its assets to the Borrower or one or more wholly-owned
Subsidiaries.
10.2 SECTION Reports, Certificates and Other Information. The Borrower
shall furnish to the Lead Bank and each Lender:
(a) Interim Reports. Within 30 days after the end of each month of
each fiscal year of the Borrower, a copy of an unaudited financial
statement of the Borrower and any Subsidiary prepared on a
consolidated basis, signed by an authorized officer of the Borrower
and consisting of at least (i) a balance sheet as at the close of such
month, (ii) a statement of earnings, for such month, for the period
from the beginning of such fiscal year to the close of such month and
for the comparable periods in the preceding fiscal year, (iii) a
statement of cash flows for such month and for the period from the
beginning of such fiscal year to the close of such month, and (iv) a
statement of cash flows, prepared and delivered weekly, that provides
results of the actual cash flow for the preceding calendar week and
further provides a rolling 90 day cash flow forecast.
(b) Audit Report. Within 90 days after the end of each fiscal year of
the Borrower, a copy of an annual audit report of the Borrower and any
Subsidiary prepared on a consolidated basis and in conformity with
generally accepted accounting principles applied on a consistent
basis, duly certified by independent certified public accountants of
recognized standing satisfactory to the Lenders, accompanied by an
opinion and a certificate from such accountants containing a
computation of, and showing compliance with, any financial restriction
contained in this Agreement, and to the effect that, in making the
examination necessary for the signing of such annual audit report by
such accountants, they have not become aware of any Event of Default
or any Unmatured Event of Default, or if they have become aware of any
such event, describing it.
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(c) Compliance Certificates. Contemporaneously with the furnishing of
a copy of each annual audit report and of each interim report provided
for in this Section, a certificate in the form of Exhibit C dated the
date of such annual report or such interim report and signed by any
one of the President, the Chief Financial Officer or the Treasurer of
the Borrower, to the effect that no Event of Default or Unmatured
Event of Default has occurred and is continuing, or, if there is any
such event, describing it and the steps, if any, being taken to cure
it, and showing compliance with the financial restrictions set forth
in Sections 10.4 and 10.11.
(d) Notice of Default, Litigation and ERISA Matters. Promptly and in
any event within three days after learning of the occurrence of any of
the following, written notice to the Lead Bank and each Lender
describing the same and the steps being taken by the Borrower or any
Subsidiary affected in respect thereof: (i) the occurrence of an Event
of Default or an Unmatured Event of Default; (ii) the institution of,
or any adverse determination in, any litigation, arbitration or
governmental proceeding which is material to the Borrower or any
Subsidiary on a consolidated basis; (iii) the occurrence of a
Reportable Event under, or the institution of steps by the Borrower or
any Subsidiary to withdraw from, or the institution of any steps to
terminate, any Plan; or (iv) any change in the Borrower's status as a
"C corporation" for federal income tax purposes.
(e) Subsidiaries. Promptly from time to time a written report of any
changes in the list of its Subsidiaries and Affiliates set forth on
Schedule 9.5.
(f) Strategic Transaction. Except as provided in the succeeding
sentence of this Section 10.2(f), promptly provide, on a continuing
basis, all information relating to any possible Strategic Transaction
(including, without limitation, any possible initial public offering
of common stock), including, without limitation, copies of any and all
valuations of the Borrower's assets or business operations undertaken
in connection therewith and/or any and all securities law filings made
or to be made in connection therewith. The Borrower does not need to
provide such information to the extent that it does not relate to an
initial public offering of common stock and further relates to a
unsolicited proposal made to the Borrower by an entity that the
Borrower reasonably believes does not have the financial ability to
consummate such a proposal.
(g) Other Information. From time to time such other information,
financial or otherwise, as the Lenders may reasonably request.
10.3 SECTION Inspection. Upon not less than 48 hours' prior notice (which
may be oral and need not be written) to the Borrower from the Lead Bank (except
if an Event of Default shall have occurred and be continuing, in which case
prior notice to the Borrower shall not be required), the Borrower and any
Subsidiary shall permit the Lead Bank and each Lender and their respective
representatives at any time during normal business hours to inspect the
properties of the Borrower and such Subsidiary and to inspect and make copies of
their books and records.
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10.4 SECTION Financial Requirements. The Borrower and any Subsidiary shall
continue to pay all of their respective operating expenses (including (a)
interest owning on the debentures, (b) interest, letters of credit fees, and
other fees and expenses owing to Lenders, and (c) fees and expenses of
completing the Borrower's certified audit for 1998 fiscal year) as they come due
in the ordinary course.
10.5 SECTION Indebtedness, Liens and Taxes. The Borrower and any
Subsidiary shall:
(a) Indebtedness. Not incur, permit to remain outstanding, assume or
in any way become committed for indebtedness in respect of borrowed
money, except (i) indebtedness existing on the date of this Agreement
shown on the financial statements furnished to the Lenders before this
Agreement was signed, including any extensions or renewals thereof so
long as the principal amount of such indebtedness is not increased by
such extension or renewal; (ii) the Bridge Financing; and (iii)
indebtedness incurred after the date hereof in the nature of
Capitalized Lease Liabilities and/or purchase money debt, provided
that the aggregate amount thereof outstanding at any one time does not
exceed (a) $750,000 in calendar 1999, (b) $1,500,000 in calendar 2000,
and (c) $1,500,000 through June 30, 2001 (assuming a total year
limitation of $2,500,000) for the Borrower and all Subsidiaries and
otherwise does not have a Material Adverse Effect on the Borrower and
its business operations at any time.
(b) Liens. Not create, suffer or permit to exist any lien or
encumbrance of any kind or nature upon any of their assets now or
hereafter owned or acquired, or acquire or agree to acquire any
property or assets of any character under any conditional sale
agreement or other title retention agreement, but this Section 10.5(b)
shall not be deemed to apply to liens, encumbrances and security
interests listed on Schedule 10.5(b) hereto, including, without
limitation, (ii) liens in favor of the Bridge Lenders to secure the
Bridge Financing.
(c) Taxes. (i) Not change, or permit any change to occur in, the
Borrower's status as a " C corporation" for federal income tax
purposes; and (ii) pay and discharge all taxes, assessments and
governmental charges or levies imposed upon them, upon their income or
profits or upon any properties belonging to them, prior to the date on
which penalties attach thereto, and all lawful claims for labor,
materials and supplies when due, except that no such tax, assessment,
charge, levy or claim need be paid which is being contested in good
faith by appropriate proceedings and as to which adequate reserves
shall have been established, and as to which no foreclosure,
distraint, sale or similar proceedings have commenced which, if not
stayed or terminated, would have a Material Adverse Effect.
(d) Keep Well Agreements. Not assume, guarantee, indorse or otherwise
become or be responsible in any manner (whether by agreement to
purchase any obligations, stock, assets, goods or services, or to
supply or advance any funds, assets, goods or services, or otherwise)
with respect to the obligation of any other Person, except
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for the indorsement of negotiable instruments for deposit or
collection in the ordinary course of business.
10.6 SECTION Capital Structure and Dividends; Ownership of Subsidiaries.
(a) Capital Structure and Dividends. Other than in the context of a
Strategic Transaction or as provided in subsection (c) hereof, neither
the Borrower nor any Subsidiary shall purchase or redeem, or obligate
itself to purchase or redeem, any shares of the Borrower's capital
stock, of any class, issued and outstanding from time to time; or
declare or pay any dividend (other than dividends payable in its own
common stock or to the Borrower) or make any other distribution in
respect of such shares other than to the Borrower.
(b) Ownership of Subsidiaries. Except as provided in subsection (c)
hereof, the Borrower shall continue to own, directly or indirectly,
the same (or greater) percentage of the stock of each Subsidiary that
it held on the date of this Agreement, and no Subsidiary shall issue
any additional securities other than to the Borrower.
(c) Neural, Inc. The Borrower may enter into any equity or sale
transaction involving Neural, Inc., its wholly owned subsidiary, as it
is presently constituted so long as it is with a third party on arm's
length terms. In the event that the consideration paid by such third
party as part of an equity transaction is required by the terms of the
definitive agreements relating thereto ("Neural Agreement") to remain
in Neural, Inc. for operational and capital expenditure purposes,
there shall be no violation of the provisions of this Agreement. In
the event that the consideration paid by such third party is not
required pursuant to the provisions of the Neural Agreement to remain
in Neural, Inc. for such purposes, but instead may be distributed to
the Borrower, such amount (up to the amount then owing to the Bridge
Lenders) shall be distributed to the Bridge Lenders for application
against the amounts outstanding under the Bridge Financing, with the
balance, if any, of such amount in excess of $500,000 being set aside
by the Borrower and not used for any purpose (operational or
otherwise) pending an agreement between the Borrower and the Lead
Bank, on behalf of the Lenders, regarding the disposition thereof.
10.7 SECTION Maintenance of Properties. The Borrower and any Subsidiary
shall maintain, or cause to be maintained, in a manner consistent with their
past practices, all their properties (whether owned or held under lease) in good
repair, working order and condition, and from time to time make, or cause to be
made, in a manner consistent with their past practices, all needed and
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
10.8 SECTION Insurance. The Borrower and any Subsidiary shall maintain
insurance with responsible companies in such amounts and against such risks as
is reasonably required by the
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Lenders and, at a minimum, insurance on their business, fixed assets, inventory
and other properties, workmen's compensation or similar insurance as required by
law, and adequate public liability (including product liability) insurance
against claims for personal injury, death or property damage arising out of its
products, facilities or operations, as is usually carried by similar businesses
conducting operations in similar areas.
10.9 SECTION Compliance With Law. The Borrower and any Subsidiary shall
comply in all respects with all applicable laws, rules, regulations and orders,
except where the failure to so comply would not have a Material Adverse Effect.
10.10 SECTION Environmental Covenant. The Borrower will, and will cause each
of its Subsidiaries to use and operate all of its facilities and properties
(including handling all Hazardous Materials) in material compliance with all
Environmental Laws.
10.11 SECTION Capital Expenditures. Neither the Borrower nor any Subsidiary
shall purchase or otherwise acquire (including, without limitation, acquisition
by way of capitalized lease), or commit to purchase or otherwise acquire, any
fixed asset if, after giving effect to such purchase or other acquisition, the
aggregate cost of all fixed assets purchased or otherwise acquired by the
Borrower and its Subsidiaries on a consolidated basis in any one fiscal year of
the Borrower would exceed the projected capital expenditures of the Borrower and
its Subsidiaries for the following calendar years (or portion of calendar
years): (a) $1,000,000 in calendar year 1999, (b) $2,500,000 in calendar year
2000, and (c) $2,500,000 through June 30, 2001 (assuming a total year limitation
of $3,500,000).
10.12 SECTION Remuneration. Except as provided in the immediately two
succeeding sentences, neither the Borrower nor any Subsidiary shall pay salaries
or other remuneration to officers or employees who are stockholders (or, in the
case of a stockholder which is a trust, officers or employees who are grantors
and/or beneficiaries of such trust, as appropriate) of the Borrower or any
Subsidiary. The Borrower may continue to pay the salaries of employees or
officers (other than Robert Staib or Barbara Staib) who are direct or indirect
stockholders and who are William Staib, Robert Squires, William McNally, Scott
Porter, or any other member of senior management set forth on Schedule 10.12
hereof (a "Senior Manager") so long as such compensation is not at a rate or in
an amount in excess of that which is in effect on the date of this Agreement of
which the Lenders have been advised in writing. The Borrower may continue to
grant any employee or officer who is not a Senior Manager, or any employee or
officer who is a Senior Manager whose name appears on Schedule 10.12 hereof
(after satisfying the Lead Bank as to the market necessity therefor) such
compensation packages as the Borrower reasonably believes are necessary to
maintain compensation at market levels. Specifically, (a) no compensation shall
be paid to Robert Staib or Barbara Staib, (b) no amount shall be payable by the
Borrower to Iowa Jet Services (presently scheduled in the amount of $99,280.50)
(the "Iowa Jet Receivable") unless and until the later of the following occurs:
(i) the Borrower's liability for such amount is established pursuant to a final
and nonappealable order or judgment of a court of competent jurisdiction and
(ii) all other property of the bankruptcy estate of Iowa Jet Services has been
liquidated, and (c) no amount shall be paid to Robert Staib or Barbara Staib in
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reimbursement of any expenses, including, without limitation, the scheduled
$59,170.08 in travel expenses. Nothing set forth herein shall be deemed to
impair in any manner ISB's rights and interests, as a secured creditor of Iowa
Jet Services, in the Iowa Jet Receivable.
10.13 SECTION Further Assurances. The Borrower agrees that, from time to
time at its own expense, the Borrower will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, as reasonably determined by the Lead Bank, in order to
perfect, preserve and protect any lien or security interest granted or purported
to be granted by any Collateral Document or to enable the Lead Bank to exercise
and enforce its rights and remedies thereunder with respect to any collateral.
11 SECTION CONDITIONS TO EFFECTIVENESS OF AGREEMENT
This Agreement and the amendment of the November 28, 1997 Note, the
September 14, 1998 Note, and the L/C Reimbursement Agreements provided for
herein shall become effective as of the date hereof upon satisfaction of the
following conditions precedent:
11.1 SECTION Letters of Credit. There shall have been no demand for
payment made under any of the Letters of Credit.
11.2 SECTION Agreement. Each party hereto shall have received a counterpart
of this Agreement which has been executed by all of the parties hereto.
11.3 SECTION Documentation. The Lead Bank shall have received all of the
following, each duly executed and dated the closing date hereof or such earlier
date as is provided for herein or in an Exhibit hereto or is satisfactory to the
Lead Bank, in form and substance satisfactory to the Lead Bank and its counsel,
at the expense of the Borrower, and in such number of signed counterparts as the
Lead Bank may request (except for the Notes, of which only the originals shall
be signed):
(a) Borrower Resolution. A copy of a resolution of the Board of
Directors of the Borrower authorizing or ratifying the execution,
delivery and performance, respectively, of this Agreement, the Notes
and all other Loan Documents to be executed by the Borrower, certified
by the Secretary of the Borrower.
(b) Borrower Articles of Incorporation and By-laws. A certificate of
the Secretary of the Borrower to the effect that true and correct
copies of the articles of incorporation and the by-laws of the
Borrower the in effect are attached as exhibits to such certificate.
(c) Borrower Certificate of Incumbency. A certificate of the Secretary
of the Borrower certifying the names of the officer or officers of the
Borrower authorized to sign this Agreement, the Notes and the other
Loan Documents to be executed by the
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Borrower, together with a sample of the true signature of each such
officer (the Lead Bank and each Lender may conclusively rely on such
certificate until formally advised by a like certificate of any
changes therein).
(d) Opinion of Counsel to the Borrower. An opinion of counsel to the
Borrower to such effect as the Lead Bank may reasonably require.
(e) Insurance Policies. Certified copies of all liability, casualty,
and "at risk" insurance policies of the Borrower.
(f) Stockpoint/Staib Agreement. A copy of the Stockpoint/Staib
Agreement (as such term is defined in Section 12.3 hereof)
substantially in the form of Exhibit D hereto, which has been fully
executed by the parties thereto.
(g) Miscellaneous. Such other documents and certificates as the Lead
Bank may reasonably request.
11.4 SECTION Bridge Financing. The Lead Bank shall have received copies of
the executed agreements and other documents relating to the Bridge Financing.
11.5 SECTION Payment of Accrued Interest and Letter of Credit Fees. The
Lead Bank, on behalf of the Lenders, shall have received payment in full of all
accrued and unpaid interest on the Notes and unpaid Letter of Credit Fees as of
November 30, 1999, which aggregate $335,441.81.
11.6 SECTION Robert B. Staib. The Lenders shall have entered into such
agreement relating to Robert B. Staib substantially in the form of Exhibit E
hereto (the "Robert Staib/Lender Agreement"), which agreement will not be
subject to bankruptcy court approval, whether to be obtained before or after
closing.
12 SECTION DEFAULT
12.1 SECTION Events of Default. Each of the following occurrences is hereby
defined as an "Event of Default" under each of the Notes and the L/C
Reimbursement Agreements (unless waived in writing by the Lead Bank on behalf of
the Lenders in its sole and absolute discretion):
(a) Nonpayment. The Borrower shall fail to make any payment required
pursuant to Section 5.1 hereof when and as due and, with respect to
any payment other than a payment required pursuant to Section 5.1
hereof, the Borrower shall fail to make any payment of principal,
interest, Letter of Credit fees or other amounts payable under either
Note (as amended hereby) when and as due, which shall not be cured
within three (3) business days of the required date of such payment;
or
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(b) Loan Documents Not Enforceable, etc. Any Loan Document shall
(except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be the legal, valid, binding and
enforceable obligation of the Borrower or any other party thereto
(other than the Lead Bank or any Lender); or the Borrower or any other
party to a Loan Document (other than the Lead Bank or any Lender), or
any Affiliate of the Borrower or such other party, shall, directly or
indirectly, contest in any manner the effectiveness, validity, binding
nature or enforceability of any Loan Document; or
(c) Cross-Default. There shall occur any default or event of default,
or any event which might become such with notice or the passage of
time or both, or any similar event, or any event which requires the
prepayment of borrowed money or the acceleration of the maturity
thereof (other than the Debentures), under the terms of any evidence
of indebtedness or other agreement issued or assumed or entered into
by the Borrower, any Subsidiary, or under the terms of any indenture,
agreement or instrument under which any such evidence of indebtedness
or other agreement is issued, assumed, secured or guaranteed (except
for any such event which is being contested in good faith and by
appropriate proceedings, and as to which adequate reserves shall have
been established, and which involves indebtedness other than for
borrowed money), and such event shall continue beyond any applicable
period of grace. Consistent with the foregoing, a cross-default with
respect to the Debentures shall occur only upon the expiration of any
applicable cure period with respect to a payment obligation thereunder
and no cross-default shall be deemed to occur with respect to the CEBA
or Kirkwood debt so long as the Borrower is undertaking appropriate
measures to either pay such indebtedness in full or otherwise ensure
that any attempted collection of either such indebtedness will not
have a Material Adverse Effect; or
(d) Dissolutions, etc. The Borrower shall fail to comply with any
provision concerning its existence or that of any Subsidiary or any
prohibition against dissolution, liquidation, merger, consolidation or
sale of assets; or
(e) Warranties. Any representation, warranty, schedule, certificate,
financial statement, report, notice or other writing furnished to the
Lead Bank or any Lender by or on behalf of the Borrower or any other
party to a Loan Document (other than any Lender or the Lead Bank) is
false or misleading in any material respect on the date as of which
the facts therein set forth are stated or certified; or
(f) Change in Control. Other than with respect to a Strategic
Transaction, any Person presently not in control of the Borrower shall
obtain control directly or indirectly of the Borrower, whether by
purchase or gift of stock or assets, by contract, or otherwise; or
(g) ERISA. Any Reportable Event shall occur under ERISA in respect of
any Plan; or
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(h) Litigation. Any judgment or order for the payment of money in
excess of $250,000 or judgments in any number and of any individual
amount that, in the aggregate, exceed $500,000 shall be rendered
against the Borrower or any Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor upon such
judgment or order; or (ii) there shall be any period of 20 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(i) Noncompliance with this Agreement or Other Loan Document. The
Borrower or any other party to a Loan Document (other than any Lender
or the Lead Bank) shall fail to comply with any provision hereof or of
any other Loan Document, which failure does not otherwise constitute
an Event of Default, and such failure shall continue for ten days
after written notice thereof to the Borrower by the Lead Bank; or
(j) Letters of Credit. Any demand for payment shall have been made
under any of the Letters of Credit; or
(k) Robert Staib/Lender Agreement. The Robert Staib/Lender Agreement
shall have been subsequently repudiated by Mr. Staib in any manner or
otherwise vitiated in any respect, whether by an order of the
bankruptcy court or otherwise;
(l) Bankruptcy. Any bankruptcy, insolvency, reorganization,
arrangement, readjustment, liquidation, dissolution, or similar
proceeding, domestic or foreign, is instituted by or against the
Borrower or any Subsidiary and, if instituted against the Borrower or
any Subsidiary, is consented to or acquiesced in by the Borrower or
such Subsidiary or remains for 45 days undismissed; or the Borrower,
any Subsidiary shall take any step toward, or to authorize, such a
proceeding; or
(m) Insolvency. The Borrower or any Subsidiary shall become insolvent
(as defined in 11 U.S.C. ss. 101(32)(A)(1994)), generally shall fail
or be unable to pay its debts as they mature (other than the trade
debts set forth on Schedule 12.1(m) hereto, which the Borrower
disputes), shall admit in writing its inability to pay its debts as
they mature, shall make a general assignment for the benefit of its
creditors, shall enter into any composition or similar agreement, or
shall suspend the transaction of all or a substantial portion of its
usual business.
12.2 SECTION Remedies. Upon the occurrence of any Event of Default set
forth in subsections (a)-(k) of Section 12.1 and during the continuance thereof
and in addition to any other rights under the Notes or the L/C Reimbursement
Agreements, the waiver of existing defaults set forth in Section 4.1 hereof as
to the Borrower only shall automatically terminate (all without action of any
kind on the part of the Lead Bank or the Lenders), and the Lead Bank, upon the
direction of the Lenders (which direction the Lenders may or may not give in
each such instance and at such time(s) as they determine in their sole and
absolute discretion), shall (i)
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declare the Notes and any other amounts owed to the Lead Bank and the Lenders to
be immediately due and payable whereupon the Notes and any other amounts owed to
the Lead Bank and the Lenders shall forthwith become due and payable, (ii)
require the Borrower to supply the Lead Bank with cash collateral to secure the
Borrower's reimbursement obligations with respect to (a) the undrawn face amount
of any issued and unexpired Letters of Credit and (b) any unreimbursed amount in
respect of amounts drawn under any Letters of Credit (whether expired or
unexpired). Upon the occurrence of any Event of Default set forth in subsections
(l)-(m) of Section 12.1, the waiver of existing defaults set forth in Section
4.1 hereof as to the Borrower only shall automatically terminate (all without
action of any kind on the part of the Lead Bank or the Lenders), and (i) the
Notes and any other amounts owed to the Lead Bank and the Lenders shall be
immediately and automatically due and payable and (ii) the cash collateral
referred to in clause (ii) of the immediately preceding sentence shall be
immediately and automatically due to the Lead Bank, all without action of any
kind on the part of the Lead Bank or the Lenders. The Borrower expressly waives
presentment, demand, notice or protest of any kind in connection herewith. The
Lead Bank shall promptly give the Borrower notice of any such declaration, but
failure to do so shall not impair the effect of such declaration. No delay or
omission on the part of the Lead Bank or any of the Lenders in exercising any
power or right hereunder or under any Note shall impair such right or power or
be construed to be a waiver of any Event of Default or any acquiescence therein,
nor shall any single or partial exercise of any power or right hereunder
preclude other or further exercise thereof, or the exercise of any other power
or right.
12.3 SECTION Stockpoint/Staib Agreement. The Borrower and Robert Staib are
expected to enter into a settlement agreement (substantially in the form of
Exhibit D hereto) (the "Stockpoint/Staib Agreement"), whereby, in consideration
of the resolution of potential claims that the Borrower may or may not be able
to assert against Robert Staib, (a) Mr. Staib will transfer (or agree to the
cancellation of) certain (if not all) of the stock options and/or certain (but
not all) of the stock he presently holds or controls in the Borrower, but (b)
Mr. Staib will be permitted to retain and/or dispose of prior to the
consummation of any Strategic Transaction certain of the stock he presently
holds or controls in the Borrower. Stockpoint acknowledges that the Lenders are
not agreeing to be parties to the Stockpoint/Staib Agreement and that the
Lenders shall have no liability in connection therewith. The Lead Bank and the
Lenders acknowledge that the execution and delivery of the Stockpoint/Staib
Agreement, so long as such execution and delivery occurs prior to the closing
hereunder, shall constitute neither an Event of Default under the Notes or this
Agreement nor a default under the Robert Staib/Lender Agreement.
13 SECTION DEFINITIONS
13.1 SECTION Definitions. The definitions are set forth in Schedule I
hereof.
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14 SECTION MISCELLANEOUS
14.1 SECTION Waivers, Amendments, Etc. The provisions of this Agreement and
of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Lenders. No failure or delay on the part of the Lead
Bank, any Lender or the holder of any Note in exercising any power or right
under this Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No notice to or demand on the Borrower in any case shall entitle
it to any notice or demand in similar or other circumstances. No waiver or
approval by the Lead Bank, any Lender or the holder of any Note under this
Agreement or any other Loan Document shall, except as may be otherwise stated in
such waiver or approval, be applicable to subsequent transactions. No waiver or
approval hereunder shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
14.2 SECTION Notices. All notices and other communications provided to any
party hereto under this Agreement or any other Loan Document shall be in writing
(except as otherwise specifically provided in this Agreement) or by facsimile
and addressed, delivered or transmitted to such party at its address or
facsimile number set forth below its signature hereto or set forth in the Lender
Assignment Agreement or at such other address or facsimile number as may be
designated by such party in a notice to the other parties. Any notice, if mailed
and properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted and the party
giving such notice shall have received (including either through telephonic
communication initiated by it or telephonic communication received by it)
telephonic, machine, or other confirmation that such notice has been received by
the intended recipient.
14.3 SECTION Nonwaiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, on the part of the Lead Bank or any Lender, any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of the Lead Bank and the Lenders herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
14.4 SECTION Survival of Agreements. All agreements, representations and
warranties made herein shall survive the delivery of this Agreement. The
obligations of the Borrower under Sections 14.9 survive any termination of this
Agreement, the payment in full of all Obligations (or, in the case of the
Borrower, all other Obligations), and the expiration or earlier termination of
all Letters of Credit.
14.5 SECTION Effectiveness and Successors. This Agreement shall, upon
execution and delivery by the Borrower, the Lenders and the Lead Bank in
Chicago, Illinois, become effective and shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Lead Bank
19
<PAGE> 20
and their respective successors and assigns, except that the Borrower may not
transfer or assign any of its rights or interest hereunder without the prior
written consent of the Lenders. Consistent with, but in no manner in limitation
of, the foregoing, in the event that Robert Staib shall satisfy in full all of
his obligations to the Lead Bank under his guarantees (including, without
limitation, the payment in full of all indebtedness owing under the Notes), Mr.
Staib shall be bound by the provisions of this Agreement (including, without
limitation, the provisions of Section 4.1 hereof).
14.6 SECTION Captions. Captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. References herein to Sections or provisions without reference to the
document in which they are contained are references to this Agreement.
14.7 SECTION Singular and Plural. Unless the context requires otherwise,
wherever used herein the singular shall include the plural and vice versa, and
the use of one gender shall also denote the other where appropriate.
14.8 SECTION Counterparts. This Agreement may be executed by the parties on
any number of separate counterparts, and by each party on separate counterparts;
each counterpart shall be deemed an original instrument; and all of the
counterparts taken together shall be deemed to constitute one and the same
instrument.
14.9 SECTION Payment of Costs and Expenses. Other than with respect to the
professional fees and expenses of the Lead Bank and the Lenders relating to the
period prior to the execution and delivery of this Agreement (which are
addressed in Section 7.1 hereof), the Borrower's obligations under the Notes
and/or the L/C Reimbursement Agreements to reimburse the Lead Bank and the
Lenders for their respective expenses remain unchanged. The aggregate limit set
forth in Section 7.1 hereof in no manner applies or otherwise limits the rights
of the Lead Bank and each Lender to be reimbursed for such fees and expenses,
which, for expenses incurred from the date hereof to such date, shall be due and
payable on the earlier to occur of the date of the consummation of a Strategic
Transaction (or other acceleration of the Obligations pursuant to any of the
other provisions hereof) and June 30, 2001 and which, for expenses incurred
after such date, shall be due and payable on demand.
14.10 SECTION Confidentiality. The Lenders shall hold all non-public
information (which has been identified as such by the Borrower) obtained
pursuant to the requirements of this Agreement in accordance with their
customary procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure to any of their examiners, insurers, Affiliates, outside auditors,
counsel and other professional advisors in connection with this Agreement or as
reasonably required by any bona fide transferee, participant or assignee or as
required or requested by any governmental agency or representative thereof or
pursuant to legal process.
20
<PAGE> 21
14.11 SECTION Construction. This Agreement, the Notes (as amended by this
Agreement), the Loan Documents and any other document or instrument executed in
connection herewith shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of Illinois, and shall be deemed
to have been executed in the State of Illinois.
14.12 SECTION Reaffirmation of the Provisions of the Loan Documents. Except
as amended hereby, the provisions of the Notes and the L/C Reimbursement
Agreements remain unchanged, and the Borrower hereby reaffirms its obligations
thereunder. Consistent with the foregoing, any conflict between the provisions
of the Notes and/or the L/C Reimbursement Agreements prior to the date hereof,
on the one hand, and the provisions of this Agreement, on the other hand, shall
be governed by the provisions of this Agreement.
14.13 SECTION Relationship between this Agreement and Participation
Agreement. Iowa State Bank's execution and delivery of this Agreement shall be
deemed to satisfy any consent requirement under any of the existing
participation agreements (the "Participation Agreements") between Iowa State
Bank and Northern. Except as provided in the preceding sentence, the provisions
of the Participation Agreement shall remain unchanged and any conflict between
the provisions of the Participation Agreement and this Agreement shall be
governed by the provisions of the Participation Agreement.
14.14 SECTION Submission to Jurisdiction; Venue; Waiver of Right to Jury
Trial. THE BORROWER IRREVOCABLY AGREES THAT ALL SUITS, ACTIONS OR OTHER
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO
THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH, SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS
WITHIN CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND
STATE. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY, TO
TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT
AGAINST ANY PARTY IN ACCORDANCE WITH THIS SECTION, OR TO CLAIM THAT ANY SUCH
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
* * * * * *
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
STOCKPOINT, INC., formerly known as
NEURAL APPLICATIONS CORPORATION
By: /s/ William E. Staib
Its: Chief Executive Officer
Address: 2600 Cross Park
Coralville, IA 52241
Attention: William E. Staib
Facsimile: 319-626-5001
THE NORTHERN TRUST COMPANY
By: /s/ [illegible]
Its: Vice President
Address: 50 South LaSalle Street
Chicago, Illinois 60675
Attention: David Gozdecki, Vice President
Credit Policy Division
Facsimile: 312/630-6105
Telephone: 312/444-5829
IOWA STATE BANK & TRUST
By: /s/ [illegible]
Its: Senior Vice President
Address:
Attn:
Facsimile:
22
<PAGE> 23
SCHEDULE I
DEFINITIONS
General. The following terms when used in this Agreement, including
its preamble and recitals, shall, except where the context otherwise requires,
have the following meanings (such meanings to be equally applicable to the
singular and plural forms thereof):
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person. A Person shall be deemed to be "controlled by" any other Person if such
other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agreement" is defined in the preamble.
"Authorized Officer" means, relative to the Borrower, those of its
officers whose signatures and incumbency shall have been certified to the Lead
Bank and the Lenders pursuant to subsection (f) of Section 6.2.
"Borrower" is defined in the preamble.
"Bridge Financing" is defined in Section 6.1 hereof.
"Bridge Lenders" is defined in Section 6.1 hereof.
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with generally accepted accounting principles, would be
classified as capitalized leases, and, for purposes of this Agreement, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with generally accepted accounting principles.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Debentures" is defined in Recital C.
<PAGE> 24
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"ERISA" means the federal Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" is defined in Section 12.1.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Iowa Jet Receivable" is defined in Section 10.12.
"ISB" is defined in Recital D.
"Issuer" means Northern in its capacity as the issuer of any Letter of
Credit.
"Lead Bank" means Northern in its lead bank capacity or any of its
successors in that regard.
"Lenders" is defined in the preamble.
"Letters of Credit" is defined in Recital C.
"L/C Reimbursement Agreements" is defined in Recital C.
<PAGE> 25
"Loan Documents" means this Agreement, the Notes, the L/C
Reimbursement Agreements, and each other document or agreement executed and
delivered in connection with this Agreement or any of the transactions
contemplated by this Agreement by the Borrower or any other Person directly or
indirectly obligated with respect to any of the Obligations.
"Material Adverse Effect" means a material and adverse effect on the
business, assets, liabilities, financial condition, operations or business
prospects of the Borrower and its Subsidiaries taken as a whole or on the
ability of the Borrower to perform its obligations under this Agreement, the
Notes or the other Loan Documents to which the Borrower is a party or on the
value of any of the collateral securing any of the Obligations or on the ability
of the Lead Bank to realize on any such collateral.
"Northern" is defined in the preamble.
"November 28, 1997 Line of Credit" is defined in Recital A.
"November 28, 1997 Note" is defined in Recital A.
"Notes" is defined in Section 1.4 hereof.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower arising under or in connection with this Agreement, the Note, each
other Loan Document to which the Borrower is a party, and the Letters of Credit.
"PBGC" means the Pension Benefit Guaranty Corporation and its
successors and assigns.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.
"Plan" means an employee benefit plan which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the
Internal Revenue Code as to which the Borrower or any Subsidiary may have any
liability.
"Prime Rate" is defined in Section 2.1.
"Purported UAL Stock Certificates" is defined in Recital F.
"Release" means a "release", as such term is defined in CERCLA.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events which, singly or in the aggregate, do not and
will not have a Material Adverse Effect.
<PAGE> 26
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in effect from
time to time.
"Robert Staib Agreement" is defined in Section 11.6 hereof.
"Senior Manager" is defined in Section 10.12 hereof.
"September 14, 1998 Line of Credit" is defined in Recital E.
"September 14, 1998 Note" is defined in Recital E.
"Strategic Transaction" is defined in Section 5.1 hereof.
"Subsidiary" means any corporation, partnership, joint venture, limited
liability company, trust, or other legal entity of which the Borrower owns
directly or indirectly 50% or more of the outstanding voting stock or interest,
or of which the Borrower has effective control, by contract or otherwise.
"Unfunded Liabilities" means
(a) in the case of single employer Plans, the amount (if any)
by which the present value of all vested nonforfeitable benefits under
such Plan exceeds the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation date
for such Plan; and
(b) in the case of multi-employer plans, the withdrawal
liability of the Borrower and its Subsidiaries.
"Unmatured Event of Default" means an event or condition which would
become an Event of Default with notice or the passage of time or both.
Except as and unless otherwise specifically provided herein, all
accounting terms in this Agreement shall have the meanings given to them by
generally accepted accounting principles and shall be applied, and all reports
required by this Agreement shall be prepared, in a manner consistent with the
financial statements referred to in Section 10.2(a).
Applicability of Subsidiary and Affiliate References. Terms hereof
pertaining to any Subsidiary or Affiliate shall apply to the Borrower only
during such times as the Borrower has any Subsidiary or Affiliate.
<PAGE> 27
SCHEDULE 9.4
SCHEDULE OF LITIGATION LIABILITIES OF THE BORROWER
List of pending litigation, arbitration proceedings or governmental proceedings
pending or threatened:
None.
<PAGE> 28
SCHEDULE 9.5
SUBSIDIARIES AND AFFILIATES
1. Neural, Inc., a Delaware corporation, a wholly owned subsidiary.
2. Ethos Corporation, a California corporation, a wholly owned subsidiary.
<PAGE> 29
SCHEDULE 10.5(b)
SCHEDULE OF LIENS AND ENCUMBRANCES ON PROPERTY OF THE BORROWER
1. Kirkwood Community College (unpaid balance $146,243)
2. Iowa Department of Economic Development
and City of Coralville, Iowa (unpaid balance $150,000)
3. New Resources, Inc. (unpaid balance $36,368)
4. Berthel Fischer Company (unpaid balance $10,411)
5. Bridge Lender/Norwest Bank Iowa,
National Association (unpaid balance of $2,500,000)
<PAGE> 30
SCHEDULE 10.12
SCHEDULE OF SENIOR MANAGERS
William E. Staib
Scott D. Porter
William E. McNally
Robert Squires
<PAGE> 31
SCHEDULE 12.1(m)
<TABLE>
<CAPTION>
SCHEDULE OF TRADE CREDITORS WHOSE CLAIMS
ARE IN THE PROCESS OF BEING RESOLVED
<S> <C>
North Star Steel $237,799
Belle Plaine Air Services $ 39,340
Arnold Communications Public Relations $ 84,264
</TABLE>
<PAGE> 32
EXHIBIT A
FORM OF COVENANT NOT TO SUE
This Covenant Not to Sue is from The Northern Trust Company
("Northern") and Iowa State Bank, & Trust ("ISBT") to and in favor of
Stockpoint, Inc., formerly known as Neural Applications Corporation
("Stockpoint").
W I T N E S S E T H:
WHEREAS, Stockpoint, Northern, and ISBT have entered into a certain
Restructuring Agreement, dated as of , 1999 (the "Restructuring
Agreement"); and
WHEREAS, under the Restructuring Agreement, Northern and ISBT agreed,
upon the satisfaction of the conditions of Section 8.1 thereof, to not seek the
imposition of personal liability on Stockpoint with respect to the Obligations
(including, without limitation, the Notes and Stockpoint's reimbursement
obligations under the Letter of Credit) (all as such terms are defined in the
Restructuring Agreement);
NOW, THEREFORE, each of Northern and ISBT hereby does agree as follows:
14.15 SECTION Modified Covenant Not to Sue. In consideration of the receipt of
$ and the release referred to in Section 8.1 of the Restructuring
Agreement, Northern and ISBT, severally, for themselves and their successors and
assigns, hereby agree not to seek the imposition of personal liability on
Stockpoint, its successors and assigns and each of the former, current and
future shareholders, directors, officers, employees, agents, attorneys, trustees
and representatives, their respective heirs, legal representatives, successors
and assigns, of Stockpoint, for any and all claims, counterclaims, demands,
liens, agreements, contracts, covenants, suits, actions, causes of action,
obligations, controversies, debts, compensation, losses, costs, expenses,
attorneys' fees, damages, judgments, orders and liabilities of whatever kind,
type, nature, character or description, in law, equity or otherwise, whether now
known or unknown, contingent or vested, liquidated or unliquidated, suspected or
unsuspected, and whether or not sealed or hidden, which have existed, or which
do exist as of the date hereof, or which may now or hereafter exist, pertaining
to or arising out of the Obligations (including, without limitation, the Notes
and Stockpoint's reimbursement obligations under the Letter of Credit);
provided, however, that (i) the Obligations are not canceled, discharged or
deemed paid hereby, (ii) each of Northern and ISBT reserves the right to implead
Stockpoint in any action in which a claim is made against either of Northern or
ISBT; moreover, each of Northern and ISBT reserves its rights to contribution
and indemnity in any action in which either is a party, and (iii) if any court
of competent jurisdiction shall at any time determine that any payment or other
transfer made pursuant to or in connection with the Obligations constitutes a
fraudulent transfer or preference under applicable law or otherwise, or shall
otherwise avoid such transfer, and shall require, whether by order, judgment,
declaration or otherwise, either of Northern or ISBT or any designee thereof to
reconvey any such transfer or any material part thereof, or to pay an amount,
<PAGE> 33
representing the value of all or any material part thereof, to Stockpoint or to
any trustee, receiver of custodian for any thereof, then, any rule of law or
equity or agreement of the parties to the contrary notwithstanding, immediately
and without any notice or action by either Northern or ISBT or any designee
thereof or any other party, this Covenant Not to Sue and each and every other
relief, indulgence or relinquishment of rights by Northern and/or ISBT set forth
in this Section A shall be void ab initio, and each of Northern and ISBT shall
be entitled to enforce its rights with respect to the Obligations, including
without limitation, its rights and claims under and in connection with the Notes
and the Letter of Credit, all as if this Covenant Not to Sue had never been
executed and delivered (except that any pertinent statute of limitations shall
be deemed to have been tolled during the period from the date of the execution
and delivery of this Covenant Not to Sue to and through the date that is 30 days
after any such avoidance determination becomes final and nonapplicable).
14.16 SECTION No Release of Third Parties. In executing and delivering this
Covenant Not to Sue, each of Northern and ISBT does not hereby release or
discharge in any manner whatsoever any other person or entity (including, in
particular, Robert Staib) which is or may be liable to it in respect to any
matter relating directly or indirectly to the aforementioned claims, and each of
Northern and ISBT hereby expressly reserves all of its claims, rights, powers,
and remedies against all such other persons and entities (including, in
particular, Robert Staib).
14.17 SECTION Binding Effect. This Covenant Not to Sue shall be binding upon the
successors and assigns of Northern and ISBT and shall inure to the benefit of
the heirs, legal representatives, successors and assigns of Stockpoint.
Consistent with Section B hereof, there are no intended third party
beneficiaries of this Covenant Not to Sue.
14.18 SECTION Execution in Counterparts. This Covenant Not to Sue may be
executed in any number of counterparts each of which shall be deemed an original
and all of which shall be deemed for all purposes, one agreement.
14.19 SECTION Choice of Law. To the extent not governed by federal law, this
Covenant Not to Sue shall be deemed to be a contract made under the laws of the
State of Illinois ad for all purposes shall be governed by and construed in
accordance with the laws of that state (except the choice of law rules thereof)
in all respects, including, without limitation, mattes of construction, validity
and performance.
<PAGE> 34
14.20 SECTION No Amendment. This Covenant Not to Sue may not be amended,
modified, altered or waived.
Dated: , 2000
-------------
THE NORTHERN TRUST COMPANY IOWA STATE BANK & TRUST
By: By:
--------------------------------- ----------------------------------
Its: Its:
-------------------------- ---------------------------------
Agreed to and Accepted this
day of , 200 .
By: STOCKPOINT, INC., formerly known
as Neural Applications Corporation
By:
-------------------------------
Its:
-------------------------
<PAGE> 35
EXHIBIT B
FORM OF RELEASE
This Release is from Stockpoint, Inc., formerly known as Neural
Applications Corporation, a Delaware corporation ("Stockpoint"), to and in favor
of The Northern Trust Company, an Illinois banking corporation ("Northern") and
Iowa State Bank & Trust ("ISBT").
W I T N E S S E T H:
WHEREAS, Stockpoint, Northern and ISBT have entered into a certain
Restructuring Agreement, dated as of November __, 1999 (the "Restructuring
Agreement"); and
WHEREAS, under the Restructuring Agreement, Stockpoint agreed, upon the
satisfaction of the conditions of Section 8.1 thereof, to release each of
Northern and ISBT from any claim pertaining to or in any other manner relating
to the Obligations (including, without limitation, the Notes and the Letters of
Credit) (all such terms are defined in the Restructuring Agreement and used
herein with the same meaning), Stockpoint or its business operations, or Robert
Staib;
NOW, THEREFORE, Stockpoint does hereby agree as follows:
14.21 SECTION Release. In consideration of Northern and ISBT entering into the
Restructuring Agreement, and for other consideration, Stockpoint, for itself and
its legal representatives, subsidiaries, affiliates, successors and assigns,
hereby knowingly and voluntarily, absolutely, finally and forever releases,
acquits and discharges each of Northern and ISBT, their successors and assigns,
and each of their respective former, current, and future affiliated corporations
(including parents and subsidiaries) and their respective successors and assigns
and each of the former, current and future shareholders, directors, officers,
employees, agents, attorneys, trustees and representatives, their respective
heirs, legal representatives, successors and assigns, of each of Northern and
ISBT (collectively, the "Released Parties"), from any and all claims
counterclaims, demands, liens, agreements, contracts, covenants, suits, actions,
causes of action, obligations, controversies, debts, compensation, losses,
costs, expenses, attorneys' fees, damages, judgments, orders and liabilities of
whatever kind, type, nature, character or description, in law, equity or
otherwise, whether now known or unknown, contingent or vested, liquidated or
unliquidated, suspected or unsuspected, and whether or not sealed or hidden,
which have existed, or which do exist as of the date hereof, or which may now or
hereafter exist, pertaining to, arising out of, or in any manner relating to the
Obligations (including, without limitation, the Notes and the Letters of
Credit), Stockpoint generally (including its business operations), or Robert
Staib.
14.22 SECTION Unwind Provision. Northern and ISBT each has this date executed a
Covenant Not to Sue in favor of Stockpoint. If such Covenant Not to Sue is
determined to be void ab initio, and if, as a matter of applicable law, this
Release shall be void ab initio as a result thereof, then Stockpoint shall be
entitled to enforce its rights, if any, as though the Release had not been
executed.
<PAGE> 36
14.23 SECTION Certain Representations and Warranties. Stockpoint represents and
warrants that (i) it has had the opportunity to obtain advice of counsel of its
own choosing in the negotiations for and preparation of this Release, that its
authorized officers have read this Release, that its authorized officers have
had this Release fully explained to them on behalf of Stockpoint by such counsel
(if consulted) and that it (through its authorized officers) is fully aware of
its contents and legal effects, and (ii) except as herein provided, it has not
assigned any claims, counterclaims, demands, liens, agreements, contracts,
covenants, suits, actions, causes of action, obligations, controversies, debts,
compensation, losses, costs, expenses, attorneys' fees, damages, judgments,
orders or liabilities that are the subject matter of this Release to any other
person or entity.
14.24 SECTION Binding Effect. This Release shall be binding upon the heirs,
legal representatives, successors and assigns of Stockpoint and shall inure to
the benefit of the Released Parties (including, without limitation, each of
Northern and ISBT and their respective successors and assigns).
14.25 SECTION Execution in Counterparts. This Release may be executed in any
number of counterparts each of which shall be deemed an original and all of
which shall be deemed for all purposes, one agreement.
14.26 SECTION Choice of Law. To the extent not governed by federal law, this
Release shall be deemed to be a contract made under the laws of the State of
Illinois and for all purposes shall be governed by and construed in accordance
with the laws of that state (except the choice of law rules thereof) in all
respects, including, without limitation, matters of construction, validity and
performance.
<PAGE> 37
14.27 SECTION No Amendment. This Release may not be amended, modified,
altered and waived.
Dated: , 200
-------------- -
STOCKPOINT, INC., formerly known as
Neural Applications Corporation, a
Delaware corporation
By:
-------------------------------
Its:
-----------------------
Agreed to and Accepted this day of 200
---- -
By: THE NORTHERN TRUST COMPANY
By:
--------------------------------
Its:
--------------------------
By: IOWA STATE BANK & TRUST
By:
--------------------------------
Its:
--------------------------
<PAGE> 38
EXHIBIT C - FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
To: The Northern Trust Company, as Lead Bank under the
Credit Agreement referred to below
50 South LaSalle Street
Chicago, Illinois 60675
Attention:
Reference is made to the Restructuring Agreement, dated as of November
, 1999 (herein, as it may be amended, supplemented, restated or otherwise
modified from time to time, called the "Restructuring Agreement"), among
Stockpoint, Inc., formerly known as Neural Applications Corporation (the
"Borrower"), the financial institutions parties thereto and The Northern Trust
Company, as Lead Bank. Terms used but not otherwise defined herein are used
herein as defined in the Restructuring Agreement.
The Borrower hereby certifies, represents and warrants, as of the date
hereof: (i) no Event of Default or Unnatural Event of Default has occurred and
is continuing and (ii) the Borrower is in compliance with the financial
restrictions set forth in Sections 10.5 and 10.11 of the Restructuring
Agreement.
Very truly yours,
STOCKPOINT, INC.
By:
------------------------------
Its:
-----------------------
<PAGE> 1
EXHIBIT 10.16
S&P COMSTOCK INFORMATION DISTRIBUTION
LICENSE AGREEMENT
AGREEMENT, made as of September 23, 1999, by and between S&P ComStock,
Inc. a corporation having offices at 600 Mamaroneck Avenue, Harrison, New York
10528, and Stockpoint, Inc. ("Distributor"), having an office at 2600 Crosspark
Road, Coralville, Iowa 52241.
WHEREAS, S&P ComStock, Inc. gathers, formats and distributes an
information service comprised of certain securities and commodities prices and
other data which is known as the S&P ComStock Service ("ComStock") and
WHEREAS, S&P ComStock, Inc. is licensed to distribute information from
various Stock Exchanges, Commodity Exchanges, and other sources (collectively,
"Sources") as part of S&P ComStock; and
WHEREAS, the parties desire that certain information from S&P ComStock
("the ComStock Information") as specified in Exhibit A (Part 1), attached
hereto, be licensed to Distributor for use by Distributor as described fully in
Exhibit B attached hereto (collectively, the "Distributor Service").
NOW, THEREFORE, the parties mutually agree as follows:
1. Distribution License.
(a) Distributor is hereby granted for the term of this Agreement a
nonexclusive, nontransferable right and license to distribute electronically the
ComStock Information via the Distributor Service solely for access by Internet
users of the Distributor Service (such users referred to herein as
"Subscribers"), provided that the ComStock Information is supplied to the
Subscribers by means (such as data encryption, or packet
transmission-digitizing) which prevent unauthorized reception, use or
retransmission and further provided that Distributor has executed in advance any
and all necessary documents with the various Sources, which documents have been
accepted and approved by the Sources. Notice of such Sources' acceptance and
approval must be supplied to S&P ComStock, Inc. prior to Distributor's use or
distribution of the ComStock Information.
(b) Distributor agrees and understands that it shall directly provide
the ComStock Information to Subscribers as specifically set forth in Exhibit B.
Distributor also agrees and understands that it shall not otherwise sublicense,
transfer, or assign its rights hereunder nor permit the redistribution of the
ComStock Information without the express prior authorization of S&P ComStock,
Inc. pursuant to a separate agreement or by mutually agreeable amendment
executed and attached hereto.
2. ComStock Equipment.
(a) During the term of this Agreement, S&P ComStock, Inc. shall provide
Distributor the equipment listed in Exhibit C, attached hereto ("the ComStock
Equipment"), for installation only at the site(s) specified therein. Distributor
shall not relocate the ComStock Equipment without the written permission of S&P
ComStock, Inc.
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(b) S&P ComStock, Inc. shall, at Distributor's expense and request,
install, furnish, and maintain necessary modems and/or communications interface
equipment.
(c) Distributor shall not attach, or permit or cause to be attached,
any non-ComStock equipment to the ComStock communications line or the ComStock
Equipment without the prior written permission of S&P ComStock, Inc.
(d) Distributor shall have no right in or to any of the ComStock
Equipment except for the rights of use herein granted. Distributor shall pay all
extraordinary costs for repair or replacement of the ComStock Equipment, over
and above ordinary maintenance which shall be performed by S&P ComStock, Inc.,
Such extraordinary maintenance includes electrical work external to the ComStock
Equipment, maintenance of accessories or attachments, and repair of damage to
the ComStock Equipment resulting from accident, neglect, misuse, failure of
electrical power or causes other than ordinary use. Distributor shall promptly
return the ComStock Equipment in good condition, ordinary wear and tear
excepted, upon termination of this Agreement for any reason.
3. ComStock Information.
(a) The furnishing to Distributor of the ComStock Information is
conditioned upon strict compliance with the provisions of this Agreement, the
applicable policies of the Sources, and with all local, state and federal
regulations which might pertain to the use of the ComStock Information. It shall
be the sole responsibility of Distributor to confirm with the applicable Sources
whether or not all of the ComStock Information may be distributed by Distributor
to its Subscribers. S&P ComStock, Inc. may discontinue provision of the ComStock
Information hereunder, without notice, whenever the terms of its agreements with
the Sources require such discontinuance, or if in its reasonable judgment S&P
ComStock, Inc. finds a breach by Distributor of any of the provisions of this
Agreement. S&P ComStock shall give Distributor at least thirty (30) days notice
before discontinuance.
(b) Neither S&P ComStock, Inc., nor any of its affiliates, nor any
Sources make any express or implied warranties (including, without limitation,
any warranty of merchantability or fitness for a particular purpose or use).
Neither S&P ComStock, Inc., any of its affiliates, or any Sources warrant that
the ComStock information will be uninterrupted or error-free. Distributor
expressly agrees that its use and distribution of the ComStock Information and
its use of the ComStock Equipment is at the sole risk of Distributor and its
Subscribers. S&P ComStock, Inc., its affiliates, and all Sources involved in
creating or providing the ComStock Information will in no way be liable to
Distributor or any of its Subscribers for any inaccuracies, errors or omissions,
regardless of cause, in the ComStock Information or for any defects or failures
in the ComStock Equipment, or for any damages (whether direct or indirect, or
consequential, punitive or exemplary) resulting therefrom. The liability of S&P
ComStock, Inc. and its affiliates in any and all categories, whether arising
from contract, warranty, negligence, or otherwise shall, in the aggregate, in no
event exceed one month's ComStock Information Delivery Fee.
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(c) Prior to commencing distribution of real time SPC Information to
any Subscriber, Distributor shall enter into a written or electronic
subscription agreement with each such Subscriber. The form of any such agreement
shall be subject to the prior review and written approval of SPC and shall
include provisions to the effect that each Subscriber:
(i) agrees that SPC and the Sources shall have no
liability for the accuracy or completeness of the SPC
Information or for delays, interruptions, or
omissions therein;
(ii) agrees that its arrangement with Distributor for
receipt of the SPC Information is subject to
termination in the event that this Agreement between
Distributor and SPC is terminated for any reason
(iii) acknowledges that the Sources described in the
preceding paragraph may have the right to terminate
provision of the SPC Information to Subscriber with
or without notice and that neither any such Source,
SPC nor Distributor shall have any liability in
connection therewith.
(d) Distributor agrees that it shall not display the ComStock
Information in the Distributor Service without a prominent notice indicating
that the ComStock Information is being displayed on a minimum fifteen (15)
minute delayed basis, where applicable.
(e) Distributor also agrees to include S&P Comstock's Terms and
Condition of Use, a copy of which is attached hereto as Exhibit E, within the
Distributor Service in a manner which alerts Subscribers of the applicability
thereof.
(f) Distributor shall clearly and prominently identify S&P ComStock as
the source of the ComStock Information by display of the S&P ComStock logo (the
"Logo") in a manner to be agreed to by the parties. Distributor shall also
create a hypertext or other computer link from the Logo to the S&P ComStock site
on the World Wide Web.
(g) Distributor represents and warrants that it has and will employ
adequate security procedures to prevent the unauthorized access to the ComStock
Information or corruption of the ComStock Information.
(h) Distributor agrees to indemnify and hold S&P ComStock, Inc. and its
affiliates harmless from and against any and all losses, damages, liabilities,
costs, charges and expenses, including reasonable attorneys' fees, arising out
of: (i) any liability of S&P ComStock, Inc. to any Subscriber where Distributor
has failed to include the Terms and Conditions of Use in the Distributor Service
pursuant to Section 3(d) above; or (ii) any breach or alleged breach on the part
of Distributor or any Subscribers with respect to its/their obligations to
obtain prior approvals from appropriate Sources and to comply with any
applicable conditions, restrictions or limitations imposed by any Source.
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(i) S&P ComStock, Inc. represents that it has the rights and licenses
necessary to transmit the ComStock Information to Distributor, and that to the
best of S&P ComStock, Inc.'s knowledge, the license granted to Distributor
hereunder does not infringe any proprietary right or any third party right at
common law or any statutory copyright.
(j) S&P ComStock, Inc. shall deliver the ComStock Information to
Distributor at the site(s) set forth in Exhibit C or at such other locations as
Distributor may designate within the continental United States or Canada.
4. Payments.
In consideration for the license granted to Distributor by S&P
ComStock, Inc. under this Agreement, Distributor shall make the following
payments to S&P ComStock, Inc.:
(a) Distributor shall pay to S&P ComStock, Inc. a monthly License Fee
and Subscriber Fee, as listed in Exhibit D. Together with the Subscriber Fee
payment, Distributor shall provide to S&P ComStock, Inc. on a monthly basis a
list identifying the number of web hosting 3rd parties and their respective page
views. S&P ComStock, Inc. shall keep such list confidential.
(b) Distributor shall be responsible for the payment of any and all
applicable fees billed to S&P ComStock, Inc. or directly to Distributor by
Sources, which fees result from Distributor's use and distribution of the
ComStock Information. Distributor shall also be responsible for payment of any
Subscriber's Source fees which must be paid directly by Distributor to the
Sources. Distributor shall provide to S&P ComStock, Inc. a copy of its monthly
Source fee reports when and as filed with the Sources.
(c) Any amounts payable to S&P ComStock, Inc. by Distributor hereunder
which are more than thirty (30) days past due shall bear interest at the rate of
1-1/2% per month.
(d) S&P ComStock, Inc. may, in its sole discretion and at any time
following the initial term of this Agreement, change the per-Subscriber fee
payment schedule and/or the ComStock Information Delivery Fee as specified
herein after having provided written notice to Distributor at least ninety (90)
days in advance of such changes.
(e) S&P ComStock, Inc. may audit Distributor's records for the sole
purpose of verifying the accuracy of Distributor's reported monthly Subscriber
Fee payments as set forth in Paragraph 4(a), above. Distributor will make such
records readily available to S&P ComStock, Inc. for inspection during normal
working hours on one week's notice. S&P ComStock, Inc. agrees that Distributor's
records will be treated as confidential and will not be used for any purpose
other than verifying Distributor's compliance with this Agreement. Any such
audit shall be at S&P ComStock, Inc.'s expense unless it is determined that S&P
ComStock, Inc. has been underpaid by an amount exceeding five percent (5%) of
the revenues actually received by S&P ComStock, Inc. in the period covered by
the audit; in such case, the expense of the audit shall be borne by Distributor.
5. Information Enhancements; Changes to Data Specification.
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(a) Any additions of new Sources or other enhancements to the ComStock
Information which may be made by S&P ComStock, Inc. during the term of this
Agreement, while unidentified at this time, will be offered to Distributor under
terms and conditions to be negotiated, provided that (i) S&P ComStock, Inc. has
the necessary rights to convey such new information to Distributor for
redistribution; and (ii) Distributor and S&P ComStock, Inc. execute a separate
agreement or an amendment to this Agreement.
(b) S&P ComStock, Inc. shall have the right, on at least six (6) months
prior written notice, to change the ComStock Data Format Specification, provided
that any such change shall be made effective generally by S&P ComStock, Inc. to
its customers. Distributor shall be responsible at its own expense for making
any modifications to its software necessitated by such change.
6. Term.
(a) This Agreement shall take effect upon its execution by an
authorized representative of S&P ComStock, Inc. and of Distributor.
(b) The term of this Agreement shall be for an initial term of two (2)
years commencing on the first day of service operation and shall automatically
renew at the end of each term for successive terms, each of the same duration as
the initial term, unless it is terminated effective at the end of any term with
written notice by either party given to the other at least ninety (90) days
prior to the end of the then current term. If S&P ComStock, Inc. increases
charges to Distributor pursuant to Paragraph 4(d), above, Distributor shall have
the option to terminate this Agreement by written notice to S&P ComStock, Inc.
within sixty (60) days of Distributor's receipt of notice of such increases;
such termination will become effective no sooner than thirty (30) days from the
last day of the month in which notice of termination by Distributor is received
by S&P ComStock, Inc.
7. Marketing.
Distributor may not use the names "ComStock", "SPC.", or "S&P ComStock,
Inc.", which are proprietary to S&P ComStock, Inc., or refer to the ComStock
Information in marketing or advertising materials without the prior written
consent of S&P ComStock, Inc., such consent not to be unreasonably withheld.
Upon S&P ComStock, Inc.'s written request, Distributor shall notify Subscribers
by a display in the service itself that S&P ComStock is the source of the quote
information and any sales literature discussing ComStock provided quotes shall
list S&P ComStock as the provider of the service.
8. Rights to Data Specification; Other Confidential Information.
(a) Distributor agrees and acknowledges that the Data Specification is
a confidential and proprietary trade secret belonging to ComStock, and nothing
in this Agreement conveys any proprietary rights whatsoever with regard to the
Data Specification to Distributor. The Data Specification is provided to the
Distributor strictly and solely for the purpose of developing internal computer
software to receive the ComStock Information. Distributor may not use the Data
Specification for any other purpose whatsoever, including, but not limited to,
the development of systems for the receipt or transmission of computer data.
Distributor may not give, transmit, or provide access to the ComStock Data
Specification to any Subscriber or other third party. On any termination of this
Agreement, regardless of cause, Distributor shall promptly return the Data
Specification to S&P ComStock, Inc. and shall provide a written certification by
an officer that no copies have been retained by Distributor.
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<PAGE> 6
(b) In addition to the duties imposed on Distributor pursuant to
Paragraph 8(a), above, S&P ComStock, Inc. and Distributor agree to hold
confidential any and all of each other's trade secrets, procedures, formulae,
financial data, Subscriber lists, and future plans, which may be learned before
and during the term of this Agreement. Notwithstanding the foregoing, however,
such duty of confidentiality shall not extend to information which is or comes
into the public domain, is rightfully obtained from third parties not under a
duty of confidentiality, or which is independently developed without reference
to the other party's confidential information.
(c) The duties of confidentiality imposed herein shall survive any
termination of this Agreement.
9. Prevention of Performance.
Neither party shall be liable for any failure in performance of this
Agreement if such failure is caused by acts of God, war, governmental decree,
power failure, judgment or order, strike, or other circumstances, whether or not
similar to the foregoing, beyond the reasonable control of the party so
affected. Neither party shall have any liability for any default resulting from
force majeure, which shall be deemed to include any circumstances beyond its
control. Such circumstances shall include, but are not limited to acts of the
government, fires, flood, strikes, power failures or communications line or
network failures.
10. Right of Termination in the Event of Breach or Bankruptcy; Right to
Injunctive Relief.
(a) Either party shall have the right to terminate this Agreement for
material breach by the other party by giving thirty (30) days prior written
notice, such termination to take effect unless the breach is cured or corrected
within such notice period.
(b) If a receiver is appointed for either party's business or if either
party petitions under the Bankruptcy Act and is adjudicated a bankrupt, declared
an insolvent, or makes an assignment for the benefit of creditors, then the
other party shall, upon thirty (30) days prior written notice, have the right to
terminate this Agreement.
(c) Upon termination of this Agreement for any reason, Distributor
shall cease all use and distribution of any of the ComStock Information.
(d) In addition to and notwithstanding the above, if Distributor, or
any of its employees, agents or representatives, shall attempt to use or dispose
of the ComStock Information or the Data Specification in a manner contrary to
the terms of this Agreement, S&P ComStock, Inc. shall have the right, in
addition to such other remedies as may be available to it, to injunctive relief
enjoining such acts or attempt, it being acknowledged that legal remedies are
inadequate.
(e) SPC shall have the right to terminate this Agreement upon written
notice to Distributor in the event of a sale or transfer of all or substantially
all of the assets of Distributor or a sale or transfer of a controlling equity
interest in Distributor.
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11. Assignment.
This Agreement may not be assigned, sublicensed or otherwise
transferred by either party without the written consent, except to a majority
owned subsidiary, of the other party, such consent not to be unreasonably
withheld, provided, however, that no such consent shall be required with respect
to any assignment by S&P ComStock, Inc. to its parent company, or to any S&P
ComStock, Inc. affiliate. Any attempted transfer or assignment of this Agreement
in violation of this provision shall be null and void.
12. Entire Agreement.
This Agreement and its Exhibits embodies the entire agreement between
the parties hereto. There are no promises, representations, conditions or terms
other than those herein contained. No modification, change or alteration of this
Agreement shall be effective unless in writing and signed by the parties hereto.
13. Non-Waiver.
The failure of either party to exercise any of its rights under this
Agreement for a breach thereof shall not be deemed to be a waiver of such rights
nor shall the same be deemed to be a waiver of any subsequent breach.
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14. Notices.
All notices under this Agreement shall be given in writing to the parties as
follows:
To: S&P ComStock, Inc.
600 Mamaroneck Avenue
Harrison, New York 10528
Attn.: Mr. Paul Zinone
To: Stockpoint, Inc.
2600 Crosspark Road
Coralville, Iowa 52241
Attn.: Mr. William Staib
15. Governing Law.
This Agreement shall be governed by the laws of the State of New York
and the parties agree to select New York jurisdiction for any claims or disputes
which may arise hereunder.
IN WITNESS WHEREOF, Distributor and S&P ComStock, Inc. have caused this
Agreement to be executed by their duly authorized respective officers, as of the
day and year above written.
S&P COMSTOCK, INC.
By: /s/ [illegible]
Title: President
Date: 9/23/99
DISTRIBUTOR
By: /s/ William E. Staib
Title: CEO
Date: 9/23/1999
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<PAGE> 9
EXHIBITS
A. COMSTOCK INFORMATION DEFINITION; AUTHORIZED COUNTRIES
B. DESCRIPTION OF DISTRIBUTOR SERVICE
C. LISTING OF COMSTOCK EQUIPMENT; DISTRIBUTOR DELIVERY SITES
D. SCHEDULES OF SUBSCRIBER FEES
E. TERMS AND CONDITIONS OF USE
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<PAGE> 1
Exhibit 10.17
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on March 1, 2000 (the "Effective Time"), by
and between Scott D. Porter, an individual resident of the State of Iowa
("Executive"), and Stockpoint, Inc., a Delaware corporation ("Company").
WHEREAS, Executive has heretofore been employed as the Chief Financial
Officer of the Company; and
WHEREAS, the Company desires to continue to have the benefit of the
Executive's services as a corporate officer of the Company;
NOW, THEREFORE, in consideration of the premises, the respective
undertakings of the Company and Executive set forth below, the Company and
Executive agree as follows:
1. Employment. The Company hereby agrees to employ Executive, and Executive
accepts such employment and agrees to perform services for the Company, upon the
other terms and conditions set forth in this Agreement.
2. Term. The term of this agreement is one year and renews annually, unless
either party provides written notification 90 days prior to the renewal. See
section 8 below for Termination definitions and remedies.
3. Positions, Duties and Reporting.
3.01 Service with Company. During the term of this Agreement, Executive
agrees to perform such reasonable employment duties consistent with the role of
Chief Financial Officer as the Company shall assign to him/her from time to
time.
3.02 Performance of Duties. Executive agrees to serve the Company
faithfully and to the best of his/her ability and to devote his/her full time,
attention, and efforts to the business and affairs of the Company during the
term of this Agreement. Executive represents to the Company that he/she is under
no contractual commitments inconsistent with his/her obligations set forth in
this Agreement, and that during the term of this Agreement, he/she will not
render or perform services for any other corporation, firm, entity or person
which are inconsistent with the provisions of this Agreement.
3.03 Reporting. This position will report to the President or Chief
Executive Officer of the Company.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be rendered by
Executive under this Agreement during the first year of the term of this
Agreement, the Company shall pay to Executive a base salary at a rate of
$105,000 per year, which salary shall be paid on a twice-monthly basis in
accordance with the Company's normal payroll procedures and policies. The salary
payable to Executive during each subsequent year during the term of this
Agreement shall be established by the Company and Executive, but in no event
shall the salary for any subsequent year be less than the base salary in effect
for the prior year. Upon the completion of an initial public offering of the
Company's common stock or another strategic transaction that satisfies the
Company's present obligations to the Northern Trust Company in full, the base
salary payable to the Executive will be increased to $122,500 per year.
4.02 Participation in Benefit Plans. During the term of this Agreement,
Executive shall be entitled to receive such medical and hospitalization
insurance and other fringe benefits as are being provided to the Company's other
executive level employees from time to time to the extent that Executive's age,
position or other factors qualify him/her for such fringe benefits.
4.03 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him/her in the
performance of his/her duties under this
<PAGE> 2
Agreement, subject to the presentment of appropriate vouchers in accordance with
the Company's normal policies for expense verification.
4.04 Incentive for completion of an initial public offering. Upon the
completion of an initial public offering of the Company's common stock, the
Company will also pay Executive an IPO cash bonus of $35,000, which is due and
payable, immediately upon the close.
4.05 Annual Incentive Compensation. The Company shall formulate and deliver
to Executive by March 31, 2000 with respect to the remainder of fiscal 2000, and
by January 1 with respect to each succeeding fiscal year during the term of this
Agreement, and the Company and Executive shall use their best efforts to
negotiate and agree to, an annual incentive compensation plan for Executive.
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter, Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with or will acquire or become
acquainted with during the period of his/her employment by the Company, whether
developed by himself/herself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans, devices or material
(whether or not patented or patentable) directly or indirectly useful in any
aspect of the business of the Company, any confidential or secret development or
research work of the Company, or any other confidential information or secret
aspects of the business of the Company. Executive expressly acknowledges that,
in addition to the Company's proprietary software and technical know-how, the
Company's customer lists and the form (including, without limitation, payment
terms) of the Company's relationships with its customers is not publicly known
and that the disclosure or use of such information for any purpose other than
for the benefit of the Company could cause substantial damage the Company and
would place the Company at a competitive disadvantage. Executive acknowledges
that the above-described knowledge or information constitutes a unique and
valuable asset of the Company and that any disclosure or other use of such
knowledge or information other than the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company. The foregoing
obligations of confidentiality shall not apply to any knowledge or information
which is now published, which subsequently becomes generally publicly known,
other than as a direct or indirect result of the breach of this Agreement by
Executive, or which was known to the Executive prior to the term of his/her
employment with the Company. Executive agrees to notify any person or entity
with which Executive is employed or for which Executive provides services of the
requirements of this Section 5 and to notify the Company of the identity of any
such person or entity with which Executive is employed during the One year after
termination of this Agreement.
6. Employee Solicitation. During employment, and for a period of nine
months thereafter, Executive shall not (i) directly or indirectly solicit any
employee of the Company or any of Company's affiliates to leave the employ of
any such entity or in any way interfere adversely with the relationship between
any such employee and any such entity, (ii) directly or indirectly solicit any
employee of the Company or any affiliates to work for, render services or
provide advice to or supply confidential business information or trade secrets
of any such entity to any third person, firm or corporation, or (iii) directly
or indirectly solicit any existing customers and potential customers that have
an unexpired written proposals under consideration. For purposes of the
foregoing, solicitation shall not include solicitation of employees, vendors or
customers (i) who first solicit employment or a relationship from Executive, or
(ii) who are solicited (A) by advertising in periodicals of general circulation
or by general circulation Internet advertising, or (B) by a search or consulting
firm on behalf of Executive or Executive's affiliates, so long as Executive or
such affiliates did not direct or encourage such firm to solicit such employee,
vendor or customer of the Company. If any restriction set forth in this
paragraph is held to be unreasonable, then Executive and the Company agree, and
hereby submit, to the reduction and limitation of such prohibition to such area
or period as shall be deemed reasonable.
7. Patent and Related Matter.
7.01 Disclosure and Assignment. Executive will promptly disclose in
writing to the Company complete information concerning each and every
invention, discovery, improvement, work of authorship, device, design,
apparatus, practice, process, method or product whether patentable or not,
made, developed, authored, perfected, devised, conceived or first reduced
to practice by Executive, either solely or in collaboration with others,
during the term of this Agreement, whether or not during regular working
hours,
<PAGE> 3
relating to the Business of the Company (hereinafter referred to as
"Developments"). Executive, to the extent that he/she has the legal right
to do so, hereby acknowledges that any and all of said Developments are the
property of the Company and hereby assigns and agrees to assign to the
Company any and all of Executive's right, title and interest in and to any
and all of such Developments.
7.02 Limitation on Section 7.01. The provisions of section 7.01 shall
not apply to any Development meeting the following conditions:
(a) such Development was developed entirely on Executive's own
time; and
(b) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information, excluding
Executives laptop; and
(c) such Development does not relate (I) directly to the Business
of the Company, or (ii) to the Company's actual or demonstrably
anticipated research or development; and
(d) such Development does not result from any work performed by
Executive for the Company.
7.03 Assistance of Executive. Upon request and without further
compensation therefor, but at no expense to Executive, and whether during
the term of this Agreement or thereafter, Executive will do all lawful
acts, including, but not limited to, the execution of papers and lawful
oaths and the giving of testimony, that in the opinion of the Company, its
successors and assigns, may be necessary or desirable in obtaining,
sustaining, reissuing, extending and enforcing United States and foreign
patents and/or registrations including, but not limited to, design patents,
on any and all of such Developments (other than those described in 7.02),
and for perfecting affirming and recording the Company's complete ownership
and title thereto, and to cooperate otherwise in all proceedings and
matters relating thereto.
7.04 Obligations, Restrictions and Limitations. Executive understands
that the Company may enter into agreements or arrangements with agencies of
the United States Government, and that the Company may be subject to laws
and regulations which impose obligations, restrictions and limitations on
it with respect to inventions and patents which may be acquired by it or
which may be conceived, authored or developed by employees, consultants or
other agents rendering services to it. Executive agrees that he/she shall
be bound by all such obligations, restrictions and limitations applicable
to any such invention or work of authorship conceived, authored or
developed by him/her during the term of this Agreement and shall take any
and all further action which may be required to discharge such obligations
and to comply with such obligations and to comply with such restrictions
and limitations.
8. Termination
8.01 Grounds for Termination. This Agreement may be terminated:
(a) by the Company, if Executive dies, or
(b) by the Executive, if Executive becomes disabled (as defined
below), or
(c) by the Company, if the Executive has engaged in conduct
constituting cause for his/her termination and the Company notifies
Executive in writing of such election, or
(d) by the Company without cause upon notice to the Executive in
writing of such election, provided that such termination may only
occur by unanimous decision of the Board of Directors if there are
then three or fewer Directors or by a majority decision of the Board
of Directors if there are then four or more Directors.
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(e) by the Executive, if the Executive is constructively
terminated, as defined in paragraph 8.01(2) herein and the Executive
has notified the Company of his/her election to terminate for
Constructive Termination, or
(f) by the Executive upon notice to the Company in writing of
such election.
If this Agreement is terminated pursuant to subsection (a), (b), (c),
(e) or (f) of this section 8.01, such termination shall be effective
immediately. If this Agreement is terminated pursuant to subsection (d) of
this section 8.01, such termination shall be effective thirty (30) days
after delivery of the notice of termination.
(1) "Cause" Defined. "Cause" means:
(a) The Employee has breached the provisions of Section 5, 6 or 7
of this Agreement in any material respect,
(b) The Executive has engaged in willful and material misconduct,
including willful and material failure to perform the Employee's
duties as an officer or employee of the Company and has failed to cure
such default within 30 days after receipt of written notice of default
from the Company,
(c) The Executive has committed fraud, misappropriation or
embezzlement in connection with the Company's business, or
(d) Executive has been convicted or has pleaded nolo contendere
to criminal misconduct that is detrimental to the Company's reputation
or that calls into question, in the judgement of the Board,
Executive's integrity in fulfilling his/her duties under this
Agreement.
In the event the Company terminates Executive's employment for "cause"
pursuant to subsection 8.01 and Executive objects in writing to the Board's
determination that there was proper "cause" for such termination within
(30) days after Executive is notified of such termination, the matter shall
be resolved by arbitration in accordance with the provisions of section
10.01. If Executive fails to object to any such determination of "cause" in
writing within such thirty (30) day period, he/she shall be deemed to have
waived his/her right to object to that determination. If such arbitration
determines that there was not proper "cause" for termination, such
termination shall be deemed to be a termination pursuant to subsection
8.01(d).
(2) "Constructive Termination" defined. Constructive Termination means
termination by Executive after written notice to the Company that Executive
deems such termination by Executive as a result of Constructive
Termination, and only after:
(a) A material breach by the Company of a material obligation of
the Company under this Agreement after the Executive has
given the Company written notice of the breach and the
Company has not remedied the breach within 30 days;
(b) A failure of the Company to pay when due to the Executive
any annual base salary, annual bonus or other earned bonus
or awards referred to in this Agreement;
(c) The relocation of the Executive's principal place of
employment to a location not within a 30 mile radius of such
place of employment on the Effective Date;
(d) A material reduction by the Company of the Executive's
duties or responsibilities;
4
<PAGE> 5
(e) The failure of the Company to obtain an agreement reasonably
satisfactory to the Executive from any successor to assume
and agree to perform this Agreement , or, if the business
for which the Executive's services are principally performed
is sold or transferred, the failure of the Company to obtain
such an agreement from the purchaser or transferee of such
business; or
(f) The Company becomes insolvent or bankrupt where executive
can no longer perform his/her duties as outlined above.
In the event the Executive terminates Executive's employment for
"Constructive Termination" pursuant to subsection 8.01 and the Company
objects in writing to the Executive's determination that there was
Constructive Termination within (30) days after Executive has notified the
Company of the same, the matter shall be resolved by arbitration in
accordance with the provisions of section 10.01. If the Company fails to
object to any such determination of "Constructive Termination" in writing
within such thirty (30) day period, it shall be deemed to have waived its
right to object to that determination. If such arbitration determines that
there was not proper "Constructive Termination", such termination shall be
deemed to be a termination pursuant to subsection 8.01(c).
8.02 "Disability" Defined. For purposes of this Agreement, the term
"disabled" means any mental or physical condition which renders Executive unable
to perform the essential functions of his/her positions, with or without
reasonable accommodation, for a period of more than ninety (90) days during any
consecutive one hundred twenty (120) day period.
8.03 Surrender of Records and Property. Upon termination of his/her
employment with the Company, Executive shall deliver promptly to the Company all
records, manual, book, blank forms, document, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company or which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or case are in his/her possession or under his/her
control.
8.04 Wage and Benefit Continuation. If Executive's employment by the
Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company
shall continue to pay to Executive his/her base salary and shall continue to
provide health insurance benefits for Executive for a period 9 months after
termination. Notwithstanding anything else in this Section 8.04, Executive shall
not be entitled under this Section 8.04 or any other provision of this Agreement
to receive any cash compensation pursuant to this Agreement which constitutes an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, or any successor provision or regulations
promulgated.
If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or
8.01 (f), Executive's right to base salary and benefits shall immediately
terminate except as may otherwise be required by applicable law.
If Executive's employment is terminated by the Company pursuant to
subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall also be
entitled to receive any bonus payment that as of the time of termination
would have been payable to him/her pursuant to any incentive plan then in
effect.
9. Indemnification and Directors & Officers Insurance
9.01 Indemnification. The Company will provide Executive indemnification,
exculpation and expense advancement, to the fullest extent of the law,
including, without limitation, entering into an indemnification agreement with
Executive in at least as beneficial a form to Executive as the Company has
entered into with any other officer or director of the Company.
9.02 Directors and Officers Insurance. The Company will provide, at its
expense, Directors and Officers (D&O) insurance in an amount deemed appropriate
by its Board of Directors and Officers. If the Company shall show any employee
as a named insured under such policy, the Executive shall be a named insured
under such policy.
5
<PAGE> 6
10. Settlement of Disputes.
10.01 Arbitration. Except as provided in section 10.02 any claims or
disputes of any nature between the Company and Executive arising from or
related to the performance, breach, termination, expiration, application,
or meaning of this Agreement or any related matter relating to Executive's
employment and the termination of that employment by the Company shall be
resolved exclusively by arbitration in Minneapolis, MN, in accordance with
the then applicable rules of the American Arbitration Association. Any such
arbitration shall be conducted by an arbitrator with said Rules, who has at
least ten (10) years experience as an attorney in executive compensation
and employment law. The fees of the arbitrator (s) and other cost,
including attorney fees, incurred by Executive and the Company in
connection with such arbitration shall be paid by the party who is
unsuccessful in such arbitration, as determined by the arbitrator. The
decision if the arbitrator(s) shall be final and binding upon both parties.
Judgement of the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. In the event of submission of any
dispute to arbitration, each party shall, not later than thirty (30) days
prior to the date set forth hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely
at the hearing and a list of all persons each party intends to call at the
hearing.
10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01
shall have no application to claims by the Company asserting a violation of
section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise,
the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the
Company in a lawsuit subject to the terms of section 10.03. Executive
agrees that, in addition to, but not to the exclusion of any other
available remedy, the Company shall have the right to enforce the
provisions of sections 5, 6, 7 and 8.03 by applying for and obtaining
temporary and permanent restraining orders injunctions from a court of
competent jurisdiction without the necessity of filing a bond therefor and
without the necessity of proving actual damages, and the Company shall be
entitled to recover from the Employee its reasonable attorneys' fees and
costs in enforcing the provisions of Sections 5, 6, 7 and 8.03.
10.03 Venue. Any action at law, suit in equity, or judicial proceeding
arising directly or indirectly, or otherwise in connection with, out of,
related to or from this Agreement or any provisions hereof shall be
litigated only in the courts of the State of Iowa. Executive waives any
right the Executive may have to transfer or change the venue of any
litigation brought against Executive by the Company.
10.04 Severability. To the extent any provisions of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom
and the remainder of such provisions and if this Agreement shall be
unaffected and shall continue in full force and effect. In furtherance and
not in limitation of the foregoing, should the duration or geographical
extent of, or business activities covered by, any provisions of this
Agreement be in excess of that which is valid and enforceable under
applicable law, then such provisions shall be construed to cover only that
duration, extent or activities which may validly and enforceably be
covered. Executive acknowledges the uncertainty of the law in respect and
expressly stipulates that this Agreement be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
11 Miscellaneous.
11.01 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of Iowa.
11.02 Prior Agreements. Except as set forth in Section 1, this
Agreement contains the entire agreement of the parties relating to the
employment of Executive by the Company and the ancillary matters discussed
herein and supersedes all prior agreements and undertakings with respect to
such matters, and the parties hereto made no arrangements, representations
or warranties relating to such employment or ancillary matters which are
not set forth herein.
11.03 Withholding Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes shall
be required pursuant to any law governmental regulation, or ruling or any
other amount owed to the Company.
11.04 Amendments. No amendment or modification of this Agreement shall
be deemed effective unless made in writing and signed by the both Executive
and Company.
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<PAGE> 7
11.05 No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by
the party against whom enforcement of the waiver or estoppel is sought. Any
written waiver shall not be deemed a continuing waiver unless specifically
stated, shall operate only as to specific term or condition waived and
shall not constitute a waiver of such term or condition for the future or
as to any act other than that specifically waived.
11.06 Assignment. This Agreement shall not be assignable, in whole or
in part, by either party without the written consent of the other party,
except that the Company may, without the consent of the Executive, assign
its rights and obligations under this Agreement to any corporation, firm or
other business entity with or into which the Company may merge or
consolidate, or to which the Company may sell or transfer all or
substantially all of its assets, or of which 50% or more of the equity
investment and of the voting control is owned, directly or indirectly, by,
or is under common ownership with, the Company; provided, however, that no
such assignment will relieve Company of any of its obligations hereunder.
After any such assignee shall thereafter be deemed to be the Company for
the purposes of all provisions of this Agreement including section 9. .
11.07 Counterparts. This Agreement may be simultaneously executed in
any number of counterparts, and such counterparts executed and delivered,
each as an original, shall constitute but the same instrument.
11.08 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have given when personally
delivered or three days after being mailed, if mailed, by first class mail,
return receipt requested, or when receipt is acknowledged, if sent by
facsimile, telecopy or other electronic transmission device. Notices,
demands and communications to Company and the Executive will, unless
another address is specified in writing, be sent to the address indicated
below:
Notices to Company: Notice to Executive:
------------------- --------------------
Stockpoint, Inc. ________________
2600 Crosspark Road ________________
Coralville, Iowa 52241 ________________
Attn: President
11.09 Captions and Headings. The captions and paragraph headings used
in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
11.10 Effect of Termination. It is expressly understood that neither
the Company nor the Executive shall have any continuing obligation under
this agreement upon termination hereof, except in respect of the matters
referenced in Sections 5, 6, 7 and 8.03.
IN WITNESS WHEREOF, Executive and the Company have executed this Agreement
as of date set forth herein.
Stockpoint, Inc.
By:___________________
Its___________________
EXECUTIVE
______________________
Scott D. Porter
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<PAGE> 1
EXHIBIT 10.18
FIRST AMENDMENT
to
RESTRUCTURING AGREEMENT,
Dated as of March 29, 2000
among
STOCKPOINT, INC., formerly known as
NEURAL APPLICATIONS CORPORATION,
as the Borrower,
and
THE NORTHERN TRUST COMPANY,
and
IOWA STATE BANK & TRUST
<PAGE> 2
EXHIBIT 10.18
FIRST AMENDMENT
to
RESTRUCTURING AGREEMENT
Dated as of March 29, 2000
THIS FIRST AMENDMENT TO RESTRUCTURING AGREEMENT, dated as of March 29,
2000 (this "Agreement"), is entered into by and among STOCKPOINT, INC., formerly
known as NEURAL APPLICATIONS CORPORATION, a corporation organized under the laws
of the State of Delaware (the "Borrower"), THE NORTHERN TRUST COMPANY, an
Illinois banking corporation ("Northern"), as lead bank (the "Lead Bank") and as
a lender to the Borrower, and IOWA STATE BANK & TRUST, as Northern's participant
(together with Northern, the "Lenders").
R E C I T A L S :
A. Northern extended a line of credit (the "November 28, 1997 Line of
Credit") to the Borrower in the maximum principal amount of THREE MILLION
DOLLARS ($3,000,000), the Borrower's obligations relating to which being
evidenced by a promissory note dated as of November 28, 1997 (the "November 28,
1997 Note"), of the Borrower in favor of Northern.
B. ISB has purchased a $1,000,000.00 participating interest in the
November 28, 1997 Line of Credit.
C. Northern issued letters of credit (collectively, the "Letters of
Credit") in the maximum aggregate amount of $6,313,000 for the account of the
Borrower to support the repayment of certain debentures issued by the Borrower
(the "Debentures"), the Borrower's reimbursement obligations relating to which
being set forth in accompanying reimbursement agreements (collectively the "L/C
Reimbursement Agreements").
D. Iowa State Bank & Trust ("ISB"), an Iowa banking corporation, has
purchased a $2,000,000.00 participating interest in Northern's obligations
relating to the Letters of Credit.
E. Northern extended another line of credit (the "September 14, 1998
Line of Credit") to the Borrower in the maximum principal amount of TWO MILLION
DOLLARS ($2,000,000), the Borrower's obligations relating to which being
evidenced by a promissory note, dated as of September 14, 1998 (the "September
14, 1998 Note"), of the Borrower in favor of Northern.
F. The Borrower's obligations under and in relation to the November 28,
1997 Line of Credit, the Letters of Credit, and the September 14, 1998 Line of
Credit were guaranteed by Robert B. Staib and the sole original collateral for
these obligations was to be shares of UAL Corporation stock to be pledged by Mr.
Staib to secure his obligations under such guarantees.
<PAGE> 3
Consistent with the foregoing, Mr. Staib ultimately delivered certificates to
Northern purporting to represent shares of UAL Corporation stock (the
"Purported UAL Stock Certificates").
G. Based on information obtained on December 1, 1998, the Lenders
believed and continue to believe that the Purported UAL Stock Certificates are
counterfeit. The Borrower states that its senior management (other than Mr.
Staib) first learned that the certificates were alleged to be counterfeit on
December 3, 1998. Mr. Staib has since become subject to an involuntary
bankruptcy petition. These constitute events of default under each promissory
note and the L/C Reimbursement Agreements, resulting, inter alia, in the
termination of the lines of credit.
H. The Borrower, Northern, ISB, and the Lead Bank entered into
restructuring discussions regarding the existing events of default, particularly
in light of the Borrower's stated intent to provide for the payment in full of
all obligations owing to the Lenders through the consummation of a strategic
transaction such as an initial public offering of its common stock, and the
parties amended the November 28, 1997 Note, the September 14, 1998 Note, and the
L/C Reimbursement Agreements to definitively reflect the terms of such a
restructuring pursuant to the terms and conditions set forth in that certain
Restructuring Agreement (the "Restructuring Agreement"), dated as of December 3,
1999, among the Borrower and the Lenders, it being understood that the Lead Bank
and the Lenders would not have entered into such a restructuring in the absence
of the Borrower's intent (and its commitment to use its best efforts) to
consummate such a strategic transaction on or before June 30, 2001 and that,
consequently, the Lead Bank and the Lenders materially relied thereupon in
entering into the Restructuring Agreement.
I. The parties desire to amend the provisions of the Restructuring
Agreement for the limited purpose of (i) increasing the maximum amount of the
Bridge Financing (as such term is defined in the Restructuring Agreement) by
$500,000 and (ii) permitting the Borrower to incur up to $1,000,000 in unsecured
indebtedness for borrowed money from John Pappajohn, one of its present equity
holders, or from one of his affiliates.
Therefore, the parties hereto agree, subject to the satisfaction of the
conditions precedent set forth in Section 3, to amend the Restructuring
Agreements as follows:
SECTION 1 AMENDMENTS TO RESTRUCTURING AGREEMENT
SECTION 1.1 Bridge Financing Increase. Section 6.1 of the Restructuring
Agreement is hereby amended to delete the amount "$2.5 million" in the third
line thereof and substitute "$3.0 million" therefor.
SECTION 1.2 Indebtedness for Borrowed Money. Section 10.5(a) of the
Restructuring Agreement is hereby amended to delete the present text in its
entirety and substitute the following therefor:
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<PAGE> 4
(a) Indebtedness. Not incur, permit to remain outstanding,
assume or in any way become committed for indebtedness in respect of
borrowed money, except (i) indebtedness existing on December 3, 1999
shown on the financial statements furnished to the Lenders before the
Restructuring Agreement was originally signed, including any extensions
or renewals thereof so long as the principal amount of such
indebtedness is not increased by such extension or renewal; (ii) the
Bridge Financing; (iii) after March 29, 2000, up to ONE MILLION DOLLARS
($1,000,000) in an unsecured line of credit (the "New Unsecured Line of
Credit") to be extended by John Pappajohn, one of the Borrower's equity
holders, or one of his affiliates, which, in addition to being
unsecured, (A) shall not bear interest at a rate greater than (i) the
Prime Rate and (ii) LIBOR plus 1.75%, (B) shall permit the lender
thereunder to receive "interest only" payments until maturity, (C)
shall have a stated maturity of June 30, 2001, and (D) may be
accelerated only upon the occurrence of either a payment default that
remains uncured or unwaived for three (3) business days or the
consummation of a Strategic Transaction; and (iv) indebtedness incurred
after the date hereof in the nature of Capitalized Lease Liabilities
and/or purchase money debt, provided that the aggregate amount thereof
outstanding at any one time does not exceed (a) $750,000 in calendar
1999, (b) $1,500,000 in calendar 2000, and (c) $1,500,000 through June
30, 2001 (assuming a total year limitation of $2,500,000) for the
Borrower and all Subsidiaries and otherwise does not have a Material
Adverse Effect on the Borrower and its business operations at any time.
SECTION 1.3 Unsecured Line of Credit. Prior to incurring any
indebtedness under the New Unsecured Line of Credit, Borrower shall submit
executed copies of the agreement and documents relating thereto to the Lead Bank
and shall receive the Lead Bank's approval as to the form thereof, which
approval shall not be unreasonably withheld if such agreements and documents
comply with the provisions set forth in Section 1.2 of this Agreement.
SECTION 2 REPRESENTATIONS AND WARRANTIES
To induce the Lenders, the Issuer and the Lead Bank to enter into this
Agreement, the Borrower represents and warrants unto the Lead Bank, and each
Lender that:
SECTION 2.1 Organization. The Borrower is a corporation existing and in
good standing under the laws of the state indicated in the heading; any
Subsidiary is a corporation or partnership duly existing and in good standing
under the laws of the state of its formation as indicated on Schedule 2.5; the
Borrower and any Subsidiary are duly qualified, in good standing and authorized
to do business in each other jurisdiction where, because of the nature of their
activities or properties, such qualification is required and where the failure
to be so qualified may have a Material Adverse Effect; and the Borrower and any
Subsidiary have the power and authority to own their properties and to carry on
their businesses as now being conducted.
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<PAGE> 5
SECTION 2.2 Authorization; No Conflict. The execution and delivery of
this Agreement is within the Borrower's corporate powers, has been authorized by
all necessary corporate action, have received all necessary governmental
approval (if any shall be required) and do not and will not contravene or
conflict with any provision of law applicable to the Borrower or of the charter
or by-laws of the Borrower or any Subsidiary or of any agreement binding upon
the Borrower or any Subsidiary.
SECTION 2.3 Taxes. Except in the case of state and local tax returns
for the fiscal years ended December 31, 1998 and December 31, 1999,
respectively, the Borrower and any Subsidiary have filed or caused to be filed
all federal, state and local tax returns which, to the knowledge of the Borrower
or any Subsidiary, are required to be filed, and have paid or have caused to be
paid all taxes as shown on such returns or on any assessment received by them,
to the extent that such taxes have become due (except for current taxes not
delinquent and taxes being contested in good faith and by appropriate
proceedings for which adequate reserves have been provided on the books of the
Borrower or the appropriate Subsidiary, and as to which no foreclosure,
distraint, sale or similar proceedings have been commenced). Specifically, the
Borrower is current in the filing of all of its federal income tax returns,
including for the calendar year ending December 31, 1998 and December 31, 1999,
respectively. The Borrower and any Subsidiary have set up reserves which are
adequate for the payment of additional taxes for years which have not been
audited by the respective tax authorities.
SECTION 2.4 Litigation and Contingent Liabilities. No litigation
(including derivative actions), arbitration proceedings or governmental
proceedings are pending or threatened against the Borrower which would (singly
or in the aggregate), if adversely determined, have a Material Adverse Effect.
SECTION 2.5 Subsidiaries. Attached hereto as Schedule 2.5 is a correct
and complete list of all Subsidiaries and Affiliates of the Borrower.
SECTION 2.6 ERISA/Health. The Borrower does not maintain a Plan, but
only administers a 401(k) plan for its employees. The Borrower maintains a
self-funded health insurance plan, which represents a scheduled contingent
liability of no more than $100,000. Each of the foregoing complies in all
material respects with all applicable requirements of law and regulations.
SECTION 2.7 Strategic Transaction Acknowledgment. The Borrower
continues to understand and acknowledge that the Lead Bank and the Lenders would
not have entered into the restructuring set forth in the Restructuring Agreement
(as amended hereby) in the absence of the Borrower's stated intent to use its
best efforts to consummate a Strategic Transaction on or before June 30, 2001
and that, consequently, the Lead Bank and the Lenders materially relied
thereupon in entering into the original Restructuring Agreement and continue to
materially rely thereupon in entering into this Agreement; provided, however,
that the failure to actually consummate a Strategic Transaction on or before
such date shall not constitute an Event of Default.
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<PAGE> 6
SECTION 2.8 No Defaults. As of the date hereof, (a) no Event of Default
or Unmatured Event of Default has occurred and is continuing and (b) the
Borrower is in compliance with the financial restrictions set forth in Sections
10.5 and 10.11 of the Restructuring Agreement (as amended by this Agreement).
SECTION 3 CONDITIONS TO EFFECTIVENESS OF AGREEMENT
This Agreement and the amendment of the Restructuring Agreement
provided for herein shall become effective as of the date hereof upon
satisfaction of the following conditions precedent:
SECTION 3.1 Letters of Credit. There shall have been no demand for
payment made under any of the Letters of Credit.
SECTION 3.2 Agreement. Each party hereto shall have received a
counterpart of this Agreement which has been executed by all of the parties
hereto.
SECTION 3.3 Documentation. The Lead Bank shall have received all of the
following, each duly executed and dated the closing date hereof or such earlier
date as is provided for herein or in an Exhibit hereto or is satisfactory to the
Lead Bank, in form and substance satisfactory to the Lead Bank and its counsel,
at the expense of the Borrower, and in such number of signed counterparts as the
Lead Bank may request:
(a) Borrower Resolution. A copy of a resolution of the Board
of Directors of the Borrower authorizing or ratifying the execution,
delivery and performance, respectively, of this Agreement, to be
executed by the Borrower and certified by the Secretary of the
Borrower.
(b) Borrower Articles of Incorporation and By-laws. A
certificate of the Secretary of the Borrower to the effect that true
and correct copies of the articles of incorporation and the by-laws of
the Borrower then in effect are attached as exhibits to such
certificate or that its articles of incorporation and its by-laws are
unchanged from the certified copies thereof that were provided by the
Borrower at the time of the original execution and delivery of the
Restructuring Agreement.
(c) Borrower Certificate of Incumbency. A certificate of the
Secretary of the Borrower certifying the names of the officer or
officers of the Borrower authorized to sign this Agreement, to be
executed by the Borrower, together with a sample of the true signature
of each such officer (the Lead Bank and each Lender may conclusively
rely on such certificate until formally advised by a like certificate
of any changes therein).
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<PAGE> 7
(d) Opinion of Counsel to the Borrower. An opinion or opinions
of counsel to the Borrower to such effect as the Lead Bank may
reasonably require.
(e) Miscellaneous. Such other documents and certificates as
the Lead Bank may reasonably request.
SECTION 3.4 Bridge Financing. The Lead Bank shall have received copies
of the executed agreements and other documents relating to the increase in the
maximum amount of the Bridge Financing contemplated hereby.
SECTION 3.5 Payment of Accrued Interest and Letter of Credit Fees. The
Lead Bank, on behalf of the Lenders, shall have received current payment in full
of all accrued and unpaid interest on the Notes and unpaid Letter of Credit
Fees.
SECTION 3.6 Robert B. Staib. The Lenders shall have entered into an
amendment to the Robert Staib/Lender Agreement substantially in the form of
Exhibit A hereto (the "Robert Staib/Lender Agreement"), which agreement will not
be subject to bankruptcy court approval, whether to be obtained before or after
closing.
SECTION 4 DEFINITIONS
SECTION 4.1 Definitions. Unless otherwise set forth herein, the
definitions are set forth in Schedule I of the Restructuring Agreement.
SECTION 5 MISCELLANEOUS
SECTION 5.1 Effectiveness and Successors. This Agreement shall, upon
execution and delivery by the Borrower, the Lenders and the Lead Bank in
Chicago, Illinois, become effective and shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Lead Bank and their respective
successors and assigns, except that the Borrower may not transfer or assign any
of its rights or interest hereunder without the prior written consent of the
Lenders.
SECTION 5.2 Captions. Captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. References herein to Sections or provisions without reference to the
document in which they are contained are references to this Agreement.
SECTION 5.3 Singular and Plural. Unless the context requires otherwise,
wherever used herein the singular shall include the plural and vice versa, and
the use of one gender shall also denote the other where appropriate.
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<PAGE> 8
SECTION 5.4 Counterparts. This Agreement may be executed by the parties
on any number of separate counterparts, and by each party on separate
counterparts; each counterpart shall be deemed an original instrument; and all
of the counterparts taken together shall be deemed to constitute one and the
same instrument.
SECTION 5.5 Payment of Costs and Expenses. Other than with respect to
the professional fees and expenses of the Lead Bank and the Lenders relating to
the period prior to the execution and delivery of the original Restructuring
Agreement (which are addressed in Section 7.1 of the Restructuring Agreement),
the Borrower's obligations under the Notes and/or the L/C Reimbursement
Agreements to reimburse the Lead Bank and the Lenders for their respective
expenses remain unchanged. The aggregate limit set forth in Section 7.1 of the
Restructuring Agreement in no manner applies or otherwise limits the rights of
the Lead Bank and each Lender to be reimbursed for such fees and expenses
(including, without limitation, those relating to the preparation, execution,
and delivery of this Agreement and the other matters relating thereto), which,
for expenses incurred from December 3, 1999 to such date, shall be due and
payable on the earlier to occur of the date of the consummation of a Strategic
Transaction (or other acceleration of the Obligations pursuant to any of the
other provisions hereof) and June 30, 2001 and which, for expenses incurred
after such date, shall be due and payable on demand.
SECTION 5.6 Confidentiality. The Lenders shall hold all non-public
information (which has been identified as such by the Borrower) obtained
pursuant to the requirements of this Agreement in accordance with their
customary procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure to any of their examiners, insurers, Affiliates, outside auditors,
counsel and other professional advisors in connection with this Agreement or as
reasonably required by any bona fide transferee, participant or assignee or as
required or requested by any governmental agency or representative thereof or
pursuant to legal process.
SECTION 5.7 Construction. This Agreement, the Restructuring Agreement
(including as amended by this Agreement), the Notes (as amended by the
Restructuring Agreement), the Loan Documents and any other document or
instrument executed in connection herewith shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of Illinois,
and shall be deemed to have been executed in the State of Illinois.
SECTION 5.8 Reaffirmation of the Provisions of the Loan Documents. This
Agreement amends the Restructuring Agreement only to the extent expressly set
forth herein. Consistent with the foregoing, none of the other provisions of the
Restructuring Agreement shall be amended, and the parties reaffirm the
Restructuring Agreement, as amended by the provisions of this Agreement, in all
respects. Except as amended by the Restructuring Agreement (including as amended
by the provisions of this Agreement), the provisions of the Notes and the L/C
Reimbursement Agreements remain unchanged, and the Borrower hereby reaffirms its
obligations thereunder. Consistent with the foregoing, any conflict between the
provisions of the Notes and/or the L/C Reimbursement Agreements prior to
December 3, 1999, on the one hand, and the provisions of the Restructuring
Agreement (including as amended by the provisions of
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<PAGE> 9
this Agreement), on the other hand, shall be governed by the provisions
of the Restructuring Agreement (including as amended by the provisions of this
Agreement).
SECTION 5.9 Relationship between this Agreement and Participation
Agreement. Iowa State Bank's execution and delivery of this Agreement shall be
deemed to satisfy any consent requirement under any of the existing
participation agreements (the "Participation Agreements") between Iowa State
Bank and Northern. Except as provided in the preceding sentence, the provisions
of the Participation Agreement shall remain unchanged and any conflict between
the provisions of the Participation Agreement and the Restructuring Agreement
(including as amended by the provisions of this Agreement) shall be governed by
the provisions of the Participation Agreement.
SECTION 5.10 Submission to Jurisdiction; Venue; Waiver of Right to Jury
Trial. THE BORROWER IRREVOCABLY AGREES THAT ALL SUITS, ACTIONS OR OTHER
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO
THIS AGREEMENT, THE RESTRUCTURING AGREEMENT (INCLUDING AS AMENDED BY THE
PROVISIONS OF THIS AGREEMENT), THE NOTES, THE LOAN DOCUMENTS OR ANY OTHER
DOCUMENT EXECUTED IN CONNECTION HEREWITH, SHALL BE SUBJECT TO LITIGATION IN
COURTS HAVING SITUS WITHIN CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN
SAID CITY AND STATE. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL
BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING
BROUGHT AGAINST ANY PARTY IN ACCORDANCE WITH THIS SECTION, OR TO CLAIM THAT ANY
SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
* * * * * *
-8-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
STOCKPOINT, INC., formerly known as
NEURAL APPLICATIONS CORPORATION
By: /s/ W.E. Staib
-----------------------------------------------
Its: President
----------------------------------------------
Address: 2600 Crosspark Road
Coralville, IA 52241
Attention: William E. Staib
Facsimile: 319/626-5001
THE NORTHERN TRUST COMPANY
By: /s/ David A. Gozdecki
----------------------------------------------
Its: Vice President
----------------------------------------------
Address: 50 South LaSalle Street
Chicago, Illinois 60675
Attention: David Gozdecki, Vice President
Credit Policy Division
Facsimile: 312/630-6105
Telephone: 312/444-5829
IOWA STATE BANK & TRUST
By: /s/ Kent L. Jehle
----------------------------------------------
Its: Senior Vice President
----------------------------------------------
Address: P.O. Box 1700
Iowa City, IA 52244
Attn: Kent L. Jehle
Facsimile: 319/356-5844
-9-
<PAGE> 1
Exhibit 10.19
SETTLEMENT AGREEMENT AND GENERAL RELEASE
This Settlement Agreement and General Release (this
"Agreement") is made and entered into this third day of December, 1999, by
and between Robert B. Staib ("Staib"), a resident of the State of Iowa, and
Stockpoint, Inc., a Delaware corporation (the "Company").
WHEREAS, Staib was employed as Chief Executive Officer of
the Company until December 3, 1998 when he took a leave of absence, and
formally resigned his positions as an officer, director and employee of the
Company effective April 12, 1999;
WHEREAS, Staib claims entitlement to certain back pay,
vacation and severance benefits in connection with his employment
("Employment Related Compensation") as well as reimbursements for
expenditures on behalf of the Company ("Reimbursements");
WHEREAS, at various times beginning in November 1994,
Staib guaranteed certain bank lines and other debt obligations (the
"Loans") of the Company and was obligated to collateralize those guarantees
with certain marketable securities (the "Pledged Securities")
WHEREAS, in consideration of the guarantees and
collateralization by Staib of the Loans, the Company issued to Staib
warrants to purchase an aggregate of 500,000 shares of the Company's common
stock (the "Common Stock") at a price of $8.00 per share (the "$8.00
Warrants"), warrants to purchase an aggregate of 806,250 shares of the
Common Stock at a price of $4.00 per share (the "$4.00 Warrants" and
together with the $8.00 Warrants, the "Warrants"), and paid Staib guarantee
fees (the "Guarantee Fees");
WHEREAS, the Company now asserts that it has actionable
claims against Staib with respect to Pledged Securities and has alleged
that (a) the Pledged Securities did not in fact exist, and the Loans and
the Warrants were therefore falsely induced, (b) the Warrants are void for
lack of consideration, (c) the Company has been damaged by Staib's actions
by being unable to obtain additional funds under its Loans necessary to
fund its operations and by being forced to incur significant expense to
resolve disputes with its lenders and with Staib, and (d) the Company's
reputation in its community has been damaged by Staib's actions;
WHEREAS, the Company further alleges that it has no
obligation to honor any of the Warrants, that it is entitled to refund of
the Guarantee Fees, that it has fully paid and has no further obligation to
pay any further Employment Related Compensation to Staib, that it has paid
all Reimbursements and does not have proper documentation for further
Reimbursements and that it has no obligation to pay any sums to entities
now, or previously controlled by Staib;
WHEREAS, Staib denies the Company's allegations and
claims that the Company is obligated to pay the Employment Related
Compensation and the Reimbursements, to honor the Warrants, and to issue to
Staib $8.00 Warrants to purchase an additional 200,000 shares of Common
Stock;
<PAGE> 2
WHEREAS, Staib holds 246,000 shares of the Common Stock
and 1600 shares of the Company's Series B Preferred Stock (collectively,
the "Staib Shares");
WHEREAS, Staib and the Company desire to settle all
disputes related to the Loans, the Warrants, Reimbursements and to
determine the voting rights and disposition of the Staib Shares and shares
issuable upon exercise of the $4.00 Warrants and the $8.00 Warrants in
accordance with the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Resignation of Staib. Staib agrees and acknowledges
that he voluntarily terminated all services as an employee, officer and
director of the Company effective as of the date of his leave of absence
(December 3, 1998), confirmed such resignation on April 12, 1999, and does
not serve in any capacity as an officer, director or employee of the
Company and has not served in any such capacity since December 3, 1998.
2. Surrender and Cancellation of Warrants. Staib and the
Company hereby agree that, effective upon execution of this Agreement, (i)
all $8.00 Warrants, and (ii) $4.00 Warrants to purchase 306,250 shares of
Common Stock shall be and hereby are cancelled and shall be considered null
and void. In accordance therewith, Staib hereby agrees to surrender, and is
delivering and surrendering to the Company with this Agreement:
(a) Staib's $8.00 Warrant to purchase 500,000 shares of
Common Stock as evidenced by that certain Warrant Agreement dated
as of April 13, 1998;
(b) Staib's $4.00 Warrant to purchase 93,750 shares of
Common Stock as evidenced by that certain Warrant to Purchase
Common Stock of Neural Applications Corporation dated November 15,
1994;
(c) Staib's $4.00 Warrant to purchase 78,125 shares of
Common Stock as evidenced by that certain Warrant to Purchase
Common Stock of Neural Applications Corporation dated May 16,
1995;
(d) Staib's $4.00 Warrant to purchase 46,875 shares of
Common Stock as evidenced by that certain Warrant to Purchase
Common Stock of Neural Applications Corporation dated June 26,
1995; and
(e) Staib's $4.00 Warrant to purchase 400,000 shares of
the Company's Common Stock as evidenced by that certain Warrant To
Purchase 400,000 Shares of Common Stock of Neural Applications
Corporation dated February 27, 1996 (the "Warrant Agreement");
provided, however, that the Company shall issue to Staib a new
warrant (the "Replacement Warrant") to purchase 312,500 shares of
the Company's
<PAGE> 3
Common Stock at a purchase price of $4.00 per share having the
same terms as the Warrant Agreement and representing the portion
of the Warrant Agreement not cancelled in accordance with the
foregoing.
Staib further agrees and represents that all other rights of Staib
to receive warrants to purchase shares of the Common Stock, whether current
or prospective, in connection with Staib's personal guarantee of, or pledge
of assets as security for, or both, the obligations of the Company,
including, without limitation, any further right to receive $8.00 Warrants
to purchase 200,000 Shares, are hereby surrendered and cancelled. Staib
hereby represents and acknowledges that, after the transactions set forth
in this Section 2, Staib shall hold, subject to the terms of the Voting
Trust Agreement described in Section 5 (a) $4.00 Warrants to purchase an
aggregate of 500,000 shares of Common consisting solely of the Replacement
Warrant and that certain Warrant to Purchase Common Stock of Neural
Applications Corporation dated June 1, 1996 Stock (collectively, the
"Remaining Warrants") representing the right to purchase 187,500 shares of
Common Stock, and (b) the Staib Shares (the Staib Shares and such Remaining
Warrants being hereafter referred to as the "Remaining Equity Rights"), and
hereby further represents and agrees that he shall not hold, or have the
right to purchase, acquire or receive, any shares of Common Stock or equity
interest in the Company other than the Remaining Equity Rights. Staib
hereby agrees to indemnify and hold harmless the Company from and against
any claim from Staib, the trust (the "Trust") created by that certain
voting trust agreement of even date herewith in accordance with the Voting
Trust Agreement described in Section 5, or any direct or indirect
transferee or assignee of Staib, that relates to the ownership,
beneficially or of record, of any equity securities or rights to acquire
equity securities of the Company other than the Remaining Equity Rights.
3. Release of claim to Employment Related Compensation
and Reimbursements. Staib agrees that he is not now, and has never been,
entitled to any further Employment Related Compensation, including, without
limitation, any unpaid salary, bonuses, wages, vacation pay, disability
pay, severance pay, or other compensation of any kind. Staib hereby agrees
that the Company shall be, and hereby is, released and discharged from any
further obligation, liability or claim related to the Employment Related
Compensation.
4. Consideration. In consideration of the foregoing, the
Company agrees not to contest the validity, enforceability or ownership of
the Remaining Equity Rights and acknowledges, reaffirms and otherwise
agrees to honor all rights represented by the Remaining Equity Rights,
including the Remaining Warrants. The Company further agrees to pay to
Staib a total of $60,000 upon the earlier of June 30, 2001 or receipt of
the net proceeds from an initial public offering of the Company's stock (by
check delivered to Staib within 10 days of receipt of such net proceeds).
5. Voting Trust. Staib hereby agrees to execute a Voting
Trust Agreement in substantially the form of Exhibit A attached hereto and
to transfer to the trustee of such Voting Trust all of the Staib Shares,
and any shares ("Warrant Shares") issuable upon exercise of the Remaining
Warrants (so long as such Remaining Warrants are held, directly or
indirectly, by Staib). Concurrent with execution of this Agreement, Staib
agrees to deliver stock certificates
<PAGE> 4
evidencing the Staib Shares to the trustee and further agrees that stock
certificates evidencing shares issued upon the exercise of the Remaining
Warrants shall be issued in the name of the Voting Trustee.
6. Hold Harmless Agreements. Staib and the Company hereby
agree that the Company's obligation under that certain Indemnification and
Hold Harmless Agreement dated February 27, 1996 as amended by that certain
Amendment to Indemnification and Hold Harmless Agreement dated August 1,
1997 (as so amended, the "Hold Harmless Agreement") and that certain
Reimbursement and Subordination Agreement dated August 1, 1997 (the
"Reimbursement Agreement") to indemnify Staib, hold Staib harmless and
reimburse Staib for amounts that Staib is required to pay The Northern
Trust Bank shall apply only if and to the extent that the Company is in
default of the Company's obligations to pay principal and interest when due
to The Northern Trust Bank and shall not, in any event, include indemnity
or reimbursement of amounts arising out of breach of Staib's contractual
obligation to pledge collateral to secure such obligations. Staib agrees
that, in the event he is obligated to pay any amounts to The Northern Trust
Bank and, by virtue of such payment, is subrogated to the rights of The
Northern Trust Bank, he will not be entitled to any reimbursement from the
Company except to the extent that his subrogated interest would have been
payable under the terms of the debt obligations with The Northern Trust
Bank.
7. Transfer of Remaining Equity Rights. The Company and Staib
acknowledge that the Company intends to make a public offering of certain
Company stock (the "Potential Public Offering"). Staib and the Company agree
that such Potential Public Offering is in the mutual interest of both parties.
In order to facilitate the Potential Public Offering and as further
consideration for the settlement agreements set forth herein, Staib and the
Company have agreed that, during the term of this Agreement, Staib shall not
sell, offer to sell, hypothecate, pledge, dispose of or otherwise transfer the
Remaining Equity except as provided in this Section 7. The Company and Staib
acknowledge that voting trust certificates will be issued to Staib upon transfer
of the Staib Shares and any Warrant Shares to the Voting Trust ("Voting Trust
Certificates") and agree that such "Voting Trust Certificates shall be deemed to
be "Remaining Equity Rights" for purposes of this Section 7.
(a) Potential Public Offering. Staib and the Company
acknowledge that Staib contemplates the sale of the Staib Shares
to one or more underwriters (the "Underwriters") in the Potential
Public Offering, which Underwriters would offer and sell the Staib
Shares to the public. Staib and the Company further understand
that it is contemplated that all or part of the Warrants will be
exercised by Staib and the resulting Warrant Shares sold to the
Underwriters, who would offer and sell such Warrant Shares to the
Public. Staib agrees to negotiate and sign such reasonable and
customary agreements as are necessary to facilitate such a sale on
the same terms as shares are sold by the Company in such Potential
Public Offering. Staib and the Company agree that the Shares and
the Warrants may be delivered to a custodian for delivery and
transfer to the Underwriters upon completion of such Potential
Public Offering. In any event, Staib's agreement to negotiate the
sale of a portion of his Remaining Equity Rights under this
Subsection 7(a) shall only extend to the Staib Shares plus
Warrants for 200,000 shares of
<PAGE> 5
the Company's common stock and any additional Warrant Shares
necessary, if at all, to bring the total consideration realized
from such sale by Staib to at least $6,000,000. Nothing in this
Section 7 shall create an obligation on behalf of the Company or
any Underwriter to include any Staib Shares or Warrant Shares in a
Potential Public Offering.
(b) Transfer to a Permitted Third Party. Staib shall have
the right to transfer all or any part of the Remaining Equity
Rights to a Permitted Third Party upon the Company's prior written
consent, which consent shall not be unreasonably withheld.
Withholding of the Company's consent shall not be deemed
unreasonable if any Underwriter(s) has indicated in writing that
such Underwriter intends in good faith to enter negotiations with
Staib in a manner consistent with Subsection 7(a) and otherwise
objects in writing to the transfer proposed by Staib. For purposes
of this Section 7(b), the term "Permitted Third Party" means:
(1) "Permitted Third Party" means any Person
that is not (a) related to Staib by blood or by marriage,
(b) a Person owned or controlled by Staib, (c) an
Affiliate of any Person related to Staib by blood or by
marriage or owned or controlled by Staib or (d) a
creditor of Staib.
(2) "Person" means any individual, partnership,
joint venture, corporation, limited liability company,
trust, unincorporated organization or any other entity.
(3) "Affiliate" means any Person directly or
indirectly controlling, controlled by or under direct or
indirect common control with such other Person, through
the ownership of all or part of any Person; for purposes
of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under direct or
indirect common control with") means the possession,
direct or indirect, of the power to (A) vote 50% or more
of the voting securities of such Person or (B) direct or
cause the direction of the management and policies of
such Person, whether by contract or otherwise.
(c) Transfer to Creditors. Staib shall have the right,
without the prior written consent of the Company, to (i) pledge
any Voting Trust Certificate or unexercised Warrant to one or more
creditor(s) of Staib or (ii) transfer any Voting Trust Certificate
or unexercised Warrant to a trust created to benefit all or part
of Staib's creditor's.
(d) Notification. Notwithstanding any other provision of
this Section 7, no transfer shall be made under this Section 7
unless Staib complies with the provisions of this subsection 7(d)
and Section 17 hereunder and the transferee of any Voting Trust
Certificate or Warrant (or any trustee of any trust established in
accordance with 7(c)) agrees to be bound by the Voting Trust
Agreement (to the extent applicable thereto) and the provisions of
Section 5, Section 7(a) and Section 7(e) of this Agreement, and
provided further that such transfer is in compliance with federal
and applicable state securities laws. Written notice of any
transfers pursuant to this Section 7 shall be delivered to the
Company, to the trustee of the Trust and to the other parties
identified in
<PAGE> 6
Section 17 hereof prior to the date of transfer. Staib shall
provide the Company with all information reasonably requested by
it to confirm that this Subsection 7(d) has been satisfied. The
Company shall not unreasonably withhold the written consent
required by the Voting Trust Agreement to any such transfer.
(e) Lockup. In connection with any Potential Public
Offering, and except for transfers in accordance with Section 7(a)
and 7(c), Staib agrees that he will not, without the prior written
consent of the representative (the "Representative") of the
Underwriters, sell, offer to sell, contract to sell, hypothecate,
pledge, grant any option to sell or otherwise dispose of, or file
(or participate in the filing of) a registration statement with
the Securities and Exchange Commission (the "Commission") in
respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the
meaning of Section 16 of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission
promulgated thereunder with respect to, any shares of capital
stock of the Company or any securities convertible into or
exercisable or exchangeable for such capital stock or any voting
trust certificate representing beneficial or pecuniary interest in
the same, including the Remaining Equity Rights, or publicly
announce an intention to effect any such transaction, for a period
of at least 180 days, and at the reasonable request of the
Representative up to 365 days, after the date of execution of the
underwriting agreement related to the Potential Public Offering.
Staib agrees that the Representative shall be a third party
beneficiary of this provision.
(f) Subject to Section 17, the provisions of this Section
7 shall survive termination of this Agreement and until June 30,
2002.
8. Proprietary Information. Staib acknowledges that
during his employment with the Company, he was exposed to and acquired
confidential, proprietary and trade secret information belonging to the
Company and the Company's customers ("Confidential Information"),
including, without limitation, designs, processes, formulae, plans, devices
and material, directly or indirectly, useful in any aspect of the Company's
business, past, current or anticipated products or services, customer and
supplier lists, development and research work, business strategies, plans
and proposals, financial, employee and personnel data and information and
purchasing, accounting, marketing, selling and services information. Staib
understands and agrees that such Confidential Information was disclosed to
him in confidence and for the sole benefit of the Company. Staib agrees
that beginning on the date of this Agreement he and any entity directly or
indirectly controlled by Staib will (i) diligently protect the
confidentiality of all Confidential Information; (ii) not disclose or
communicate any Confidential Information to any third party without the
consent of the Company; and (iii) not make use of Confidential Information
on his own behalf or on behalf of any third party. Staib agrees that any
unauthorized disclosure or use of such Confidential Information to or on
behalf of third parties would cause irreparable harm to the confidential
status of such information and to the Company, and, therefore, the Company
shall be entitled to an injunction prohibiting any such disclosure, use, or
threatened disclosure or use. The foregoing obligations of confidentiality
shall not apply to any
<PAGE> 7
knowledge or information that is now or subsequently becomes generally
publicly known, other than as a direct or indirect result of a breach of this
Agreement by Staib.
9. Full Compromise and General Release.
(a) Staib agrees that the payment and acceptance of the
consideration described in Sections 2, 3 and 4 hereof is in full,
final, and complete compromise, settlement, and satisfaction of
any and all claims relating directly or indirectly to (i) Staib's
employment with the Company, (ii) Staib's resignation from
employment with the Company, (iii) Staib's personal guarantee of,
and pledge of personal assets as collateral for, any Loans, and
(iv) any other claims of any nature whatsoever that Staib could
have asserted against the Company or any of the "Released Parties"
as that term is defined in Section 9(b) arising prior to the date
of this Agreement; provided that nothing contained in this
Agreement shall relieve the Company of its obligations under the
Hold Harmless Agreements as amended by Section 6 of this
Agreement.
(b) Staib, for and on behalf of himself and his heirs,
administrators, executors, successors and assigns, agrees to, and
hereby does, release, acquit, and forever discharge the Company
and its affiliates, subsidiaries, and related companies, and the
current and former directors, officers, members, agents,
attorneys, servants, independent contractors and employees of the
Company and all of its related entities (the "Released Parties"),
from any and all claims, whether direct or indirect, fixed or
contingent, known or unknown, which Staib ever had, has, or may
claim to have, for, upon, or by reason of any matter, act or thing
prior to the date of this Agreement, including, but not limited
to, any cause of action Staib could have asserted in any
litigation against any of the Released Parties, any cause of
action or claim relating to Staib's association with or employment
by the Company, and/or any cause of action or claim relating to
Staib's decision to resign; provided that nothing contained in
this Agreement shall relieve the Company of its obligations under
the Hold Harmless Agreements as amended by Section 6 of this
Agreement. The General Release of this Section 9 specifically
encompasses, but is not limited to, claims that could be brought
under Chapter 91A Code of Iowa (1999); Title VII of the Civil
Rights Act, 42 U.S.C. ss. 2000e, et seq., as amended by the Civil
Rights Act of 1991; the Age Discrimination in Employment Act, 29
U.S.C. ss. 621 et seq. (the "Age Discrimination in Employment
Act"); the Americans With Disabilities Act, 42 U.S.C. ss.ss.
12101-12213; the Employee Retirement Income Security Act (ERISA),
29 U.S.C. ss. 1001, et seq.; the Fair Labor Standards Act, 29
U.S.C. ss. 201, et seq.; the National Labor Relations Act, 29
U.S.C. ss. 151, et seq.; the Worker Adjustment Retraining and
Notification Act, 29 U.S.C. ss. 2101, et seq.; and any other
federal or state statute, or local ordinance, including any
attorneys' fees, liquidated damages, punitive damages, costs or
disbursements that could be awarded in connection with these or
any other statutory claims. The release contained in this Section
9(b) also specifically encompasses any and all claims grounded in
contract or tort theories, including, but not limited to, breach
of contract; tortious interference with contractual relations;
promissory estoppel; breach of the implied covenant of good faith
and fair dealing; breach of employee handbooks, manuals or other
policies; wrongful discharge; wrongful discharge
<PAGE> 8
in violation of public policy; assault; battery; fraud; false
imprisonment; invasion of privacy; intentional or negligent
misrepresentation; defamation, including libel and slander,
discharge defamation and self-defamation; intentional or negligent
infliction of emotional distress; negligence; breach of fiduciary
duty; negligent hiring, retention or supervision; whistleblower
claims; and/or any other contract or tort theory based on either
intentional or negligent conduct of any kind, including any
attorneys' fees, liquidated damages, punitive damages, costs or
disbursements that could be awarded in connection with these or
any other common law claims.
(c) The Company, for and on behalf of itself and its
successors and assigns, agrees to, and hereby does, release,
acquit, and forever discharge Staib, from any and all claims,
whether direct or indirect, fixed or contingent, known or unknown,
which the Company ever had, has, or may claim to have by reason of
the issuance of the Warrants, the failure of the collateral
relating to the Loans, the Guarantee Fees, any damages relating to
its inability to obtain capital under the Loans or incurred in
negotiating amendment of the documentation relating to the Loans
or this Agreement, including attorney's fees and expenses and fees
incurred or assessed by the Company's lenders either before or
after the date of this Agreement; provided that nothing contained
in this Agreement shall relieve the Staib of his obligations to
the Creditors to guarantee and provide collateral with respect to
the Loans and nothing in this Agreement shall be deemed to be a
surrender of any defense available to the Company with respect to
any obligation under the Hold Harmless Agreement or the
Reimbursement Agreement.
10. Right to Consider and Rescind.
(a) Right to Consider under the Age Discrimination in
Employment Act. Staib understands that he has twenty-one (21) days
to consider whether he should agree to release his claims, if any,
under the Age Discrimination in Employment Act. Staib further
understands, however, that he is not required to take the entire
21-day period to decide whether he wishes to release his claims,
if any, under the Age Discrimination in Employment Act, and that
he may do so on an accelerated basis without prejudice to his own
or the Company's rights under this Agreement.
(b) Right to Rescind or Revoke under the Age
Discrimination in Employment Act. Staib understands that he has
the right to rescind the release of his claims, if any, under the
Age Discrimination in Employment Act, for any reason, within seven
(7) days after he signs this Agreement. Staib understands that the
release of his claims, if any, under the Age Discrimination in
Employment Act, will not become effective or enforceable unless
and until he executes this Agreement and the applicable rescission
period has expired. Staib understands that if he wishes to
rescind, the rescission must be in writing and must be
hand-delivered or mailed to the Company. To be effective, such
written notice must be delivered either by hand or by mail, to
William McNally, Stockpoint, Inc., Oakdale Research Park, 2600
Crosspark Road, Coralville, IA 52241-3212 (phone number:
319-626-5000), within the 7-day period. If a notice of rescission
is delivered by mail, it must be: (i) postmarked within the 7-day
period,
<PAGE> 9
(ii) properly addressed to William McNally at the above address
and (iii) sent by certified mail, return receipt requested.
Staib understands that even if he elects to rescind his
agreement to release his claims, if any, under the Age
Discrimination in Employment Act, this rescission shall have no
effect or consequence whatsoever on the release of any other
claims Staib released pursuant to this Agreement, as set forth
above. Staib further understands that, in the event Staib rescinds
his agreement to release his claims, if any, under the Age
Discrimination in Employment Act, the Company shall have no
further obligation to pay any consideration under section 4 of
this Agreement.
11. Confidentiality. The Company, and Staib, for himself
and on behalf of any entity that he controls, agree that it is the intent
of the parties to maintain the complete confidentiality of the terms of
this Agreement and the negotiations leading to this Agreement. Therefore,
the parties agree that they will not publicize, and will take all prudent
steps to ensure the confidentiality of, this Agreement. Notwithstanding the
terms of this Section 11, the parties shall be entitled to disclose the
terms of this Agreement to their respective lawyers, tax advisors,
accountants, immediate family, creditors, and as otherwise provided in
Section 17 or in connection with any legal or administrative proceeding of
any kind whatsoever if required by law or on the condition that those to
whom such disclosure is made also will be bound by the terms of this
Section 11, and the Company shall be entitled to disclose the terms of this
Agreement, or to file this Agreement, if required under applicable
securities laws in connection with the Potential Public Offering and to
disclose the terms of this Agreement to the Representative and the
underwriters of the Potential Public Offering as part of their due
diligence investigation. Nothing in this Section 11 shall prevent either
party from disclosing to anyone the warrants held by Staib upon execution
of this agreement and the terms related to such warrants under the
applicable warrant agreement, provided that any other information covered
by this Section 11, including the terms and conditions of this agreement
remain confidential.
12. Complete Agreement. This Agreement contains the
entire agreement between the parties with respect to the subject matter
contained herein. Staib hereby affirms that his rights to compensation
and/or benefits from the Company are specified exclusively and completely
in this Agreement. Any modification of, or addition to, this Agreement must
be in writing signed by Staib and by an authorized representative of the
Company.
13. Severability. Staib and the Company agree that should
any provision of this Agreement be held invalid or illegal, such illegality
shall not invalidate the whole of this Agreement, but rather, the Agreement
shall be construed as if it did not contain the illegal part, and the
rights and obligations of the parties shall be construed accordingly.
14. Effect on Successors. This Agreement is personal to
the parties and may not be assigned by Staib without the written agreement
of the Company. This Agreement shall be binding on the Company, its
successors and assigns.
<PAGE> 10
15. Governing Law. This Agreement shall be governed by,
and interpreted in accordance with, the laws of the State of Iowa.
16. Knowing and Voluntary Agreement. Staib agrees that he
has entered into this Agreement knowingly and voluntarily. Staib further
acknowledges that he has had the opportunity to be represented by counsel
in connection with the negotiation and preparation of this Agreement and
have any terms of this Agreement explained to him. Staib also acknowledges
that the Company has recommended that he consult legal counsel to assist
him in understanding all terms of this Agreement before executing this
Agreement. Staib further affirms that he understands the meaning of the
terms of this Agreement and their effect and agrees that the provisions set
forth in the Agreement are written in language understandable to Staib.
17. Notice to Certain Parties. The Company acknowledges
that Staib is obligated to provide notice to the United States Bankruptcy
Court for the Iowa District (the "Court") pursuant to bankruptcy proceeding
98-5481, the office of the United States Attorney for the Northern District
of Iowa located in Cedar Rapids, Iowa and to Guarantee Bank & Trust of the
surrender of Warrants and claims in this Agreement. Staib agrees to provide
notice of this Agreement immediately and to promptly provide any other
notice that is subsequently required to be given under this Agreement. In
the event that the Court objects to the terms of this Agreement or any
actions taken pursuant to this Agreement, this Agreement shall be null and
void ab initio and of no further force or effect on the parties but only to
the extent provided in Section 13; provided, however, that no objection of
the Court with respect to the execution of this Agreement shall be binding
on the parties if Staib fails within five business days of the date of this
Agreement to provide such notice.
18. Counterparts. This Agreement may be executed in
counterparts (including by facsimile signature), each of which shall be
deemed an original for all purposes and all of which shall be deemed,
collectively, one agreement, but in making proof hereof it shall not be
necessary to exhibit more than one such counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement by
their signatures below.
Dated: December ____, 1999
_______________________________________
Robert Staib
STOCKPOINT, INC.
By ___________________________________
Its __________________________________
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Stockpoint, Inc. on
Form S-1 of our report dated February 8, 2000, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Cedar Rapids, Iowa
March 30, 2000
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints William E. Staib and Scott D.
Porter, and each of them, his or her true and lawful attorneys-in-fact and
agents, each acting alone, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities to sign a Registration Statement on Form S-1 of Stockpoint, Inc.
(the "Company") and any and all amendments thereto, including post-effective
amendments (or any other registration statement for the same offering that is
to be effective on filing pursuant to Rule 462(b) under the Securities Act) and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and with such state
securities commissions and other agencies as necessary; granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or the substitutes for such attorneys-in-fact and
agents, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHERE OF, this Power of Attorney has been signed on this 30th
day of March, 2000, by the following persons.
/s/ Harry O. Hefter
- --------------------------------
Chairman of the Board,
Harry O. Hefter
/s/ David G. Sengpiel
- --------------------------------
Director
David G. Sengpiel
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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