<PAGE>
As filed with the Securities and Exchange Commission on February 9, 2000
Registration No. 333-93185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OPUS360 CORPORATION
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Delaware 7389 13-4023714
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
733 Third Avenue, 17th Floor
New York, New York 10017
(212) 301-2250
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
Ari B. Horowitz
Chairman and Chief Executive Officer
Opus360 Corporation
733 Third Avenue, 17th Floor
New York, New York 10017
(212) 301-2250
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
------------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
John J. Suydam, Esq. Mark L. Mandel, Esq.
O'Sullivan Graev & Karabell, LLP Morrison & Foerster LLP
30 Rockefeller Plaza 1290 Avenue of the Americas
New York, New York 10112 New York, New York 10104
(212) 408-2400 (212) 468-8000
</TABLE>
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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>
<CAPTION>
Amount Proposed Maximum Proposed Maximum
Title of Each Class to be Offering Price Aggregate Offering Amount of
of Securities to be Registered Registered Per Unit Price(1) Registration Fee
<S> <C> <C> <C> <C>
Common stock, $0.001 par value............... 8,050,000 $11.00 $88,550,000 $23,378(2)
</TABLE>
(1) Includes 1,050,000 shares that the Underwriters have the option to purchase
from the Company solely to cover over-allotments, if any.
(2) $17,160 was previously paid.
------------------------
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 such Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Explanatory Note
This Registration Statement contains two forms of prospectuses. One will be
used in connection with an offering of the registrant's common stock to the
general public and one will be used in connection with an offering of the
registrant's common stock in the Safeguard Subscription Program to certain
stockholders of Safeguard Scientifics, Inc. The general public prospectus and
the Safeguard Subscription Program prospectus will be identical except that a
letter to the stockholders of Safeguard Scientifics, Inc. detailing the
procedures for the Safeguard Subscription Program will be bound to the cover of
the prospectus to be used in that program. The letter to the stockholders of
Safeguard Scientifics, Inc. has been filed as Exhibit 99.1 to this Registration
Statement.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 2000
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 SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]
7,000,000 SHARES
COMMON STOCK
Opus360 Corporation is offering 7,000,000 shares of its common stock. Of the
shares being offered, we are offering shares to the public generally and
shares at the initial public offering price to stockholders of Safeguard
Scientifics, Inc., one of our principal stockholders, that owned at least 100
shares of common stock of Safeguard as of December 16, 1999. Safeguard or its
designees will purchase any shares of common stock that are not purchased by
Safeguard stockholders under the Safeguard Subscription Program. Safeguard is an
underwriter with respect to the shares offered to the stockholders of Safeguard.
Safeguard is not an underwriter with respect to any other shares offered hereby
and is not included in the term underwriter as used elsewhere in this
prospectus.
This is our initial public offering, and no public market currently exists
for our shares. We will apply to have our shares approved for quotation on the
Nasdaq National Market under the symbol "OPUS." We anticipate that the initial
public offering price will be between $9.00 and $11.00 per share.
------------------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 10.
---------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Underwritten Public Offering:
Public Offering Price................................... $ $
Underwriting Discounts and Commissions.................. $ $
Proceeds to Opus360..................................... $ $
Safeguard Subscription Program:
Public Offering Price................................... $ $
Management Fee.......................................... $ $
Proceeds to Opus360..................................... $ $
Aggregate Proceeds:......................................... $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Opus360 has granted the underwriters a 30-day option to purchase up to an
additional 1,050,000 shares of common stock to cover over-allotments.
------------------------
ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
E*OFFERING
------------------------
The date of this prospectus is , 2000.
<PAGE>
[graphics]
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. Unless the context otherwise
indicates, references in this prospectus to "Opus360," "we," "us," and "our"
refer to Opus360 Corporation and its wholly owned subsidiaries, The Churchill
Benefit Corporation and, as of January 20, 2000, Ithority Corporation.
Until , 2000 (25 days after the date of this prospectus), all
dealers that buy, sell or trade our common stock, whether or not participating
in this offering, may be required to deliver a prospectus. This requirement is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Summary..................................................... 3
Risk Factors................................................ 10
Cautionary Note Regarding Forward Looking Statements; Market
Data...................................................... 27
Use of Proceeds............................................. 28
Dividend Policy............................................. 28
Capitalization.............................................. 29
Dilution.................................................... 31
Unaudited Pro Forma Consolidated Combined Financial
Statements................................................ 33
Selected Financial Data..................................... 39
Management's Discussions and Analysis of Financial Condition
and Results of Operations................................. 40
Business.................................................... 52
Management.................................................. 69
Related Party Transactions.................................. 80
Principal Stockholders...................................... 83
Description of Capital Stock................................ 85
Shares Eligible for Future Sale............................. 89
Underwriting................................................ 92
Legal Matters............................................... 96
Experts..................................................... 96
Where You Can Find More Information......................... 96
Index to Financial Statements............................... F-1
</TABLE>
------------------------
FREEAGENT.COM, OPUS XCHANGE, OPUSRM, FREEAGENT E.OFFICE, E.PORTFOLIO and our
logos are our trademarks or service marks. PEOPLEMOVER/STAFFING is a registered
trademark of PeopleMover, Inc. All other trademarks, service marks and trade
names referred to in this prospectus are the property of their respective
owners.
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING "RISK FACTORS,"
BEFORE INVESTING IN OUR COMMON STOCK.
Opus360 Corporation
Our Business
Opus360 is a leading provider of a suite of Internet-based services for
putting people and projects together across the labor supply chain. Our
business-to-business electronic commerce solution is designed to streamline the
procurement and management of professional resources. We have developed an
efficient exchange that uses advanced technologies to enable corporations,
professional services firms, staffing companies and other buyers requiring
individuals with specific professional skills to identify and procure free
agents, such as independent professionals, consultants and other persons with
technology, creative, strategic consulting and other expertise. As of
January 31, 2000, over 64,000 free agents were registered with our FREEAGENT.COM
service and there were project assignments available from over 900
organizations. Through strategic alliances with organizations that provide
complementary services or products or that will provide us access to their user
base, we expect that additional employers and over 1,000,000 additional
individuals will be part of our database and eligible to be matched to projects
through our exchange by June 30, 2000.
Market Opportunity
The rapid growth of the Internet economy has fueled demand for professionals
with technology, creative, strategic consulting and other expertise who can
create and implement Internet, e-business or other technology-related
strategies. Organizations are expected to increasingly rely on external
professionals on a project-by-project basis to rapidly implement their
e-commerce strategies. According to the Gartner Group, by 2004, 60% of
enterprises will use externally sourced workers to fulfill more than 50% of
their information technology-related needs. To hire professionals across the
labor supply chain for projects, organizations typically rely on a
labor-intensive, manually generated paper-based procurement process. We believe
that the primary obstacle impeding an organization's ability to easily and
rapidly reach professionals with the skills needed for these projects has been
the lack of an efficient platform to connect the buyers and suppliers of these
professionals.
Although there are many websites that advertise permanent and temporary
positions in multiple industries, free agents typically have not had access to a
centralized source of project assignments or the ability to easily find those
project assignments due to the minimal searching capabilities of these websites.
These websites also typically do not offer free agents the opportunity to
effectively market themselves for projects. In addition, many free agents do not
readily have access to benefits, services or products comparable to those
available in a traditional corporate setting. These free agents represent a
market with substantial buying power.
Our Solution
Our solution consists of a suite of Internet-based services designed to
optimize the procurement and management of professionals across the labor supply
chain. We believe our services will provide a more efficient marketplace for
connecting organizations with the skilled professionals they seek for their
project
3
<PAGE>
assignments. Our three principal services, each of which is offered and can be
used as a stand-alone application and is also designed to be integrated and used
with our other services, are:
SERVING THE FREE AGENT COMMUNITY. FREEAGENT.COM is an Internet portal where free
agents can easily and rapidly access project opportunities from all sources
across the labor supply chain and procure benefits and services to help them
cost effectively manage their independent careers by offering:
- an Internet community where professionals can create an E.PORTFOLIO, a
multimedia, easily updatable portfolio of skills, accomplishments, work
history, references, work samples, attached graphics and publications, to
market themselves to potential clients, can search a database of multiple
project opportunities and can interact with other free agents to share
knowledge and form teams to respond to projects;
- FREEAGENT E.OFFICE services, available for a monthly fee, that include a
broad range of back office and administrative services, such as project
invoicing and expense reporting, as well as corporate-level benefits, such
as group health insurance, a 401(k) plan and Opus360 stock options; and
- an online marketplace where we offer products and services that help free
agents manage their independent businesses.
MATCHING BUYERS WITH PROFESSIONALS FOR PROJECTS. OPUS XCHANGE is an Internet
platform that is designed to enable buyers requiring individuals with specific
professional skills to quickly and easily procure those professionals in an
online environment by:
- using search technologies that match the skills and expertise required by
an organization for a project with the appropriate professionals based on
their E.PORTFOLIOS and availability.
Our enhanced version of OPUS XCHANGE designed for large corporate customers
allows organizations to procure professionals for projects from all sources
across the labor supply chain and will enable professional services firms,
staffing companies and other suppliers of professional resources to procure
professionals from each other. It will also provide an efficient procurement
process, by using advanced vendor management, performance tracking, and
sophisticated matching capabilities that are designed to:
- automate the requisition, approval and engagement processes; and
- capture key performance information in an easily searchable database to
help these buyers evaluate the efficiency, cost-competitiveness and
quality of their professionals and suppliers of professionals.
MANAGING LABOR RESOURCES. OPUSRM is a labor resource management service designed
to centralize resource and project information and to easily and rapidly
integrate with OPUS XCHANGE to enable corporations, staffing vendors,
professional service organizations and other buyers of individual professional
talent to more efficiently manage their internal and external professionals by:
- increasing labor resource utilization across an organization's entire
range of projects, industries, geographic regions and personnel groups in
order to reduce downtime costs and improve profitability; and
- delivering project- and resource-related information online, with detailed
reporting of project finances and labor resource utilization in order to
eliminate the need for labor-intensive, manually generated project and
financial reports.
We introduced FREEAGENT.COM on July 4, 1999 and OPUS XCHANGE on
September 6, 1999, and expect to commercially release OPUSRM and our enhanced
version of OPUS XCHANGE during the first half of 2000.
4
<PAGE>
Our Strategy
Our goal is to be the premier solution for putting people and projects
together across the labor supply chain by:
- building FREEAGENT.COM into the largest free agent community through an
aggressive marketing campaign and strategic alliances;
- attracting large buyers of professionals to our enhanced version of OPUS
XCHANGE through our direct sales force and strategic partners;
- capturing pertinent data on professionals and organizations to make the
labor procurement process more efficient by establishing skills standards
for these individuals and service benchmarks for staffing vendors;
- attracting clients for our OPUSRM labor resource management service by
marketing it as a stand-alone service and as part of an overall
professional management and procurement solution to our OPUS XCHANGE
users; and
- pursuing strategic acquisitions and investments in complementary
businesses, products and technologies to further enhance our product and
service offerings.
Recent Developments
In January and February 2000, we completed two acquisitions and entered into
an agreement to acquire another corporation. We believe that these acquisitions
will expand and complement our business, products and services.
PEOPLEMOVER, INC.
On January 30, 2000, we entered into an agreement to acquire
PeopleMover, Inc. for up to 2,620,000 shares of our common stock and the
assumption of PeopleMover stock options which will be exercisable for up to
1,212,000 shares of our common stock. PeopleMover's principal application
service, PEOPLEMOVER/ STAFFING, is complementary to our OPUSRM resource
management service and is designed specifically for the staffing industry.
PeopleMover currently provides this service to leading staffing companies such
as Robert Half International, Re:Sources Connection and Net-Strike Worldwide.
Our acquisition of PeopleMover is expected to be completed by February 14, 2000.
PeopleMover had revenues of $1.3 million in 1999.
ITHORITY CORPORATION
On January 20, 2000, we acquired Ithority Corporation for up to 426,120
shares of our common stock and $500,000 in cash. Up to an additional
$4.0 million of our common stock is payable to Ithority's stockholders on the
first anniversary of the closing if specified conditions are satisfied. Ithority
is a knowledge marketplace for expert advice on a variety of subjects, such as
technology, software development, strategic consulting, design and finance. We
plan to integrate this knowledge marketplace into FREEAGENT.COM, which will
expand our free agent marketplace to anyone who chooses to buy or sell expert
knowledge. Ithority had no revenues in 1999.
INDUSTRYINSITE.COM
On January 12, 2000, we acquired the assets and liabilities of a website,
INDUSTRYINSITE.COM, for $1.0 million. INDUSTRYINSITE.COM has a network of
approximately 63,000 professionals that work in a variety of professional
industries, such as management consulting, information technology management,
computer software and marketing. By June 30, 2000, we plan to integrate
INDUSTRYINSITE.COM into FREEAGENT.COM and convert its approximately 63,000
member profiles into E.PORTFOLIOS so that these members can be matched to
projects through OPUS XCHANGE.
5
<PAGE>
Our History
We were incorporated in Delaware in August 1998 as Enterspect Corporation
and changed our name to Opus360 Corporation in March 1999. Until May 27, 1999,
we focused on the development of our strategy and services and the formation of
strategic alliances with organizations whose sales and marketing staffs will
further the distribution of our services to their customer base. On May 27,
1999, we acquired all of the outstanding stock of The Churchill Benefit
Corporation. Since the acquisition, Churchill has been doing business as
FREEAGENT.COM and its employee benefit services, which historically had been
provided offline, have been integrated into our FREEAGENT E.OFFICE services.
We have a limited operating history and have never been profitable. We had
no revenues prior to our acquisition of Churchill and through December 31, 1999,
our revenues consisted principally of the fees charged for our FREEAGENT
E.OFFICE services, consisting of an initial sign-up fee and monthly fees
thereafter. We incurred net losses of $29.4 million in 1999 on revenues of
$0.4 million and our accumulated deficit at December 31, 1999 was
$30.4 million. We operate in a highly competitive market and expect to incur net
losses for the foreseeable future.
In January 2000, we began charging fees to organizations that list projects
on OPUS XCHANGE and, during the first quarter of 2000, will begin charging
organizations project placement fees. During the first quarter of 2000, we began
to receive revenues for integration and customization services related to OPUSRM
and the enhanced version of OPUS XCHANGE and, during the first half of 2000, we
expect to begin receiving subscription fee revenue for each employee managed
within each of our client's installed OPUSRM database.
Corporate Information
Our principal executive offices are located at 733 Third Avenue, 17th Floor,
New York, New York 10017, and our telephone number is (212) 301-2250. Our
principal websites are WWW.OPUS360.COM and WWW.FREEAGENT.COM. Information
contained on our websites does not constitute part of this prospectus.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Opus360........... 7,000,000 shares
Common stock to be outstanding after this
offering................................ 45,035,541 shares
Use of proceeds........................... General purposes, including working capital, capital
expenditures, sales and marketing, product and
technology development and potential acquisitions of
technologies, products or businesses which may be
complementary to our business. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.... OPUS
</TABLE>
The number of shares of our common stock outstanding after this offering is
based on our shares of common stock outstanding as of December 31, 1999, after
giving effect to:
- the issuance of 426,120 shares of common stock in the Ithority
acquisition;
- 840,000 shares of common stock issued in January 2000 upon exercise of
warrants; and
- the assumed issuance of 450,000 shares of our common stock prior to the
closing of this offering upon the exercise of a warrant held by
Greenhill & Co., LLC, which acts as a financial advisor to us.
The common stock to be outstanding after this offering excludes:
- the issuance of up to 2,620,000 shares of our common stock upon
consummation of the PeopleMover acquisition;
- 406,000 shares of our common stock held in escrow, together with
additional shares of our common stock, issuable to the former stockholder
of Churchill as described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Unaudited Pro Forma
Consolidated Combined Financial Statements;"
- 5,340,000 shares of our common stock issuable at a weighted average
exercise price of $1.09 per share upon the exercise of stock options
outstanding at December 31, 1999, 1,236,000 shares of which (including
shares of our common stock issuable upon the exercise of options which
automatically vest upon the consummation of this offering) are currently
exercisable;
- options to purchase 1,862,775 shares of our common stock issued subsequent
to December 31, 1999 to officers, directors and employees, including our
new President and Chief Operating Officer, at a weighted average exercise
price of $5.31 per share;
- options to purchase 1,212,000 shares of our common stock held by officers
and employees of PeopleMover, at a weighted average exercise price of
$0.81 per share, which will be assumed by us in the PeopleMover
acquisition;
- shares of our common stock reserved for future grant under our stock
option and employee stock purchase plans;
- 105,548 shares of our common stock issuable at a weighted average exercise
price of $1.00 per share upon the exercise of warrants outstanding at
January 31, 2000;
- shares of our common stock issuable upon the exercise of additional
warrants that will be issued as compensation to a provider of advertising
services at the end of February 2000 if this offering is not consummated
prior to that time, the number of warrants to be issued to be based upon
the fair market value of our common stock on the date of issuance of the
warrants;
- 450,000 shares of our common stock issuable upon the exercise of a warrant
having an exercise price of $8.15 per share issued in January 2000 to
Greenhill & Co., LLC under its financial advisory agreement with us as a
result of the consummation of the INDUSTRYINSITE.COM and Ithority
acquisitions;
7
<PAGE>
- an additional 450,000 shares of our common stock issuable upon the
exercise of an additional warrant which may be issued to Greenhill under
its financial advisory agreement with us upon the completion of a
specified number or aggregate value of acquisitions, and having an
exercise price equal to the fair market value of our common stock on the
Nasdaq National Market on the date of issuance of the additional warrant;
- 225,000 shares of our common stock issuable upon exercise of a warrant
having an exercise price of $3.33 per share issued in February 2000 to
Lucent Technologies Inc. in connection with the establishment of a
strategic alliance; and
- shares of our common stock issuable upon the exercise of an additional
warrant issued to Lucent in February 2000 in connection with the
establishment of the strategic alliance, and which is exercisable for that
number of shares of our common stock, having a fair value no greater than
$2,655,000 using the Black-Scholes option-pricing model, at an exercise
price and on a specified effective beginning date, in each case as
described in greater detail under "Related Party Transactions--Lucent
Strategic Alliance."
In addition, except as otherwise indicated, we have presented information in
this prospectus based on the following assumptions:
- the mandatory conversion of all outstanding shares of our preferred stock
into 25,441,090 shares of our common stock on the closing of this
offering;
- the declaration of a 3-for-2 common stock split to be effected before the
completion of this offering;
- the underwriters do not exercise their over-allotment option; and
- all of the shares offered in the Safeguard Subscription Program are
purchased by stockholders of Safeguard.
SAFEGUARD SUBSCRIPTION PROGRAM
As a part of this offering, we are offering shares of our common stock to
stockholders of Safeguard that owned at least 100 shares of Safeguard common
stock on December 16, 1999 in the Safeguard Subscription Program. The program is
described in greater detail in the section of this prospectus entitled
"Underwriting--Safeguard Subscription Program."
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table presents our summary historical and pro forma financial
information. The pro forma data gives effect to the May 27, 1999 acquisition of
Churchill and our pending acquisition of PeopleMover, as if the acquisitions had
occurred on January 1, 1999. You should read the information set forth below in
conjunction with "Unaudited Pro Forma Consolidated Combined Financial
Statements," "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
Opus360, Churchill and PeopleMover and the notes to those financial statements
included elsewhere in this prospectus. Under applicable SEC rules, the
historical audited financial statements of Ithority and pro forma financial
statements for us reflecting the Ithority acquisition are not required to be
included in this prospectus. However, those audited and pro forma financial
statements will be filed with the SEC within 75 days of consummation of the
Ithority acquisition.
<TABLE>
<CAPTION>
Period from August 17,
1998 (inception)
through December 31, Year Ended
1998 December 31, 1999
---------------------- --------------------
Actual Pro Forma
-------- ---------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Total revenues.................................... $ -- $ 419 $ 2,019
Gross profit...................................... -- 158 790
Total operating expenses.......................... 1,041 30,293 51,745
Loss from operations.............................. (1,041) (30,135) (50,955)
Net loss.......................................... $(1,035) $(29,390) $ (50,283)
Basic and diluted net loss per share.............. $ (0.11) $ (2.91) $ (3.84)
Weighted average number of shares used in
calculating basic and diluted net loss per
share........................................... 9,120 10,084 13,082 (1)
Pro forma basic and diluted net loss per
share(2)........................................ $ (0.11) $ (1.12) $ (1.71)
Pro forma weighted average number of shares used
in calculating basic and diluted net loss per
share(2)...................................... 9,391 26,324 29,322 (1)
</TABLE>
- ------------------------
(1) Reflects the issuance of shares of our common stock in the Churchill
acquisition and the pending PeopleMover acquisition as if the shares were
outstanding for the entire period presented.
(2) Reflects the automatic conversion of our outstanding preferred stock into
our common stock on a share-for-share basis on the consummation of this
offering as if these shares were outstanding from their respective dates of
issuance.
The following table presents our consolidated balance sheet data as of
December 31, 1999: on an actual basis; on a pro forma basis to give effect to
our pending acquisition of PeopleMover as if the acquisition had occurred on
December 31, 1999; and on a pro forma as adjusted basis to give effect to the
mandatory conversion of all outstanding shares of our preferred stock into
shares of common stock on the closing of this offering and the estimated net
proceeds from the sale of 7,000,000 shares of common stock in this offering at
an assumed initial public offering price of $10.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us.
<TABLE>
<CAPTION>
As of December 31, 1999
----------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities............ $28,463 $28,404 $ 92,219
Working capital............................................. 21,638 18,340 82,155
Total assets................................................ 40,716 73,830 137,645
Convertible preferred stock................................. 17 17 --
Total stockholders' equity.................................. $27,727 $56,435 $120,250
</TABLE>
9
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING RISKS, TOGETHER WITH THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE TO BUY OUR COMMON STOCK. IF ANY
OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION WOULD LIKELY SUFFER. THIS COULD CAUSE THE MARKET PRICE OF
OUR COMMON STOCK TO DECLINE, AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID
TO BUY OUR COMMON STOCK.
Risks Related to Our Financial Condition and to Our Business Model
Our limited operating history, particularly in light of our recent inception,
makes it difficult for you to evaluate our business and to predict our future
success.
We were founded in August 1998. Until May 27, 1999, we focused on
development of our strategy and services and the formation of strategic
alliances with organizations that provide complementary products or services and
that will provide us access to their user base to broaden our access to
potential free agents and employers in need of professionals. On May 27, 1999,
we acquired Churchill and commenced formal operations. Our limited operating
history will make it difficult to forecast our future operating results. For
example, our ability to forecast operating expenses and revenues based on our
historical results will be difficult because we have only recently begun sales
of our OPUS XCHANGE and OPUSRM services and have recently consummated the
acquisitions of Ithority and INDUSTRYINSITE.COM and have executed an agreement
to acquire PeopleMover. You should evaluate our chances of financial and
operational success in light of the risks, uncertainties, expenses, delays and
difficulties associated with operating a new business. These risks include our
need to:
- increase usage of our services and derive revenue from these services;
- enter into additional strategic alliances with organizations that will
provide us access to their user base;
- expand our marketing and sales efforts;
- effectively respond to competitive developments;
- integrate the business, products, services and technology of our recent
and pending acquisitions and possible future acquisitions; and
- manage our anticipated growth.
The uncertainty of our future performance and the uncertainties of our
operating in a new and expanding market increases the risk that the value of
your investment in our common stock will decline.
We have never been profitable, and we expect that our losses will continue for
the foreseeable future.
We have incurred net losses and have never been profitable. We expect to
incur net losses for the foreseeable future and may never become profitable. We
had no revenues and incurred net losses of $1.0 million for the period from
August 17, 1998 (our inception) to December 31, 1998, and had net losses of
$29.4 million on revenues of $0.4 million for the year ended December 31, 1999.
As of December 31, 1999, we had an accumulated deficit of $30.4 million. Our
operating and net losses have increased for each of the fiscal quarters of our
operating history and we expect that this trend will continue. On a pro forma
basis to give effect to the acquisition of Churchill and the pending acquisition
of PeopleMover as if these acquisitions had occurred as of January 1, 1999 for
statement of operations purposes and, in the case of the PeopleMover
acquisition, December 31, 1999 for balance sheet purposes, our revenues and net
losses for 1999 would have been $2.0 million and $50.3 million, respectively,
and we would have had an accumulated deficit of $30.4 million. See "Unaudited
Pro Forma Consolidated Combined Financial Statements." Neither PeopleMover nor
Ithority have ever been profitable.
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We expect to substantially increase our sales and marketing, service and
product development and general and administrative expenses, in part as a result
of our two recent acquisitions and our pending acquisition of PeopleMover. In
addition, as a result of our acquisitions of Ithority and INDUSTRYINSITE.COM and
upon consummation of our pending acquisition of PeopleMover, we expect to record
for the quarter ending March 31, 2000 substantial amounts of goodwill and other
intangible assets which will result in non-cash charges as these assets are
amortized over the next three years, as well as acquisition related expenses.
See "Unaudited Pro Forma Consolidated Combined Financial Statements."
Furthermore, we will incur substantial stock-based compensation expense in
future periods representing non-cash charges incurred as a result of the
issuance of common stock and stock options prior to this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." As a result of these factors, we will need to generate significant
additional revenues to achieve profitability in the future. Although our
revenues have grown in recent quarters, we cannot be certain that this growth
will continue or that we will achieve profitability. If our revenues fail to
grow at the rates that we anticipate and we fail to adjust our operating expense
levels accordingly, or if our operating expenses increase without a commensurate
increase in our revenues, our operating and net losses will increase further. If
we do become profitable in any period, we cannot be certain that we will sustain
or increase profitability on a quarterly or an annual basis.
Our operating results may vary from quarter to quarter in future periods which
may cause our stock price to fluctuate or to decline.
Our operating results in any quarter will be harmed if our revenues for that
quarter fall below our expectations and we are not able to quickly reduce our
operating expenses in response. Our operating expenses, which include sales and
marketing, service and product development and general and administrative
expenses, are based on our expectations of future revenues and are relatively
fixed over a 30 to 45 day period. As a result, our ability to rapidly adjust
these expenses is limited, which may increase the fluctuations in our quarterly
operating results.
Our business model is unproven, and we may not become profitable if we are
unable to adapt it to changes in our market.
If we are unable to anticipate changes in the market for labor procurement
and management solutions, or if our business model is not successful, we may not
be able to expand our business or successfully compete with other companies. Our
current business model depends upon the Internet to enable us to build and
deliver a comprehensive labor procurement and management solution. However, the
market for these kinds of Internet-based solutions is at an early stage of
development and we may be unable to implement our business plan fully or obtain
broad acceptance of our products and services either by organizations or by free
agents. Our revenue model and profit potential are also unproven. We may be
required to further adapt our business model in response to additional changes
in the market for these solutions, or if our current business model is not
successful.
If we are unable to obtain additional financing, we may not be able to continue
or expand our operations.
Since our inception, our operating activities have used more cash than they
have generated. Because we will continue to need substantial amounts of working
capital to fund the growth of our business, we expect to experience significant
negative operating cash flows for the foreseeable future. We may need to raise
additional funds in the future in order to fund more aggressive brand promotion
or more rapid expansion, to develop new or enhanced products or services, to
respond to competitive pressures or to acquire complementary businesses,
products or technologies. We cannot be certain that additional financing will be
available on terms favorable to us, if at all. If adequate funds are not
available on acceptable terms or not available at all, we may be unable to
successfully promote our products and services, fund our expansion, develop or
enhance our products or services, respond to competitive pressures or take
advantage of acquisition opportunities.
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You will experience dilution if we raise additional funds through the issuance
of additional equity or convertible debt securities.
If we raise additional funds through the issuance of equity securities or
convertible debt securities, you will experience dilution of your percentage
ownership of our company. This dilution may be substantial. In addition, these
securities may have powers, preferences and rights that are preferential to the
holders of our common stock and may limit our ability to pay dividends on our
common stock.
Risks Related to Our Markets and Our Strategy
Our revenues will not grow if the Internet does not become a proven procurement
and project search medium.
If we are unable to compete with traditional methods for procuring free
agent talent and searching for and securing project assignments, our revenues
will not increase. The future of our business is dependent on the acceptance of
the Internet by professionals and buyers requiring individuals with specific
professional skills. as an effective means to procure labor and to search for
and transact project-based work assignments. To date, only a small percentage of
U.S. businesses engage in any recruiting activities online. The online
recruitment and project-based work search market is new and is rapidly evolving,
and we do not yet know how effective online recruiting and project searching
will be compared to traditional recruitment and project search methods. The
adoption of online recruiting and project searching, particularly among
organizations and professionals who have historically relied upon traditional
recruiting and project searching methods, requires the acceptance of a new way
of conducting business, exchanging information, advertising and searching for
project-based work. Many potential buyers requiring individuals with specific
professional skills have little or no experience using the Internet for
recruiting, and only a limited number of professionals who are currently
searching for project assignments have experience using the Internet in
connection with their searches. As a result, we may not be able to effectively
compete with traditional recruiting and project-based work search methods.
We will not be able to expand our business if use of the Internet does not
continue to grow.
If use of the Internet does not continue to grow, we may not be able to meet
our business objectives or expand our operations. Use of the Internet may be
inhibited by any of the following factors:
- the Internet infrastructure may be unable to support the demands placed on
it, or its performance and reliability may decline as usage grows;
- websites may be unable to provide adequate security and authentication of
confidential information contained in transmissions over the Internet; or
- the Internet industry may be unable to adequately respond to privacy
concerns of potential users.
We will not be able to fully implement our solution if we do not successfully
release OPUSRM and our enhanced version of OPUS XCHANGE on a commercial basis.
Our business model and technologies are designed to permit our existing
FREEAGENT.COM website to be integrated with our OPUS XCHANGE and OPUSRM
services. However, we have not yet released our OPUSRM service or our enhanced
version of OPUS XCHANGE on a commercial basis, and may not succeed in doing so.
If we are unable to offer these services on a widespread basis, or if we
encounter delays in doing so, our service offerings may be less attractive to
potential customers, which will reduce our revenues and prospects for growth. In
addition, while our enhanced version of OPUS XCHANGE and OPUSRM are being
designed to be integrated with each other, there can be no assurance that these
services will be successfully integrated.
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We will not be able to maintain or increase the number of free agents who
purchase our FREEAGENT E.OFFICE services if our vendors do not provide the
back-office administrative services that these free agents require.
We rely on a single vendor, Automatic Data Processing, to provide payroll
processing services, including the preparation of IRS Form W-2s and other tax
forms, for our FREEAGENT E.OFFICE employees. We also rely on vendors to deliver
the 401(k) plan and the group health, life insurance and disability insurance
coverage that we offer to free agents through our FREEAGENT E.OFFICE services
program. If our current or future vendors fail to perform, or fail to deliver,
these back-office administrative services for our FREEAGENT E.OFFICE employees
in a professional, reliable and timely manner or fail to improve their services
for these free agents in accordance with market requirements from time to time,
we will not be able to maintain or increase the number of free agents who
purchase our FREEAGENT E.OFFICE services, which will impair our ability to
increase our revenues. Our standard agreement with free agents who purchase our
FREEAGENT E.OFFICE services is generally subject to termination by us or the
free agent at any time upon prior written notice provided conditions are met. A
significant number of terminations could substantially reduce our revenues.
Our revenues will not increase if we do not successfully develop awareness of
our brand names.
If we fail to successfully promote and maintain our FREEAGENT.COM, OPUS
XCHANGE or OPUSRM brand names, fail to generate a corresponding increase in
revenues as a result of our branding efforts, or encounter legal obstacles in
connection with our continued use of our brand names, our revenues will not
increase and our prospects for growth will be diminished. We believe that
continuing to build awareness of each of our brand names is critical to
achieving widespread acceptance of our services. We believe that brand
recognition will become a key differentiating factor among providers of
project-based professional procurement and management solutions as competition
in the market for these solutions increases. We will be unable to maintain and
build brand awareness if we do not succeed in our marketing efforts, provide
high quality services and increase the number of professionals and buyers
requiring individuals with specific professional skills to fulfill project
needs.
Our revenues will not increase and we will not become profitable if we do not
increase the number of transactions that are effected through the OPUS XCHANGE
marketplace.
We expect to release our enhanced version of OPUS XCHANGE on a commercial
basis during the first half of 2000. Once this enhanced version is released, if
we are unable to increase the volume of transactions in the OPUS XCHANGE
marketplace between professionals and buyers requiring individuals with specific
professional skills to fulfill project needs, our revenues will not increase.
Our business model assumes that a growing percentage of our future revenues will
be based upon project listing and placement fees paid by organizations for using
the OPUS XCHANGE marketplace, and we anticipate that these revenues will
generate higher gross margins than the principal source of our historical
revenues, the fees paid by free agents who purchase our FREEAGENT E.OFFICE
services. Accordingly, our future revenues and improvement in our gross profit
margin will depend to a large extent on the number of project listings that are
originated by buyers requiring professionals and the number of project
placements that occur within the OPUS XCHANGE marketplace. We will also need to
develop the means to accurately track the transactions that occur on OPUS
XCHANGE in order to ensure that we receive the revenues due us for these
transactions.
Our ability to increase transaction volume in the OPUS XCHANGE marketplace
depends in large part on our ability to build a critical mass of professionals
and buyers requiring individuals with specific professional skills to fulfill
project needs. If we are unable to increase the number of free agents who
participate in the OPUS XCHANGE marketplace through FREEAGENT.COM and to attract
more of these buyers to the OPUS XCHANGE marketplace, our services will not be
perceived to provide an effective market for project-based professionals, and
demand for our services will decrease. To attract and maintain free agents, we
must build a critical mass of organizations that seek to obtain their services
for specific projects. Similarly, organizations requiring individuals with
specific professional skills must perceive value in participating in our OPUS
XCHANGE
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marketplace, which, in part, will depend on the number of free agents who
participate in the marketplace. These free agents must possess a sufficient
variety of skills in order to render their services attractive.
Our plans to charge for project listing fees and project placement fees may
limit the number of organizations willing to list project assignments on OPUS
XCHANGE.
We recently began to charge organizations that list projects on OPUS XCHANGE
and, commencing in the first quarter of 2000, we plan to charge a fee to
organizations that procure free agents to complete a project. These charges may
limit the number of organizations that are willing to list their assignments or
procure professionals through OPUS XCHANGE.
Our efforts to attract buyers requiring individuals with specific professional
skills to fulfill project needs and those professionals to the OPUS XCHANGE
marketplace may not be successful if we are not able to establish strategic
alliances that will broaden our access to these buyers and professionals or if
these strategic partners do not support our efforts to direct suppliers and
users of project-based professionals to OPUS XCHANGE.
We may be unable to establish additional strategic alliances with
organizations that provide complementary services or products or that will
provide us access to their user base, thereby broadening our access to potential
free agents and employers in need of professionals. If this occurs, our ability
to enhance the demand for and supply of professionals in our OPUS XCHANGE
marketplace will be diminished. Our existing agreement with CAREERPATH.COM and
other organizations limit our ability to enter into strategic alliances with
specified organizations for a specified time period. In addition, the parties
with whom we have or may enter into strategic alliances may not successfully
direct buyers and sellers of professionals to our OPUS XCHANGE marketplace. If
these entities fail to successfully support our efforts to direct suppliers and
users of professionals to our OPUS XCHANGE marketplace, or if the extent of this
incoming traffic to our OPUS XCHANGE marketplace is less than anticipated, our
revenues will not increase.
Our OPUSRM service may not be accepted by customers.
Before making any commitment to use our OPUSRM service, potential users will
likely consider a wide range of issues, including service benefits, integration
with legacy systems, potential capacity, functionality and reliability.
Prospective users will generally need to change established professional
management and procurement practices and operate their businesses in new ways.
Because our OPUSRM service represents a new, Internet-based approach for most
organizations to manage and allocate their professional resources, those persons
responsible for the use or approval of our OPUSRM service within these
organizations will be addressing these issues for the first time. If our OPUSRM
service is not attractive to potential customers, our revenues from this service
will not increase. In addition, if systems integrators fail to adopt and support
OPUSRM as a resource management tool, our ability to reach our target customers
in this market may be diminished.
Our sales cycles for OPUSRM and our enhanced version of OPUS XCHANGE may be
lengthy, which could delay the growth of our revenues and increase our
expenditures.
Our OPUSRM service and our enhanced version of OPUS XCHANGE are new and
commercially untried services and will not be commercially released until the
first half of 2000. We may face significant delays in their acceptance. We will
not be able to recognize any revenues during the period in which a potential
customer evaluates whether or not to use them, and this period may be
substantial, ranging to as much as six to 12 months. The decision of a customer
to use either or both of these services may be expensive, time consuming and
complex and may require an organization to make a significant commitment of
resources. As a result, we will have to expend valuable time and resources to
educate interested persons at all levels in these organizations on their use and
benefits. Our expenditure of substantial time and resources to persuade
customers to use either or both of these services or an unexpectedly long sales
and implementation cycle for
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them will have a negative impact on the timing of our revenues. Since we have
not yet released either OPUSRM or the enhanced version of OPUS XCHANGE, we
cannot predict how long the average sales and implementation cycle will be, and
we may be unable to adapt our business to shorten the average sales cycle.
Our future success will depend upon the continued services of members of our
executive management team.
The loss or departure of any of our executive officers could impair our
ability to implement our business model and could lower our revenues. Our future
success depends to a significant extent on the continued service of the members
of our executive management team, in particular, Ari B. Horowitz, our Chairman
and Chief Executive Officer, Richard S. Miller, our President and Chief
Operating Officer, and Carlos B. Cashman, our Chief Technology Officer.
If we are unable to hire and retain highly skilled personnel, we will not be
able to grow and to compete effectively.
Our future success will also depend to a significant extent on our ability
to attract and retain senior management, experienced sales and marketing
personnel, software developers, qualified engineers and other highly skilled
personnel. Competition for these highly skilled employees is intense,
particularly in the Internet industry. We may experience difficulty from time to
time in hiring the personnel necessary to support the growth of our business.
If we are unable to successfully introduce new or enhanced services, products or
features, our sales may decline.
We may not be able to increase our sales if we are unable to develop and
introduce new or enhanced services or products, or if these services or products
do not achieve market acceptance. In addition, in order to remain competitive,
we believe that we must continually improve on a timely basis the
responsiveness, functionality and features of our existing services and
products. However, we may not succeed in developing or introducing features,
functions, services or products that buyers requiring individuals with specific
professional skills or free agents find attractive. We expect to introduce
enhanced services, products and features in order to respond to:
- rapidly changing technology in online professional procurement and
management;
- evolving industry standards, including both formal and de facto standards,
relating to online labor procurement and management;
- developments and changes relating to the Internet;
- competing services and products that offer increased functionality; and
- changes in the requirements of buyers requiring individuals with specific
professional skills and free agents.
If any new or enhanced service, product or feature that we introduce is not
favorably received, the public's perception and the reputation of our brands
could suffer irreparable damage.
If we cannot compete successfully, our revenues will decrease and we may never
become profitable.
Due to competition, we may experience reduced use of our services and lower
margins on our services and products. If we are unable to compete effectively
with current or future competitors, our revenues will decrease and we will be
unable to grow our business.
The market for labor procurement and management solutions is intensely
competitive and highly fragmented. Our three primary services compete with a
combination of online and offline companies that provide competing solutions,
including traditional companies providing benefits and services to independent
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professionals, traditional and online recruiting and job-posting services, and
developers of enterprise resource planning solutions. Some of our competitors
may offer their services at no cost or at prices that are less than the ones
that we currently offer or intend to offer. For example, some competitors do not
charge for posting a project on their website or may charge a fee lower than we
are now charging for project listings on OPUS XCHANGE. Similarly, while we
intend to charge a placement fee in the first quarter of 2000, some of our
competitors do not charge a success or placement fee when a person is engaged
for a project.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources and larger customer bases than we do. In addition, current and
potential competitors may make strategic acquisitions or establish cooperative
relationships to expand their businesses or to offer more comprehensive
solutions. We believe that the companies in our target market compete primarily
on the basis of breadth and functionally of services, and the extent of their
relationships with both organizations that procure project-based professionals
and individuals who are available for projects. We believe that we compete
effectively by offering a suite of services that addresses the procurement and
management of project-based professionals. However, the rapid pace at which the
market is evolving, both in terms of technological innovation, increased
functionality and service offerings, will require us to continually improve our
infrastructure and our web platform, as well as the range of services we offer.
We may not be able to respond adequately to these competitive challenges.
If we fail to manage our growth, our revenues may not increase and we may incur
additional losses.
Since we have only been in business a short time, our expansion has placed,
and will continue to place, significant strains on our infrastructure,
management, internal controls and financial systems. Our personnel, systems,
procedures and controls may be inadequate to support our future operations. In
order to accommodate the growth of our business, we will need to hire, train and
retain appropriate personnel to manage our operations. We will also need to
improve our financial and management controls, reporting systems and operating
systems. We may encounter difficulties in developing and implementing these new
systems. Our management has limited experience managing a business of our size
or experience managing a public company. If we are unable to manage our growth
effectively and maintain the quality of our products and services, our business
may suffer.
Any acquisitions of technologies, products or businesses that we make may not be
successful, may cause us to incur substantial additional costs, and may require
us to incur indebtedness or to issue debt or equity securities on terms that may
not be attractive.
As part of our business strategy, we have in the recent past acquired or
invested in technologies, products or businesses that are complementary to our
business and may do so in the future. We have only limited experience in
integrating acquisitions into our business. The process of integrating
PeopleMover, Ithority, and INDUSTRYINSITE.COM as well as any future acquisitions
could involve substantial risks for us, including:
- unforeseen operating difficulties and expenditures;
- difficulties in assimilation of acquired personnel, operations,
technologies and products;
- the need to manage a significantly larger and more
geographically-dispersed business, such as the PeopleMover and Ithority
operations in California;
- amortization of large amounts of goodwill and other intangible assets,
such as the approximately $31.6 million including to our acquisition of
PeopleMover;
- the diversion of management's attention away from ongoing development of
our business or other business concerns;
- the risks of loss of employees of an acquired business, including
employees who may have been instrumental to the success or growth of that
business; and
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- the use of substantial amount of our available cash, including in the case
of any future acquisitions, the proceeds of this offering, to consummate
the acquisition.
We may never achieve the benefits that we expect from the acquisitions of
PeopleMover, Ithority and INDUSTRYINSITE.COM or that we might anticipate from
any future acquisition. If we make future acquisitions, we may issue shares of
our capital stock, as we have in the PeopleMover and Ithority acquisitions, that
dilute other stockholders, incur debt, assume significant liabilities or create
additional expenses related to amortizing goodwill and other intangible assets,
any of which might reduce our reported earnings and cause our stock price to
decline. Any financing that we might need for future acquisitions may only be
available to us on terms that restrict our business or that impose on us costs
that would reduce our net income or increase our net losses.
If we expand our operations into international markets, we will face new
challenges that we have not previously faced.
As part of our expansion, we may begin to conduct a portion of our
operations outside the United States. We currently have minimal experience
operating in foreign markets. If we expand our operations into foreign markets,
we will face new challenges that we have not previously faced while conducting
our operations in the United States. These challenges include:
- currency exchange rate fluctuations, particularly if we sell our products
and services in foreign currencies;
- trade barriers including tariffs and export controls;
- difficulties in collecting accounts receivable in foreign countries;
- the burdens of complying with a wide variety of foreign laws, particularly
complex labor regulations;
- reduced protection for intellectual property rights in some countries,
particularly in Asia; and
- the need to tailor our products and services for foreign markets.
In addition, if we conduct any of our foreign operations through joint ventures
with third parties, we may have limited ability to control the operation of
these entities.
Risks Related to Our Technology Infrastructure and the Internet
We may experience reduced visitor traffic, reduced revenue and harm to our
reputation if any system failures result in unexpected network interruptions.
Any system failure that we may experience, including network, software or
hardware failures, that causes an interruption in the delivery of our products
and services or a decrease in responsiveness of our services could result in
reduced use of our services and damage to our reputation and brands. Our servers
and software must be able to accommodate a high volume of traffic by
organizations and free agents to OPUS XCHANGE and FREEAGENT.COM. We rely on
third-party Internet service providers to provide our clients with access to our
services. We have experienced on two occasions service interruptions as a result
of systems failures by these Internet service providers which have lasted
between four to eight hours. We believe that these interruptions will occur from
time to time in the future. In addition, from time to time the speed of our
system has been reduced as a result of increased traffic through our Internet
service provider. We may not be able to expand and adapt our network
infrastructure at a pace that will be commensurate with the additional traffic
increases that we anticipate will occur. We do not currently maintain business
interruption insurance and our other insurance may not adequately compensate us
for any losses that may occur due to any failures in our system or interruptions
in our service.
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Our services may contain defects or errors that could damage our reputation.
The services that we have developed and that we currently plan to introduce
are complex and must meet the stringent technical requirements of our customers.
We must develop our services quickly to keep pace with the rapidly changing
industry in which we operate. However, the services we provide may contain
undetected errors or defects, especially when first introduced or when new
versions are released. In addition, our services may not properly operate when
integrated with the systems of our customers.
While we continually test our services for errors and work with customers
through our customer support services to identify and correct bugs, errors in
our services may be found in the future. Testing for errors is complicated in
part because it is difficult to simulate or anticipate the computing
environments in which our customers use our services. Our services may not be
free from errors or defects even after they have been tested, which could result
in the rejection of our services and damage to our reputation, as well as lost
revenue, diverted development resources, and increased support costs.
Breaches of our network security could increase our costs and damage our
reputation.
Our FREEAGENT.COM service contains FREEAGENT E.OFFICE and E.PORTFOLIO data
for many of the free agents in our FREEAGENT.COM community. In addition,
following their release, our OPUSRM and enhanced OPUS XCHANGE services will
contain resource and project information for organizations. As a result, we may
become liable to any of those free agents or organizations that experience
losses due to any security failures in our services. Unauthorized persons that
penetrate our network security could misappropriate proprietary information or
cause interruptions in our services. Misappropriation of proprietary information
or interruptions of our services could result in reduced traffic to our
FREEAGENT.COM website and reduce demand for our OPUS XCHANGE or OPUSRM services.
As a result, we may be required to expend capital and resources to protect
against or to alleviate security breaches, which could reduce our profitability.
Computer viruses could disrupt our systems, which could reduce demand for our
services and damage our reputation.
Computer viruses may cause disruptions of our services and the loss of
information saved on our servers by free agents and organizations that seek
individuals with specific professional skills to fulfill project needs. These
viruses could reduce demand for our services, and damage our reputation in the
markets in which we compete. In addition, the inadvertent transmission of
computer viruses could expose us to a material risk of loss or litigation and
possible liability for any damages incurred by third parties.
We may become subject to burdensome government regulations and legal
uncertainties affecting the Internet which could increase our expenses or limit
the scope of our operations.
Legal uncertainties and new regulations relating to the use of the Internet
could increase our costs of doing business, prevent us from delivering our
products and services over the Internet or slow the growth of our business. To
date, governmental regulations have not materially restricted use of the
Internet in our markets. However, the legal and regulatory environment relating
to the Internet is uncertain and may change. In addition to new laws and
regulations being adopted, existing laws may be applied to the Internet. New and
existing laws may cover issues which include:
- user privacy;
- civil rights and employment claims;
- consumer protection;
- libel and defamation;
- copyright, trademark and patent infringement;
- pricing controls;
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- characteristics and quality of products and services;
- sales and other taxes; and
- other claims based on the nature and content of Internet materials.
In addition, any imposition of state sales and use taxes imposed on the
products and services sold over the Internet may decrease demand for products
and services that we sell over the Internet. The U.S. Congress has passed
legislation which limits until October 21, 2001 the ability of states to impose
any new taxes on Internet-based transactions. If Congress does not renew this
legislation, any subsequent imposition of state taxes on Internet-based
transactions could limit the demand for our services or increase our expenses.
Our year 2000 compliance efforts may involve significant time and expense, and
uncorrected or undetected problems could prevent us from operating or impose
substantial costs upon our business.
The risks posed by year 2000 issues, which arise because computer systems
and software products may be unable to distinguish between twentieth century
dates and twenty-first century dates, could harm our business in a number of
significant ways. Both before and after January 1, 2000, computer systems and
software used by many companies in a wide variety of industries may produce
erroneous results or fail unless they have been modified or upgraded to process
date information correctly. If we experience disruptions as a result of the year
2000 problem, our revenue could decline and we may incur significant costs to
correct any problems. Although we believe that our products, services and
technology, which were generally developed after the year 2000 issues became
widely known to the public, are year 2000 compliant, our systems and technology
could be impaired or cease to operate due to year 2000 problems. We may face
claims based on year 2000 issues arising from the integration of multiple
products, including ours, within an overall system. Our customers may also cease
or delay the purchase and installation of new complex systems, such as our
enhanced version of OPUS XCHANGE, as well as OPUSRM, as a result of their own
internal year 2000 testing. To date, however, we have not experienced any year
2000 problems.
Our products and services are integrated with the systems of other
organizations, that use our software to procure individuals with specific
professional skills to fulfill project needs and to interact with the free agent
community over the networks of Internet service providers. If their software
processes information erroneously, or fails to deliver information or to
otherwise operate, as a result of their failure to process information relating
to year 2000 issues, our services will not be properly delivered. If this
occurs, our products may become less attractive to potential customers.
Risks Related to Intellectual Property Matters and to Intellectual Property
Rights
Defending against intellectual property infringement claims, including an
existing claim relating to our use of the service mark FREE AGENT, could be time
consuming and expensive, and any liabilities imposed on us for infringing on the
intellectual property rights of others could require us to pay significant
damages or disrupt our business.
Successful intellectual property infringement claims against us could result
in monetary liability or a material disruption in our operations. We cannot be
certain that our services, products, content, technology and brand names do not
or will not infringe upon valid patents, copyrights or other intellectual
property rights held by others. We expect that the number of infringement claims
will increase as more participants enter our markets. We may be subject to legal
proceedings and claims from time to time relating to the intellectual property
of others in the ordinary course of our business. We may incur substantial
expenses in defending against these third party infringement claims, regardless
of their merit. In the event of a successful infringement suit against us, we
could be liable for substantial damages and be required to pay substantial
royalties for our use of third party intellectual property or be prohibited from
using third party intellectual property in our products or services. Any of
these outcomes could reduce our revenues and prospects for growth.
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In July 1999, we received a letter from counsel to the San Jose Mercury News
alleging that our use of the service mark FREE AGENT and our registration of the
domain name WWW.FREEAGENT.COM with Network Solutions, Inc. infringed upon the
Mercury News' federal registration of the mark FREE AGENT for a computerized
online matching service and violated Network Solutions' Domain Name Dispute
Policy. The letter requested that we cease all use of the mark FREE AGENT for
online job searching services and transfer the domain name WWW.FREEAGENT.COM to
the Mercury News. We believe we have valid defenses to the claims. However, in
the event we are not able to resolve this issue with the Mercury News and it
decides to bring an infringement claim against us, or to initiate an arbitration
proceeding against us with Network Solutions under Network Solutions' Domain
Name Dispute Policy, we would likely incur significant expense in defending
against the claim or in connection with arbitration proceedings. In addition, if
a claim of infringement is made and we are not successful in defending against
the claim, we could be liable for substantial damages. We could also be required
to cease use of the FREE AGENT mark and transfer our WWW.FREEAGENT.COM domain
name to the Mercury News. We have expended, and will continue to spend,
substantial amounts in order to promote the FREEAGENT.COM brand name, the
benefits of which would be lost if we could no longer use that mark. In
addition, we would need to incur substantial new expenses to promote a new brand
name. Until such time as free agents and buyers requiring individuals with
specific professional skills to fulfill project needs became aware of any new
brand name and website, our transaction volume could be substantially limited.
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We may be unable to obtain U.S. trademark registration for our brands or to
protect our other proprietary intellectual property rights.
If we fail to obtain federal trademark or service mark registrations for our
marks and any related derivative marks, our promotion of these marks as our
brands could be disrupted. If we are unable to secure the rights to use these
marks and related derivative marks, a key element of our strategy of promoting
these marks as brands in our target markets could be disrupted. To date, we have
filed intent to use applications for several of our service marks, including
OPUS360, OPUS FREEAGENT, FREEAGENT.COM, FREEAGENT, OPUS XCHANGE, FREEAGENT
XCHANGE, OPUSRM, FREEAGENT E.OFFICE and E.PORTFOLIO. Adverse outcomes to our
applications for these marks, any failure to register our marks, or any related
litigation, should it occur, could result in our being limited or prohibited
from using our marks and related derivative marks in the future.
If we fail to protect our patents, copyrights or other intellectual property
rights, other parties could appropriate our proprietary properties, including
our technology.
The technology and software we have developed which underlies our
FREEAGENT.COM, OPUS XCHANGE and OPUSRM products and services is important to us.
We do not have any patents relating to our technology and software, although we
do have a U.S. patent application pending for the "Opus360 Knowledge Worker
Network" which describes the processes and technology involved in implementing
an Internet-based supply chain solution for matching people and projects. This
patent may not be granted and, if granted, the patent and any other patents we
apply for in the future may be successfully challenged.
In general, to protect our proprietary technology and software, we rely on a
combination of contractual provisions, confidentiality procedures and trade
secrets. The unauthorized reproduction or other misappropriation of our
intellectual property, including our technology on which our FREEAGENT.COM, OPUS
XCHANGE and OPUSRM products and services are based, could enable third parties
to benefit from our intellectual property without paying us. If this were to
occur, our revenues would be reduced, and our competitors may be able to compete
with us more effectively. The steps we have taken to protect our proprietary
rights in our intellectual property may not be adequate to deter
misappropriation of their use. We may not be able to detect unauthorized use of
our intellectual property or take appropriate steps to enforce our intellectual
property rights. In addition, the validity, enforceability and scope of
protection of intellectual property in Internet-related industries is uncertain
and still evolving. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and expensive.
The proceedings also could involve a high degree of risk that we will not
succeed in protecting our rights to the technology that we develop.
We may not be able to access third party technology which we depend upon to
conduct our business and as a result we could experience delays in the
development and introduction of new services or enhancements of existing
services.
If we lose the ability to access third party technology which we use, are
unable to gain access to additional products or are unable to integrate new
technology with our existing systems, we could experience delays in our
development and introduction of new services and related products or
enhancements until equivalent or replacement technology can be accessed, if
available, or developed internally, if feasible. If we experience these delays,
our revenues could be substantially reduced. We license technology that is
incorporated into our services and related products from third parties for
database technology. In light of the rapidly evolving nature of Internet
technology, we may increasingly need to rely on technology licensed to us by
other vendors, including providers of development tools that will enable us to
quickly adapt our technology to new platforms. Technology from our current or
other vendors may not continue to be available to us on commercially reasonable
terms, or at all.
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We may be liable for substantial payments as a result of information retrieved
from or transmitted over the Internet.
We may be sued for defamation, civil rights infringement, negligence,
copyright or trademark infringement, personal injury, product liability or other
legal claims relating to information that is published or made available on
FREEAGENT.COM and the other sites linked to it. These types of claims have been
brought, sometimes successfully, against other online services in the past. We
could also be sued for the content that is accessible from FREEAGENT.COM and
through links to other Internet sites or through content and materials that may
be posted by members in chat rooms or on bulletin boards. Our acquisition of
Ithority creates the possibility that we will be subject to potential claims
that, among others, the professional advice obtained through the service was
inappropriate, incorrect, or negligently or recklessly provided. We also offer
e-mail services, which may subject us to potential risks, such as liabilities or
claims resulting from unsolicited email or spamming, lost or misdirected
messages, security breaches, illegal or fraudulent use of email or interruptions
or delays in email service. Our insurance does not specifically provide for
coverage of these types of claims and therefore may not adequately protect us if
we are required to make these types of payments. In addition, we could incur
significant costs in investigating and defending these types of claims, even if
we ultimately are not liable.
Risks Related to Regulatory Compliance and Adverse Regulatory Interpretations
We may be subject to the unfavorable interpretation of government regulations.
As an employer, we are subject to all federal, state and local statutes and
regulations governing our relationships with our employees and affecting
businesses generally. In addition, by entering into employment agreements with
free agents, FREEAGENT.COM is affected by specifically applicable licensing and
other regulatory requirements and by uncertainty in the application of numerous
federal and state laws relating to labor, tax and employment matters. These laws
include the U.S. Family Medical Leave Act, the Fair Labor Standards Act and the
Americans With Disabilities Act, as well as state laws relating to workers
compensation, unemployment benefits, minimum wages and medical and pregnancy
issues. Many of these laws do not specifically address the obligations and
responsibilities of non-traditional employers such as us. Because we expect to
be subject to some or all of these laws in each state in which we have
employees, our expenses to comply with these laws may be substantial.
Interpretive issues concerning these types of relationships have arisen and
remain unsettled.
We expect to incur substantial expenses in order to comply with state employee
leasing, employment agency or temporary employment laws.
Uncertainties arising under state law include the compliance requirements to
which FREEAGENT.COM is subject under state employee leasing, employment agency
or temporary employment laws, as well as under other state laws. We expect to
incur substantial expenses in order to comply with these laws and could be
subject to substantial penalties for failing to comply with these laws.
FREEAGENT.COM has attributes that could be seen as potentially triggering
compliance requirements under some of these laws. Some states regulate employee
leasing companies, employment agencies and temporary staffing companies, while
most states focus on only one or two of these types of businesses. State
statutory and regulatory definitions and requirements concerning these types of
businesses are occasionally similar, but generally all of them differ in several
important respects. If we are governed by any of these statutes or regulations,
we may be subject to licensing requirements and financial oversight. The length
of time for us to obtain any regulatory approval required to begin or continue
operations could vary from state to state, and there can be no assurance that we
will be able to satisfy the licensing requirements or other applicable
regulations of any particular state in which we have already begun to operate or
intend to operate, that we will be able to provide the full range of FREEAGENT
E.OFFICE services currently offered or that we will be able to operate
profitably within the regulatory environment of any state in which we do decide
to obtain regulatory approval.
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There are considerable uncertainties in the application of federal tax and
employee benefits laws to our business that could limit our ability to provide
benefits that will attract free agents.
Uncertainties arising under the Internal Revenue Code of 1986, as amended,
and ERISA include the qualified tax status and favorable tax status of some of
the benefit plans that we provide. For example, the IRS could determine that
free agents who purchase our FREEAGENT E.OFFICE services are not our employees
under the provisions of the Code and ERISA relating to employee benefit plans
such as the 401(k) plan we offer. If the IRS made such a determination, neither
free agents who pay for our FREEAGENT E.OFFICE services nor we would be
permitted to make tax deferred contributions to our 401(k) plan. Similarly, the
IRS or other taxing authorities could determine that free agents who purchase
our FREEAGENT E.OFFICE services are not our employees under federal, state or
local laws and regulations providing for the favorable tax treatment of payments
made for group health, disability and life insurance benefits provided as part
of our FREEAGENT E.OFFICE services or for purposes of receiving incentive stock
options under our stock option plan. If an adverse determination was made as to
the employee status of free agents who purchase our FREEAGENT E.OFFICE services
under one or more of these federal, state or local laws and regulations, our
FREEAGENT E.OFFICE services would become less attractive to our registered free
agents since we would no longer be able to provide those valuable
corporate-style benefits as part of our FREEAGENT E.OFFICE services. As a
result, it is likely that our revenues would be adversely affected and our
ability to attract free agents to FREEAGENT.COM would be reduced.
In contrast to our method of reporting for purposes of generally accepted
accounting principles under which we only report as revenues the fees received
from free agents who purchase our FREEAGENT E.OFFICE services, for tax purposes
we will report as revenues the gross billings we receive from organizations for
the services rendered by these free agents. Upon receipt of the gross billings
from these organizations, we pay or reimburse the free agents' project-related
expenses, pay the premiums for the free agents' health, disability and life
insurance, make the free agents' desired 401(k) contributions and withhold any
required federal, state and local taxes. We then remit the remaining funds to
the free agent as wages and salaries, treating the free agents' project-related
expenses, the premiums for health, disability and life insurance and 401(k)
contributions as deductible expenses for tax purposes. In the event free agents
who purchase our FREEAGENT E.OFFICE services are held not to be our employees
under applicable laws and regulations as described above, we could be liable to
the IRS or other taxing authorities for improper reporting of their wages and
salaries, because the amounts deducted for their health, disability and life
insurance and 401(k) contributions would not be properly deductible for tax
purposes. In addition, whether or not the free agent is treated as our employee,
we could also be liable to the IRS or other taxing authorities if amounts
treated as deductible project-related reimburseable expenses are not properly
deductible for tax purposes. Under these circumstances, we could also be subject
to suit by the free agent. Furthermore, in the event the free agents who
purchase our FREEAGENT E.OFFICE services are held to be employees of an
organization using their services, the qualified plans of these organizations
may be adversely affected. In such event, we could be subject to suit by these
organizations. While we believe that we have a reasonable basis for concluding
that free agents who purchase our FREEAGENT E.OFFICE services are our employees
under applicable laws and regulations, the application of these laws and
regulations to our business is uncertain and there can be no assurance as to the
ultimate resolution of these issues.
We may be subject to claims relating to our FREEAGENT E.OFFICE employees or the
organizations that use their services.
We may be subject to claims relating to the actions of free agents who
purchase our FREEAGENT E.OFFICE services, including possible claims of
discrimination and harassment, violations of non-competition agreements, theft
of property from organizations for whom projects are performed, misuse of
proprietary information from organizations, claims of negligence or gross
negligence in the performance of projects by our FREEAGENT E.OFFICE employees,
and other criminal actions or torts and other claims. These claims may allege
that we do not adequately supervise these free agents in a manner sufficient to
ensure that these types
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of events do not occur. The project-related conduct of free agents who purchase
our FREEAGENT E.OFFICE services may result in negative publicity, injunctive
relief and the payment by us of money damages or fines.
As the employer of the free agents who purchase our FREEAGENT E.OFFICE
services, we may be subject to a wide variety of employment-related claims, such
as claims for injuries, wrongful death, harassment, discrimination, wage and
hour violations and other matters. In addition, a number of legal issues remain
unresolved with respect to arrangements among businesses of the type such as
ours, free agents and the buyers of professional talent, including questions
concerning ultimate liability for violations of employment and discrimination
laws. As a result of our status as employer, we may be subject to liability
under various governmental regulations for violations of these regulations even
if we do not participate in the violations. We carry liability insurance, but
there can be no assurance that any of our insurance policies will be sufficient
to cover any judgments, settlements or costs relating to any claims, suits or
complaints or that sufficient insurance will be available to us in the future on
satisfactory terms, if at all. If insurance is not sufficient to cover any
judgments, settlements or costs relating to any present or future claims, suits
or complaints, we may incur substantial losses.
Risks Related to this Offering
Our common stock has no prior trading market, is likely to be highly volatile
and you may not be able to resell it at or above the initial public offering
price.
Before this offering there has not been a public market for our common
stock. There may not be sufficient investor interest in our common stock after
the closing of this offering to cause the development of an active trading
market for our shares with significant liquidity. The stock market has
experienced significant price and volume fluctuations and the market prices of
securities of Internet-related companies have been highly volatile. Any trading
market which does develop for shares of our common stock is likely to be also
highly volatile and investors may not be able to sell their shares of common
stock at or above the initial public offering price. The market price of our
common stock after this offering may vary significantly from the initial
offering price in response to a number of factors, some of which are beyond our
control, including the following:
- changes in financial estimates or investment recommendations by securities
analysts relating to our stock;
- changes in market valuations of Internet companies generally or in
companies in a similar line of business;
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- loss of a major client or strategic partner;
- additions or departures of key personnel; and
- fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology sector.
In the past, after periods of volatility in the market price of securities
which are publicly traded, securities class action litigation has often been
instituted against the company issuing the securities. After this offering, this
type of litigation could also be instituted against us and could result in
substantial costs to us and a diversion of our management's attention and
resources.
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Shares eligible for public sale after this offering may depress our stock price
and impair our ability to raise funds in new stock offerings.
The market price of our common stock could fall as a result of sales of a
large number of shares of our common stock in the market after this offering or
as a result of the perception that these sales could occur. These factors also
could make it more difficult for us to sell equity securities in the future at a
time and price which we deem appropriate.
There will be approximately 45,050,841 shares of common stock outstanding
immediately after this offering. All of the shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended, except for shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. The remaining
38,050,841 shares and the 7,983,323 shares subject to outstanding options and
warrants will be "restricted securities" as defined in Rule 144. These
restricted securities may be sold in the future without registration under the
Securities Act subject to applicable holding period, volume limitations, manner
of sale and notice requirements set forth in applicable SEC rules. In addition,
stockholders holding approximately 37.6 million shares of these restricted
securities after the offering will have registration rights that could allow
those holders to sell all of their shares freely through a registration
statement filed under the Securities Act. In connection with this offering, our
directors and executive officers and the securityholders named in this
prospectus, together with other securityholders that collectively hold most of
the shares of common stock and shares of common stock issuable upon the exercise
of options and warrants, have agreed not to sell their shares without the prior
written consent of FleetBoston Robertson Stephens Inc. for a period of 180 days
from the effective date of the registration statement of which this prospectus
is a part.
After this offering, we will have shares of common stock reserved for
issuance under our stock option plans, employee stock purchase plan and other
stock option agreements of which options to purchase 7,138,387 shares were
outstanding as of as of February 2, 2000. Promptly following this offering, we
intend to file one or more registration statements on Form S-8 to register these
shares which, upon effectiveness, will permit substantial additional sales of
shares of our common stock as these shares are issued.
Our officers and directors will have significant influence over all matters
requiring the approval of stockholders.
We anticipate that our executive officers, directors and 5% stockholders
will control approximately 47.5% of our outstanding common stock following the
completion of this offering or 46.5% if the underwriters exercise their
overallotment option in full. These stockholders, if they act together, may be
able to exercise substantial influence over all matters requiring approval by
our stockholders, including the election of directors and approval of
significant corporate transactions, such as mergers or acquisitions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of our company in a transaction in which you might otherwise
receive a premium for your shares, and might adversely affect the market price
of the common stock.
Because we are currently unable to specify the specific uses to which the net
proceeds from this offering will be applied, you will be relying on the
judgement of our management regarding the application of the proceeds.
We expect to use the net proceeds from this offering for working capital and
general corporate purposes, but we are unable to identify the specific uses to
which the net proceeds will be applied. Accordingly, our management will have
broad discretion with respect to the expenditure of the proceeds. Although we
have included estimates of expenditures for some specified uses under "Use of
Proceeds," actual expenditures for expansion of sales and marketing staff,
marketing of our brands, capital expenditures and other purposes will depend on
market and other conditions existing in the future. You will be relying on the
judgment of our management regarding the application of the proceeds.
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You will suffer immediate and substantial dilution.
If you buy shares of common stock in this offering, you will incur immediate
and substantial dilution in your investment, since you will pay more for your
shares of common stock than the amounts paid by the existing stockholders for
their shares or by the persons or entities that may acquire shares by exercising
options or warrants that were granted before this offering. Based on an assumed
initial public offering price of $10.00 per share, purchasers of common stock in
this offering will experience immediate and substantial deduction of
approximately $8.11 per share in the net tangible book value of the common
stock. In addition, in the past, we issued options and warrants to acquire
common stock at prices significantly below the initial public offering price. To
the extent these outstanding options or warrants are ultimately exercised, your
investment will be further diluted.
Provisions of our charter and bylaws may delay or prevent transactions that are
in your best interests.
Upon consummation of this offering, our restated certificate of
incorporation and restated bylaws will contain provisions which may have the
effect of deterring takeovers or delaying or preventing changes in control of
our company, including transactions in which you might otherwise receive a
premium for your shares. In addition, these provisions may limit your ability to
approve other transactions that you may believe are in your best interests.
For example, our restated certificate of incorporation and restated bylaws
will state that any action that can be taken by stockholders must be done at an
annual or special meeting and may not be done by written consent. These
documents also require reasonable advance notice by a stockholder of a
stockholder proposal or director nomination. Only the chairman of the board, the
chief executive officer, the president or the board of directors may call a
special meeting of the stockholders. These provisions may have the effect of
precluding the conduct of some types of business at a meeting if the proper
procedures are not followed or may discourage or deter a potential acquiror from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of us.
The restated certificate of incorporation and restated bylaws will also
provide for a classified board of directors with staggered three year terms, and
generally will provide that, subject to any rights of holders of preferred stock
that we may create, to elect additional directors under specified circumstances,
a member of the board of directors may be removed only for cause and only by the
vote of the holders of at least 66 2/3% of the voting power of the then
outstanding shares of stock enabled to vote generally in the election of
directors, voting together as a single class. The provision for a classified
board and the director provisions could prevent a party who acquires control of
a majority of our outstanding voting stock from obtaining control of our board
until the second annual stockholders meeting following the date the acquiror
obtains the controlling stock interest. These provisions could also have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of us and could increase the likelihood
that incumbent directors will retain their positions.
In addition, the board of directors has the authority, without further
action by the stockholders, to issue shares of preferred stock without
stockholder approval. Under some circumstances, the issuance of shares of
preferred stock may render more difficult or tend to discourage a merger, tender
offer or proxy contest, the assumption of control by a holder of a large block
of our securities or the removal of incumbent management.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS; MARKET DATA
This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing forward-looking statements may be found in
the material set forth under "Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business" as
well as in this prospectus generally. We generally use words such as "believes,"
"intends," "expects," "anticipates," "plans," and similar expressions to
identify forward-looking statements. You should not place undue reliance on
these forward-looking statements. Our actual results could differ materially
from those expressed or implied in the forward-looking statements for many
reasons, including the risks described under "Risk Factors" and elsewhere in
this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements contained in this prospectus are reasonable, they relate only to
events as of the date on which the statements are made, and we cannot assure you
that our future results, levels of activity, performance or achievements will
meet these expectations. Subject to any obligation that we may have to amend or
supplement this prospectus as required by law and the rules of the Securities
and Exchange Commission, we are under no duty to update any of these
forward-looking statements after the date of this prospectus to conform these
statements to actual results or to changes in our expectations.
This prospectus contains market data, including projections, related to
business-to-business e-commerce, the markets for our services, Internet usage in
general and estimates regarding their size and growth. This market data has been
included in industry reports published by organizations such as International
Data Corporation, Forrester Research, Inc. or the Gartner Group. These industry
publications generally indicate that they have derived this data from sources
believed to be reliable, but do not guarantee the accuracy and completeness of
this data. While we believe those industry publications to be reliable, we have
not independently verified this data or any of the assumptions on which the
projections included in this data are based. These assumptions include increased
worldwide business use of the Internet and the absence of any failure of the
Internet. If any of these assumptions is incorrect, actual results may differ
from the projections based on those assumptions and these markets may not grow
at the rates projected by such data, or at all. The failure of these markets to
grow at these projected rates may have a material adverse effect on our business
and the market price of our common stock.
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USE OF PROCEEDS
We estimate the net proceeds to be received by us from the sale of the
7,000,000 shares of common stock offered by us in this offering will be
$63.8 million, assuming an initial public offering price of $10.00 per share and
after deducting underwriting discounts and commissions and estimated offering
expenses payable by us. If the underwriters' over-allotment option is exercised
in full, we estimate the net proceeds to be received by us will be
$73.6 million.
We expect to use the net proceeds from this offering for working capital and
general corporate purposes, including an estimated $5 to $7 million for capital
expenditures, an estimated $15 to $20 million for sales and marketing and an
estimated $15 to $20 million for product and technology development. The actual
amounts expended for these purposes may vary from our current expectations and
will be determined by our management. We also intend to use $350,000 of the
proceeds to repay in full our non-interest bearing promissory note issued in
connection with the acquisition of INDUSTRYINSITE.COM. The note was issued on
January 12, 2000. We may also use a portion of these proceeds for potential
acquisitions of technologies, products or businesses which may be complementary
to our business. Pending any use, we intend to invest the net proceeds from this
offering in interest-bearing, investment-grade instruments, certificates of
deposit or direct or guaranteed obligations of the U.S. Government.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. We do not
anticipate paying any cash dividend in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of our board of directors and will be dependent upon our
financial condition, operating results, capital requirements, general business
conditions, restrictions imposed by financing arrangements, if any, legal and
regulatory restrictions on the payment of dividends and other factors that our
board of directors deems relevant.
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect our pending acquisition of PeopleMover as
if the acquisition had occurred as of December 31, 1999; and
- on a pro forma as adjusted basis to reflect the mandatory conversion of
all outstanding shares of our preferred stock into 25,441,091 shares of
our common stock on the closing of this offering and the sale of the
7,000,000 shares of our common stock in this offering, at an assumed
initial public offering price of $10.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us.
You should read the information set forth below in conjunction with the
consolidated and pro forma financial statements and the notes thereto appearing
elsewhere in this prospectus. Upon consummation of this offering, our authorized
preferred stock will consist of 25,000,000 shares, which may be issued in
classes or series from time to time.
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------------
Pro Forma
Actual Pro Forma (1) As Adjusted
-------- ------------- -----------
(in thousands, except share data)
<S> <C> <C> <C>
Series A convertible preferred stock, $0.001 par value;
8,400,000 shares authorized; 8,284,000 shares issued
and outstanding, actual and pro forma; none issued
and outstanding, pro forma as adjusted................... $ 8 $ 8 $ --
Series B convertible preferred stock, $0.001 par value;
8,700,000 shares authorized; 8,676,777 shares issued
and outstanding, actual and pro forma; none issued
and outstanding, pro forma as adjusted................... 9 9
Common stock, $0.001 par value; 45,000,000 shares
authorized actual, 150,000,000 pro forma and pro forma as
adjusted; 10,880,000, 13,500,000 and 45,940,000 shares
issued and outstanding, actual, pro forma and pro forma
as adjusted, respectively................................ 11 14 46
Additional paid-in capital................................. 63,835 95,730 159,530
Stock subscription receivable.............................. (239) (239) (239)
Deferred compensation...................................... (5,469) (8,659) (8,659)
Accumulated deficit........................................ (30,425) (30,425) (30,425)
Accumulated other comprehensive loss....................... (3) (3) (3)
-------- -------- --------
Total stockholders' equity............................. $ 27,727 $ 56,435 $120,250
======== ======== ========
</TABLE>
- ------------------------
(1) Under applicable SEC rules, the historical audited financial statements of
Ithority and pro forma financial statements for us reflecting the Ithority
acquisition are not required to be included in this prospectus. However,
those audited and pro forma financial statements will be filed with the SEC
within 75 days of consummation of the Ithority acquisition.
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The above table excludes:
- the issuance of 426,120 shares of common stock in the Ithority
acquisition;
- 406,000 shares of our common stock held in escrow, together with
additional shares of our common stock issuable to the former stockholder
of Churchill as described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Unaudited Pro Forma
Consolidated Combined Financial Statements;"
- 5,340,000 shares of common stock issuable at a weighted average exercise
price of $1.09 per share upon the exercise of stock options outstanding at
December 31, 1999, 1,236,000 shares of which are currently exercisable
(including shares of common stock issuable upon the exercise of options
that automatically vest upon the consummation of this offering);
- options to purchase, 1,862,775 shares of our common stock issued
subsequent to December 31, 1999 to officers, directors and employees,
including our new President and Chief Operating Officer, at a weighed
average exercise price of $5.31 per share;
- options to purchase 1,212,000 shares of our common stock held by officers
and employees of PeopleMover, at a weighed average exercise price of $0.81
per share and to be assumed by us in the PeopleMover acquisition;
- shares of common stock reserved for future grant under our stock
option and employee stock purchase plans;
- 945,548 shares of common stock issuable at a weighted average exercise
price of $1.20 per share upon the exercise of warrants outstanding at
December 31, 1999, of which warrants to purchase 840,000 shares of common
stock were exercised in January 2000;
- shares of our common stock issuable upon the exercise of additional
warrants that will be issued as compensation to a provider of advertising
services at the end of February 2000, the number of warrants to be issued
to be based upon the fair market value of our common stock on the date of
issuance of the warrants;
- the assumed issuance of 450,000 shares of common stock upon the exercise
of certain warrants owned by Greenhill & Co., LLC, which acts as a
financial advisor to us, which terminate upon consummation of this
offering at an exercise price of $3.07 per share;
- 450,000 shares of common stock issuable upon the exercise of a warrant
having an exercise price of $8.15 per share issued in January 2000 to
Greenhill under the terms of its financial advisory agreement with us as a
result of the consummation of the INDUSTRYINSITE.COM and Ithority
acquisitions;
- an additional 450,000 shares of our common stock issuable upon the
exercise of an additional warrant which may be issued to Greenhill under
its financial advisory agreement with us upon the completion of a
specified number or aggregate value of additional acquisitions and having
an exercise price equal to the fair market value of our common stock on
the Nasdaq National Market on the date of issuance of the additional
warrant;
- 225,000 shares of our common stock issuable upon exercise of a warrant
having an exercise price of $3.33 per share issued to Lucent Technologies
Inc. in February 2000 in connection with the establishment of a strategic
alliance; and
- shares of our common stock issuable upon the exercise of an additional
warrant issued to Lucent in February 2000 in connection with the
establishment of the strategic alliance, and which is exercisable for that
number of shares of our common stock, having a fair value no greater than
$2,655,000 using the Black-Scholes option-pricing model, at an exercise
price and on a specified effective beginning date, in each case as
described in greater detail under "Related Party Transactions--Lucent
Strategic Alliance."
30
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
$23.2 million, or $0.59 per common share, after giving effect to our pending
acquisition of PeopleMover as if the acquisition had occurred on December 31,
1999 and the conversion of all outstanding shares of our preferred stock into
shares of common stock upon the closing of this offering. Pro forma net tangible
book value per common share represents the difference between our total tangible
assets and our total liabilities, divided by the total number of shares of
common stock outstanding (pro forma to reflect the PeopleMover acquisition and
the conversion of our preferred stock referred to above).
After giving effect to the sale by us of the 7,000,000 shares of common
stock in this offering at an assumed initial public offering price of $10.00 per
share, after deducting underwriting discounts and commissions and estimated
offering expenses payable by us.
Our pro forma net tangible book value as of December 31, 1999 would have
been $87.0 million, or $1.89 per common share. This represents an immediate
increase in pro forma net tangible book value of $1.30 per common share to
existing stockholders and an immediate dilution of $8.11 per common share to the
new investors. Dilution is determined by subtracting the pro forma net tangible
book value per common share after the offering from the amount of cash paid by a
new investor for a share of common stock. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $10.00
Pro forma net tangible book value per common share as of
December 31, 1999..................................... $ 0.59
Pro forma increase per common share attributable to new
investors............................................. 1.30
------
Pro forma net tangible book value per common share after
this
offering.................................................. 1.89
------
Pro forma dilution per share to new investors............... $ 8.11
======
</TABLE>
The following table summarizes on a pro forma basis to reflect the
adjustments described above, differences between our existing stockholders as of
December 31, 1999 and new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid by our then existing stockholders and by new
investors at the assumed initial public offering price of $10.00 per share,
before deducting underwriting discounts and commissions and estimated offering
expenses payable by us.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
-------------------- ----------------------- Average Price
Number Percent Amount Percent Per Share
--------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 36,319,512 83.8% $ 54,861,999 43.9% $ 1.51
New investors.................... 7,000,000 16.2 70,000,000 56.1 10.00
--------- ------ ------------ ----- ------
Total........................ 43,319,512 100.0% $124,861,999 100.0% $ 2.88
========= ====== ============ ===== ======
</TABLE>
The foregoing discussion and tables do not reflect:
- the consummation of the Ithority and INDUSTRYINSITE.COM acquisitions and
the issuance of 426,120 shares of our common stock in the Ithority
acquisition;
- shares of our common stock issuable upon the exercise of options and
warrants outstanding as of December 31, 1999; and
- shares of our common stock issuable upon the exercise of options and
warrants issued subsequent to December 31, 1999. See "Capitalization."
31
<PAGE>
To the extent outstanding options or warrants are exercised, new investors
will suffer further dilution. This offering will benefit our existing
stockholders by creating a public market for our common stock. Upon consummation
of this offering, the unrealized appreciation in the value of the common stock
held by the stockholders identified in the immediately preceding table will be
approximately $308.3 million ($367.9 million assuming exercise of all
outstanding options and warrants outstanding as of the date of this prospectus),
assuming an initial public offering price of $10.00 per share.
32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated combined statement of
operations for the year ended December 31, 1999 gives effect to our acquisition
of Churchill and our pending acquisition of PeopleMover as if the transactions
had occurred on January 1, 1999 and the following unaudited pro forma
consolidated combined balance sheet gives effect to our pending PeopleMover
acquisition as if it occurred on December 31, 1999.
ACQUISITION OF CHURCHILL
On May 27, 1999, we acquired all of the outstanding common stock of
Churchill in exchange for 946,000 shares of our common stock with a fair market
value of approximately $1.85 per share, or $1.75 million, subject to the
issuance of additional shares upon an earnout as described below. Amounts
included for Churchill in the unaudited pro forma consolidated combined
statement of operations for the year ended December 31, 1999 represent the
pre-acquisition period of January 1, 1999 to May 26, 1999. The acquisition of
Churchill has been accounted for using the purchase method. We have allocated
the purchase price to Churchill's historical assets and liabilities based on
their carrying values, as these carrying values are estimated to approximate the
fair market value of the assets acquired and liabilities assumed. The goodwill
of $2.1 million created as a result of the Churchill acquisition is being
amortized over three years from the acquisition date. See Note 2 of Notes to our
Consolidated Financial Statements.
The former owner of Churchill is potentially entitled to an additional
406,000 shares of our common stock, which have been placed in escrow, and,
commencing on November 27, 2000, $850,000 of our common stock based on the fair
market value of our common stock on May 27, 2000. The shares held in escrow and
the shares issuable on November 27, 2000 vest ratably over three years from May
27, 1999 based on the continuous employment of the seller and a key employee and
are subject to downward adjustment based on a targeted number of free agents
purchasing our FREE AGENT E.OFFICE services by May 27, 2000. As of December 31,
1999, we cannot determine if the former owner of Churchill will be entitled to
any of the shares held in escrow or to be issued on November 27, 2000.
After determination of the number of shares owed to the former owner of
Churchill, we will charge to compensation expense that portion of the shares
held in escrow and to be issued on November 27, 2000 which have been earned
based on the fair market value of our common stock on that date. We will then
amortize to compensation expense the unvested portion of these shares over the
remaining vesting period.
ACQUISITION OF PEOPLEMOVER
On January 30, 2000, we entered into an agreement to acquire all of the
outstanding capital stock of PeopleMover. Under the agreement, PeopleMover's
shareholders are entitled to receive, subject to adjustment as described below,
0.1845 shares of our common stock for each issued and outstanding share of
PeopleMover. Additionally, we will assume outstanding stock options to purchase
PeopleMover's common stock at the same exchange ratio. The exchange ratio may be
adjusted downwards if PeopleMover incurs specified types of liabilities between
the signing of the agreement and the closing date, which is expected to occur by
February 14, 2000, or upwards if PeopleMover executes specified customer
agreements prior to the closing date. In no event can the adjusted exchange
ratio exceed 0.2239. The following pro forma consolidated combined financial
statements assume the maximum number of shares and options are issued in the
acquisition, 2,620,000 and 1,212,000, respectively, based on the maximum
adjusted exchange ratio of 0.2239, and without giving effect to the accretion of
PeopleMover convertible preferred stock through the closing date of the
acquisition.
Based on the maximum exchange ratio, approximately 350,000 shares of our
common stock to be issued in the acquisition to shareholders of PeopleMover will
be subject to a three-year restricted stock vesting agreement under which the
shares may be forfeited in the event the shareholder is no longer employed by
us.
33
<PAGE>
The value of these shares, estimated at approximately $3.2 million, will be
recorded as deferred compensation expense and amortized over the term of the
vesting agreement.
We intend to account for the acquisition of PeopleMover using the purchase
method and, accordingly, PeopleMover's results of operations will be included in
our consolidated financial statements from the date of acquisition. We intend to
preliminarily allocate the purchase price to PeopleMover's assets and
liabilities based on their historical carrying values as these carrying values
are estimated to approximate fair market value of the assets acquired and
liabilities assumed.
The following pro forma financial statements represent the preliminary
allocation of purchase price over historical net book values of the acquired
assets and assumed liabilities of PeopleMover at December 31, 1999, and are for
illustrative purposes only. Goodwill and other intangibles of approximately
$33.3 million expected to be created as a result of the PeopleMover acquisition
will be amortized over three years. Actual fair values will be based on
financial information as of the acquisition date.
The unaudited pro forma consolidated condensed statement of operations does
not purport to be indicative of what our actual results of operations would have
been had the acquisitions of Churchill and PeopleMover actually been completed
on January 1, 1999, and the unaudited pro forma consolidated condensed balance
sheet does not purport to be indicative of what our actual financial condition
would have been had the acquisition of PeopleMover actually been completed on
December 31, 1999. These unaudited pro forma consolidated condensed financial
statements also do not purport to be indicative of the results of operations or
financial condition that we may achieve in the future. Under applicable SEC
rules, the historical audited financial statements of Ithority and pro forma
financial statements for us reflecting the Ithority acquisition are not required
to be included in this prospectus. However, those audited and pro forma
financial statements will be filed with the SEC within 75 days of consummation
of the Ithority acquisition.
The unaudited pro forma consolidated combined financial statements should be
read in conjunction with our consolidated financial statements, the financial
statements of Churchill and PeopleMover and the notes to those financial
statements included elsewhere in this prospectus.
34
<PAGE>
OPUS360 CORPORATION
Unaudited Pro Forma Consolidated Combined Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
Pro forma
Opus360 Pro forma Consolidated
Corporation PeopleMover, Inc. Adjustments(1) Combined
------------ ----------------- -------------- ------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash............................................. $ 1,326,000 $ 241,000 $ (300,000) $ 1,267,000
Accounts receivable.............................. 2,314,000 624,000 -- 2,938,000
Short-term investments........................... 27,137,000 -- -- 27,137,000
Prepaid expenses and other 3,850,000 215,000 -- 4,065,000
------------ ------------ ------------ ------------
Total current assets......................... 34,627,000 1,080,000 (300,000) 35,407,000
Property and equipment, net........................ 2,990,000 1,216,000 -- 4,206,000
Goodwill........................................... 1,702,000 -- 31,579,000 33,281,000
Deferred loan costs................................ 16,000 -- -- 16,000
Due from People Mover.............................. 575,000 -- (575,000) --
Other assets....................................... 806,000 114,000 -- 920,000
------------ ------------ ------------ ------------
Total assets................................. $ 40,716,000 $ 2,410,000 $ 30,704,000 $ 73,830,000
============ ============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Lines of Credit.................................. $ -- $ 980,000 $ -- $ 980,000
Accounts payable................................. 5,489,000 712,000 -- 6,201,000
Accrued expenses................................. 4,818,000 513,000 -- 5,331,000
Accrued wages 2,682,000 -- -- 2,682,000
Deferred Revenue................................. -- 1,686,000 -- 1,686,000
Capital Lease Obligation......................... -- 187,000 -- 187,000
Convertible Notes Payable........................ -- 1,375,000 (1,375,000) --
Due to Opus360................................... -- 575,000 (575,000)
------------ ------------ ------------ ------------
Total current liabilities.................... 12,989,000 6,028,000 (1,950,000) 17,067,000
Capital lease obligations, net of current
portion........................................ -- 328,000 -- 328,000
Total Liabilities............................ 12,989,000 6,356,000 (1,950,000) 17,395,000
Mandatory Redeemable Series A convertible
preferred stock, 6,000,000 shares designated;
4,935,848 shares issued and outstanding at
December 31, 1999; zero shares outstanding on a
pro forma basis................................ -- 5,425,000 (5,425,000) --
Stockholders' equity
Series A convertible preferred stock, $0.001 par
value; 8,400,000 shares authorized; 8,284,000
shares issued and outstanding; zero shares
outstanding on a pro forma basis............... 8,000 -- -- 8,000
Series B convertible preferred stock, $0.001 par
value; 8,700,000 shares authorized; 8,677,000
shares issued and outstanding; zero shares
outstanding on a pro forma basis............... 9,000 -- -- 9,000
Common stock, $0.001 par value 45,000,000 shares
authorized; 10,880,000 issued and outstanding;
13,500,000 shares outstanding on a pro forma
basis.......................................... 11,000 5,000 (2,000) 14,000
Additional paid-in capital 63,835,000 1,786,000 30,109,000 95,730,000
Stock subscription receivable.................... (239,000) (239,000)
Deferred compensation............................ (5,469,000) (932,000) (2,258,000) (8,659,000)
Accumulated deficit.............................. (30,425,000) (10,230,000) 10,230,000 (30,425,000)
Accumulated other comprehensive loss............. (3,000) -- -- (3,000)
------------ ------------ ------------ ------------
Total stockholders' equity................... 27,727,000 (9,371,000) 38,079,000 56,435,000
------------ ------------ ------------ ------------
Commitments and contingencies
Total liabilities and stockholders' equity... $ 40,716,000 $ 2,410,000 $ 30,704,000 $ 73,830,000
============ ============ ============ ============
</TABLE>
See accompanying notes to pro forma consolidated combined financial statements.
35
<PAGE>
OPUS360 CORPORATION
Unaudited Pro Forma Consolidated Combined Statement of Operations
Year Ended December 31, 1999
<TABLE>
<CAPTION>
The Churchill
Benefit Pro Forma Adjustments
Corporation ------------------------------------
Period from The Churchill
January 1, 1999 Benefit
Opus360 to May 26, 1999 PeopleMover, Inc. Corporation PeopleMover, Inc.
------------ --------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Revenues..................... $ 419,000 $ 298,000 $ 1,302,000
Cost of revenues............. 261,000 29,000 939,000
------------ --------- -----------
Gross profit............. 158,000 269,000 363,000
Operating expense:
Sales and marketing........ 11,068,000 -- 1,952,000
Product development........ 9,034,000 -- 3,824,000
General and
administrative........... 7,114,000 460,000 2,341,000 $300,000(2) $ 172,000(3)
Depreciation and
amortization............. 629,000 8,000 180,000 295,000(2) 10,530,000(3)
Amortization of stock-based
compensation............. 2,448,000 -- 326,000 1,064,000(3)
------------ --------- ----------- -------- -----------
Total costs and
expenses............... 30,293,000 468,000 8,623,000 595,000 11,766,000
------------ --------- ----------- -------- -----------
Loss from operations..... (30,135,000) (199,000) (8,260,000)
Other income and expense:
Interest income............ 765,000 -- --
Interest expense........... (20,000) -- (73,000)
------------ --------- -----------
Net loss................. (29,390,000) (199,000) (8,333,000)
Historical basic and diluted
net loss per share (4)..... $ (2.91)
============ ========= =========== ======== ===========
Shares used in the
calculation of historical
basic and diluted net loss
per share (4).............. 10,083,563
============ ========= =========== ======== ===========
Pro forma basic and net loss
per share (4).............. $ (1.12)
============
Shares used in the
calculation of pro forma
basic and diluted net loss
per share (4).............. 26,324,000
============
<CAPTION>
Pro Forma
Consolidated
Combined
------------
<S> <C>
Revenues..................... $ 2,019,000
Cost of revenues............. 1,229,000
------------
Gross profit............. 790,000
Operating expense:
Sales and marketing........ 13,020,000
Product development........ 12,858,000
General and
administrative........... 10,387,000
Depreciation and
amortization............. 11,642,000
Amortization of stock-based
compensation............. 3,838,000
------------
Total costs and
expenses............... 51,745,000
------------
Loss from operations..... (50,955,000)
Other income and expense:
Interest income............ 765,000
Interest expense........... (93,000)
------------
Net loss................. (50,283,000)
Historical basic and diluted
net loss per share (4)..... $ (3.84)
============
Shares used in the
calculation of historical
basic and diluted net loss
per share (4).............. 13,082,153
============
Pro forma basic and net loss
per share (4).............. $ (1.71)
============
Shares used in the
calculation of pro forma
basic and diluted net loss
per share (4).............. 29,322,000
============
</TABLE>
See accompanying notes to pro forma consolidated combined financial statements.
36
<PAGE>
NOTES TO PRO FORMA UNAUDITED FINANCIAL INFORMATION
(1) Based on the maximum adjusted exchange ratio of 0.2239 and PeopleMover's
capitalization as of January 30, 2000, the acquisition of PeopleMover will
consist of the following:
- the issuance of 2,620,000 shares of our common stock valued at
approximately $23,876,000, or $9.11 per share;
- our assumption of outstanding PeopleMover stock options which will be
exercisable for approximately 1,212,000 shares of our common stock. The
options have been valued at approximately $8,028,000 using the
Black-Scholes pricing model. These options have an aggregate exercise
price of approximately $985,000; and
- estimated acquisition costs of approximately $300,000.
Assuming the transaction had occurred on December 31, 1999, the preliminary
allocation of the purchase price would have been as follows:
<TABLE>
<S> <C>
Value of 2,270,000 shares not subject to restricted stock
vesting agreement......................................... $20,680,000
Value of stock options issued under Black-Scholes pricing
model..................................................... 8,028,000
Estimated costs associated with acquisition................. 300,000
Conversion of redeemable preferred stock.................... (5,425,000)
Conversion of notes payable into equity..................... (1,375,000)
Negative net assets acquired, as of December 31, 1999....... 9,371,000
-----------
Excess purchase price over net assets acquired.............. $31,579,000
</TABLE>
This allocation is preliminary and may be subject to change upon evaluation
of the fair value of PeopleMover's acquired assets and liabilities assumed
as of the acquisition date as well as the potential identification of
certain intangible assets, including customer lists and in-process
technology.
The value of the 350,000 shares which are subject to the three-year vesting
agreement is approximately $3,190,000 and will be recorded to deferred
compensation expense and amortized over the term of the vesting agreement.
(2) For the year ended December 31, 1999, the adjustments to pro forma operating
expenses include $295,000 of goodwill amortized during the period and
$300,000 incremental payroll expenses related to new employment contracts
entered into with the former owner and a key employee of Churchill. The
adjustment for goodwill represents five months of amortization expense,
which is not included in our historical financial statements, in order to
reflect the acquisition of Churchill as if it took place on January 1, 1999.
The adjustment for payroll expense represents the incremental difference
between the actual salaries earned by the former owner and key employee of
Churchill and the amounts that they would have earned had their new
employment contracts been in effect as of January 1, 1999.
(3) For the year ended December 31, 1999, the adjustments to pro forma operating
expenses include $10,530,000 and $1,064,000 of goodwill and deferred
compensation amortized during the period, respectively, and $172,000 of
incremental payroll expenses related to new employment contracts entered
into with some PeopleMover employees. The adjustment for goodwill and
stock-based compensation represents 12 months of amortization expense to
reflect the acquisition of PeopleMover as if it occurred on January 1, 1999.
The adjustment for payroll expense represents the incremental difference
between the actual salaries earned by the PeopleMover employees and the
amounts that they would have earned had their new employment contracts been
in effect as of January 1, 1999.
(4) Pro forma basic and diluted historical net loss per share is calculated
using our historical weighted-average amounts adjusted by the impact of the
shares of our common stock issued in connection with the Churchill and
PeopleMover acquisitions, as if these shares were outstanding from January
1, 1999.
37
<PAGE>
Basic and diluted net loss per share excludes the effect of approximately
406,000 escrowed shares and $850,000 of contingently issuable shares of
common stock in connection with the Churchill acquisition as the conditions
surrounding the release of such shares have not been satisfied. Diluted net
loss per share for the year ended December 31, 1999 does not include the
effect of options and warrants to purchase 6,552,000 and 1,395,548 shares of
common stock, respectively, including the options we assumed in the
PeopleMover acquisition, or 25,500,000 shares of our common stock issuable
upon the conversion of our Series A and B preferred stock on an "as-if
converted" basis, respectively, as the effect of their inclusion is
anti-dilutive.
38
<PAGE>
SELECTED FINANCIAL DATA
The selected balance sheet data as of December 31, 1998 and 1999 and the
selected statement of operations data for the period from August 17, 1998 (our
inception) through December 31, 1998 and for the twelve months ended
December 31, 1999 are derived from our audited financial statements, which have
been audited by KPMG LLP, included elsewhere in this prospectus. Historical
results are not necessarily indicative of the results to be expected in the
future.
You should read the data set forth below in conjunction with "Unaudited Pro
Forma Consolidated Combined Financial Statements," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from
August 17, 1998
(our inception) through Year Ended
December 31, 1998 December 31, 1999
----------------------- -----------------
(in thousands, except per share data)
<S> <C> <C>
Statement of Operations Data:
Revenues.............................................. $ -- $ 419
Cost of revenues...................................... -- 261
------- --------
Gross profit.......................................... -- 158
Operating expenses:
Sales and marketing................................. 80 11,068
Product development................................. 552 9,034
General and administrative.......................... 407 7,114
Depreciation and amortization....................... 2 629
Amortization of equity-based compensation........... -- 2,448
------- --------
Total operating expenses.......................... 1,041 30,293
------- --------
Loss from operations................................ (1,041) (30,135)
Other income, net..................................... 6 745
------- --------
Net loss............................................ $(1,035) $(29,390)
======= ========
Basic and diluted net loss per share:................. $ (0.11) $ (2.91)
======= ========
Weighted average number of shares used in calculating
basic and diluted net loss per share(1)............. 9,120 10,084
======= ========
Pro forma basic and diluted net loss per share........ $ (0.11) $ (1.12)
======= ========
Pro forma weighted average number of shares used in
calculating basic and diluted net loss per
share(1)............................................ 9,391 26,324
======= ========
</TABLE>
- ------------------------
(1) Reflects the automatic conversion of each share of our outstanding preferred
stock into 1.5 shares of our common stock as if these shares were
outstanding from their respective dates of issuance.
<TABLE>
<CAPTION>
As of December 31,
-----------------------------
1998 1999
---------- ----------
(in thousands)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities............ $5,818 $28,463
Working capital............................................. 5,199 21,638
Total assets................................................ 5,886 40,716
Convertible preferred stock................................. 5 17
Total stockholders' equity.................................. $5,253 $27,727
</TABLE>
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, THE FINANCIAL STATEMENTS AND THE NOTES TO THOSE
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
Overview
We are a leading provider of a suite of Internet-based services for putting
people and projects together across the labor supply chain. Our e-commerce
solution streamlines the procurement and management of professional resources by
using advanced technologies to enable buyers requiring individuals with specific
professional skills to fulfill project needs to identify and procure those
professionals. Our solution consists of three services, each of which is offered
and can be used as a stand-alone application and is designed to be integrated
and used with our other services:
- FREEAGENT.COM: an Internet portal that enables free agents to efficiently
and cost effectively manage their independent careers by offering them
access to multiple project opportunities, our FREEAGENT E.OFFICE and
E.PORTFOLIO services and a marketplace of corporate products and services.
- OPUS XCHANGE: an Internet platform which is designed to enable
corporations, professional services firms, staffing companies and other
buyers requiring individuals with specific professional skills to easily
and rapidly procure professionals from FREEAGENT.COM. Our enhanced version
of OPUS XCHANGE for corporate customers will also allow these
organizations to procure professionals from each other in an
exchange-based environment by using technologies to match individuals with
projects and by automating the requisition, approval and engagement
processes.
- OPUSRM: a labor resource management service designed to centralize
resource and project information and enable organizations to more
efficiently manage their professional resources.
We were founded in August 1998 and have a limited operating history. During
the period from August 1998 through our acquisition of Churchill in May 1999, we
did not have any revenues and our activities consisted primarily of the
development and testing of our Internet-based solutions, capital raising
activities and building our corporate infrastructure. We launched our
FREEAGENT.COM website in July 1999. We purchased the worldwide rights to some of
the intellectual property underlying the OPUSRM technology from USWeb
Corporation in September 1998 for common stock. We expect the general release of
OPUSRM to occur in the first half of 2000. We launched OPUS XCHANGE in
September 1999. We expect to release the enhanced version of OPUS XCHANGE, which
has been designed for use by large corporate customers, in the first half of
2000, and to integrate OPUSRM with the enhanced version of OPUS XCHANGE in the
second half of 2000. OPUSRM has been released to a limited number of selected
customers for implementation and final testing prior to full commercial
availability. We are currently in the final stages of internal testing of the
enhanced version of OPUS XCHANGE prior to our releasing it to a limited number
of customers for implementation and further testing.
On May 27, 1999, we acquired all of the outstanding stock of Churchill in
exchange for approximately 946,000 shares of our common stock. Churchill's
employee benefit services, which had historically been provided offline to
approximately 190 contract technology professionals, have been integrated into
our FREEAGENT E.OFFICE services. The former owner of Churchill is potentially
entitled to an additional 406,000 shares of our common stock, which have been
placed in escrow, and, commencing on November 27, 2000, $850,000 of our common
stock based on the fair market value of our stock on May 27, 2000. The shares
held in escrow and the shares to be issued on November 27, 2000 vest ratably
over three years from the date of the agreement based on the continuous
employment of the seller and a key employee and are subject to downward
adjustment based on a targeted number of free agents purchasing our FREEAGENT
E.OFFICE services by May 27, 2000. As of December 31, 1999, we cannot determine
if the former owner of Churchill will be entitled to any of the shares held in
escrow or to be issued on November 27, 2000. After determination on May 27, 2000
of the number of shares owed to the former owner of Churchill, we will charge to
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<PAGE>
compensation expense that portion of the shares held in escrow and to be issued
on November 27, 2000 that have been earned based on the fair market value of our
common stock on May 27, 2000. We will then amortize to compensation expense the
unvested portion of these shares over the remaining vesting period. These
compensation expense charges could be substantial and will increase if our stock
price increases.
Our limited operating history makes an evaluation of our future prospects
very difficult. We will encounter risks and difficulties frequently encountered
by early-stage companies in new and rapidly evolving markets. These risks
include our need to:
- increase usage of our services and derive revenue from these services;
- enter into additional strategic alliances with organizations that provide
complementary products or services or that will give us access to their
user base, thereby broadening our access to potential free agents and
employers in need of individual professional talent;
- expand our marketing and sales efforts;
- effectively respond to competitive developments;
- integrate the business, products, services and technology of our recent
and pending acquisitions and any future acquisitions; and
- manage our anticipated growth.
We may not successfully address any of these risks. See "Risk Factors."
We have incurred substantial losses since inception to develop our products
and brands and anticipate that these losses will continue into the future. Our
accumulated deficit at December 31, 1999 was $30.4 million. For financial
reporting purposes, our reportable operating segments are as follows:
- Application and Procurement Services--which represents the business of
OPUSRM and OPUS XCHANGE; and
- FreeAgent Services--which represents the services and products we offer to
free agents through FREEAGENT.COM.
The table below presents information about our reportable segments:
<TABLE>
<CAPTION>
Application and
Procurement FreeAgent
Services Services Total
--------------- --------- --------
(in thousands)
<S> <C> <C> <C>
Year ended December 31, 1999:
Revenues................................................. $ -- $ 419 $ 419
Gross profit ............................................ -- 158 158
Net loss before equity-based compensation charges........ (18,943) (7,999) (26,942)
Total assets at period end............................... 37,864 2,852 40,716
Period from August 17, 1998 (inception) to December 31,
1998:
Revenues................................................. $ -- $ -- $ --
Gross profit............................................. -- -- --
Net income (loss)........................................ (1,035) -- (1,035)
Total assets at period end............................... 5,886 -- 5,886
</TABLE>
Substantially all of our revenues during our short operating history have
been derived from the fees paid by free agents who purchase our FREEAGENT
E.OFFICE services. Free agents who purchase our FREEAGENT E.OFFICE services are
our contractual employees for federal income tax purposes for whom we prepare
IRS Form W-2s. We enter into contracts with organizations for the projects to be
performed by our FREEAGENT E.OFFICE employees, process invoices on their behalf
and, upon our receipt of amounts due from the contracting organizations for the
services rendered by our FREEAGENT E.OFFICE employees, remit these amounts to
them after deducting the initial and monthly fees and payroll taxes and
directing a portion of these amounts to their health insurance and 401(k) plan,
as instructed by the free agent.
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<PAGE>
Recent Acquisitions
PEOPLEMOVER, INC.
On January 30, 2000, we entered into an agreement to acquire 100% of the
outstanding capital stock of PeopleMover, Inc. PeopleMover, which is
headquartered in Manhattan Beach, California, is a developer of Internet-based
resource management application services, similar to our OPUSRM service, that
are designed to increase workforce utilization, improve service delivery and
increase employee retention. Its principal application service,
PEOPLEMOVER/STAFFING, is designed to improve resource management efficiencies
within staffing companies by automating quality assurance calls, managing
service relationships, marketing professionals for project assignments, matching
project requirements with skills listed by professionals and providing real-time
sales and project activity reporting. PeopleMover currently provides its
PEOPLEMOVER/ STAFFING service to leading staffing companies such as Robert Half
International, Re: sources Connection and Net-Strike Worldwide. For the year
ended December 31, 1999, PeopleMover had revenues of $1.3 million and a net loss
before preferred stock dividends of $8.3 million.
Under the merger agreement, the former shareholders of PeopleMover will
receive on the closing of the acquisition up to approximately 2,620,000 shares
of our common stock plus a number of additional shares of our common stock in
respect of the accreted value of PeopleMover convertible preferred stock through
the closing date, the exact number of shares to be issued on the closing date of
the acquisition to be based on the PeopleMover closing balance sheet and whether
certain specifically identified customer contracts are executed by PeopleMover
prior to the closing. In addition, we will assume options outstanding under the
PeopleMover stock option plan which will be exercisable for up to approximately
1,212,000 shares of our common stock, the exact number of shares for which the
options will be exercisable to be based on the factors discussed above. At
closing, approximately 350,000 shares will be placed into escrow and are subject
to forfeiture at their original valuation of $9.11 per share in order to satisfy
any breaches of representations, warranties, covenants and other indemnity
obligations of PeopleMover and some of its former shareholders. All of the
shares in escrow will also be subject to a three-year vesting agreement that
requires the individuals receiving these shares to remain employed by us in
order to obtain them without restriction at the end of the vesting periods. We
have made loans to PeopleMover in connection with the acquisition. The
outstanding indebtedness will be recorded as a contribution to capital upon
consummation of the acquisition. As of December 31, 1999, the amount due from
PeopleMover was $575,000. See "Unaudited Pro Forma Consolidated Combined
Financial Statements." Our acquisition of PeopleMover is expected to be
consummated by February 14, 2000.
ITHORITY CORPORATION
On January 20, 2000, we acquired 100% of the outstanding capital stock of
Ithority Corporation. Ithority, which is headquartered in San Francisco,
California, provides an online marketplace where people in need of expert advice
are connected with providers of expert advice on subjects such as technology,
software development, strategic consulting, design and finance. We plan to
integrate this knowledge marketplace into our FREEAGENT.COM service offering,
which will expand our free agent marketplace to anyone who chooses to buy or
sell expert knowledge. The Ithority website was launched in September 1999. As
of January 31, 2000, Ithority had approximately 900 registered users.
Under the merger agreement, the former shareholders of Ithority received
243,510 shares of our common stock at the closing and $500,000 in cash, of which
$250,000 was paid at closing and $250,000 is payable upon the integration of the
Ithority website with FREEAGENT.COM. The former owners are also entitled to
receive 182,610 shares of our common stock, which were placed in escrow at
closing, on the first anniversary of the closing, and additional shares of
common stock valued at $4.0 million based on the fair market value of our common
stock on the first anniversary of the closing. The escrowed shares and 97% of
the additional shares are subject to forfeiture, at their original valuation of
$8.21 per share, in order to satisfy any breaches of representations,
warranties, covenants and other indemnity obligations of Ithority and its former
principal shareholders set forth in the acquisition agreement. 177,668 of the
escrow shares and 97% of the additional shares issuable to the former principals
of Ithority are also subject to a three-year vesting agreement that
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requires the individuals receiving these shares to remain employed by us in
order to obtain them without restriction at the end of the vesting periods.
INDUSTRYINSITE.COM
On January 12, 2000, we acquired from Brainstorm Interactive, Inc. all of
the assets and liabilities of INDUSTRYINSITE.COM, a website operated by
Brainstorm, for an aggregate purchase price of $1.0 million, of which $650,000
was paid in cash on the closing date and the remainder is represented by a
promissory note due upon the earlier to occur of 90 days after the closing date,
three business days after the consummation of this offering or upon our change
of control. As of December 31, 1999, INDUSTRYINSITE.COM had a network of
approximately 63,000 professional users that work in various professional
industries such as management consulting, information technology, computer
software and marketing. By accessing the INDUSTRYINSITE.COM website, these
professionals can create a profile of their skills, academic background, work
experience and interests to market themselves to potential employers,
communicate online with professionals in similar industries, receive content,
news and information on industry events, create a personal e-mail, and search
for job opportunities. By June 30, 2000, we plan to integrate INDUSTRYINSITE.COM
into our FREEAGENT.COM service offering and convert the approximately 63,000
member profiles into E.PORTFOLIOS so that these members will be able to be
matched to projects through OPUS XCHANGE.
PRO FORMA REVENUE AND ACCUMULATED DEFICIT
On a pro forma basis, as if we acquired Churchill and PeopleMover on
January 1, 1999, our revenues for the year ended December 31, 1999 would have
been $2.0 million and our net loss would have been $50.3 million. On a pro forma
basis as if the PeopleMover acquisition had been consummated as of December 31,
1999, our accumulated deficit would have been $30.4 million. Under the rules of
the SEC, we have not included in this prospectus pro forma information relating
to our acquisitions of Ithority and INDUSTRYINSITE.COM. See "Unaudited Pro Forma
Consolidated Combined Financial Statements."
Classification and Recognition of Revenues
We classify and recognize our revenues within our reportable segments as
follows:
FREEAGENT SERVICES REVENUE
FREEAGENT E.OFFICE revenues consist of an initial sign-up fee of $199 and
monthly fees, ranging from approximately $120 to $400 depending on the level of
services package requested, paid by free agents who purchase our FREEAGENT
E.OFFICE services. We recognize the initial sign-up fee over the period of the
free agent's initial contract term. Free agents may elect to terminate the
receipt of FREEAGENT E.OFFICE services at any time and for any reason; however,
we have no obligation to return any fees previously paid by the free agent.
FREEAGENT business services revenues consists of commission-based or
fee-based e-commerce services for products provided through FREEAGENT.COM by our
business partners. Registered users of FREEAGENT.COM, whether or not purchasing
our FREEAGENT E.OFFICE services, may procure various business services and
products provided by these business partners. These services will consist of a
variety of support services, including training, health benefits, and products
designed to help free agents establish and manage their careers. We will be paid
a commission or a fee, either on a fixed or variable basis, based on the
purchase price for each service used by, or product purchased by, each
registered free agent. Business service revenues that are transaction-based will
be recognized as revenues when the transaction is consummated, provided that no
significant obligations on our part exist, including refunds, and collection of
the resulting receivable is probable.
FREEAGENT.COM advertising revenue, consists of advertising revenues sold on
a monthly or extended-term basis and fees from sponsorship arrangements which
allow advertisers to sponsor an area of FREEAGENT.COM. Banner advertising
revenues are recognized as revenue over the period in which the ads are
displayed, and
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sponsorship revenues will be recognized over the term of sponsorship. These
revenues are derived either through third party advertising organizations which
sell advertising space on FREEAGENT.COM, in which case we will receive a
negotiated percentage of the advertising fee charged by the organization to the
advertiser, or directly from the advertiser who purchases the advertising space
from us.
APPLICATION AND PROCUREMENT SERVICES REVENUE
OPUS XCHANGE project listing revenues consist of fees that are paid by
organizations that list projects on OPUS XCHANGE. An organization may either pay
a fixed fee of $50 for each specific project listed or a quarterly fee of $500
for unlimited listings during that quarter. These fees will be recognized as
revenues over the applicable period for which the project is listed. Through
December 31, 1999, project listings were offered to organizations without
charge.
OPUS XCHANGE project placement revenues consist of a negotiated fixed base
fee and/or a variable fee, generally ranging between 1% to 10% of the total
procurement dollar value. These fees to be paid by the contracting organization
will generally be recognized as revenue either when a person is engaged for a
project if the person is not a FREEAGENT E.OFFICE employee, or over the term of
the contract with the buyer if the person is our FREEAGENT E.OFFICE employee.
Through December 31, 1999, we did not charge organizations for project
placements.
OPUSRM and OPUS XCHANGE integration revenues consist of fees based on our
standard billing rates paid for the integration, installation and customization
of OPUSRM and the enhanced version of OPUS XCHANGE and are recognized as the
specific services are performed.
OPUSRM service revenues will consist of subscription fees paid by clients
for each managed employee resource, or "seat," within their internal OPUSRM
database, and will be recognized as revenues over the subscription term. These
fees will be negotiated with each organization and are expected to vary based on
the number of seats managed in the OPUSRM database. Unlike traditional software
pricing models, which employ one-time license fees and annual maintenance and
upgrade fees, our OPUSRM service is offered as a subscription-based service
where users are charged on a quarterly basis. We anticipate that during the
first several years of our sales efforts, we will offer OPUSRM at a discounted
price in order to increase our client base and the number of seats.
As noted above, through December 31, 1999, substantially all of our revenues
were fees for our FREEAGENT E.OFFICE services. In January 2000, we began to
recognize FREEAGENT business services and FREEAGENT.COM advertising revenues and
began to charge OPUS XCHANGE project listing fees. We expect to charge for OPUS
XCHANGE project placement fees beginning in the first quarter of 2000 and to
begin to recognize OPUSRM and enhanced OPUS XCHANGE integration and service
revenues in the first half of 2000. Over time, we expect that the revenues
derived from our application and procurement services segment will comprise an
increasing percentage of our total revenues.
Classification of Cost of Revenues and Operating Expenses
We classify our cost of revenues and operating expenses within our operating
segments as follows:
COST OF REVENUES. Cost of revenues included in our FREEAGENT services
segment include salaries paid to staff that help administer our FREEAGENT
E.OFFICE services and other costs associated with operating FREEAGENT.COM,
including certain technical personnel, equipment leasing costs,
telecommunications charges and depreciation. We expect cost of revenues for our
FREEAGENT services to increase as a percentage of revenues in the near term as
we continue to build staff and technology resources capable of sustaining our
anticipated growth.
Cost of revenues associated with operating our Application and Procurement
Services includes the costs of providing integration services to OPUSRM and
enhanced OPUS XCHANGE customers as well as other costs associated with operating
OPUS XCHANGE and OPUSRM, including certain technical personnel, equipment
leasing costs, telecommunications charges and depreciation.
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<PAGE>
We expect the cost of revenues to increase in subsequent quarters as we
continue to add staff and infrastructure to support the growth of our integrated
services.
SALES AND MARKETING EXPENSE. Sales and marketing expense consists primarily
of agency fees, production fees, marketing and advertising for OPUS XCHANGE and
OPUSRM, salaries and benefits paid to our sales and marketing staff, sales
commissions, public relations expenses, trade shows and conferences, and
consulting fees. Changes in the timing and magnitude of marketing initiatives
for OPUS XCHANGE and OPUSRM will continue to cause fluctuations in sales and
marketing expense as a percentage of revenues. We intend to aggressively market
our services to increase our brand awareness. Consequently, we expect to
increase our sales and marketing expenses in future periods as we increase our
advertising efforts and add staff to our sales and marketing departments. Sales
and marketing expense will increase in future periods as a result of our recent
completed and pending acquisitions.
PRODUCT DEVELOPMENT EXPENSE. Product development expense consists primarily
of costs associated with the compensation of internal and external personnel
used to develop OPUS XCHANGE and OPUSRM, and the continuing efforts of our
development staff to enhance the content, features and functionality of
FREEAGENT.COM, OPUS XCHANGE and OPUSRM. We expect these costs to increase
through 2000 as we add staff and consultants to our development team. Product
development expense are expected to increase as a result of the consummation of
our acquisition of PeopleMover.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
consists primarily of lease expenses for our office facilities, compensation and
benefits for administrative and executive staff, general office expenses, fees
for professional services, recruiting and relocation expenses. We expect these
costs to increase in future quarters as we continue to add administrative
personnel and implement our strategy of attracting and retaining high-quality
professionals. Another significant component of general and administrative costs
has been the cost of leasing additional space to support our growth. We expect
general and administrative expenses to increase in future periods to support our
expanded operations and the added expenses of being a public company. General
and administrative expense will increase in future periods as a result of our
recent completed and pending acquisitions.
Results of Operations
We have a short operating history and have incurred substantial losses since
our inception. From the date of our inception in August 1998 through
December 31, 1998, we incurred net losses of approximately $1.0 million. For the
year ended December 31, 1999, we incurred net losses of approximately
$29.4 million. As of December 31, 1999, we had an accumulated deficit of
approximately $30.4 million. Our net losses and resulting accumulated deficit
are primarily due to the costs we incurred to develop our products and services
and to expand our sales and marketing programs.
We intend to devote significant resources to advertising and brand-marketing
programs designed to attract free agents to FREEAGENT.COM and promote our OPUS
XCHANGE and OPUSRM services, as well as the PEOPLEMOVER/STAFFING service upon
consummation of the PeopleMover acquisition. We anticipate increasing
advertising spending in the future. This will result in sales and marketing
expenses increasing as a percentage of total revenues. We also expect to
increase our internal staff, particularly in the areas of sales and marketing
and product development.
As a result of our expansion plans and our expectation that operating
expenses will increase significantly in the next several years, especially in
the areas of sales and marketing and brand promotion, we expect to incur
additional losses from operations for the foreseeable future. To the extent
these increases in our operating expenses precede and are not followed by
commensurate increases in revenues, or if we are unable to adjust operating
expense levels accordingly, our operating losses may exceed our expectations for
those periods. We cannot be sure that we will ever achieve or sustain
profitability.
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<PAGE>
The following table presents our quarterly operating results for the four
quarters ended December 31, 1999.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------
March 31, 1999 June 30, 1999 September 30, 1999 December 31, 1999
-------------- ------------- ------------------ -----------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues.......................... $ -- $ 64 $ 177 $ 178
Cost of revenues.................. -- 9 139 113
------- ------- ----------- --------
55 38 65
Operating expenses excluding
deferred compensation........... 1,976 3,721 6,494 15,654
------- ------- ----------- --------
Net loss from operations before
deferred compensation........... $(1,976) $(3,665) $ (6,415) $(15,631)
</TABLE>
Year Ended December 31, 1999 Compared to Period from August 17, 1998 (Inception)
to December 31, 1998
REVENUES
For the year ended December 31, 1999, our revenues were $0.4 million,
substantially all of which consisted of the initial sign-up fees and monthly
fees paid by our FREEAGENT E.OFFICE employees. We had no revenues for the period
August 17, 1998 (inception) to December 31, 1998. At January 31, 2000, we had
over 64,000 registered users of FREEAGENT.COM, of whom 286 were FREEAGENT
E.OFFICE employees, approximately 190 of whom joined us through our May 1999
acquisition of Churchill.
COST OF REVENUES
Cost of revenues for the year ended December 31, 1999 were $0.3 million and
were $0 for the period from August 17, 1998 (inception) to December 31, 1998.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses of $11.1 million for the
year ended December 31, 1999 consisted primarily of marketing and advertising
expenses for FREEAGENT.COM, salaries and benefits paid to our sales and
marketing staff and consulting fees. During this period, we added sales and
marketing staff and commenced an advertising campaign to coincide with the
launch of FREEAGENT.COM in an effort to increase our brand awareness and develop
business relations. Sales and marketing expense in 1999 included non-cash
charges of $0.2 million related to the fair market value of warrants issued as
partial consideration for advertising services provided by Kirshenbaum Bond &
Partners. See Note 10 of Notes to our Consolidated Financial Statements included
elsewhere in this prospectus. A portion of the advertising services will
continue to be paid on a quarterly basis by the issuance of additional warrants
having an exercise price of $0.01 per share through the consummation of this
offering. The next quarterly payment will be made at the end of February 2000.
As a result, we expect to incur additional non-cash charges in the first quarter
of 2000. The amount of these non-cash charges in 2000 through the consummation
of this offering is currently not determinable since it will be based on the
fair market value of our common stock on the date of issuance of the warrants
determined under the Black-Scholes pricing model, some variables of which will
not be known until the date of grant. For the period from our date of inception
in August 1998 to December 31, 1998, sales and marketing expenses were
$0.1 million.
PRODUCT DEVELOPMENT. Product development expenses of $9.0 million for the
year ended December 31, 1999 consisted primarily of salaries and consulting fees
paid to our development engineers. Product development during this period
related to the development of FREEAGENT.COM and the development of our OPUS
XCHANGE and OPUSRM services. Product and development expense in 1999 included
non-cash charges of approximately $24,000 related to the amortization of the
fair market value of warrants and stock issued as consideration for product and
development services provided by Sapient Corporation and J.P. Morgan & Co.
Incorporated, respectively. See Note 10 of Notes to our Consolidated Financial
Statements included elsewhere
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<PAGE>
in this prospectus. Product development expenses of $0.6 million for the period
from the date of our inception in August 1998 to December 31, 1998 related to
our initial OPUSRM development.
GENERAL AND ADMINISTRATIVE. General and administrative expenses of
$7.1 million for the year ended December 31, 1999 consisted primarily of
salaries and benefits, general office expenses, rent and utilities, recruiting
fees and professional fees. General and administrative expense in 1999 included
non-cash charges of $0.4 million related to the amortization of the fair market
value of warrants to purchase 450,000 shares of our common stock issued as
consideration for financial and advisory services provided by Greenhill & Co.,
LLC, one of our shareholders. In accordance with our financial advisory
agreement with Greenhill, warrants to purchase an additional 450,000 shares of
our common stock were issued to Greenhill in January 2000 upon consummation of
the Ithority and INDUSTRYINSITE.COM acquisitions. As a result, we recorded a
prepaid expense of approximately $832,500 million which will be amortized over
one year. Accordingly, we will reflect additional non-cash charges of
approximately $208,125 per quarter in 2000 as a result of this issuance. See
Note 10 of Notes to our Consolidated Financial Statements included elsewhere in
this prospectus. General and administrative expenses for the period August 17,
1998 (inception) to December 31, 1998 were $0.4 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense of
$0.6 million for the year ended December 31, 1999 consisted primarily of
amortization of goodwill associated with the Churchill acquisition and
depreciation of equipment. Depreciation and amortization expense was negligible
in the 1998 period. Depreciation and amortization expense will increase
substantially in future periods, primarily reflecting amortization of goodwill
associated with our acquisitions of PeopleMover, Ithority and
INDUSTRYINSITE.COM, and depreciation of assets acquired or to be acquired in
these acquisitions. See "Unaudited Pro Forma Consolidated Combined Financial
Statements."
AMORTIZATION OF EQUITY-BASED COMPENSATION. The amortization of equity-based
compensation for the year ended December 31, 1999 was $2.4 million and consisted
principally of deferred compensation expense for options to purchase common
stock granted to employees, directors and non-employees having exercise prices
below the fair market value of our common stock at the date of grant. Of this
amount, $0.8 million was amortization of deferred compensation expense
associated with option grants to employees, officers and directors and included
amounts related to the acceleration of certain options granted to directors. In
addition, we recognized $0.2 million of compensation expense upon the purchase
of shares of our common stock by our Chairman and Chief Executive Officer from a
former employee at the employee's original purchase price in accordance with a
repurchase agreement. See Note 10 of Notes to our Consolidated Financial
Statements included elsewhere in this prospectus. In January and February 2000,
we issued options to purchase 1,588,957 shares of common stock at exercise
prices below the fair market of our common stock at the date of grant to
directors, officers and employees, principally to our new President and Chief
Operating Officer. After giving effect to the issuance of these additional
options, we expect to recognize deferred compensation expense in future periods
as a result of the issuance of options with an exercise price below fair market
value to officers, directors and employees as follows:
<TABLE>
<CAPTION>
Deferred
Period Compensation Expense
- --------------------------------------------------------- --------------------
<S> <C>
Year ending December 31, 2000............................ $4,729,000
Year ending December 31, 2001............................ 2,922,000
Year ending December 31, 2002............................ 2,922,000
Year ending December 31, 2003............................ 907,000
</TABLE>
In connection with the grant of 332,000 stock options in 1999 to
non-employees, we recorded deferred compensation expense of approximately
$1.9 million for the year ended December 31, 1999. In December 1999, we fully
vested 227,000 of the options granted to non-employees which would have
otherwise vested over a three-year period. Accordingly, we revalued and
immediately expensed the fair market value of these options and amortized to
compensation expense any previously unamortized deferred compensation related to
these options. The amount recognized as expense during the year ended
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<PAGE>
December 31, 1999 relating to non-employee options, including in respect of the
accelerated options, was $1.4 million. We will amortize deferred compensation
for those options issued to non-employees and will record compensation expense
for the fair market value of the options at each interim vesting date over which
the options vest. We cannot presently determine the amount of future
compensation expense we may record related to the remaining non-vested 105,000
options issued to non-employees as these amounts are subject to adjustment based
on the fair market value of the underlying options at each vesting date. The
compensation expense charges could be substantial and will increase if our stock
price increases.
As a result of the acquisition of Ithority, we recorded approximately
$5.3 million of deferred compensation expense in the first quarter of 2000
related to the shares placed in escrow and additional shares issuable to the
former owners of Ithority which are subject to the three-year vesting
arrangement. See "--Recent Acquisitions." We will amortize this amount over the
vesting period. Accordingly, we will reflect additional non-cash charges related
to these shares of approximately $0.4 million per quarter.
Upon consummation of the PeopleMover acquisition, we expect to record
approximately $3.2 million of deferred compensation expense related to a portion
of the shares to be placed in escrow which will be subject to the three-year
vesting arrangement. See "--Recent Acquisitions." We will amortize this amount
over the vesting period. Accordingly, upon consummation of the PeopleMover
acquisition, we expect to reflect additional non-cash charges related to these
shares of approximately $0.3 million per quarter.
OTHER INCOME. Interest income, net of $0.7 million for the year ended
December 31, 1999 consisted primarily of interest income from short-term
investments. Interest income, net was negligible in the 1998 period. We have
invested our cash primarily in U.S. government agency securities.
INCOME TAX EXPENSE. We have not recorded a provision for income tax expense
as we have incurred substantial losses in every fiscal period since our
inception. At December 31, 1999, we had a net operating loss carryforward of
$26.7 million which gives rise to substantially all of our $11.7 million gross
deferred tax asset. We have recorded a valuation allowance in the amount of
$11.7 million to fully eliminate the deferred tax asset as management believes
sufficient uncertainty exists regarding the realization of the deferred tax
asset. We have not yet analyzed, under certain complex tax rules, whether there
will be limitations placed on the use of our net operating loss carryforward to
offset future income, if any. Such limitations may occur as a result of this
offering.
Liquidity and Capital Resources
We have funded our operations primarily with the sale of our equity
securities, through which we have raised net proceeds of approximately
$53.4 million through December 31, 1999. Between December 1998 and April 1999,
we raised in a private placement approximately $11 million from the sale of
8,284,000 shares of our Series A preferred stock. We also issued 568,000
warrants to purchase common stock in connection with the issuance of the
Series A preferred stock. During September and October 1999, in another private
placement, we raised $40 million from the sale of 8,676,727 shares of our
Series B preferred stock. We have obtained a $1 million line of credit from
Silicon Valley Bank, of which $650,000 is used to guarantee a letter of credit
for collateral against our leasehold interest obligation. In August 1999, we
entered into an additional $1,500,000 equipment facility with Silicon Valley
Bank. In connection with these credit arrangements, we issued warrants to
purchase an aggregate of 46,500 shares of our common stock. The facilities
contain various non-financial and financial covenants, including the maintenance
of $2.0 million of tangible net worth, and amounts borrowed under the facilities
are collateralized by our current assets. At December 31, 1999, we were in
compliance with all of these covenants. At December 31, 1999, our cash and
short-term investments totaled $28.5 million.
Cash used in operating activities for the year ended December 31, 1999
totaled $20.8 million, primarily due to our net loss of $29.4 million, adjusted
for various non-cash charges including non-cash compensation and depreciation
and amortization, and changes in operating assets and liabilities, including
changes in our accounts receivable, accounts payable and accrued expenses. Cash
used in operating activities totaled $0.3 million for the period from our date
of inception in August 1998 to December 31, 1998. Because we
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will continue to need substantial amounts of working capital to fund the growth
of our business, we expect to experience significant negative operating cash
flows for the foreseeable future.
Cash used in investment activities for the year ended December 31, 1999
totaled $30.7 million. We used $27.1 million derived from our financing
activities to acquire short-term investments. Cash used in investing activities
for the period from our inception in August 1998 to December 31, 1998 was less
than $0.1 million. We will be moving into our new principal offices during the
first quarter of 2000 and expect to spend approximately $3.5 million in capital
expenditures as part of the design and development of these new facilities. In
addition, we also expect to have additional capital expenditures of
approximately $3 to $7 million during 2000.
Net cash provided by financing activities for the year ended December 31,
1999 was $47.1 million. The cash from financing activities resulted primarily
from the sale of our Series B preferred stock and additional shares of our
Series A preferred stock. Cash flow provided by financing activities for the
period from our inception in August 1998 to December 31, 1998 totaled
$6.2 million and consisted of proceeds from the initial sale of our Series A
preferred stock and sales of our common stock. Each share of the Series A
preferred stock and Series B preferred stock will automatically convert into 1.5
shares of common stock upon consummation of this offering.
In December 1999 and January 2000, we entered into agreements with other
Internet sites pursuant to which the parties have agreed to promote their
respective content, products and services and jointly develop either a
co-branded website or feature our services within their sites. We have agreed to
spend in the aggregate a minimum of approximately $0.1 million in development
costs as well as approximately $5.0 million in advertising to market the new
sites. In addition, the terms of some of these agreements require us to share
revenues generated on the site, including advertising and e-commerce revenues,
with these parties. The terms of these agreements vary from one to five years.
We have also entered into an agreement pursuant to which we have agreed to
purchase development and implementation services through September 2000. The
aggregate annual commitment under these agreements does not exceed $4.0 million
in 2000 or $1.5 million thereafter.
We currently anticipate that the net proceeds from this offering, together
with our current cash and marketable securities and available borrowings under
our bank facilities, will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next 12 months.
Thereafter, we may need to raise additional funds through public or private
financings, or other arrangements to fund our operations and potential
acquisitions, if any. We cannot assure you that any such financings or other
arrangements will be available in amounts or on terms acceptable to us or at all
and any new financings or other arrangements could place operating or other
restrictions on us. Our inability to raise capital when needed could seriously
harm the growth of our business and results of operations. If additional funds
are raised through the issuance of equity securities, the percentage ownership
of our stockholders would be reduced. Furthermore, these equity securities could
have rights, preferences or privileges senior to our common stock.
Qualitative and Quantitative Disclosure About Market Risk
As of December 31, 1999, we had $27.1 million in short term investments,
which were held primarily in the form of short term, investment grade U.S.
government securities. As a result, our interest income is sensitive to changes
in the general level of U.S. interest rates. However, due to the short-term
nature of our investments and the fact that we generally hold these instruments
until their maturity dates, we believe that we are not subject to any material
risks as a result of this exposure.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept or recognize only two-digit entries in the date code field. However,
these systems and software products now need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. While computer systems
and software used by many companies and governmental agencies have been upgraded
to comply with these year
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2000 requirements, existing systems and software at some companies may still
need to be upgraded to comply with these year 2000 requirements or risk system
failure or miscalculations which could cause disruptions of normal business
activities.
We designed all of our products to be year 2000 compliant when configured
and used in accordance with the related documentation, provided that the
underlying operating system of the host machine and any other software used with
or in the host machine or our products are year 2000 compliant. We have defined
year 2000 compliant as the ability to:
- correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
- function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century;
- respond to two-digit date input in a way that resolves the ambiguity as to
century in a disclosed, defined and predetermined manner;
- store and provide output of date information in ways that are unambiguous
as to century if the date elements in interfaces and data storage specify
the century; and
- recognize year 2000 as a leap year.
We have been informed by our material software component vendors and our
Internet service providers that the products and services we use are year 2000
compliant. We purchased or developed our systems within the past two years, and
believe that we do not have legacy systems that have been historically
identified to have year 2000 issues. We have applied vendor patches for relevant
software to bring them into compliance with vendor-defined year 2000 standards.
We are not currently aware of any remaining material operational issues or costs
associated with preparing our internal information technology for the year 2000.
However, we may experience material unanticipated problems and costs caused by
undetected errors or defects in the technology used in our internal information
technology and non-information technology systems.
Despite testing by us and current and potential customers, and assurances
from developers of products incorporated into our products, our products may
contain undetected errors or defects associated with year 2000 date functions.
Known or unknown errors or defects in our products could result in delay or loss
of revenues, diversion of development resources, damage to our reputation,
increased service and warranty costs, or liability to our customers. Moreover,
the failure to adequately address year 2000 compliance issues in our technology
and our information technology and non-information technology systems could
result in claims of mismanagement, misrepresentation or breach of contract and
related litigation, which could be costly and time-consuming to defend.
We have funded our year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material.
We do not currently have any information concerning the year 2000 compliance
status of our customers. Our current or future customers may incur significant
expenses to achieve year 2000 compliance. If our customers are not year 2000
compliant, they may experience material costs to remedy problems, or they may
face litigation costs. In either case year 2000 issues could reduce or eliminate
the budgets that current or potential customers could have for or delay
purchases of our products and services. There is a risk that orders for our
products will be reduced or delayed as information technology departments within
companies reallocate their capital expenditures to resolve year 2000 problems.
In addition, year 2000 compliance issues also could cause a significant number
of companies, including our current customers, to reevaluate their current
system needs and, as a result, consider switching to other systems and
suppliers. In addition, these customers may not be able to utilize the systems
necessary to access our products and services.
In addition, governmental agencies, utility companies, Internet service
providers, third-party service providers and others outside our control may not
be year 2000 compliant. The failure by such entities to be year 2000 compliant
could result in a systemic failure beyond our control, such as a prolonged
Internet, telecommunications or electrical failure, which could also prevent us
from delivering our products and
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services to our customers, decrease the use of the Internet or prevent users
from accessing the websites of companies with whom we have entered into business
alliances.
Based on our assessment completed to date, we believe that the reasonably
likely worst case scenario with respect to year 2000 issues could be:
- portions of FREEAGENT.COM may be down while programmers fix our systems or
the systems of Internet service providers or other third parties;
- temporary data loss could occur while back-up copies of data are retrieved
from tape;
- lengthy outages could occur while programmers work to repair or restore
corrupted or missing database files;
- our internal corporate, billing and accounting system may be down while
programmers fix our system;
- the inability of our customers to use our products and services;
- claims from our customers asserting liability, including liability for
breach of warranties related to the failure of our products and services
to function properly, and any resulting settlements or judgments; and
- our inability to manage our own business.
Although these events could have an adverse effect on our business in the
short term, we do not believe that year 2000 issues will materially and
adversely affect our business, results of operations or financial condition over
the long term. As of the date of this prospectus, we have not experienced any
year 2000 problems and are not aware of any material year 2000 problems
experienced by our customers or potential customers.
We have also prepared a contingency plan, which includes the availability of
year 2000 compliant software on our servers and the availability of trained
information services support staff to respond to unforeseen desktop failures. We
have redundant servers for a variety of our operating systems to minimize
potential outages of server operations. Regular backups will be supplemented and
relocated offsite to ensure our ability to reconstruct any failed systems
quickly. Secondary servers throughout our operations will maintain our
connections to the Internet.
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." We have adopted
SOP 98-1 which requires that entities capitalize certain costs related to
internal use software once certain criteria have been met. We are required to
implement SOP 98-1 for the year ending December 31, 1999. Adoption of SOP 98-1
did not have a material effect on our financial condition or results of
operations.
In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Cost of
Start-Up Activities". SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP 98-5 is adopted. We
implemented SOP 98-5 on January 1, 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning June 15, 2000. The
statement is not expected to affect us because we currently do not engage or
plan to engage in derivative instruments or hedging activities.
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BUSINESS
Overview
Opus360 is a leading provider of a suite of Internet-based services for
putting people and projects together across the labor supply chain. Our
business-to-business exchange uses advanced technologies to enable corporations,
professional services firms, staffing companies and other organizations to
identify and procure professionals with technology, creative, strategic
consulting and other expertise required for their projects. Our strategy is to
build the largest community of free agents by providing them with access to
multiple project opportunities and to create a marketplace that will attract
large buyers of professional resources to fulfill their project needs. We
believe organizations will use our labor resource management services in order
to more efficiently manage their highly skilled internal and external
professional resources.
Our solution consists of three services, each of which is offered and can be
used as a stand-alone application and is designed to be integrated and used with
our other services:
- SERVING THE FREE AGENT COMMUNITY. FREEAGENT.COM is an Internet portal
where free agents can efficiently and cost-effectively manage their
independent careers by accessing multiple project opportunities, our
FREEAGENT E.OFFICE and E.PORTFOLIO services and a marketplace of corporate
products.
- MATCHING BUYERS WITH PROFESSIONALS FOR PROJECTS. OPUS XCHANGE is an
Internet platform designed to enable buyers requiring individuals with
specific professional skills to quickly and easily procure those
professionals through matching technologies in an online environment. Our
enhanced version of OPUS XCHANGE for large corporate customers is designed
to enable corporations, professional services firms, staffing companies
and other organizations to easily and rapidly procure professionals from
all sources across the labor supply chain using more advanced matching
technologies and by automating the requisition, approval and engagement
processes.
- MANAGING LABOR RESOURCES. OPUSRM is a labor resource management service
designed to centralize resource and project information and enable
organizations to more efficiently manage their professional resources.
We introduced FREEAGENT.COM on July 4, 1999 and OPUS XCHANGE on
September 6, 1999. During the first half of 2000, we expect to commercially
release OPUSRM and our enhanced version of OPUS XCHANGE.
Industry Background
GROWTH OF THE INTERNET AND BUSINESS-TO-BUSINESS E-COMMERCE
The Internet has grown rapidly in recent years. International Data
Corporation estimates that at the end of 1998 the Internet had over 142 million
users worldwide, of which approximately 63 million were in the U.S., and that by
2003 the number of users worldwide will grow to approximately 502 million, of
which approximately 177 million will be in the U.S. The widespread adoption of
the Internet as a communications platform has created a foundation for
business-to-business e-commerce that will enable organizations to streamline
complex processes, lower costs and improve productivity. According to Forrester
Research, business-to-business e-commerce is expected to grow from $43 billion
in 1998 to $1.3 trillion in 2003. Organizations are increasingly using Internet
technologies to improve traditional operations such as customer service, supply
chain management, employee recruiting and training, and communications.
RAPIDLY INCREASING DEMAND FOR QUALIFIED PROFESSIONALS
Faced with an increasingly competitive environment, organizations are
refocusing on their core competencies and recognizing their increasing need to
use external resources. The rapid growth of e-commerce has fueled the demand for
professionals with skills including strategic consulting, creative design and
systems engineering. In response, many organizations externally source, on a
project-by-project basis, different aspects of the development, design and
maintenance of their e-commerce strategies and applications to qualified
independent professionals, professional services firms and staffing companies to
capitalize on
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their accumulated strategic, creative and technical expertise. International
Data Corporation estimates that U.S. corporate spending on outsourcing services
will grow from $51 billion in 1998 to $81 billion in 2003. According to the
Gartner Group, by 2004, 60% of enterprises will use externally sourced workers
to fulfill more than 50% of their information technology-related activities.
ORGANIZATIONS REQUIRE EFFICIENT RESOURCE MANAGEMENT ACROSS THE LABOR SUPPLY
CHAIN
Faced with shorter deadlines, increased demand for services and rapid
technological change within their complex enterprises, organizations must
attract, recruit, retain and effectively use and manage their resources across
the labor supply chain, including internal employees, workers supplied by
professional services firms or staffing companies and free agents. Historically,
organizations typically employed decentralized systems, or combined manually
implemented, ad hoc procedures, to gather data and manage projects and procure,
allocate and deploy skilled labor resources. These systems generally have had
only limited ability to report real time project-related information or capture
data for post-project performance analysis. Managing professionals across the
labor supply chain on multiple projects has been, and continues to be, a
resource intensive, paper based, and error prone process, resulting in increased
costs, inefficient utilization and decreased profits.
INEFFICIENT MARKETPLACE FOR PROCURING PROFESSIONALS
As organizations and individuals increasingly embrace more flexible work
arrangements made possible by advances in technology and telecommunications, a
community of independent professionals that desire to work outside of the
corporate environment has emerged. The primary obstacle impeding an
organization's ability to easily and rapidly reach professionals has been the
lack of an efficient platform to connect them with professionals from numerous
professional services firms, staffing companies and other organizations and free
agents. Because of the Internet's ability to centralize information and
disseminate it widely, a growing number of organizations are using it as a
platform for improving their labor procurement processes. According to
Forrester, of the six million businesses in the U.S., only 15,000 currently
procure labor online, with this number forecasted to rise to 124,000 by 2003. We
believe a more efficient marketplace for connecting organizations with
professionals will lead to an increase in the number of organizations that
procure external labor online.
LARGE MARKET OF UNDERSERVED FREE AGENTS
While free agents enjoy the freedom of selecting the organizations they work
for, they typically lack a community in which to interact and share knowledge.
In addition, many free agents do not readily have access to benefits, services
and products comparable to those available in a traditional corporate setting.
Free agents require:
- COMMUNITY, CONTENT, INFORMATION SHARING AND NETWORKING. Free agents
require in-depth and up-to-date content and information, such as reference
and training materials, business and legal forms and other industry data,
to improve their skills and maintain their businesses. Members of the free
agent community who are unaffiliated with organizations also require a
forum to share information, discuss common issues and form project teams.
- CORPORATE-LEVEL BENEFITS AND BACK-OFFICE SERVICES. The ability of free
agents to participate in group-oriented benefits and achieve volume
discounts on corporate products and services is limited by their
unaffiliated status and lack of access to readily available information.
Free agents also lack convenient, fully automated back-office
administrative services to allow them to focus their time and energy on
projects.
The Opus360 Solution
We are a leading provider of a suite of Internet-based services for putting
people and projects together across the labor supply chain. Our
business-to-business, e-commerce platform is designed to streamline the
procurement and management of professional resources and to enable corporations,
professional services
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firms, staffing companies and other buyers requiring individuals with specific
professional skills to identify and procure these professionals to fulfill
project needs and to enable free agents to search for and secure project
assignments. Our comprehensive solution consists of the following services:
SERVING THE FREE AGENT COMMUNITY
FREEAGENT.COM is an Internet portal where free agents can access multiple
project opportunities from corporations, professional services firms and
staffing companies and more effectively market themselves using E.PORTFOLIOS. An
E.PORTFOLIO, in addition to containing traditional resume information such as
their skills, experiences, references and other professional information, allows
free agents to, among other things, upload their photographs, audio/video clips,
graphic design snapshots, and PowerPoint files. In contrast to the typically
static paper-based resume, an E.PORTFOLIO is a multimedia, online service that
is easily updatable to reflect a real-time snapshot of a free agent's
availability, work experiences and preferences and current project pipeline.
Through FREEAGENT.COM, free agents can interact with each other, receive
industry-related content and research project offerings. Free agents can also
subscribe for corporate-style benefits and administrative services to assist
them in managing their careers. FREEAGENT.COM is one of the first online
communities to provide a comprehensive array of products and services to the
free agent community and to aggregate corporate-style benefits such as group
health insurance, liability insurance, a 401(k) plan and Opus360 stock options.
As of January 31, 2000, we had over 64,000 registered free agents, over
21,500 E.PORTFOLIOS and over 5,000 projects posted on FREEAGENT.COM.
MATCHING BUYERS WITH PROFESSIONALS FOR PROJECTS
OPUS XCHANGE is an Internet-based, business-to-business platform that is
designed to enable organizations to post projects through FREEAGENT.COM and
procure free agents that match the specific skills, qualifications and
preferences required by these organizations. Our enhanced version of OPUS
XCHANGE, which is designed for use by large clients such as corporations,
professional services firms and staffing companies, enable these organizations
to perform, sophisticated and customized searches to identify and procure
professionals from any source in the labor supply chain. It will also facilitate
the transactions among them by automating the requisition, approval and
engagement processes. We believe our enhanced version of OPUS XCHANGE will
assist organizations by capturing data each time the service is used on the
time, efficiency, cost-competitiveness and quality of professionals and
suppliers of professionals and that access to this performance data will
encourage repeat usage of OPUS XCHANGE by eventually helping to establish
metrics to identify the prevailing billing rates for project-based services. We
expect to commercially release our enhanced version of OPUS XCHANGE by June 30,
2000.
MANAGING PROFESSIONALS
OPUSRM is a labor resource management service that is designed to centralize
resource and project information, permitting organizations to manage their
professional resources more efficiently in a project-driven environment. OPUSRM
is designed to realize efficiencies in all project phases, including budgeting,
forecasting, resource allocation, information capture, real-time project
accounting, knowledge sharing and post-transaction analysis. OPUSRM can either
be run as an e-service through strategic hosting partners or be installed and
integrated with an organization's legacy systems. OPUSRM is designed to easily
and rapidly integrate with OPUS XCHANGE and our FREEAGENT.COM community,
enabling organizations to procure, manage and track the project performance of
external resources in the same manner as full-time employees. We expect to
launch OPUSRM in the first half of 2000 and integrate OPUSRM with the enhanced
version of OPUS XCHANGE in the second half of 2000.
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Our Strategy
Our goal is to be the leading provider of Internet-based services for
putting people and projects together across the labor supply chain by providing
a suite of services that enhance the efficiency of the procurement and
management of highly-skilled professional resources. The key components of this
strategy include:
BUILD A LARGE COMMUNITY OF FREE AGENT TALENT
We believe it is critical to build a large community of free agents by
continuing to aggressively market our services. We will also seek to enter into
additional strategic alliances with companies that will provide us with access
to a larger base of free agent talent through their existing customer bases. We
intend to attract and enhance the retention of free agents by continuing to sell
products and services that will enable them to efficiently operate their
businesses and expand their knowledge in their particular areas of expertise.
ATTRACT LARGE BUYERS OF PROJECT-BASED PROFESSIONALS
We intend to rapidly increase the volume of transactions in OPUS XCHANGE by
providing an efficient marketplace, establishing a large pool of free agents and
aggressively marketing our services to large buyers requiring professionals to
fulfill project needs. We believe that creating an easy-to-use, open marketplace
based on XML standards that allow buyers and professionals to interact easily
and rapidly with each other will increase the flow of projects to our OPUS
XCHANGE marketplace. We expect that our direct sales and marketing efforts to
attract large buyers of professionals will be augmented by the sales and
marketing efforts of organizations with which we enter into strategic
relationships and that have existing relationships with these buyers.
CAPTURE IMPORTANT DATA ON PROFESSIONALS AND ORGANIZATIONS
The enhanced version of OPUS XCHANGE is designed to capture and manage
performance information about suppliers of project-based professionals, such as
staffing companies, professional services organizations and other recruiting,
search and placement firms, as well as performance information about the
professional after completion of the project. Vendor performance information
will enable organizations to analyze the timeliness of vendor response,
appropriateness of individual candidates provided by the vendor and the cost
competitiveness of the vendor service. We expect to develop and maintain an
extensive database of professionals and vendor information through relationships
with internal, vendor, client and free agent sources. Each time a professional
completes a project, we will attempt to gather information about the
individual's skills and expertise and the client's evaluation of their project
performance. This data will enable us to provide organizations with industry
information that they cannot easily produce themselves or obtain from other
sources, including performance metrics and the prevailing billing rates for
specific project expertise. We believe the availability of data about the vendor
and professionals will encourage organizations to procure talent through our
OPUS XCHANGE marketplace on a recurring basis and provide a useful tool for
staffing vendors to improve their performance.
DEVELOP AND STRENGTHEN CLIENT RELATIONSHIPS FOR OPUSRM AND OPUS XCHANGE
We target our sales and marketing for OPUSRM and our enhanced version of
OPUS XCHANGE, which we expect to commercially release during the first half of
2000, to resource-intensive, project-focused service organizations, such as
information technology, web consulting firms, internal information technology
departments of Fortune 1000 companies, information technology staffing companies
and other service firms. We believe these project-focused organizations are
well-positioned to benefit from our services to increase the efficiency of their
labor resource management and procurement. We also intend to provide additional
consulting and support services to these organizations and believe that these
on-going relationships will enable us to sell new services as they are
developed. We believe that organizations using either OPUS XCHANGE or OPUSRM
alone will find it attractive to use both services because they have been
designed to integrate with one another to provide organizations with a single
platform for the procurement and management of their internal and external
professional resources.
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CONTINUE TO ENHANCE FUNCTIONALITY OF SERVICES
We intend to provide the best available services and tools to empower buyers
requiring professionals to fulfill project needs to more effectively manage
their labor procurement processes. We will continue to develop enhancements to
our services to improve our user interfaces, searching capabilities and workflow
and collaboration tools. During the first half of 2000, we plan to release our
enhanced version of OPUS XCHANGE designed for large corporate customers, which
will provide advanced vendor management, performance tracking and enhanced
matching capabilities. The enhanced version of OPUS XCHANGE will also capture
key performance information in an easily searchable database to help
organizations evaluate the efficiency, cost-competitiveness, and quality of
their suppliers of project talent. We will continue to invest capital to create
a first-class client service organization that will work with clients to develop
and further enhance our services.
PURSUE STRATEGIC ACQUISITIONS
We have recently completed the acquisitions of Ithority and
INDUSTRYINSITE.COM and have entered into an agreement to acquire PeopleMover,
which is expected to close by February 14, 2000. These acquisitions expand or
are complementary to our business and we expect that we will continue to
evaluate from time to time acquisition and investment opportunities in
complementary businesses, products and technologies. We intend to explore
opportunities which may accelerate our growth, attract buyers requiring
individuals with specific professional skills to fulfill project needs, increase
our free agent talent pool, add new content and advertisers, enhance our product
and services, develop new technologies or assist us in penetrating new markets,
including the international markets.
Products and Services
FREEAGENT.COM
FREEAGENT.COM is an Internet portal designed to aggregate a large pool of
free agent talent and enable free agents to more efficiently access project
opportunities and manage their careers. FREEAGENT.COM offers a broad range of
services to meet the needs of the free agent community, including back-office
administrative services, corporate-style benefits, project assignments,
third-party commercial and professional products and services, community,
content, information sharing and networking. As of January 31, 2000, over 64,000
free agents were registered users of FREEAGENT.COM. Through co-branding
strategic alliances with organizations that provide complementary services or
products or provide us access to their user base, we expect that by June 30,
2000 additional employers and more than 1,000,000 additional professionals will
be part of our database and eligible to be matched to projects through
FREEAGENT.COM. FREEAGENT.COM currently includes the following services:
E.PORTFOLIOS AND PROJECT OPPORTUNITIES. FREEAGENT.COM enables free agents to
create E.PORTFOLIOS to market themselves to organizations seeking project-based
professionals. The typical E.PORTFOLIO includes the free agent's background,
skills, work, project and educational histories, professional references and any
other information which the free agent chooses to include to better market his
or her services, and allows the free agent to upload his or her photograph,
audio/visual clips, graphic design snapshots and PowerPoint files. As
organizations list projects on OPUS XCHANGE, our search technologies match their
project requirements with suitable free agents based on the skills and
experience described in their E.PORTFOLIOS. In addition, by browsing
E.PORTFOLIOS on our system, free agents can locate and team with other free
agents who have complementary skills to collectively respond to projects. In the
future, we expect to incorporate additional functionality into our E.PORTFOLIO
service, such as video interviewing capabilities. As of January 31, 2000, over
21,500 of our registered free agents had created E.PORTFOLIOS on FREEAGENT.COM.
COMMUNITY, CONTENT, INFORMATION SHARING AND NETWORKING. FREEAGENT.COM
provides a forum where free agents can exchange ideas with professionals who
share common skills and interests or perform complementary services. Free agents
can access content targeted to them through journals, case studies, daily and
weekly challenges, expert advice, Q&A columns, user reviews and success stories.
FREEAGENT.COM enables free agents to participate in online discussions, training
and interactive seminars. As we enter into additional
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strategic alliances, we expect to provide in the future individual sites within
FREEAGENT.COM which will contain industry-specific content designed for specific
segments of our free agent community, such as the technology, creative and
strategic consulting segments. We also plan to provide free agents with
professional networking opportunities by offering them access to specialized
databases of other professionals where they can find potential mentors and
contacts across a range of professions, backgrounds and interests. In addition,
we also expect to facilitate the organization of free agents into project teams,
by providing them with web pages on FREEAGENT.COM where they can manage critical
project information and documents and hold interactive work sessions.
FREEAGENT E.OFFICE SERVICES. FREEAGENT.COM offers free agents a broad range
of back-office administrative services and corporate-level benefits designed
exclusively for them, which we call FREEAGENT E.OFFICE services. These services
and benefits consist of project invoicing, billing and collections, payroll tax
withholding, project expense reimbursement, general liability insurance, group
health insurance, a 401(k) plan and Opus360 stock options.
Free agents typically do not readily have access to these services and
benefits on terms that are comparable to those offered in a traditional
corporate setting. Our FREEAGENT E.OFFICE services offer, on a pre-tax basis,
project expense reimbursement and group medical, dental and life insurance
coverage at premiums priced to reflect the collective purchasing power of the
free agents who buy coverage, as well as the right to participate in a 401(k)
plan with a variety of investment funds. We also offer participating free agents
the opportunity to receive Opus360 stock options. As of January 31, 2000,
approximately 285 of our registered free agents had elected to receive our
FREEAGENT E.OFFICE services.
Free agents who purchase our FREEAGENT E.OFFICE services can choose between
two different membership plans, the terms of which differ based on whether the
free agent desires to receive group healthcare insurance and be eligible to
participate in our 401(k) plan. We expect to offer additional plans in the
future. Free agents who purchase our FREEAGENT E.OFFICE services are our
employees, for whom we withhold payroll taxes and provide IRS Form W-2s.
We believe that our FREEAGENT E.OFFICE services are especially valuable to
free agents who must expend substantial amounts of time managing their projects,
must purchase expensive general liability, errors and omissions or other
insurance to satisfy clients, and must spend significant amounts of time
searching for cost-effective health benefits and pension plans. In addition,
many organizations require IRS Form W-2 hourly contracts, which our FREEAGENT
E.OFFICE services provide. The benefits provided by our FREEAGENT E.OFFICE
services are fully portable, enabling free agents to work on whatever projects
they choose with the knowledge and security that their benefits will remain in
place.
BUSINESS PRODUCTS AND SERVICES. FREEAGENT.COM is also an online marketplace
where free agents can buy commercial and professional products and services
which they can use for their businesses. These include computers, business
cards, industry group membership, fax and communication equipment, office
supplies and training and reference materials. We expect that as the
FREEAGENT.COM community continues to grow, we will be able to take greater
advantage of the purchasing power of this community to obtain volume price
discounts from product and service vendors that desire to participate in this
marketplace.
ITHORITY.
Our recent acquisition of Ithority expands our FREEAGENT.COM marketplace to
include any buyer or seller of expert knowledge. Ithority's knowledge
marketplace connects experts on a variety of subjects, such as technology,
software development, strategic consulting and design with buyers requiring such
knowledge. These buyers and sellers generally negotiate a fee for the sale of
this knowledge and we expect to receive a percentage of this fee for
facilitating the transaction. We plan to integrate Ithority into FREEAGENT.COM
during the first half of 2000.
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OPUS XCHANGE
OPUS XCHANGE is an Internet platform that enables corporations, professional
services firms and staffing companies to post projects and procure free agents
for project assignments. OPUS XCHANGE is designed to perform a detailed match of
a project manager's specific project skill requirements with the corresponding
skills set forth in E.PORTFOLIOS, producing a more accurate match than a
traditional text-based resume search.
Our enhanced version of OPUS XCHANGE is designed to enable our customers to
identify and procure professionals using more sophisticated matching
technologies and to significantly reduce candidate search and procurement costs
by automating the requisition, approval and engagement processes. The typical
process today for procuring external, project-based workers is a manual,
paper-based and inefficient process. Our enhanced version of OPUS XCHANGE
reduces the costs of hiring professionals by automating the procurement process
over the Internet to reduce time and labor costs. We believe each of our OPUS
XCHANGE services will benefit both buyers and professionals by creating a more
efficient labor procurement marketplace.
Our enhanced version of OPUS XCHANGE is designed to automate the following
steps of the labor procurement process:
- THE COMPLETION OF AN ONLINE REQUISITION FOR A PROFESSIONAL. Today,
requisitions are often completed on a piece of paper and faxed to the
supplier or communicated by telephone which often results in information
being missed and the exact requirements not being captured. OPUS XCHANGE
is designed to allow project managers to enter their exact requirements
online and to instantaneously send this requisition to various suppliers
with the press of a button rather than sending multiple faxes or making
multiple phone calls.
- THE EVALUATION OF QUALIFIED CANDIDATES FOR A PROJECT. Using OPUS XCHANGE,
suppliers and individuals will be able to submit their E.PORTFOLIO
directly for viewing by the project manager. OPUS XCHANGE will allow the
project manager to have a single screen or home page on OPUS XCHANGE to
view all E.PORTFOLIO responses from suppliers and individuals, in contrast
to the typical process of receiving various faxed resumes and/or email
responses.
- THE SCHEDULING OF CANDIDATE INTERVIEWS. Through OPUS XCHANGE, suppliers
and individuals will be able to suggest available interview times when
they submit their response forms. Project managers may then accept the
appropriate interview times online when they select the candidate for
interviews. Today, the process is often completed through multiple phone
calls and lengthy coordination between the project manager and the
supplier.
- THE COMPLETION OF ONLINE EVALUATION FORMS. Rather than a paper-based
evaluation form or even a wordprocessor-based evaluation form, OPUS
XCHANGE will supply an on-line evaluation form for interviewees and
project managers. These evaluation forms will also be distributed
automatically to the project manager with a reminder to complete the
evaluation. Today, this process is often completed manually.
- THE COMPLETION OF PROJECT TIME AND EXPENSE REPORTS. Through OPUS XCHANGE,
organizations and professionals will be able to complete online time and
expense reports. These time and expense reports will then be automatically
routed to the various approvers on both the buyer and supplier sides of
the transaction. Today, the time and expense reports are typically
completed manually, on spreadsheets or paper-based forms. Often buyers and
suppliers have their own time and expense systems which are often
different or incompatible so that the information must be entered twice
because there is often no connection between the buyer and supplier
systems.
OPUS XCHANGE is designed to be accessed and used as a stand-alone
application or it can be used together with OPUSRM AND FREEAGENT.COM as an
integrated solution. To facilitate transactions in the OPUS XCHANGE marketplace,
we are implementing open XML standards that will enable corporations,
professional service firms, staffing companies and other buyers and providers of
professionals to connect their existing and new systems to OPUS XCHANGE
including OPUSRM or other resource management applications.
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We expect to commercially release the enhanced version of OPUS XCHANGE for
large corporate clients during the first half of 2000 that will incorporate more
advanced matching capabilities and the TCQ(2) vendor management tracking system.
TCQ(2) is an internally developed performance tracking system that evaluates the
service of vendors and free agents based on time, cost, quality and quantity.
The enhanced version of OPUS XCHANGE will capture TCQ(2) data and develop
performance metrics for all transactions conducted through the OPUS XCHANGE
marketplace.
TCQ(2) data will be supplied to buyers of project-based professionals to
enable them to make better sourcing decisions, such as evaluating competing bids
by professional services firms or free agents for projects or project
deliverables. This data will also be offered to staffing companies and sellers
of project-based professionals in a generalized form to establish benchmarks to
enable them to compare themselves to peers and to improve project performance.
OPUSRM
OPUSRM provides organizations with a labor resource management tool designed
to centralize resource and project information to enable organizations to more
efficiently manage complex projects, increase utilization rates, streamline
project schedules, coordinate project data, predict resource shortages and
surpluses and provide access to performance results. OPUSRM is designed to
optimize core business processes by:
- assigning the most-qualified professionals to a particular project by
matching project requirements with individual skills, expertise and
availability;
- monitoring internal and external labor resource utilization
organization-wide, across projects, industries, geographic regions and
personnel groups, to decrease downtime costs and improve profitability;
- delivering real-time project and resource related information online, with
detailed reporting on project finances and labor utilization, to eliminate
the need for labor-intensive, manually generated project and financial
reports;
- disseminating project information on a timely basis to project field
managers for analysis that previously was available only after the
completion of a project through a review of multiple accounting reports.
OPUSRM's flexible Internet architecture makes it customizable to the
specific requirements of organizations without substantial additional cost or
lengthy implementation cycles. OPUSRM is designed to manage internal labor
resources and, if integrated with OPUS XCHANGE, will also manage the procurement
of external resources for projects. OPUSRM can be integrated with existing
systems and incorporate company data. Through web browsers, our OPUSRM service
will permit user access through the Internet from remote hosting facilities
located anywhere in the world, enabling organizations and free agents to
interface and work as teams on assigned projects using a common platform.
We believe customers will increasingly use Internet applications instead of
traditional client-server systems, which are often difficult to learn and costly
to maintain. We intend to form strategic relationships with complementary
systems integrators, web integrators, and web consulting firms to create a
valuable support and implementation organization for OPUSRM.
PEOPLEMOVER
On January 30, 2000, we entered into an agreement to acquire PeopleMover.
PeopleMover is a developer of Internet-based resource management application
services, similar to our OPUSRM service, that are designed to increase workforce
utilization, improve service delivery and increase employee retention. Its
principal application service, PEOPLEMOVER/STAFFING, is designed to improve
resource management efficiencies within staffing companies by automating quality
assurance calls, managing service relationships, marketing professionals for
project assignments, matching project requirements with skills listed by
professionals and providing real-time sales and project activity reporting.
PeopleMover currently provides its PEOPLEMOVER/
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STAFFING service to leading staffing companies such as Robert Half
International, Re: sources Connection and Net-Strike Worldwide.
Customer and Business Alliances
As of December 31, 1999, 234 organizations have used our FREEAGENT E.OFFICE
employees. These organizations include large and medium-sized companies that
operate across a broad range of industries, including computer software,
computer hardware, finance, telecommunications and aerospace. Companies which
have procured FREEAGENT E.OFFICE employees on at least three or more occasions
include:
<TABLE>
<S> <C> <C>
Computer Horizons Corporation MISI Co., Ltd. Transaction Information
Systems
Design Strategy NEC Corporation TSR Consulting Company
Information Technology Pfizer Incorporated Vital Computer Services
Partners
Lucent Technologies Tiburon Group Inc.
</TABLE>
We have entered into an agreement with CAREERPATH.COM, a leading recruiting
solutions company that provides career counseling and job placement services
over the Internet, to jointly develop a co-branded web site featuring content
and services geared toward free agents. The co-branded website will:
- allow CAREERPATH.COM's affiliated network of over 100 leading newspapers
to list projects on OPUS XCHANGE;
- allow employers to procure professionals through the co-branded website
and individuals to obtain all of the products and services available on
FREEAGENT.COM; and
- allow CAREERPATH.COM's current database of over 1,000,000 individuals to
be matched to projects through OPUS XCHANGE.
We agreed with CAREERPATH.COM to jointly share the costs associated with
building the co-branded website which we estimate to be $180,000. Any amounts in
excess of this estimate will be our responsibility. We have agreed to a revenue
sharing arrangement with CAREERPATH.COM for transactions conducted through the
co-branded website, including project listing and placement fees, subscriptions
for products and services and advertising revenue. We agreed to pay
CAREERPATH.COM an advance on its revenue share and for advertising fees to
promote the co-branded website in their affiliated newspapers through the
issuance of 163,570 shares of our common stock.
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OPUS XCHANGE
The following is a list of customers who have entered into agreements with
us to post projects to OPUS XCHANGE:
<TABLE>
<S> <C> <C>
Aegis Software Inc. ISAM People Unlimited Consulting Inc.
Cambridge Technology Partners J.P. Morgan & Co. Primenet Inc.
CompuCom Systems, Inc. Klein Management Systems recruit.com Inc.
Concise Design Inc. Lucent Technologies Inc. RCM Technologies Inc.
Eland Solutions, LLC MDTSC SVR Group Inc.
ETR Technology Center MISI Co., LTD The Sporn Group
Gregory & Gregory Legal Staffing NSP Inc. TIS Worldwide
International Informaric Solutions Inc. Paragon Computer Professional Inc.
</TABLE>
In addition, Cambridge Technology Partners, CompuCom Systems, Inc., J.P.
Morgan & Co. and Lucent Technologies Inc. have entered into agreements with us
to use our enhanced version of OPUS XCHANGE.
OPUSRM
The following is a list of customers who have entered into agreements with
us to use OPUSRM:
<TABLE>
<S> <C> <C>
CompuCom Systems, Inc. Lucent Technologies Inc. PricewaterhouseCoopers*
CyberSafe Corporation PRT Group, Inc. Sapient Corporation
</TABLE>
- ------------------------
(*) Indicates only a provider of OPUSRM integration and implementation
services.
PEOPLEMOVER/STAFFING
The following is a list of customers that have entered into agreements with
PeopleMover to use PEOPLEMOVER/STAFFING:
<TABLE>
<S> <C> <C>
Aetea Information Technology, Furst Staffing Services Robert Half International Inc.
Inc. Global Employment Solutions, The TriStaff Group
DM Stone, Inc. Inc. Superior Technical Resources,
Dunhill Staffing Systems, Inc. Re: sources Connection LLC Inc.
</TABLE>
Product and Service Providers
The following product and service providers promote their offerings through
FREEAGENT.COM either directly or through third parties. We generally receive a
percentage of the revenues generated by these parties from the sale of these
products and services to users of FREEAGENT.COM. These product and service
providers include:
<TABLE>
<S> <C> <C>
1-800-Flowers Furniture.com Qspace
2ThankU.com Gift Certificate.com QuickSand
ActBig.com HealthAxis.com Send.com
Alias Wavefront IBA Insurance Sessions.edu
Amazon.com Investors Broadcast Net SmartShip.com
Bell South iPrint.com Staples.com
BizBuyer JCM Enterprise TechInsurance.com
Bizfone LinkShare Textbooks.com
Card Star McAfee The Gift.com
ConsumerInfo.com My Talk.com Timebills
Crucial Technology Office Max Tutorials.com
Datafix.com OneCore.com Veritec Inc.
Dell Computer Corporation PC Connections WebCriteria
e*Stamp Perfect Cents.com Webtrends
Enews Prestige Yellowpages.com
</TABLE>
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Content and Distribution Partners
We have entered into agreements with the following companies that will
provide content to FREEAGENT.COM and/or will feature FREEAGENT.COM products and
services and OPUS XCHANGE on their websites or on co-branded websites,
including:
<TABLE>
<S> <C> <C>
AltaVista (through Worklife Solutions, Inc.) Career Exchange Wall Street Journal Interactive Edition
Contract Professional Gartner Institute Vault.com
CareerPath.com Screaming Media
</TABLE>
Sales and Marketing
We sell our integrated services through our direct sales organization and
strategic alliances. As of December 31, 1999, our direct sales force consisted
of 10 sales professionals. We plan to expand our direct sales force in the near
future, with regional sales managers located in Chicago, Atlanta, San Francisco,
Toronto and other major metropolitan areas. We have commenced an aggressive
marketing campaign which includes print, radio and online advertising to build
our existing base of registered free agents and to further promote
FREEAGENT.COM.
For our OPUSRM service, which we expect to release during the first half of
2000, we typically target our direct sales efforts at senior executives and
chief technology officers within large professional services companies, Fortune
1000 information technology departments, large information technology staffing
companies and the service divisions of large software/hardware organizations
that require assistance in managing a workforce of varying skills and staffing
projects across a wide corporate enterprise. We work with prospective clients to
analyze how OPUSRM can best be integrated into existing management systems. We
intend to use these larger clients to develop a sales channel into mid-market
firms.
Technology
We have developed Internet applications that are designed for high-level
performance and reliability using standard tools and computer languages. We
believe that these applications lower an organization's total cost of ownership
because they are relatively easy to use and maintain and to integrate into an
existing intranet or Internet framework. Due to the ease of use and intuitive
nature of web browser interfaces, the training required for the use of these
applications is minimal, so that organizations are more likely to use these
applications. Upgrades of Internet-based applications are much easier to
implement across organizations since the upgrades do not need to be directly
installed on our clients' systems. We believe that these Internet-based
applications are also generally well-suited for the application service provider
model, which simplifies the installation, upgrade and maintenance process for
these applications.
We are able to leverage existing third-party tools, such as web application
servers, to provide standard services which enhance the performance, reliability
and redundancy of our applications. Use of these tools and frameworks allows us
to focus on higher value-added business functionality rather than building and
maintaining complex infrastructure code. These tools and frameworks provide
advanced services, including message queuing, resource pooling, transaction
distribution and management, and security, and enable our services to be
deployed on a variety of server platforms such as Unix or WindowsNT.
Our Internet applications, OPUSRM and OPUS XCHANGE, are written in the Java
programming language. We use open standards, such as XML (extensible markup
language) as our means of communicating between our systems, which facilitates
our integration with customers and partners in an open, network environment. We
use other open, Internet standards such as SSL (secure sockets layer) for secure
transmission of data and HTML (hypertext markup language) and DHTML (dynamic
hypertext markup language) for presentation of information in web browsers.
Our development team employs object-oriented analysis and design principles
in order to guide the development of software code. Our methodology allows us to
exploit the capabilities of object-oriented
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programming languages like Java to build reusable components and designs. This
methodology helps to reduce the risks inherent in developing complex systems and
also helps us design our solutions to meet the varied needs of our customers.
Parts of our application services were based on intellectual property that
we acquired from PRT Group and USWeb Corporation. In December 1998, we purchased
from PRT the worldwide rights for intellectual property and any and all work
covering a vendor management application. This intellectual property for the
vendor management application was created in the course of PRT's consulting
services for several large financial institutions assisting these companies in
their vendor reorganizations. Some of our design concepts for OPUS XCHANGE are
based on this intellectual property. In 1998, we purchased from USWeb the
worldwide rights to the intellectual property and all work surrounding an
internal staffing application, which was developed first at Gray Peak
Technologies and, following USWeb's acquisition of Gray Peak, later at USWeb.
Some of this intellectual property was used to help design part of our OPUSRM
application service.
Competition
The market for each of our integrated services is intensely competitive and
rapidly changing, and competition is expected to intensify in the future. Our
competitors vary in size and in the scope and breadth of the products and
services that they offer. In addition, because there are relatively low barriers
to entry in some of the markets in which we offer solutions, we expect further
competition from established and emerging companies, as these markets continue
to grow.
Our FREEAGENT.COM service competes with traditional offline companies that
offer back office, administrative and benefit services to independent
professionals, and new web-based companies, that have created Internet
communities with content, products and services geared toward independent
professionals.
Our OPUS XCHANGE service competes with traditional recruiting, search and
placement firms such as headhunters, including those that implement online
services, and online "job board" solutions, such as Monster Talent Market, and
large Internet information portals, that provide online job search services for
project-based professionals. We may experience competition from potential
customers, such as professional services firms and information technology
consulting companies, if they are able to develop their own search solutions for
project-based professionals internally. We may experience additional competition
if online providers of recruiting services relating to full-time employment
enter the market for project-based labor.
Our OPUSRM service will compete with companies offering traditional
enterprise resource planning solutions, particularly those that adopt resource
management solutions and implement web-based technologies, including companies
which provide competitive project labor management solutions, and business
application software vendors that may broaden their software offerings by
internally developing, acquiring or partnering with independent developers of
project labor management software.
We believe that there are a number of companies that offer services that
provide one or more aspects of the functionality of our services. However, we do
not believe that there are any competitors which are dominant in our market.
Many of our competitors and potential competitors have longer operating
histories, larger customer bases, wider brand recognition and greater financial,
technical, marketing and other resources than we do. Our current and potential
competitors may make strategic acquisitions or develop cooperative
relationships, in addition to the ones they have established, in order to expand
their business or offer more comprehensive solutions than we do. In addition,
new technologies and the expansion of existing technologies may increase
competitive pressures on us.
We believe that companies in our target market compete primarily on the
basis of:
- breadth and functionality of services;
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- the extent of their relationships with organizations across the labor
supply chain, including professional services firms, staffing companies
and other suppliers of professional resources, that procure professionals
and individuals who are available for projects;
- product quality and performance;
- product features and functionality; and
- ease of integration and customization.
We believe we distinguish ourselves from our competitors by offering a full
complement of solutions geared toward the procurement and management of
project-based professionals. However, the rapid pace at which the market is
evolving, both in terms of technological innovation, increased functionality and
service offerings, will require us to continually improve our infrastructure and
our Internet platform. We cannot assure you that we will be able to respond
adequately to these competitive challenges. If we are not able to compete
successfully against current and future competitors, our business could be
materially adversely affected.
Intellectual Property
We depend on our ability to develop and maintain the proprietary aspects of
our technology. To protect our proprietary technology, we rely primarily on a
combination of contractual provisions, confidentiality procedures, trade secrets
and patent, copyright and trademark laws. We seek to avoid disclosure of our
trade secrets by implementing procedures, including but not limited to,
requiring those persons with access to our proprietary information to execute
confidentiality agreements with us and restricting access to our source codes.
We seek to protect our software, documentation and other written materials under
trade secret and copyright laws, which afford only limited protection. We cannot
assure you that any of our proprietary rights with respect to our products and
services will be viable or of value in the future since the validity,
enforceability and type of protection of proprietary rights in Internet-related
industries are uncertain and still evolving.
We presently have one U.S. patent application pending for the "OPUS360
Knowledge Worker Network" which describes the processes and technology involved
in implementing an Internet-based supply chain solution for matching people and
projects. It is possible that the patent that we have applied for, if issued, or
patents we may apply for in the future, if any, may be successfully challenged
or that no patent will be issued. It is also possible that we may not develop
proprietary products, including technologies that are patentable, that any
patent issued to us may not provide us with any competitive advantages or that
the patents of others will seriously harm our ability to do business. We have
filed applications with the U.S. Patent and Trademark Office for service marks
that include OPUS360, OPUS FREEAGENT, FREEAGENT.COM, OPUSRM, E.PORTFOLIO,
FREEAGENT E.OFFICE, FREEAGENT, OPUS XCHANGE and FREEAGENT XCHANGE. These
applications are subject to review, may be opposed by private parties and
registrations may not be issued from these applications. We have not filed
applications for OPUSRM, FREEAGENT E.OFFICE or E.PORTFOLIO.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or services or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and while we are unable to determine the extent to which
piracy of our software products exists, software piracy can be expected to be a
persistent problem. In addition, the laws of some foreign countries do not
protect our proprietary rights to as great an extent as do the laws of the U.S.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around patents issued to us or our other intellectual property.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. We cannot be certain
that our products, content and brand names do not or will not infringe upon
valid patents, copyrights or other intellectual property rights held by others.
We expect that the number of infringement claims will increase as more
participants enter our markets.
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In July 1999, we received a letter from counsel to the San Jose Mercury News
alleging that our use of the service mark FREE AGENT and our registration of the
domain name WWW.FREEAGENT.COM with Network Solutions, Inc. infringed upon
Mercury News' federal registration of the mark FREE AGENT for a computerized
online matching service and violated Network Solutions' Domain Name Dispute
Policy. The letter requested that we cease all use of the mark FREE AGENT for
online job searching services and transfer the domain name WWW.FREEAGENT.COM to
the Mercury News. While we believe we have valid defenses to the claims, in the
event we are unable to resolve this issue with the Mercury News and it decides
to bring an infringement claim against us or to institute an arbitration
proceeding against us under Network Solutions' Domain Name Dispute Policy, we
would likely incur significant expense in defending against the claim or in
connection with the arbitration proceeding. In addition, if a claim of
infringement is made and we are not successful in defending against the claim,
we could be liable for substantial damages. We could also be required to cease
use of the FREE AGENT mark and transfer our WWW.FREEAGENT.COM domain name to the
Mercury News. We have expended, and will continue to spend, substantial amounts
in order to promote the WWW.FREEAGENT.COM brand name, the benefits of which
would be lost if we could no longer use that mark. In addition, we would need to
incur substantial additional expenses to promote a new brand name. Until such
time as free agents and buyers requiring individuals with specific professional
skills to fulfill project needs became aware of any new brand name and website,
our transaction volume could be substantially limited.
It is possible that in the future other third parties may claim that we or
our current or potential future products or services infringe their intellectual
property. We expect that software product developers and providers of electronic
commerce solutions will increasingly be subject to infringement claims as the
number of services, products and competitors in our segment of the industry
grows and the functionality of services and products in different segments of
the industry overlaps. We may be subject to legal proceedings and claims from
time to time relating to the intellectual property of others in the ordinary
course of our business. Any claims, with or without merit, could be
time-consuming, result in costly litigation, cause delays in the introduction of
service or product enhancements or require us to enter into royalty or licensing
agreements. Royalty or licensing agreements, if required, may not be available
on terms acceptable to us or at all, which could seriously harm our business.
Industry Regulation
By entering into employment relationships with the free agents who purchase
FREEAGENT E.OFFICE services, we assume a variety of obligations,
responsibilities and liabilities of an employer under federal and state laws.
Many of these federal and state laws were enacted prior to the development of
non-traditional employment relationships, such as temporary employment and
outsourcing arrangements, and do not specifically address the obligations and
responsibilities applicable to us by reason of our FREEAGENT E.OFFICE services.
Whether certain laws apply to us depends in many cases upon whether we are
deemed to be an "employer" for purposes of the law. The definition of "employer"
under these laws is not uniform and, therefore, the application of these laws to
our business is not always certain. In many cases, a person's status as an
"employer" is determined by application of a common law test involving the
examination of several factors to determine an employer/employee relationship.
Uncertainty as to the application of laws governing "employer" relationships is
particularly important to us in federal employment tax and employee benefit
matters.
EMPLOYER STATUS. The common law test of employment, as applied by the IRS
for employment tax and employee benefit plan purposes, involves an examination
of approximately 20 factors to ascertain whether an employment relationship
exists between a worker and a purported employer. That test is generally applied
to determine whether an individual is an independent contractor or an employee
for federal employment tax and employee benefit plan purposes. Among the various
categories of factors which appear to be considered more important by the IRS
are the employer's degree of behavioral control, such as the extent of
instructions, training and the nature of the work; the financial control or the
economic aspects of the relationship; and the intended relationship of the
parties, such as how the relationship is described in written agreements, how
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compensation is reported for income and employment tax purposes, whether
employee benefits are provided, and whether services are ongoing or for a
particular project.
EMPLOYMENT TAXES. We assume the sole responsibility and liability for the
payment of federal and state employment taxes with respect to wages and salaries
paid to our FREEAGENT E.OFFICE employees out of the gross amounts received by us
from the organizations to whom they have provided services through us. There are
three types of federal employment taxes with respect to wages and salaries paid
to employees: withholding of income tax requirements, obligations under the
Federal Income Contributions Act, and obligations under the Federal Unemployment
Tax Act. Employers have the obligations to withhold and remit the employer
portion and, where applicable, the employee portion of these taxes. To date, the
IRS has relied extensively on the common law test of employment in determining
employer status and the resulting liability for failure to withhold. Upon an
examination of our operations, the IRS or other taxing authorities may determine
that we are not the employer of the free agents who purchase FREEAGENT E.OFFICE
services under the Code provisions applicable to federal employment taxes and,
consequently, that the organizations using these free agents for projects
through our FREEAGENT E.OFFICE services are exclusively responsible for payment
of employment taxes on wages and salaries paid to these free agents. A
determination by the IRS or other taxing authorities that we are not the
employer of free agents who purchase FREEAGENT E.OFFICE services would
negatively impact our ability to report employment taxes for these free agents.
An adverse determination of this type could also result in joint and several
liability for any organization that has used these free agents through our
FREEAGENT E.OFFICE services if we have failed to remit the proper amount of
employment taxes with respect to these free agents. While we believe that we
have a reasonable basis for assuming the withholding obligation for free agents
based on our employment relationships with them, there can be no assurance as to
the ultimate resolution of the issue. A definitive adverse resolution of this
issue to the effect that free agents are not our employees for employment tax
purposes, could substantially limit our ability to aggregate a large community
of free agents and attract organizations to use free agents through our
FREEAGENT E.OFFICE services.
EMPLOYEE BENEFIT PLANS. FREEAGENT.COM offers various benefit plans to the
free agents who purchase FREEAGENT E.OFFICE services. These plans include a
401(k) plan, a group health plan, a group life insurance plan, and a group
disability insurance plan. Generally, employee benefit plans are subject to
provisions of both the Code and the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). In order to qualify for favorable tax treatment
under the Code of the payments or contributions made with respect to these
plans, the plans must be established and maintained by an employer for the
exclusive benefit of its employees. An IRS examination of us and/or an
organization using free agents for projects through our FREEAGENT E.OFFICE
services may determine that we are not the employer of these free agents under
the Code provisions applicable to employee benefit plans. Consequently, we may
be unable to offer free agents who purchase FREEAGENT E.OFFICE services benefit
plans that qualify for favorable tax treatment. If the IRS or other taxing
authorities were to conclude that we are not the employer of these free agents
for plan purposes, these free agents could not continue to make tax favored
deductions or contributions with respect to these benefit plans. This conclusion
by the IRS or other taxing authorities would prevent us from continuing to
provide an important corporate-style benefit as part of our FREEAGENT E.OFFICE
services and could have a material adverse effect on our continuing ability to
aggregate a large community of free agents. While we believe that we have a
reasonable basis for concluding that free agents who purchase our FREEAGENT
E.OFFICE services are our employees for purposes of these laws and regulations,
there can be no assurance as to the ultimate resolution of these issues.
Employee pension and welfare benefit plans are also governed by ERISA. The
United States Supreme Court has held that the common law test of employment must
be applied to determine whether an individual is an employee or an independent
contractor under ERISA. A definitive judicial interpretation of the employer in
the context of the type of arrangement provided by our FREEAGENT E.OFFICE
services has not been established. If we were found not to be an employer for
ERISA purposes, our plans would not be subject to ERISA. As a result of a
finding of this type, we and our plans would not enjoy the preemption of state
law
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provided by ERISA and could be subject to varying state laws and regulations, as
well as to claims based upon state common laws.
STATE REGULATION. As the employer-employee relationship has evolved, states
in the U.S. have regulated the various aspects of this relationship to varying
lengths. Because many of these labor laws were enacted before the rise of
alternative employment arrangements and services, like those contemplated by our
FREEAGENT E.OFFICE services, the full extent to which these laws cover us is
uncertain. FREEAGENT E.OFFICE services have attributes that may trigger
compliance requirements under state employee leasing laws, employment agency
laws or temporary employment laws, as well as under other state laws. Some
states regulate employee leasing companies, employment agencies and temporary
staffing companies, while most states focus on only one or two of these types of
businesses. Some states have not yet regulated any of these types of businesses.
State statutory definitions and requirements concerning these types of
businesses are occasionally similar, but generally all of them differ in several
important respects, requiring us to consider our legal obligations on a
state-by-state basis. To the extent we are governed by any of these state
regulations, we may be subject to additional licensing requirements and
financial oversight. We expect to incur substantial expenses in order to comply
with these laws.
Employees
As of December 31, 1999, we had 425 full-time employees, including 270 free
agents who had purchased our FREEAGENT E.OFFICE services, and 155 corporate
staff members. Of our corporate staff, 63 were in programming and technical
development, 39 were in sales, marketing, and business development, 26 were in
customer support and operations and 27 were in finance and administration. In
addition, we expect to hire a significant number of new employees for our
corporate staff in the near future. None of our employees is represented by a
labor union or a collective bargaining agreement. We have not experienced any
work stoppages and consider our relations with our employees to be good. We have
added four employees in connection with our acquisition of Ithority and expect
to add approximately 90 additional employees upon consummation of the
PeopleMover acquisition.
Free agents who purchase our FREEAGENT E.OFFICE services are treated as our
employees. Each of these free agents signs an agreement with us acknowledging
that the free agent will be our employee for so long as the free agent elects to
receive our FREEAGENT E.OFFICE services. The free agent locates, chooses and
negotiates the details of a project assignment with the assistance of a
relationship manager, in the same manner as the free agent would before becoming
our legal employee. While the free agent may be our legal employee, we allow the
free agent to retain complete discretion as to the free agent's procurement,
selection and negotiation of project assignments. For quality assurance reasons,
we require that each free agent who purchases our FREEAGENT E.OFFICE services
has a project assignment for which the free agent will use the service prior to
signing up to our services initially. In connection with each assignment, the
FREEAGENT E.OFFICE employee advises us of the details of the project and we
enter into an agreement with the organization assigning the project that sets
out the details of the project and specifies that the free agent shall be our
employee assigned to the project. During the engagement, the free agent submits
to us a time record on an easy-to-complete online form, specifying the hours
worked on the project assignment. We prepare and send a professional invoice to
the party responsible for payment under the project who makes payment directly
to us, and we provide detailed reporting to the free agent of the status of each
project. Upon the request of the free agent, we may also handle collections from
delinquent payors. Upon our receipt of project-related payments, we pay or
reimburse the free agent's project-related expenses, pay the premiums for the
free agent's insurance coverage, including health care coverage if the coverage
has been elected, make the free agent's desired 401(k) plan contributions, if
this service has been elected, withhold any required federal, state and local
taxes and prepare any required IRS Form W-2's or other tax forms. We then remit
a portion of all of the remaining funds to the free agent as wages and salary.
We are currently adopting procedures to ensure that our FREEAGENT E.OFFICE
employees meet appropriate standards, such as the completion of background and
credit checks, ongoing monitoring of project status, the solicitation of
performance reviews from the organizations to whom services are provided and the
standardization of contracts with such organizations.
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Facilities
Our corporate headquarters are currently located at 733 Third Avenue, New
York, New York 10017, where we occupy approximately 15,000 square feet of office
space under a lease that will expire in February 2000. We also lease an office
located at 425 Market Street in San Francisco, California. In March 2000, we
intend to relocate our corporate headquarters to 37 West 13(th) Street,
New York, New York 10019, where we have entered into a lease for approximately
25,000 square feet of office space.
Legal Proceedings
Although we are not currently a party to any litigation, we may from time to
time become involved in litigation relating to claims arising from our ordinary
course of business.
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MANAGEMENT
The following table sets forth information relating to our directors and
executive officers.
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- -------- -----------
<S> <C> <C>
Ari B. Horowitz.............. 31 Chairman of the Board and Chief Executive Officer
Richard S. Miller............ 41 President, Chief Operating Officer and Director
Carlos B. Cashman............ 27 Chief Technology Officer
Shawn D. Kreloff............. 36 Executive Vice President, Business Development
Allen Berger, Ph.D........... 56 Senior Vice President; General Manager, FREEAGENT.COM;
Chief Marketing Officer
Richard McCann............... 31 Senior Vice President and Chief Financial Officer
Wendy M. Petty............... 36 Senior Vice President of Sales
Edyse Vogel.................. 50 Senior Vice President of Operations
Mary Anne Walk............... 52 Senior Vice President, Human Resources
Andrew Grygiel............... 40 Vice President, General Manager, Application and
Procurement Services Group
James Cannavino.............. 55 Director
John L. Drew................. 43 Director
John K. Halvey............... 39 Director
Irwin Lieber................. 60 Director
William R. Nuti.............. 36 Director
Barry Rubenstein............. 56 Director
Roger J. Weiss............... 60 Director
</TABLE>
ARI B. HOROWITZ, our co-founder, has served as Chairman of the Board since
inception, as Chief Executive Officer since April 1999 and as President from
November 1999 to January 2000. From June 1998 to March 1999, Mr. Horowitz served
as a Senior Managing Partner of USWeb/CKS. From March 1997 to June 1998, he
served as President and Chief Financial Officer of Gray Peak Technologies, a
network consulting company. From September 1994 to March 1997, he served as
Chief Financial Officer and as Vice President, Finance and Business Development
of ICon CMT Corp., an Internet service provider. From July 1992 until
September 1994, Mr. Horowitz was a Principal and Director of Finance and
Business Development of Conley Corporation, a developer of storage management
software. Mr. Horowitz currently serves as a director of NetVendor Systems, a
provider of e-markets for the industrial, electronics and automotive sectors.
Mr. Horowitz holds a B.A. degree in Economics from the University of
Pennsylvania.
RICHARD S. MILLER has served as our President and Chief Operating Officer
and as a director since February 2000. From December 1998 to January 2000, he
served as President of the Global Services Division at AT&T which provides
telecommunication services to AT&T's largest corporate clients. From
September 1995 to November 1998, he was Vice President of the Eastern Region in
Global Services and served as a member of the leadership team of AT&T's Business
Services Unit. From January 1995 to August 1995, he was Vice President and
General Manager, Communications Services Division at Unisys Corporation. From
January 1992 to December 1994, he served as Regional Vice President at Unisys.
Prior to 1994, he held a series of sales, marketing and general management
assignments at Unisys where he began his career in 1980. Mr. Miller graduated
with a B.S. degree in Business Management from Bentley College and holds an
M.B.A. from Columbia University.
CARLOS B. CASHMAN, our co-founder, has served as Chief Technology Officer
since November 1999, as a director from inception until January 2000; and as
President from inception until November 1999. From June 1997 until June 1998,
Mr. Cashman served as Chief Information Officer of Gray Peak Technologies. From
February 1996 to June 1997, he served as Chief Technology Officer of Frankfurt
Balkind Partners, an intranet and web design firm. From July 1994 to
January 1996, he was Manager of UNIX Engineering at Conley Corporation, handling
software development, hardware engineering and OEM contracts for Unix
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products. Mr. Cashman holds a degree in Information Systems Engineering from the
Massachusetts Institute of Technology.
SHAWN D. KRELOFF has served as Executive Vice President, Business
Development, since April 1999. From June 1998 to March 1999, Mr. Kreloff served
as a Senior Managing Partner of USWeb/CKS. From March 1997 to June 1998, he
served as Chairman and Chief Executive Officer of Gray Peak Technologies. From
1995 through March 1997, he served as Vice President, On-line Services Business
Development, and Director of Operations at Bertelsmann AG. From 1988 through
1995, he served as Vice President of Network Services at Credit Suisse First
Boston. Mr. Kreloff holds a B.S. degree in Operations Research (Industrial
Engineering) from Syracuse University.
DR. ALLEN BERGER has served as Senior Vice President, General Manager,
FREEAGENT.COM, and as Chief Marketing Officer since April 1999. From May 1994 to
March 1999, Dr. Berger served as a partner and Vice President, Marketing and
Sales, at Cirrus Healthcare Products, a provider of travel health products which
he co-founded. From 1987 to 1994, he served as Chief Executive Officer of North
American Marketing Enterprises, a company specializing in direct marketing to
the packaged goods industry. From 1982 to 1987, he was a Vice President and
General Manager at Nestle Food Co. From 1979 to 1982, he served as Senior
Marketing Director at Gallo Wine Co. From 1967 to 1979, he served as Marketing
Director at Mars, Inc. Dr. Berger holds a Ph.D. degree in Industrial Psychology
from New York University.
RICHARD MCCANN has served as Senior Vice President and Chief Financial
Officer since August 1999. From June 1998 to July 1999, Mr. McCann served as
Finance Partner of USWeb/CKS. From July 1997 to June 1998, he served as the
Controller of Gray Peak Technologies. From January 1993 to July 1997, he worked
in the field of public accounting, specializing in corporate taxation, for the
firms of Kahan, Steiger & Co., LLP and Richard A. Eisner & Co., LLP. Mr. McCann
holds a B.S. degree in Business Management from the University of Vermont.
WENDY M. PETTY has served as Senior Vice President of Sales since
October 1999. From October 1996 to October 1999, Ms. Petty served in various
senior sales executive positions at Computer Associates International, most
recently as Senior Vice President of Channel Sales. From November 1990 to
October 1996, she held various sales and sales management positions at Cheyenne
Software Inc. While at Cheyenne, Ms. Petty served as Director, North American
Sales, Manager, Corporate Accounts and Western Regional Sales Manager. From 1989
to 1990, she was a consultant to NEC's Computers and Communications division.
From 1987 to 1989, she was the Director of Software Implementations at ENCORE
Systems, a developer of hospitality management software. Ms. Petty holds a B.A.
degree from Fairleigh Dickinson University.
EDYSE VOGEL has served as Senior Vice President of Operations since
June 1999. From July 1996 to June 1999, Ms. Vogel served as Director of Managed
Services for Bell Atlantic Network Integration at the Pinnacle Alliance, the
technology management unit of J.P. Morgan. From 1985 to 1996, Ms. Vogel served
as the Vice President of front office technology at Credit Suisse First Boston.
From 1976 to 1985, Ms. Vogel served as a Senior Manager of Financial and
Administrative Systems at Revlon Consumer Products Corporation. Ms. Vogel holds
a B.A. degree from Hofstra University and an M.A. degree from Kean College.
MARY ANNE WALK has served as Senior Vice President, Human Resources since
February 2000. From March 1999 until February 2000, Ms. Walk served as Vice
President, Human Resources at AT&T where she was responsible for global human
resources, policies and practices. From January 1996 until March 1999, she
served as Vice President, Labor Relations and Human Resources Business
Management for AT&T. From August 1992 to January 1996, Ms. Walk served as Human
Resources Vice President for the Business Communications Services Unit of AT&T.
From May 1964 to August 1992, Ms. Walk held various positions at AT&T and
Southwestern Bell Telephone Company. She is currently the Chairman of the Board
of Directors for the Employment Policy Foundation and a member of the Board of
Directors for the Labor Policy Association. Ms. Walk holds a B.S. Degree in
Business Administration from Tarkio College, an
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M.B.A. in Marketing from Fairleigh Dickinson University and a M.D. in Management
from the Massachusetts Institute of Technology as a Sloan Fellow.
ANDREW GRYGIEL has served as Vice President, General Manager of our
Application and Procurement Services Group since February 2000. Prior thereto,
Mr. Grygiel served as Vice President of Product Marketing, Application and
Procurement Services Group, since November 1999. From March 1999 to
October 1999, Mr. Grygiel served as Senior Director, Enterprise Solutions at
Chemdex Corporation. From March 1997 to March 1999, he served as Director,
Industry Marketing, of Documentum Inc., a developer of software for e-commerce
applications. From February 1995 to March 1997, he served as Product Manager of
Hewlett Packard Corporation. From January 1992 to February 1995, he served as
Marketing Manager of Perkin-Elmer Corporation. From 1989 to 1992, he served as
Vice President, Marketing, and co-founder of Analytical Solutions, Inc., a
developer of software for wholesale and retail distribution markets. From 1987
to 1989, he served as Vice President, Information Systems, at National Medical
Services Inc. Mr. Grygiel holds a B.S. degree from Temple University.
JAMES CANNAVINO has served as a director since January 1999. Mr. Cannavino
is Chief Executive Officer and Chairman of the Board of CyberSafe Corporation, a
developer of software used for security applications. Prior to joining
CyberSafe, Mr. Cannavino served as President and Chief Operating Officer for
Perot Systems Corporation. Until March 1995, he also held a variety of senior
executive positions at IBM, serving as senior vice president for strategy and
development at the time of his departure from IBM. Mr. Cannavino has served as a
member of the IBM Corporate Executive Committee and Worldwide Management Council
and as a member of the board of directors of IBM's Integrated Services and
Solutions Company. He currently serves as Chairman of the Internet Technology
Committee of Computer Concepts and as Chairman of the Board of Softworks, a
provider of enterprise data, storage and performance management products and
services.
JOHN L. DREW has served as a director since October 1999. Mr. Drew currently
is the Chief Executive Officer of the NetCare Professional Services Division of
Lucent Technologies, and an Executive Vice President of Lucent Technologies.
Mr. Drew joined Lucent in October 1999 following Lucent's acquisition of
International Network Services (INS), a network consulting company, at which
Mr. Drew was the President and Chief Executive Officer. Mr. Drew joined INS in
June 1994 as Vice President of Operations and was promoted to President in
January 1996. During the ten years before he joined INS, he held a variety of
senior executive positions at Unisys Corporation, serving as Vice President and
General Manager for the Network Enabled Systems Integration Business at the time
of his departure. Mr. Drew is also a Director of Linuxcare. Mr. Drew holds a
B.S. degree in Engineering from the U.S. Military Academy at West Point and an
M.S. degree in Business Policy from Columbia University.
JOHN K. HALVEY has served as a director since September 1999. Mr. Halvey
currently serves as a Senior Vice President at Safeguard Scientifics, Inc., a
holding company focused on acquiring and operating companies in the e-commerce,
e-business and e-communications sectors, where he is in charge of Safeguard's
e-business services operations. Prior to joining Safeguard, Mr. Halvey was a
partner at the law firm of Milbank, Tweed, Hadley & McCloy LLP, where he served
as the head of its Global Technology Transactions Group.
IRWIN LIEBER has served as a director since January 1999. Mr. Lieber
currently serves as Chairman and Chief Investment Officer of GeoCapital, which
he founded in 1979, and as a director of, or advisor to, Learonal, Inc., Ariel
Corporation, Giga Information Group, Inc. and ScanSource, Inc. Mr. Lieber has
served as President of Wheatley Partners, L.L.C., the General Partner of
Wheatley Partners, L.P., since its inception in 1996. In 1994, he co-founded
21st Century Partnerships, where he currently serves as a principal. In 1992, he
co-founded Applewood, an investment partnership, where he currently serves as a
principal.
WILLIAM R. NUTI has served as a director since June 1999. Since April 1992,
Mr. Nuti has been employed by Cisco Systems in a variety of positions, most
recently as Senior Vice President responsible for the Europe, Middle East and
Africa Region. From May 1990 to April 1992, he served as a sales manager with
Netrix Corporation, a developer of equipment for integrating voice, data and
video transmission over networks. From
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May 1988 to April 1990, he was a sales manager at Network Equipment
Technologies. From June 1982 to April 1988, he was employed in sales and as a
senior sales staff member at IBM. Mr. Nuti holds a B.S. degree in Finance and
Economics from Long Island University.
BARRY RUBENSTEIN has served as a director since January 1999.
Mr. Rubenstein currently serves as President and as a director of InfoMedia
Associates, Ltd., which is a General Partner of the 21st Century Partnerships.
He is also Chief Executive Officer of Wheatley Partners, L.L.C. and the General
Partner of Wheatley Foreign Partners, L.P., Seneca Ventures and Woodland Venture
Fund, each of which is an investment partnership. Mr. Rubenstein was a founder
of Novell, Inc., Applied Digital Data Systems, Inc. and Cheyenne Software, Inc.
Mr. Rubenstein also serves as a director of Infonautics, Inc., The Milbrook
Press, Inc. and Source Media Inc.
ROGER J. WEISS has served as a director since January 1999. Mr. Weiss was a
founding principal and is currently a Senior Managing Director of Weiss, Peck &
Greer Investments and chairman of all of the firm's mutual funds. Previously, he
was associated with A.G. Becker & Co., Inc. and the law firm of Cleary,
Gottlieb, Steen & Hamilton. He also was of counsel to the law firm of Schulte
Roth & Zabel LLP. Mr. Weiss serves as a trustee fellow of Cornell University and
is a member of the Board of Overseers of the Cornell Medical College and Vice
Chairman of the Investment Committee of Cornell University. Mr. Weiss holds A.B.
and J.D. degrees from Cornell University.
Officers
Our officers serve at the discretion of the board of directors and hold
office until their successors are duly elected and qualified or until their
earlier resignation or removal. There are no family relationships among any of
our directors or executive officers.
Directors' Terms
Upon completion of this offering, our board of directors will be divided
into three classes that serve staggered three-year terms as follows:
<TABLE>
<CAPTION>
Class Expiration Board Member
- ----- ---------- ------------
<S> <C> <C>
Class I.............................. 2000 Messrs. Cannavino, Nuti and Lieber
Class II............................. 2001 Messrs. Drew, Halvey and Weiss
Class III............................ 2002 Messrs. Horowitz, Miller and
Rubenstein
</TABLE>
As a result, approximately one-third of our board of directors will be
elected each year. Each director will hold office until the appropriate annual
meeting of stockholders, as determined by the year of that director's election
to the board of directors, and until his or her successor has been duly elected
and qualified. Upon consummation of the PeopleMover acquisition, a person
nominated by the former stockholders of PeopleMover will be elected to our board
of directors.
Pursuant to a stockholders agreement, our board of directors has consisted
of nine directors, two of which were designated by a majority of the holders of
our outstanding Series A and Series B preferred stock, two of which were
designated by Ari B. Horowitz, two of which were designated by a majority of the
holders of our outstanding common stock and three of which were designated by
the board. The stockholder agreement will terminate upon consummation of this
offering.
Committees of the Board of Directors
The board of directors established a compensation committee and a stock
option committee in January 1999. The compensation committee reviews and makes
recommendations regarding our compensation policies and forms of compensation
provided to our directors and officers. The compensation committee also reviews
and determines bonuses for our officers and other employees. In addition, the
compensation committee and
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the stock option committee review and determine stock-based compensation for our
directors, officers, employees and consultants and administer the 1998 Plan.
Following the closing of this offering, the stock option committee shall cease
to exist and the compensation committee shall administer all stock-based
compensation plans. The members of the compensation committee are Messrs. Weiss
and Halvey, who were appointed on January 20, 1999 and October 21, 1999,
respectively. The sole member of the stock option committee is Ari B. Horowitz,
who was appointed on January 20, 1999.
We expect that the board will establish an audit committee in February 2000.
Director Compensation
Directors do not receive any stated salary for their services as directors
or as members of board committees. However, in its discretion the board of
directors in the future may determine to pay directors a fixed annual fee for
serving as a director and/or a fixed fee and expenses for attendance at each
meeting of the board of directors or committee. Directors have been eligible to
receive stock option grants and stock purchase rights under our 1998 Stock
Option Plan. The following table sets forth information relating to option
grants to our current directors under the plan.
<TABLE>
<CAPTION>
Number of
Name Shares Exercise Price Date of Grant
- ---- --------- -------------- -----------------
<S> <C> <C> <C>
James Cannavino (1)................ 135,000 $0.83 December 24, 1998
William R. Nuti (2)................ 67,500 $1.85 June 1, 1999
John L. Drew (1)................... 67,500 $3.07 October 1, 1999
</TABLE>
- ------------------------
(1) These options were accelerated and vested and became immediately exercisable
on December 31, 1999 pursuant to action by the Stock Option Committee.
(2) This option vests ratably on an annual basis over a three-year period and
are exercisable until the tenth anniversary of the date of grant.
We will establish the 2000 Stock Option Plan for Non-Employee Directors for
the purpose of enhancing the interests of certain directors in our continued
success. The following summary of the plan is qualified in its entirety by
reference to the full text of the plan, a copy of which has been filed as an
exhibit to the registration statement of which this prospectus is a part. Each
of our directors who is not our employee or the employee of any of our
subsidiaries and who was not initially elected to the Board within the previous
12 months will, immediately following each annual stockholders meeting,
commencing with the annual meeting in 2001, automatically receive an annual
grant of options to purchase shares of our common stock at an exercise
price equal to 100% of the fair market value of our common stock at the date of
grant of the option. Each non-employee director, upon initially joining our
board of directors, will also receive under the plan an initial grant of options
to purchase shares of our common stock at an exercise price equal to 100%
of the fair market value of the common stock as of such date. A total of
shares of our common stock have been reserved for issuance under the plan.
Options granted under the plan shall be exercisable for a period of up to
10 years beginning on the date of grant.
Compensation Committee Interlocks and Insider Participation
No member of our compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as members of our board of directors or compensation committee.
Executive Compensation
The following table sets forth information concerning the compensation paid
by us for services rendered for the fiscal year ended December 31, 1999 to our
Chief Executive Officer and our other executive officers
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whose salary and bonus exceeded $100,000 during 1999. We did not pay any other
executive officer over $100,000 in annual compensation during 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------ ------------------
Securities
Salary Underlying Options
Name and Principal Position ($) (#)
- --------------------------- ------------ ------------------
<S> <C> <C>
Ari B. Horowitz(1).......................................... 125,000 750,000
Chairman and Chief Executive Officer
Carlos B. Cashman........................................... 100,000 --
Chief Technology Officer
Allen Berger................................................ 100,000 367,500
Senior Vice President and Chief Marketing Officer
</TABLE>
- ------------------------
(1) Mr. Horowitz also served as our President from November 1999 through January
2000.
Option Grants During the Fiscal Year Ended December 31, 1999
The following table sets forth information concerning grants of options to
purchase shares of common stock to each of the officers named in the summary
compensation table above during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Percentage of
Total Options Potential Realizable Value at Assumed
Number of Granted to Annual Rates of Stock Price Appreciation for
Securities Employees Exercise Option Term (2)
Underlying Options During Price per Expiration ----------------------------------------------
Name Granted (1) Period Share Date 0% 5% 10%
- ---- ------------------ ------------- --------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ari B. Horowitz...... 750,000 17.2% $0.37 4/1/04 7,222,500 8,838,797 10,703,250
Carlos B. Cashman.... -- -- -- --
Allen Berger......... 367,500 8.4% $0.33 4/13/09 3,553,725 5,579,856 8,544,183
</TABLE>
- ------------------------
(1) These options were granted under the 1998 Plan and vest over a four-year
period, with 25% of the related option shares vesting at the one-year
anniversary of the date of grant and the remaining option shares vesting in
equal monthly installments over the next 36 months. These options are
exercisable as to vested shares for five years from the date of grant in the
case of Mr. Horowitz and 10 years from the date of grant in the case of Mr.
Berger. The options will vest and become immediately exercisable upon a
change of control. Options to purchase 270,000 shares of common stock
granted to Mr. Horowitz will vest immediately upon the completion of this
offering.
(2) These amounts represent hypothetical gains that could be achieved if those
options are exercised at the end of the option term. These gains are based
on assumed rates of stock price appreciation of 0%, 5% and 10% compounded
annually from the date the respective options were granted to their
expiration dates, based upon an assumed initial public offering price of
$10.00 per share. These assumptions are not intended to forecast future
appreciation of our stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of our common stock and
overall market conditions. The potential realizable value computation does
not take into account federal or state income tax consequences of option
exercises or sales of appreciated stock.
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Option Values as of December 31, 1999
The following table sets forth information concerning the options held by
each of the officers named in the above summary compensation table.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options in-the-Money Options
Acquired at December 31, 1999 at December 31, 1999 (1)
on Value --------------------------- ---------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ari B. Horowitz(2)........ -- -- -- 750,000 -- 7,222,500
Carlos B. Cashman......... -- -- -- -- --
Allen Berger.............. -- -- -- 367,500 3,553,725
</TABLE>
- ------------------------
(1) The information set forth in these columns is based on an assumed initial
public offering price of $10.00 per share, less the exercise price,
multiplied by the number of shares underlying the option.
(2) Options to purchase 270,000 shares granted to Mr. Horowitz will become
immediately exercisable upon the completion of this offering.
Employment and Repurchase Agreements
We have entered into employment agreements with Ari B. Horowitz, our
Chairman and Chief Executive Officer, Richard S. Miller, our President and Chief
Operating Officer, and Carlos Cashman, our Chief Technology Officer. Prior to
the completion of this offering, we intend to enter into an employment agreement
with Allen Berger, our Senior Vice President, General Manager, FREEAGENT.COM and
Chief Marketing Officer. Our existing employment agreements with Messrs.
Horowitz, Miller and Cashman provide for annual base salaries of $150,000,
$250,000 and, $125,000, respectively. These executive officers may also receive
discretionary bonuses as determined by our Compensation Committee.
Our employment agreements with these executive officers generally provide or
will provide for three-year terms of employment that are automatically renewable
for successive one-year terms unless either party to the agreement gives the
other prior written notice of non-renewal. Each agreement specifies or will
specify the compensation payable by us if the officer's employment with us
terminates. In the case of Mr. Horowitz, if his employment with us is terminated
for any reason other than termination by us for cause or his resignation without
good reason, he, or his legal representatives, shall be entitled to continue to
receive his salary and benefits for a period of two years after the date of
termination and his options shall vest and become immediately exercisable. In
the event of a change of control, Mr. Horowitz's options shall also vest and
become immediately exercisable. In the case of Mr. Cashman, if his employment
with us is terminated by us without cause or because he resigns with good
reason, he, or his legal representatives, shall be entitled to continue to
receive his salary and benefits for a period of one year after the date of
termination and our right to repurchase a portion of his shares of common stock
shall lapse. If Mr. Cashman's employment with us is terminated by us by reason
of his disability or due to his death, he, or his legal representatives, shall
be entitled to continue to receive his salary and benefits for a period of three
months after the date of termination and our right to repurchase a portion of
his shares of common stock shall lapse. In the case of Mr. Berger, if his
employment with us is terminated without cause or because he resigns with good
reason, he, or his legal representative, shall be entitled to continue to
receive his salary and benefits for a period of one year after the date of
termination. If Mr. Berger's employment with us is terminated by us by reason of
the officer's disability or due to his death, he, or his legal representatives,
shall be entitled to continue to receive his salary for a period of three months
after the date of termination. In the event Mr. Berger's employment with us is
terminated by us without cause or by reason of his disability, or because he
resigns with good reason, or due to the officer's disability, vesting of a
portion of his options to purchase common stock shall vest and become
exercisable or continue to vest and become immediately exercisable through a
specified date as if he continued to be employed with us through that date.
75
<PAGE>
Mr. Miller is employed under an employment agreement that expires on
January 31, 2003. Under the agreement, Mr. Miller's base salary is $250,000,
with an annual increase at the discretion of our board of directors. Mr. Miller
is eligible to receive an annual bonus of no less than $100,000 during each
calendar year of his employment period based upon his achievement of performance
criteria mutually agreed upon by Mr. Miller and us. In addition, we have granted
to Mr. Miller options to purchase up to 1,507,500 shares of our common stock.
Options to purchase 32,918 shares have an exercise price of $9.11 per share.
Options to purchase 900,000 shares have an exercise price of $2.67 per share and
options to purchase 574,582 shares have an exercise price of $8.00 per share.
Moreover, we shall at least once each year commencing in 2001 consider
Mr. Miller for future annual or other grants of stock options and other equity
awards. If we terminate Mr. Miller's employment pursuant to an involuntary
termination or for poor or incompetent performance, he, or his legal
representatives, shall receive his salary and benefits for a period of
12 months and shall be credited with one additional year of employment for
purposes of calculating his vested interest in his options and any other equity
awards granted to him during his employment period with us. If Mr. Miller's
employment is terminated by us without cause or by Mr. Miller with good reason,
he, or his legal representatives, shall be entitled to continue to receive his
salary and benefits for a period lasting the longer of 12 months or the
remainder of his employment period and shall become fully vested in all of his
options and any other equity awards granted to him during his employment period
with us.
Our employment agreements with Messrs. Horowitz, Miller and Cashman contain
non-compete provisions that restrict them from competing against us for
specified time periods. If Mr. Horowitz's employment with us is terminated for
any reason during the term of his employment with us, he cannot compete with us
for two years following the date of termination. In the case of Messrs. Miller
and Cashman, they cannot compete with us for one year following the termination
of their employment with us. The employment agreement we intend to enter into
with Mr. Berger will contain a non-compete provision that restricts him from
competing against us for one year following the termination of his employment
with us.
Mr. Cashman has entered into a share repurchase agreement with us. The
agreement provides that the 1,100,000 shares of Common Stock held by him when he
entered into the agreement shall be subject to vesting during 2000, with the
shares vesting in equal monthly installments over the year. If Mr. Cashman's
employment with us is terminated for any reason, the shares of Common Stock
which are not then vested shall cease to vest and all or any portion of the then
unvested shares shall be subject to repurchase by us for 360 days after the date
of termination at the price per share originally paid by Mr. Cashman for them.
Mr. Cashman may transfer all or any portion of the shares of Common Stock
subject to vesting and repurchase by us, if the transferee of the shares agrees
that the shares being transferred shall continue to be subject to vesting and
repurchase by us. Mr. Cashman's employment agreement with us provides for the
immediate vesting of all unvested shares of Common Stock and the lapse of our
repurchase rights with respect to the shares if his employment with us is
terminated under the circumstances described therein.
1998 Stock Option Plan
Our 1998 Plan provides for the grant of stock options and stock purchase
rights to employees, officers, directors, and consultants of Opus360. Stock
purchase rights granted under the 1998 Plan allow a recipient to purchase shares
of common stock directly from Opus360. Incentive stock options may be granted to
employees, including the free agents who purchase our FREEAGENT E.OFFICE
services, officers and employee directors of Opus360 and non-qualified stock
options and stock purchase rights may be granted to employees, officers,
directors and consultants.
The total number of shares of common stock issuable under the 1998 Plan is
6,000,000 shares, plus an annual increase on each anniversary date of the
adoption date of the 1998 Plan equal to the lesser of 150,000 shares, 4% of the
aggregate number of shares of common stock outstanding on the anniversary date
or a lower number of shares of common stock determined by the board of
directors.
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<PAGE>
As of December 31, 1999, 5,340,000 shares of common stock were issuable upon
the exercise of outstanding options granted under the 1998 Plan at a weighted
average exercise price of $1.09. At that date, 28,437 shares of common stock
have been issued upon the exercise of options and 631,563 shares of common stock
remained available for future issuance under the 1998 Plan. The board of
directors may amend the 1998 Plan, subject to any stockholder approval required
under applicable law. Unless terminated earlier by the board of directors, the
1998 Plan will terminate in August 2008. No further shares will be granted under
the 1998 Plan following the consummation of this offering.
The 1998 Plan may be administered by the board of directors or a committee
appointed by the board of directors to administer the 1998 Plan. Mr. Horowitz
was appointed as administrator of the 1998 Plan by the board. The administrator
has the authority, among other things, to grant options and stock purchase
rights, to determine the terms and conditions of these awards provided these
awards are not inconsistent with the terms of the 1998 Plan and to reduce the
exercise price of any option to the then current fair market value of the common
stock.
The 1998 Plan provides that no employee, officer, director or consultant of
Opus360 may be granted, in any fiscal year of Opus360, options to purchase more
than 150,000 shares, provided that options to purchase up to an additional
400,000 shares may be granted in connection with the initial service of any of
these persons to Opus360. Stock options granted under the 1998 Plan may not have
a term of more than ten years and, in the case of incentive stock options
granted to persons owning stock that represents more than 10% of the total
combined voting power of all classes of stock of Opus360, the term shall be five
or less years. After the termination of an optionee's employment, directorship
or consulting relationship with Opus360, the optionee's vested stock options
shall remain exercisable for time periods specified by the administrator not to
exceed the applicable option terms and, in the absence of any specified time
periods, for time periods which vary based on whether the termination occurs as
a result of death, disability or otherwise. The exercise price of all incentive
stock options must be at least equal to the fair market value of the common
stock at the time of grant, except in the case of incentive stock options
granted to persons owning stock that represents more than 10% of the total
combined voting power of all classes of the outstanding capital stock of
Opus360, in which case the exercise price must equal at least 110% of the fair
market value of the common stock at the time of grant.
Options granted under the 1998 Plan are generally not transferable, although
the administrator has the discretion to allow their transferability. In the
event of a merger or consolidation of Opus360 with or into another corporation
where the successor corporation issues its securities to Opus360 stockholders or
the sale of all or substantially of Opus360's assets, each outstanding option
and stock purchase right shall be assumed or an equivalent option or stock
purchase right shall be substituted by the successor corporation. If the
successor corporation refuses to assume outstanding options, or make
substitutions for them, each unvested option or stock purchase right shall fully
vest and be exercisable. In the event of a proposed liquidation or dissolution,
the administrator may provide that each outstanding option or stock purchase
right granted under the 1998 Plan shall be exercisable and any Opus360
repurchase right applicable to such option or right shall lapse, provided the
proposed liquidation or dissolution occurs as contemplated.
In addition to stock options, the administrator may issue stock purchase
rights under the 1998 Plan to employees, including free agents who purchase our
FREEAGENT E.OFFICE services, officers, directors and consultants of Opus360. The
administrator determines the number of shares, price, terms and conditions and
restrictions related to a grant of stock purchase rights. Unless the
administrator determines otherwise, the shares of common stock purchased
pursuant to stock purchase rights granted under the 1998 Plan are subject to a
right of repurchase in favor of Opus360 at the holder's original purchase price
upon the termination, for any reason whatsoever, of the holder's service with
Opus360. The rate at which the repurchase right may lapse shall be determined by
the administrator. No stock purchase rights have been granted under the 1998
Plan.
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<PAGE>
2000 Stock Option Plan
Our 2000 Plan, when adopted by our board of directors and approved by our
stockholders, will serve as the successor to our 1998 Plan. We will reserve
shares of our common stock for issuance under this plan. In addition,
shares available for grant under the 1998 Plan and any shares issued under the
1998 Plan that are forfeited or repurchased by us or that are issuable upon
exercise of options that expire or become unexercisable for any reason without
having been exercised in full will be available for grant and issuance under our
2000 Plan. Shares will again be available for grant and issuance under our 2000
Plan that are subject to issuance upon exercise of an option granted under our
2000 Plan that cease to be subject to the option for any reason other than
exercise of the option, or have been issued upon the exercise of an option
granted under our 2000 Plan that are subsequently forfeited or repurchased by us
at the original purchase price.
On each January 1, the aggregate number of shares reserved for issuance
under our 2000 Plan will increase automatically by a number of shares equal to
% of our outstanding shares on December 31 of the preceding year.
Our 2000 Plan will terminate ten years from the date our board of directors
approved the plan, unless it is terminated earlier by our board of directors.
The plan will authorize the award of options. No person will be eligible to
receive more than shares in any calendar year under the plan other than a new
employee, who will be eligible to receive up to shares in the calendar year
in which the employee commences employment.
Our 2000 Plan will be administered by our compensation committee. The
compensation committee will have the authority to construe and interpret the
plan, make option grants and make all other determinations necessary or
advisable for the administration of the plan.
Our 2000 Plan will provide for the grant of both incentive stock options
that qualify under Section 422 of the Internal Revenue Code and nonqualified
stock options. Incentive stock options will be available for granted only to
employees of the Company or of a parent or subsidiary of the Company. All
nonqualified options will be available for grant to employees, officers,
directors and consultants of the Company or any parent or subsidiary of the
Company. The exercise price of incentive stock options will be at least equal to
the fair market value of our common stock on the date of grant. The exercise
price of incentive stock options granted to 10% stockholders will be at least
equal to 110% of that value. The exercise price of nonqualified stock options
will be at least equal to 85% of the fair market value of our common stock on
the date of grant.
Options will be exercisable only as they vest or may be immediately
exercisable with the shares issued subject to our right of repurchase that
lapses as the shares vest. In general, options will vest over a four-year
period. The maximum term of options granted under our 2000 Plan will be ten
years.
Options granted under our 2000 Plan will not be transferable in any manner
other than by will or by the laws of descent and distribution. They will be
exercisable only by the optionee during his or her lifetime. The compensation
committee will be authorized to determine otherwise and provide for alternative
provisions in option agreements with respect to nonqualified options granted
under our 2000 Plan. Options granted under our 2000 Plan generally will be
exercisable for a period of time after the termination of the optionee's service
to the Company or a parent or subsidiary of the Company. Options will generally
terminate immediately upon termination of employment for cause.
Employee Stock Purchase Plan
Our 2000 Employee Stock Purchase Plan will become effective on the first day
on which price quotations are available for our common stock on the Nasdaq
National Market. We have initially reserved shares of our common stock
under this plan. On each January 1, the aggregate number of shares reserved for
issuance under the Stock Purchase Plan will increase automatically by a number
of shares equal
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<PAGE>
to % of our outstanding shares on December 31 of the preceding year. Our
board of directors or compensation committee may reduce the amount of the
increase in any particular year. The aggregate number of shares reserved for
issuance under the Stock Purchase Plan may not exceed shares.
The Stock Purchase Plan will be administered by our compensation committee.
Our compensation committee will have the authority to construe and interpret the
plan, and its decisions will be final and binding.
Employees generally will be eligible to participate in the Stock Purchase
Plan if they are employed before the beginning of the applicable offering
period, are customarily employed by us, or our parent or any subsidiaries that
we designate, for more than 20 hours per week and more than five months in a
calendar year and are not, and would not become as a result of being granted an
option under the plan, 5% stockholders of us or our parent or designated
subsidiaries. Participation in the Stock Purchase Plan will end automatically
upon termination of employment for any reason.
Under the Stock Purchase Plan, eligible employees will be permitted to
acquire shares of our common stock through payroll deductions. Eligible
employees may select a rate of payroll deduction between 1% and 15% of their
compensation and are subject to maximum purchase limitations.
Except for the first offering period, each offering period under the Stock
Purchase Plan will be for two years and consist of four six-month purchase
periods. The first offering period is expected to begin on the first business
day on which price quotations for our common stock are available on the Nasdaq
National Market. Offering periods and purchase periods will begin on May 1 and
November 1 of each year. However, because the first day on which price
quotations for our common stock will be available on the Nasdaq National Market
may not be May 1 or November 1, the length of the first offering period may be
more or less than two years, and the length of the first purchase period may be
more or less than six months.
The Stock Purchase Plan will provide that the purchase price for our common
stock purchased under the plan will be 85% of the lesser of the fair market
value of our common stock on the first day of the applicable offering period or
the last day of the applicable purchase period. The compensation committee will
have the power to change the offering dates, purchase dates and duration of
offering periods without stockholder approval, if the change is announced prior
to the beginning of the affected date or offering period.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. The plan will
terminate 10 years from the date the plan is adopted by our board, unless it is
terminated earlier under the terms of the plan. The board will have the
authority to amend, terminate or extend the term of the plan, except that no
action may adversely affect any outstanding options previously granted under the
plan.
Except for the automatic annual increase of shares described above,
stockholder approval will be required to increase the number of shares that may
be issued or to change the terms of eligibility under the Stock Purchase Plan.
The board will be able to make amendments to the plan as it determines to be
advisable if the financial accounting treatment for the plan is different from
the financial accounting treatment in effect on the date the plan was adopted by
the board.
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RELATED PARTY TRANSACTIONS
Issuances of Shares and Warrants
From time to time we have issued and sold shares of our common stock,
preferred stock and warrants to purchase common stock to our employees,
directors and stockholders known to us to beneficially own more than 5% of our
common stock as follows:
In December 1998, we sold shares of our common stock to our executive
officers, as follows:
<TABLE>
<CAPTION>
Number Purchase Price
Name Title of Shares Per Share
- ---- --------------------------------- --------- --------------
<S> <C> <C> <C>
Ari B. Horowitz.................. Chairman and Chief Executive 3,000,000 $0.03
Officer
Carlos Cashman................... Chief Technology Officer 1,500,000 0.03
Shawn Kreloff.................... Executive Vice President, 1,500,000 0.03
Business Development
Richard McCann................... Senior Vice President and Chief 187,500 0.13
Financial Officer
</TABLE>
In connection with the purchase by Mr. Horowitz, we loaned him $100,000 at
an interest rate of 7% per annum, compounded annually. Mr. Horowitz repaid his
loan in full in April 1999. We also loaned Mr. Horowitz $20,000 in September
1999 in connection with his purchase of 85,715 shares of common stock from a
former employee. The rate of interest on this loan is 7%. The loan remained
outstanding on December 31, 1999.
In December 1998, in connection with our Series A preferred stock financing,
we also granted warrants to purchase an aggregate of 852,000 shares of our
common stock prior to December 24, 2005 at an exercise price of $0.83 per share.
The following table summarizes the warrants issued to executive officers,
directors or their affiliates or immediate family members.
<TABLE>
<CAPTION>
Name Relationship to Opus360 Number of Warrants
- ---- ------------------------- ------------------
<S> <C> <C>
Irwin Lieber...................................... Director 240,000
Barry Rubenstein.................................. Director 240,000
Roger J. Weiss.................................... Director 90,000(1)
Leonard Horowitz.................................. Father of Ari B. Horowitz 30,000
Gerald Cashman.................................... Father of Carlos Cashman 12,000
</TABLE>
- ------------------------
(1) Shares purchased by a partnership of which Mr. Weiss is the general partner.
The warrants issued to Messrs. Lieber, Rubenstein and Horowitz and to the
affiliated partnership of Mr. Weiss were exercised in January, 2000.
In September 1998, we entered into a software conveyance agreement with
USWeb whereby USWeb assigned rights it held to internally developed software
with a market value of $95,120 to us in exchange for 407,657 shares of common
stock that were issued on December 24, 1998. From June 1998 to March 1999, Ari
B. Horowitz served as a Senior Managing Partner of USWeb and Shawn Kreloff
served as a Senior Managing Partner of USWeb. From June 1998 to July 1999,
Richard McCann served as a Finance Partner of USWeb. We believe that this
transaction was on terms no less favorable to us than those that would have been
available to us in an arm's-length transaction with an unaffiliated party.
Between December 1998 and April 1999, we sold an aggregate of 8,284,000
shares of our Series A Preferred Stock at a price of $1.25 per share in a
private placement. In September and October of 1999, we sold an aggregate of
8,676,727 shares of our Series B preferred stock at a price of $4.61 per share
in a
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<PAGE>
private placement. The following table summarizes the shares of preferred stock
purchased by our executive officers, directors and 5% stockholders or their
affiliates or family members.
<TABLE>
<CAPTION>
Name Relationship to Opus360 Series A Series B
- ---- ---------------------------------- --------- -----------
<S> <C> <C> <C>
Wheatley Partners, LLC(1) 5% stockholder and affiliate of 1,600,000 433,839
Barry Rubenstein and Irwin Lieber,
two of our directors
Seneca Ventures Affiliate of Mr. Rubenstein, one 160,000 43,384
of our directors
Woodland Venture Fund Affiliate of Mr. Rubenstein, one 160,000 43,384
of our directors
Barry Rubenstein Director 160,0000 43,384
Irwin Lieber Director 200,000(2) 32,537
G&R Partnership, L.P. Affiliate of Roger J. Weiss, one 100,000 75,921
of our directors
CrossPoint Venture Partners, L.P. 5% stockholder 1,600,000 1,084,598(3)
Various family members of Richard Mr. McCann is our Senior Vice 80,000 31,452
McCann President and Chief Financial
Officer
Entities affiliated with Safeguard 5% stockholder; Mr. Halvey, one of 800,000 2,819,955
Scientific, Inc. our directors, is a Senior Vice
President of Safeguard
John L. Drew Director -- 216,919
Applegreen Partners Entity in which family members of -- 10,845
Mr. Lieber, one of our directors,
are affiliated
Gerald Cashman Father of Carlos Cashman, our 8,000 --
Chief Technology Officer
Leonard Horowitz Father of Ari B. Horowitz, our 20,000 5,422
Chairman and Chief Executive
Officer
Various trusts and family members Mr. Weiss is one of our directors -- 55,313
of Roger J. Weiss
</TABLE>
- ------------------------
(1) Shares purchased by two partnerships of which Wheatley Partners, LLC is the
general partner.
(2) Includes shares sold to Mr. Lieber's family members.
(3) Shares purchased by partnerships of which CrossPoint Venture Partners, L.P.
is the general partner.
Each share of Series A preferred stock and Series B preferred stock
automatically converts into 1.5 shares of our common stock upon consummation of
this offering.
CyberSafe License Agreement
In August 1999, we entered into a license agreement with CyberSafe
Corporation under which we granted a license to CyberSafe to use OPUSRM in
object code form and only for use in CyberSafe's internal business. James
Cannavino, a member of our board, is the Chairman and Chief Executive Officer of
CyberSafe. Under this license agreement, we agreed that up to 15 concurrent
users of CyberSafe will be permitted to have access to a version of OPUSRM we
provided to early adopters of OPUSRM during the period from August 1999 until
the earlier of February 15, 2000 and our release to CyberSafe of the production
version of OPUSRM in exchange for CyberSafe's performance of promotional
services for us, such as representatives speaking at tradeshows, serving as a
spokesman and providing favorable references to our potential partners or
customers. CyberSafe's access to the production version of OPUSRM will end on
August 14, 2002. In addition, we perform consulting services for CyberSafe at
hourly rates of $200 or $250 per hour, depending upon the experience level of
our staff members that provide these services. We believe
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<PAGE>
that the terms of our license agreement with CyberSafe is on terms no less
favorable to us than those that would have been available to us in an
arm's-length transaction with an unaffiliated party.
USWeb Agreements
From October 1998 until November 1999, USWeb provided us with consulting,
software development and related services for which we paid USWeb, one of our
stockholders, approximately $1.2 million.
In April 1999, we subleased approximately 6,933 square feet in the building
located at 733 Third Avenue, New York, New York for the period from April 1999
through August 1999 from USWeb for monthly rental payments of $25,000. The total
amount paid to USWeb during 1999 under the lease was $190,000. This agreement
terminated when we entered into a lease agreement with the owner of the building
with respect to the same office.
We believe that the terms of the consulting and software development
arrangement and the lease with USWeb were on terms no less favorable to us than
those that would have been available to us in an arm's-length transaction with
an unaffiliated party.
Investment Advisory Agreement with Weiss, Peck & Greer
In September 1999, we entered into an investment advisory agreement with
Weiss, Peck & Greer. Roger J. Weiss, a member of our board, is a Senior Managing
Director of Weiss, Peck & Greer. Under the agreement, Weiss, Peck & Greer acts
as the investment manager of our investment portfolio. During 1999, we obtained
services from Weiss, Peck & Greer having an aggregate cost of approximately
$22,000 under the agreement.
Lucent Strategic Alliance
In February 2000, we entered into a three year strategic relationship with
Lucent. John L. Drew, a member of our board, is the Chief Executive Officer of
the NetCare Professional Services Division of Lucent and an Executive Vice
President of Lucent. Our strategic relationship with Lucent requires Lucent to
use its reasonable best efforts to cause free agents who provide services to
Lucent's NetCare Division to become registered users of FREEAGENT.COM, post
their E.PORTFOLIOS on FREEAGENT.COM and purchase FREEAGENT E.OFFICE services. In
turn, we are required to offer these free agents our FREE AGENT E.OFFICE
services and to provide Lucent with consolidated billing services for all
services provided by these free agents to Lucent's NetCare Division. As part of
this relationship, Lucent has agreed to list projects on OPUS XCHANGE which
require the services of professionals with information technology expertise and
to use OPUSRM to manage each of Lucent's information technology employee
resources entered into the OPUSRM database. We have agreed to provide to Lucent
set-up and implementation services for OPUS XCHANGE and OPUSRM.
In conjunction with our entry into a strategic relationship with Lucent, we
issued to Lucent two warrants to purchase shares of our common stock. The first
warrant entitles Lucent to purchase up to 225,000 shares of our common stock at
the exercise price of $3.33 per share for one year from the date of grant,
subject to extension if this offering does not close by March 31, 2000. The
second warrant will be exercisable for a three-year period commencing on the
240th day after the effective date of the registration statement of which this
prospectus is a part. The exercise price of the second warrant is equal to the
average market price of our common stock during the 10 trading days immediately
preceding the date the warrant first becomes exercisable. The number of shares
issuable upon the exercise of the second warrant will be determined by dividing
$2,655,000 by the present value of a warrant to purchase one share of our common
stock, as determined by the Black-Scholes option-pricing model, with the strike
price and the market price assumed to be the actual exercise price and the
volatility rate assumed to be 100%. We believe that the terms of our strategic
relationship with Lucent and the warrants are on terms no less favorable to us
than those that would have been available to us in an arms-length transaction
with an unaffiliated party.
Legal Services
Since our inception, Leonard Horowitz, the father of Ari B. Horowitz, our
Chairman of the Board and Chief Executive Officer, has provided us with legal
services. For these legal services, we paid Mr. Horowitz approximately $36,000
in 1998 and $107,000 in 1999. We believe that fees paid to Mr. Horowitz for
legal services were no less favorable to us than those we could have obtained in
an arm's-length transaction with an unaffiliated party.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of common stock as of January 30, 1999 and as adjusted to reflect the
sale of the shares of common stock offered by us in this offering and the
concurrent placement for:
- each person or entity known by us to beneficially own more than 5% of the
common stock;
- each executive officer named in the summary compensation table;
- each of our directors; and
- all executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC.
Under the rules of the SEC, a person is deemed to be a beneficial owner of a
security if that person has or shares voting power, which includes the power to
vote or to direct the voting of such security, or investment power, which
includes the power to dispose of or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any securities of which that
person has a right to acquire beneficial ownership within 60 days, including
warrants and options. The number of shares of common stock outstanding used in
calculating the percentage for each listed person includes the shares of common
stock underlying options or warrants held by such person that are exercisable
within 60 days of January 30, 1999, but excludes shares of common stock
underlying options or warrants held by any other person.
Except in cases where community property laws apply or as indicated by
footnote, the persons named in the table below have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by
them.
Percentage of beneficial ownership is based on 38,050,840 shares of common
stock outstanding as of January 31, 1999, assuming the conversion of all of our
outstanding shares of preferred stock and 45,050,840 shares of common stock
outstanding after completion of this offering. The table assumes that the
underwriters' over-allotment option is not exercised and excludes any shares
purchased in this offering by the respective beneficial owners, including any
shares offered in the Safeguard Subscription Program.
<TABLE>
<CAPTION>
Beneficial Ownership Before Offering
-----------------------------------------------------------------
Common Stock
Underlying Options and Beneficial
Common Stock Warrants Exercisable Ownership After
Name of Beneficial Owner Outstanding Within 60 Days Total Percentage Offering
- ------------------------ -------------- ---------------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
CrossPoint Venture Partners 4,026,897 -- 4,026,897 10.6% 8.9%
L.P.(1)
18552 MacArthur Boulevard,
Suite 400
Irvine, California 92612
Safeguard Scientifics, Inc.(2) 5,429,933 -- 5,429,933 14.3% 12.1%
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087-1945
Wheatley Partners, L.L.C. (3) 3,050,759 -- 3,050,759 8.0% 6.8%
80 Cuttermill Road, Suite 311
Great Neck, New York 11021
Ari B. Horowitz................. 3,235,716 270,000(8) 3,505,716 9.2% 7.8%
Carlos B. Cashman............... 1,650,000 -- 1,650,000 4.3% 3.7%
Allen Berger.................... -- -- -- -- --
James Cannavino................. -- 135,000 135,000 * *
John L. Drew.................... 325,379 67,500 392,879 1.0 1.0%
John K. Halvey(4)............... -- -- -- -- --
Irwin Lieber(5)................. 3,399,564 3,399,564 8.9% 7.5%
William R. Nuti................. -- -- -- -- --
Barry Rubenstein(6)............. 4,205,987 4,205,987 11.1% 9.3%
Roger J. Weiss.................. 353,882(7) 353,882 1.0% 1.0%
All executive officers and
directors as a group
(17 persons).................. 11,957,269 997,500(9) 12,954,759 33.2% 28.1%
</TABLE>
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<PAGE>
- ------------------------------
* Less than 1%.
(1) Includes 2,400,000 shares held by CrossPoint Venture Partners, L.P., 650,759
shares held by CrossPoint Venture Partners 1997, L.P. and 976,139 shares
held by CrossPoint Venture Partners LS 1999, L.P. CrossPoint Venture
Partners, L.P. is the general partner of each of CrossPoint Venture Partners
1997, L.P. and CrossPoint Venture Partners LS 1999, L.P.
(2) Includes 650,759 shares held by CompuCom Systems, Inc., 1,525,379 shares
held by Pennsylvania Early Stage Partners, L.P. and 3,253,796 shares held by
Safeguard 99 Capital L.P. The majority stockholder of CompuCom is Safeguard
Scientifics. The general partner of Pennsylvania Early Stage is Pennsylvania
Early Stage Partners GP, L.L.C., a member of which is SSI Partnership
Holdings (Pennsylvania), Inc., which is a wholly owned subsidiary of
Safeguard Scientifics, of which Mr. John K. Halvey, one of our directors, is
a senior vice president.
(3) Includes 2,806,698 shares held by Wheatley Partners, L.P. and 244,061 shares
held by Wheatley Foreign Partners, L.P. The general partner of Wheatley
Partners, L.P. and a general partner of Wheatley Foreign Partners, L.P. is
Wheatley Partners, LLC, the members of which are Irwin Lieber and Barry
Rubenstein, two of our directors, Jonathan Lieber, Seth Lieber and Barry
Fingerhut. Each of these members disclaims beneficial ownership of the
shares held by the Wheatley funds, except to the extent of their respective
pecuniary interests therein arising from their ownership interests.
(4) Excludes the 5,429,933 shares held indirectly by Safeguard Scientifics
referred to in Note 2 above. Mr. Halvey, one of our directors, is a senior
vice president of Safeguard Scientifics. Mr. Halvey disclaims beneficial
ownership of these shares.
(5) Includes the 3,050,759 shares held by the Wheatley funds referred to in
Note 3 above and 348,806 shares held by Mr. Lieber. Mr. Lieber, one of our
directors, disclaims beneficial interest of the 3,050,759 shares held by the
Wheatley funds referred to in Note 3 above, except to the extent his
pecuniary interest therein arising from his ownership interest.
(6) Includes the 3,050,759 shares held by the Wheatley funds referred to in
Note 3 above, the 305,076 shares held by Seneca Ventures, the 305,076 shares
held by Woodland Venture Fund, the 240,000 shares held by Brookwood, L.P.
and the 305,076 shares held by Mr. Rubenstein. Mr. Rubenstein is the general
partner of Brookwood, L.P. and the sole stockholder of Woodland Services
Corp., which is the sole general partner of each of Seneca Ventures and
Woodland Venture Fund. Mr. Rubenstein, one of our directors, disclaims
beneficial ownership of the 3,050,759 shares held by the Wheatley funds
referred to in Note 3 above, except to the extent his pecuniary interest
therein arising from his ownership interest.
(7) Shares held by G&R Partnership, L.P., the general partner of which is
Mr. Weiss, one of our directors.
(8) Options to purchase 270,000 shares granted to Mr. Horowitz on April 1, 1999
will become immediately exercisable upon the completion of this offering.
(9) Includes the 270,000 shares underlying the option held by Mr. Horowitz
referred to in Note 8 above, as well as 225,000 shares underlying an option
held by Richard McCann which will be exercisable in full upon the completion
of this offering. Excludes the 5,429,933 shares held indirectly by Safeguard
Scientific referred to in Note 2 above as to which Mr. Halvey, one of our
directors, disclaims beneficial ownership.
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DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will
consist of 150,000,000 shares of common stock, $0.001 par value per share, and
25,000,000 shares of preferred stock, $0.001 par value per share. As of
December 31, 1999, 11,283,629 shares of common stock were outstanding, 8,284,000
shares of Series A preferred stock were outstanding and 8,676,727 shares of
Series B preferred stock were outstanding. Each share of preferred stock will
automatically convert into 1.5 shares of common stock upon the completion of
this offering.
The following description of our capital stock, provisions of our restated
certificate of incorporation and our restated bylaws are summaries thereof and
are qualified in their entirety by reference, and our restated certificate of
incorporation and our restated bylaws. Copies of our restated certificate of
incorporation and our restated bylaws will be filed with the SEC as exhibits to
the registration statement, of which this prospectus forms a part.
Common Stock
The holders of our common stock are entitled to dividends as our board of
directors may declare from time to time from funds legally available therefor,
subject to the preferential rights of the holders of any shares of our preferred
stock that we may issue in the future. The holders of our common stock are
entitled to one vote per share on any matter to be voted upon by stockholders.
Our restated certificate of incorporation will not provide for cumulative voting
in connection with the election of directors, and accordingly, holders of more
than 50% of the shares voting will be able to elect all of the directors. No
holder of our common stock will have any preemptive right to subscribe for any
shares of capital stock issued in the future.
Upon any voluntary or involuntary liquidation, dissolution, or winding up of
our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment to creditors and subject to prior
distribution rights of any shares of preferred stock that we may issue in the
future. All of the outstanding shares of common stock are, and the shares
offered by us will be, fully paid and non-assessable.
Preferred Stock
As of the closing of this offering, no shares of our preferred stock will be
outstanding. Under our restated certificate of incorporation, our board of
directors, without further action by our stockholders, will be authorized to
issue shares of preferred stock in one or more classes or series. The board may
fix the rights, preferences and privileges of the preferred stock, along with
any limitations or restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences of each
class or series of preferred stock. The preferred stock could have voting or
conversion rights that could adversely affect the voting power or other rights
of holders of our common stock. The issuance of preferred stock could also have
the effect, under certain circumstances, of delaying, deferring or preventing a
change of control of our company. We currently have no plans to issue any shares
of preferred stock.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless the business combination is approved
in a prescribed manner. A "business combination" includes specified types of
mergers, asset sales, and other transactions resulting in a financial benefit to
the "interested stockholder." Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within the past three years did own, 15% of the corporation's voting stock.
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Other Charter and Bylaw Provisions
Some of the provisions of our restated certificate of incorporation and
restated bylaws could have anti-takeover effects. These provisions are intended
to enhance the likelihood of continuity and stability in the composition of the
corporate policies formulated by our board of directors. In addition, these
provisions also are intended to ensure that our board of directors will have
sufficient time to act in what the board of directors believes to be in the best
interests of us and our stockholders. These provisions also are designed to
reduce our vulnerability to an unsolicited proposal for our takeover that does
not contemplate the acquisition of all of our outstanding shares or an
unsolicited proposal for the restructuring or sale of all or part of Opus360
Corporation. The provisions are also intended to discourage certain tactics that
may be used in proxy fights. However, these provisions could delay or frustrate
the removal of incumbent directors or the assumption of control of us by the
holder of a large block of common stock, and could also discourage or make more
difficult a merger, tender offer, or proxy contest, even if such event would be
favorable to the interests of our stockholders.
CLASSIFIED BOARD OF DIRECTORS
Our restated certificate of incorporation will divide our board of directors
into three classes of directors, with each class as nearly equal in number as
possible, serving staggered three-year terms, other than directors who may be
elected by holders of any preferred stock that we may issue. As a result,
approximately one-third of our board of directors will be elected each year. The
classified board provision will help us to assure the continuity and stability
of our board of directors and our business strategies and policies as determined
by our board of directors. The classified board provision could have the effect
of discouraging a third party from making an unsolicited tender offer or
otherwise attempting to obtain control of us without the approval of our board
of directors. In addition, the classified board provision could delay
stockholders who do not like the policies of our board of directors from
electing a majority of our board of directors for two years.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Our restated certificate of incorporation will provide that stockholder
action can only be taken at an annual or special meeting of stockholders and
prohibits stockholder action by written consent in lieu of meeting. Our restated
bylaws will provide that special meetings of stockholders may be called only by
our board of directors or our Chairman, Chief Executive Officer or President.
Our stockholders will not be permitted to call a special meeting of stockholders
or to require that our board of directors call a special meeting.
ADVANCE STOCKHOLDER PROPOSALS AND DIRECTOR NOMINEES
Our restated bylaws will establish an advance notice procedure for our
stockholders to make nominations of candidates for election as directors or to
bring other business before an annual meeting of our stockholders. This
stockholder notice procedure provides that only persons who are nominated by, or
at the direction of, our board of directors or by a stockholder who has given
timely written notice to our Secretary prior to the meeting at which directors
are to be elected will be eligible for election as our directors. The
stockholder notice procedure also provides that at an annual meeting, only such
business may be conducted as has been brought before the meeting by, or at the
direction of, our board of directors or by a stockholder who has given timely
written notice of such stockholder's intention to bring such business before the
meeting. Under the stockholder notice procedure, if a stockholder desires to
submit a proposal or nominate persons for election as directors at an annual
meeting, the stockholder must submit written notice not less than 90 days nor
more than 120 days prior to the first anniversary of the previous year's annual
meeting. In addition, under the stockholder notice procedure, a stockholder's
notice proposing to nominate a person for election as a director or relating to
the conduct of business other than the nomination of directors must contain
specified types of information. If the chairman of a meeting determines that
business was not properly brought before
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the meeting in accordance with the stockholder notice procedure, that business
shall not be discussed or transacted.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
Our restated certificate of incorporation and restated bylaws provide that
our board of directors will consist of not less than three nor more than 15
directors, other than directors elected by holders of any preferred stock that
we may issue, the exact number to be fixed from time to time by resolution
adopted by our directors. Further, subject to the rights of the holders of any
series of our preferred stock, if any, our restated certificate of incorporation
and restated bylaws will authorize our board of directors to elect additional
directors under specified circumstances and fill any vacancies that occur in our
board of directors by reason of death, resignation, removal, or otherwise. A
director so elected by our board of directors to fill a vacancy or a newly
created directorship will hold office until the next election of the class for
which such director has been chosen and until his successor is elected and
qualified. Subject to the rights of the holders of any series of our preferred
stock, if any, our restated certificate of incorporation and restated bylaws
will also provide that, subject to the right of holders of preferred stock to
elect additional directors under specified circumstances, directors may be
removed only for cause and only by the affirmative vote of holders of 66 2/3% of
the voting power of the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a single class The
effect of these provisions will be to preclude a stockholder from removing
incumbent directors without cause and simultaneously gaining control of our
board of directors by filling the vacancies created by that removal with its own
nominees.
RESTATED CERTIFICATE OF INCORPORATION
The provisions of our restated certificate of incorporation that would have
anti-takeover effects as described above are subject to amendment, alteration,
repeal, or recession by the affirmative vote of the holders of not less than
two-thirds of the outstanding shares of voting securities. This requirement will
make it more difficult for stockholders to make changes to the provisions in our
restated certificate of incorporation which could have anti-takeover effects by
allowing the holders of a minority of the voting securities to prevent the
holders of a majority of voting securities from amending these provisions of our
restated certificate of incorporation.
RESTATED BYLAWS
Our restated certificate of incorporation will provide that our restated
bylaws are subject to adoption, amendment, alteration, repeal, or recession
either by our board of directors without the assent or vote of our stockholders,
or by the affirmative vote of the holders of not less than two-thirds of the
outstanding shares of voting securities. This provision will make it more
difficult for stockholders to make changes in our restated bylaws by allowing
the holders of a minority of the voting securities to prevent the holders of a
majority of voting securities from amending our restated bylaws.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our restated certificate of incorporation includes a provision that
eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or to our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
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These provisions are permitted under Delaware law.
We have obtained directors' and officers' insurance for our directors,
officers and some employees for specified liabilities.
The limitation of liability and indemnification provisions in our restated
certificate of incorporation may discourage stockholders from bringing a lawsuit
against directors for breach of their fiduciary duty. They may also have the
effect of reducing the likelihood of derivative litigation against directors and
officers, even though an action of this kind, if successful, might otherwise
benefit us and our stockholders. Furthermore, a stockholder's investment may be
adversely affected to the extent we pay the costs of settlement and damage
awards against directors and officers pursuant to these indemnification
provisions. However, we believe that these indemnification provisions are
necessary to attract and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is American Stock
Transfer & Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock, and no prediction can be made as to the effect, if any, that market sales
of shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our common stock in the public
market or the perception that these sales could occur could adversely affect
prevailing market prices of our common stock and could also adversely affect our
ability to raise capital at a time and on terms favorable to us.
Upon completion of this offering, we will have outstanding a total of
45,050,841 shares of our common stock. Of these shares, all of the shares sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are held by our
affiliates as that term is defined in Rule 144 under the Securities Act. The
remaining 38,050,841 shares of common stock held by existing stockholders and
the 7,983,323 shares subject to outstanding options and warrants are restricted
securities as that term is defined in Rule 144 under the Securities Act.
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. These rules are summarized below.
Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares including shares issued on exercise
of outstanding options or warrants, assuming exercise on the last day of the
term of the option or warrant, will be available for sale in the public market
as follows:
<TABLE>
<CAPTION>
Number of Shares Date
- ---------------- ----
<S> <C>
90 days after the date of this prospectus, shares saleable
under Rule 144 (subject to volume limitations)
After 180 days from the effective date of the registration
statement for this prospectus (subject to volume
limitations of Rule 144)
One year after the effective date of this registration
statement for this prospectus (in some cases subject to
volume limitations of Rule 144)
Two years after the effective date of the registration
statement for this prospectus (in some cases subject to
volume limitations of Rule 144)
</TABLE>
After this offering, we will have shares of common stock reserved for
issuance under our stock option plans, employee stock purchase plan and other
stock option agreements of which options to purchase 7,138,387 shares were
outstanding as of February 2, 2000. Promptly following this offering, we intend
to file one or more registration statements on Form S-8 to register these shares
which, upon effectiveness, will permit substantial additional sales of shares of
our common stock as these shares are issued.
Lock-Up Agreements
Our directors and executive officers and the securityholders named in this
prospectus, together with other securityholders that collectively hold most of
the shares of common stock and shares of common stock issuable upon the exercise
of options and warrants have agreed, subject to limited exceptions, not to offer
to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any shares of common stock or any options or warrants
to purchase any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock owned as of the date of this prospectus
or later acquired directly by these holders or with respect to which they have
the power of disposition, without the prior written consent of FleetBoston
Robertson Stephens Inc., for a period of 180 days from the effective date of the
registration statement for this prospectus. However, FleetBoston Robertson
Stephens Inc. may, in its sole discretion and at any time or from time to time,
without notice, release all or any portion of securities subject to the lockup
agreement. There are no existing agreements between the representatives and any
of our
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stockholders, optionholders or warrantholders providing consent to the sale of
shares prior to the expiration of the lock-up period.
Rule 144
In general, under Rule 144, as currently in effect, a person, or persons
whose shares are required to be aggregated, including an affiliate, who has
beneficially owned shares of our common stock for at least one year can sell
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding (approximately
450,508 shares immediately after this offering); or
- the average weekly trading volume in our common stock 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 manner of sale provisions and notice
requirements and to the availability of public information about us. In
addition, under Rule 144(k), a person who is not one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, can sell those shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
Options
In general, under Rule 701, any of our employees, directors, consultants or
advisors who purchase shares from us in connection with a compensatory stock
option plan or other written agreement are eligible to resell these shares
90 days after the date of this offering in reliance on Rule 144, without
compliance with certain restrictions contained in Rule 144, including the
holding period. However, the holders of our outstanding options have agreed to
be subject to the restrictions described above under the caption "Lock-Up
Agreements."
After this offering, we intend to register an aggregate of up to
shares of common stock which may be issued under our stock option plans and
employee stock purchase plans. Shares issued upon exercise of options after the
effective date of the registration statement on Form S-8 will be eligible for
resale in the public market without restriction, subject to Rule 144 limitations
applicable to affiliates and the lock-up agreements noted above.
Registration Rights
After this offering, the holders of approximately 37,600,000 shares of
common stock and shares of common stock issuable upon exercise of options and
warrants, will be entitled to have their shares registered under the Securities
Act. Beginning 180 days after the date of the effectiveness of the registration
statement for this prospectus, on the written demand of holders of either
- at least 25% of the outstanding shares of common stock issued upon the
conversion of our Series A preferred stock;
- at least 25% of the outstanding shares of common stock issued upon the
conversion of our Series B preferred stock; or
- at least 25% of the outstanding shares of common stock issued to US
Web/CKS and certain of our officers and employees,
we must use our best efforts to register on Form S-1 these shares and those of
any other stockholders with registrable shares who, by prompt notice, request
registration, subject to the ability of the managing underwriter of an
underwritten offering to reduce the number of shares being sold. We are not
required to
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effect more than two demand registrations on Form S-1 for either the holders of
the shares of common stock issued upon conversion of the Series A preferred
stock or the holders of the shares of common stock issued upon conversion of the
Series B preferred stock. We are not required to effect more than one demand
registration on Form S-1 for the holders of the shares of common stock issued to
USWeb and some of our officers and employees. In addition, the holders of
registrable shares may demand unlimited registrations on Form S-3 of these
shares, subject to the ability of the managing underwriter of an underwritten
offering to reduce the number of shares being sold. Furthermore, if we propose
to register any of our securities under the Securities Act, either for our own
account, other than a registration filed on Form S-4 or S-8, or for the account
of other security holders exercising registration rights, the holders of
registrable shares are entitled to include their shares in the registration,
subject to the ability of the managing underwriter of an underwritten offering
to reduce the number of shares being sold. All offering expenses in connection
with all of these registrations will be borne by us, excluding underwriting
discounts and commissions.
In addition, holders of 225,000 shares of common stock issuable on exercise
of a warrant will have one demand right when we are eligible to use Form S-3 and
unlimited piggyback rights and the holders of shares issuable in the PeopleMover
acquisition will have a one time piggyback rights for up to 250,000 of the
shares issued in the acquisition.
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UNDERWRITING
Of the 7,000,000 shares offered by this prospectus, shares are being
offered by means of an underwritten public offering and shares are being
offered by means of the Safeguard Subscription Program to stockholders of
Safeguard Scientifics, Inc., one of our principal stockholders.
Underwritten Public Offering
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc., J.P. Morgan & Co.
and E*OFFERING Corp., have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of common stock indicated opposite their names below. The underwriters
are committed to purchase and pay for all of the shares if any are purchased.
<TABLE>
<CAPTION>
Underwriter Number of Shares
- ----------- ----------------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
Bear, Stearns & Co. Inc.....................................
J.P. Morgan & Co............................................
E*OFFERING Corp.............................................
---------
Total...................................................
=========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
common stock to the public at the initial public offering price located on the
cover page of this prospectus and to dealers at that price less a concession of
not in excess of $ per share, of which $ may be reallowed to
other dealers. After the initial public offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
reduction in this price will change the amount of proceeds to be received by us
as indicated on the cover page of this prospectus.
OVER-ALLOTMENT OPTION.
We have granted to the underwriters an option, exercisable during the 30-day
period after the date of this prospectus, to purchase up to 1,050,000 additional
shares of common stock at the same price per share as we will receive for the
shares that the underwriters have agreed to purchase. To the extent that
the underwriters exercise this option, each of the underwriters will have a firm
commitment to purchase approximately the same percentage of additional shares
that the number of shares of common stock to be purchased by it shown in the
above table represents as a percentage of the shares to be offered by the
underwriters. If purchased, the additional shares will be sold by the
underwriters on the same terms as those on which the shares are being
sold. We will be obligated, under this option, to sell shares to the extent the
option is exercised. The underwriters may exercise the option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered by them.
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The following table shows the per share and total underwriting discounts and
commissions to be paid by us to the underwriters. This information is presented
assuming either no exercise or full exercise by the underwriters of their
over-allotment option.
<TABLE>
<CAPTION>
Total(1)
-----------------------------------
Without Over- With Over-
Per Share allotment Option allotment Option
--------- ---------------- ----------------
<S> <C> <C> <C>
Initial public offering price........................ $ $ $
Underwriting discounts and commissions...............
Proceeds, before expenses, to us.....................
</TABLE>
- ------------------------
(1) Prior to this offering, FleetBoston Ventures, an affiliate of FleetBoston
Robertson Stephens Inc., purchased 216,920 shares of our Series B preferred
stock, which will automatically convert into 325,380 shares of common stock
upon completion of this offering. In December, 1999, we issued to an
affiliate of J.P. Morgan & Co. 39,000 shares of our common stock in exchange
for consulting services. The issuance of each of these securities may be
deemed to be additional underwriting compensation. See
"--FleetBoston Ventures" and "--J.P. Morgan & Co. Incorporated" below.
The total expenses of the offering payable by us are estimated at
$ . We are not responsible for expenses associated with the Safeguard
Subscription Program.
INDEMNITY.
The underwriting agreement contains covenants of indemnity among the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
FUTURE SALES.
Our directors and executive officers and the securityholders named in this
prospectus, together with other securityholders that collectively hold most of
the shares of common stock and shares of common stock issuable upon the exercise
of options and warrants, have agreed, during the period of 180 days after the
date of this prospectus, subject to several exceptions, not to offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of common stock or any options or warrants to
purchase any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock owned as of the date of this prospectus
or thereafter acquired directly by these holders or with respect to which they
have the power of disposition, without the prior written consent of FleetBoston
Robertson Stephens Inc. However, FleetBoston Robertson Stephens Inc. may, in its
sole discretion and at any time or from time to time, without notice, release
all or any portion of the securities subject to the lock-up agreements. There
are no existing agreements between the representatives and any of our
stockholders, optionholders or warrantholders providing consent to the sale of
shares prior to the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to several exceptions:
- consent to the disposition of any shares subject to lock-up agreements
prior to the expiration of the lock-up period; or
- issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering, the issuance
of common stock upon the exercise of outstanding options or warrants, the
issuance of options under existing stock option plans provided that no
portion of the options vests before the expiration of the
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lock-up period and the issuance of common stock in connection with an
acquisition of another company if the terms of such issuance provide that
the common stock so issued shall be subject to the terms of the lock-up
agreement. Please refer to the information in this prospectus under the
heading "Shares Eligible for Future Sale."
The underwriters have advised us that they do not intend to confirm sales to
any accounts over which they exercise discretionary authority.
INTERNET DISTRIBUTION.
E*OFFERING Corp. has agreed to allocate a portion of the shares that it
purchases to E*TRADE Securities, Inc. A prospectus in electronic format will be
made available on Internet sites maintained by E*OFFERING and E*TRADE.
E*OFFERING and E*TRADE will accept conditional offers to purchase shares from
all of their customers that complete and pass online eligibility profiles. In
the event that the demand for shares from the customers of E*TRADE exceeds the
amount of shares allocated to it, E*TRADE will use a random allocation
methodology to distribute shares in even lots of 100 shares per customer. There
are no plans to direct shares to particular Internet purchasers.
DIRECTED SHARES.
Of the shares of common stock to be sold by us to the public
generally, we have requested that the underwriters reserve up to shares of
common stock for sale at the initial public offering price to directors,
officers, employees and other individuals designated by us, including our
vendors, business partners, customers, potential customers and their respective
employees. The number of shares of common stock available for sale to the
general public will be reduced to the extent that such individuals purchase all
or a portion of these reserved shares. Any reserved shares which are not
purchased shall be offered by the underwriters to the general public on the same
basis as the common shares offered hereby.
NO PRIOR PUBLIC MARKET.
Before this offering, there has been no public market for the common stock.
Consequently, the initial public offering price for the common stock offered by
this prospectus will be determined through negotiations between us and the
representatives. Among the factors considered in these negotiations, the primary
factors were prevailing market conditions, our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development.
LISTING.
We will apply to have our shares approved for quotation on the Nasdaq
National Market under the symbol "OPUS."
STABILIZATION.
The representatives have advised us that under Regulation M under the
Securities Exchange Act, some participants in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A stabilizing bid is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A syndicate covering
transaction is the bid for or purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A penalty bid is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by the underwriter or syndicate member is purchased by
94
<PAGE>
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by the underwriter or syndicate member. The
representatives have advised us that these transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
DELIVERY.
The shares of common stock to be sold in this offering are expected to be
delivered to purchasers on , 2000.
Safeguard Subscription Program
As part of this offering, we are offering shares of our common stock
in the Safeguard Subscription Program to stockholders of Safeguard, one of our
principal stockholders. Safeguard's stockholders may subscribe for one share of
our common stock for every shares of Safeguard common stock held by them,
and may not transfer the opportunity to subscribe to another person except
involuntarily by operation of law. Persons who owned at least 100 shares of
Safeguard common stock as of December 16, 1999 are eligible to purchase shares
from us under the program. Stockholders who own less than 100 shares of
Safeguard common stock will be ineligible to participate in the Safeguard
Subscription Program.
Under a standby stock purchase agreement, which will be filed as an exhibit
to the registration statement relating to this prospectus, Safeguard will
purchase from us any of the shares offered by us under the program that are not
purchased by the stockholders of Safeguard. Distribution of share certificates
purchased through the Safeguard Subscription Program will be made to the
purchasers as soon as practicable following the closing of the sale of the
shares to the public. It is expected that sales under the Safeguard Subscription
Program will be reflected in purchasers' book-entry accounts at the Depository
Trust Company, if any, upon the closing of these sales. After the closing of
these sales, we will mail stock certificates to all purchasers who do not
maintain book-entry accounts at the Depository Trust Company. The purchase price
under the program, whether paid by Safeguard or its stockholders, will be the
same price per share as set forth on the cover page of this prospectus. All
shares will be sold either to Safeguard or to stockholders of Safeguard.
FleetBoston Robertson Stephens Inc. will receive a % management fee on all
shares offered through the Safeguard Subscription Program, including any shares
actually purchased by Safeguard. The management fee represents compensation for
the underwriters' role as it relates to due diligence, participation in the
drafting of this prospectus, and general coordination of the overall offering.
Safeguard will not receive any compensation from Opus360 or any other person,
with respect to this offering, including any underwriting discounts or
commissions.
The following table shows the per share and total offering price, management
fee to be paid by us to the underwriters and the proceeds before expenses to us.
<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Public offering price.......................................
Management fee..............................................
Proceeds, before expenses, to Opus360.......................
</TABLE>
The total proceeds, before expenses, to be received by us from both the
underwritten public offering and the Safeguard Subscription Program will be
approximately $ million, assuming no exercise of the over-allotment
option.
The expenses of the Safeguard Subscription Program, exclusive of the
management fee to be paid to the underwriters, are payable by Safeguard.
Safeguard is an underwriter with respect to the shares included in the
Safeguard Subscription Program. Safeguard is not an underwriter with respect to
the other shares offered by this prospectus. Safeguard is not
95
<PAGE>
included in the term "underwriter" as used in this prospectus. Safeguard's sole
condition to purchase any shares that are not purchased by its stockholders in
the Safeguard Subscription Program is that the conditions to the underwriter's
obligations have been met. This means that Safeguard will be required to
purchase these shares if, and only if, the underwriters are obligated to
purchase shares. Safeguard has not participated in any discussions or
negotiations with us and the underwriters regarding the initial public offering
price. Safeguard will not have any right to seek indemnification from us
regarding its agreement to accept underwriter liability with respect to the
shares included in the Safeguard Subscription Program.
FleetBoston Ventures
FleetBoston Ventures, an affiliate of FleetBoston Robertson Stephens Inc.,
owns shares of Series B preferred stock which will convert into shares of our
common stock upon the closing of this offering.
J.P. Morgan & Co. Incorporated
In December 1999, we entered into an agreement with J.P. Morgan & Co., one
of the representatives of the underwriters, to use OPUS XCHANGE to procure its
project-based resource requirements and to participate actively in the continued
development of the enhanced version of OPUS XCHANGE. In connection with this
agreement, in December 1999, we issued to an affiliate of J.P. Morgan & Co.
39,000 shares of our common stock in exchange for consulting services performed
under the agreement, valued at .
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by O'Sullivan Graev & Karabell, LLP, New York, New York. The
O'Sullivan Graev profit sharing plan holds 40,000 shares of Series A preferred
stock, which will automatically convert into shares of common stock on a
one-for-one basis upon the closing of this offering. Various legal matters in
connection with this offering will be passed upon for the underwriters by
Morrison & Foerster LLP, New York, New York.
EXPERTS
The consolidated financial statements for Opus360 Corporation as of
December 31, 1999 and for the period from August 17, 1998 (our inception) to
December 31, 1998 and the financial statements for The Churchill Benefit
Corporation as of December 31, 1997 and 1998 and for each of the two years ended
December 31, 1999, included in this prospectus, have been so included in
reliance on the reports of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, upon authority of said firm as experts in auditing
and accounting.
The financial statements of PeopleMover, Inc. as of December 31, 1998 and
1999 and for each of the two years in the period ended December 31, 1999,
included in this prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN GET MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including
exhibits and schedules thereto) under the Securities Act with respect to the
common stock to be sold in this offering. This prospectus, which constitutes a
part of the registration statement, does not contain all of the information set
forth in the registration statement or the exhibits and schedules which are part
of the registration statement. For further information with respect to us and
the common stock, reference is made to the registration statement and the
exhibits and the schedules thereto.
You may read and copy all or any portion of the registration statement or
any reports, statement or other information in the Opus360 files in the SEC's
public reference room at Room 1024, Judiciary Plaza, 450
96
<PAGE>
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission 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. Opus360's SEC filings, including the
registration statement, will also be available to you on the SEC's Internet site
(http://www.sec.gov). As a result of this offering, we will become subject to
the information and reporting requirements of the Securities Exchange Act and,
in accordance therewith, will file periodic reports, proxy statements and other
information with the SEC. Upon approval of the common stock for quotation on the
Nasdaq National Market, such reports, proxy and other information may be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
97
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
OPUS360 CORPORATION
Independent Auditor's Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the period from
August 17, 1998 (inception) to December 31, 1998 and for
the year ended December 31, 1999.......................... F-4
Consolidated Statements of Stockholders' Equity for the
period from August 17, 1998 (inception) to December 31,
1998 and for the year ended December 31, 1999............. F-5
Consolidated Statements of Cash Flows for the period from
August 17, 1998 (inception) to December 31, 1998 and for
the year ended December 31, 1999.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
THE CHURCHILL BENEFIT CORPORATION
Independent Auditor's Report................................ F-26
Balance Sheets as of December 31, 1997, 1998 and March 31,
1999 (unaudited).......................................... F-27
Statements of Operations for the years ended December 31,
1997 and 1998 and the three months ended March 31, 1998
and 1999 (unaudited)...................................... F-28
Statement of Stockholders' Equity for the years ended
December 31, 1997 and 1998................................ F-29
Statements of Cash Flows for the years ended December 31,
1997 and 1998 and the three months ended March 31, 1998
and 1999 (unaudited)...................................... F-30
Notes to Financial Statements............................... F-31
PEOPLEMOVER, INC.
Report of Independent Accountants........................... F-35
Balance Sheets as of December 31, 1999 and December 31,
1998...................................................... F-36
Statements of Operations for the years ended December 31,
1999 and 1998............................................. F-37
Statements of Stockholders' Deficit for the years ended
December 31, 1999 and 1998................................ F-38
Statements of Cash Flows for the years ended December 31,
1999 and 1998............................................. F-39
Notes to Financial Statements............................... F-40
</TABLE>
F-1
<PAGE>
The Board of Directors
Opus360 Corporation:
When the stock split referred to in Note 10 of the Notes to Financial
Statements has been consummated, we will be in a position to render the
following report.
/s/ KPMG LLP
Independent Auditors' Report
The Board of Directors
Opus360 Corporation:
We have audited the accompanying consolidated balance sheets of Opus360
Corporation as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity and cash flows for the period from August 17,
1998 (inception) to December 31, 1998 and the year ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Opus360 Corporation as of December 31, 1998 and 1999, and the results of its
operations and its cash flows for the period from August 17, 1998 (inception) to
December 31, 1998 and the year ended December 31, 1999 in conformity with
generally accepted accounting principles.
New York, New York
February 8, 2000
F-2
<PAGE>
OPUS360 CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Pro Forma
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Current assets:
Cash................................................ $ 5,818,000 $ 1,326,000 $ 1,326,000
Accounts receivable................................. 12,000 2,314,000 2,314,000
Short-term investments.............................. -- 27,137,000 27,137,000
Prepaid expenses and other.......................... 2,000 3,850,000 3,850,000
----------- ------------ ------------
Total current assets.......................... 5,832,000 34,627,000 34,627,000
Property and equipment, net........................... 54,000 2,990,000 2,990,000
Goodwill, net......................................... -- 1,702,000 1,702,000
Deferred loan costs................................... -- 16,000 16,000
Due from PeopleMover.................................. 575,000 575,000
Other assets.......................................... -- 806,000 806,000
----------- ------------ ------------
Total assets.................................. $ 5,886,000 $ 40,716,000 $ 40,716,000
=========== ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.................................... $ 293,000 $ 5,489,000 $ 5,489,000
Accrued expenses.................................... 340,000 4,818,000 4,818,000
Accrued wages....................................... -- 2,682,000 2,682,000
----------- ------------ ------------
Total current liabilities..................... 633,000 12,989,000 12,989,000
Stockholders' equity:
Series A convertible preferred stock, $0.001 par
value; 8,400,000 shares authorized; 4,636,000 and
8,284,000 shares issued and outstanding,
respectively; zero shares outstanding on a pro
forma basis....................................... 5,000 8,000 --
Series B convertible preferred stock, $0.001 par
value; 8,700,000 shares authorized; 0 and
8,677,000 shares issued and outstanding,
respectively; zero shares outstanding on a pro
forma basis....................................... -- 9,000 --
Common stock, $0.001 par value; 45,000,000 shares
authorized; 9,500,000 and 10,880,000 issued and
outstanding, respectively; 36,322,000 shares
outstanding on a pro forma basis.................. 9,000 11,000 36,000
Additional paid-in capital.......................... 6,381,000 63,835,000 63,827,000
Stock subscription receivable....................... (107,000) (239,000) (239,000)
Deferred compensation............................... -- (5,469,000) (5,469,000)
Accumulated deficit................................. (1,035,000) (30,425,000) (30,425,000)
Accumulated other comprehensive loss................ -- (3,000) (3,000)
----------- ------------ ------------
Total stockholders' equity.................... 5,253,000 27,727,000 27,727,000
----------- ------------ ------------
Commitments and contingencies
Total liabilities and stockholders' equity.... $ 5,886,000 $ 40,716,000 $ 40,716,000
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
OPUS360 CORPORATION
Consolidated Statement of Operations
<TABLE>
<CAPTION>
Period from
August 17, 1998
(inception) to Year ended
December 31, December 31,
1998 1999
--------------- -------------
<S> <C> <C>
Revenue..................................................... $ -- $ 419,000
Cost of revenue............................................. -- 261,000
------------ ------------
Gross profit................................................ -- 158,000
Operating expenses:
Sales and marketing....................................... 80,000 11,068,000
Product development....................................... 552,000 9,034,000
General and administrative................................ 407,000 7,114,000
Depreciation and amortization............................. 2,000 629,000
Amortization of equity-based compensation................. -- 2,448,000
------------ ------------
Total operating expenses................................ 1,041,000 30,293,000
------------ ------------
Loss from operations.................................... (1,041,000) (30,135,000)
Other income:
Interest income........................................... 6,000 765,000
Interest expense.......................................... -- (20,000)
Loss before income taxes................................ (1,035,000) (29,390,000)
Income tax expense.......................................... -- --
------------ ------------
Net loss................................................ $ (1,035,000) $(29,390,000)
============ ============
Historical basic and diluted net loss per share............. $ (0.11) $ (2.91)
============ ============
Shares used in the calculation of historical basic and
diluted net loss per share................................ 9,120,348 10,083,563
============ ============
Pro forma basic and diluted net loss per share (note 9)..... $ (0.11) $ (1.12)
============ ============
Shares used in the calculation of pro forma basic and
diluted net loss per share (note 9)....................... 9,391,063 26,323,752
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
OPUS360 CORPORATION
Consolidated Statement of Stockholders' Equity
Period from August 17, 1998 (inception) to December 31, 1998
and the Year ended December 31, 1999
<TABLE>
<CAPTION>
Class A Convertible Class B Convertible
Preferred Stock Preferred Stock Common Stock Additional
---------------------- ---------------------- ---------------------- Paid-in
Shares Amount Shares Amount Shares Amount Capital
---------- --------- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at August 17, 1998
(inception) -- $ -- -- $ -- -- $ -- $ --
Issuance of common stock........ -- -- -- -- 9,092,000 9,000 526,000
Issuance of common stock for
technology.................... -- -- -- -- 408,000 -- 95,000
Issuance of Class A convertible
preferred stock............... 4,636,000 5,000 -- -- -- -- 5,790,000
Expenses incurred in connection
with equity offerings......... -- -- -- -- -- -- (30,000)
Net loss and comprehensive
loss.......................... -- -- -- -- -- -- --
---------- --------- ---------- --------- ---------- --------- -----------
Balance at December 31,
1998...................... 4,636,000 5,000 -- -- 9,500,000 9,000 6,381,000
Issuance of Class A convertible
preferred stock............... 3,648,000 3,000 -- -- -- -- 4,557,000
Issuance of Class B convertible
preferred stock............... -- -- 8,677,000 9,000 -- -- 39,991,000
Issuance of shares in connection
with acquisition.............. -- -- -- -- 946,000 1,000 1,749,000
Expenses incurred in connection
with equity offering.......... -- -- -- -- -- -- (40,000)
Proceeds from stock
subscriptions receivable...... -- -- -- -- -- -- --
Record equity base compensation
expense to a shareholder...... -- -- -- -- -- -- 243,000
Record deferred compensation for
issuance of options to
employees..................... -- -- -- -- -- -- 5,758,000
Record deferred compensation for
issuance of options to non-
employees..................... -- -- -- -- -- -- 1,916,000
Amortization of deferred
compensation for employee
stock options................. -- -- -- -- -- -- --
Amortization of deferred
compensation for non-employee
stock options................. -- -- -- -- -- -- --
Issuance of warrants to a
bank.......................... -- -- -- -- -- -- 63,000
Issuance of warrants for
services...................... -- -- -- -- -- -- 554,000
Issuance of warrants for
services...................... -- -- -- -- -- -- 182,000
Issuance of warrants for
services...................... -- -- -- -- -- -- 54,000
Issuance of shares to
CareerPath.................... -- -- -- -- 246,000 1,000 1,999,000
Issuance of shares to
J.P. Morgan................... -- -- -- -- 39,000 -- 318,000
Warrants exercised.............. -- -- -- -- 120,000 -- 100,000
Options exercised............... -- -- -- -- 29,000 -- 10,000
Comprehensive loss..............
Net loss.................... -- -- -- -- -- -- --
Unrealized holding loss on
short term investments.... -- -- -- -- -- -- --
Comprehensive loss -- -- -- -- -- -- --
---------- --------- ---------- --------- ---------- --------- -----------
Balance at December 31,
1999...................... 8,284,000 $ 8,000 8,677,000 $ 9,000 10,880,000 $ 11,000 $63,835,000
========== ========= ========== ========= ========== ========= ===========
<CAPTION>
Stock Other
Subscriptions Deferred Accumulated Comprehensive
Receivable Compensation Deficit Loss Total
------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at August 17, 1998
(inception) $ -- $ -- $ -- $ -- $ --
Issuance of common stock........ (107,000) -- -- -- 428,000
Issuance of common stock for
technology.................... -- -- -- -- 95,000
Issuance of Class A convertible
preferred stock............... -- -- -- -- 5,795,000
Expenses incurred in connection
with equity offerings......... -- -- -- -- (30,000)
Net loss and comprehensive
loss.......................... -- -- (1,035,000) -- (1,035,000)
--------- ----------- ------------ ---------- ------------
Balance at December 31,
1998...................... (107,000) -- (1,035,000) -- 5,253,000
Issuance of Class A convertible
preferred stock............... (195,000) -- -- -- 4,365,000
Issuance of Class B convertible
preferred stock............... -- -- -- -- 40,000,000
Issuance of shares in connection
with acquisition.............. -- -- -- -- 1,750,000
Expenses incurred in connection
with equity offering.......... -- -- -- -- (40,000)
Proceeds from stock
subscriptions receivable...... 63,000 -- -- -- 63,000
Record equity base compensation
expense to a shareholder...... -- -- -- -- 243,000
Record deferred compensation for
issuance of options to
employees..................... -- (5,758,000) -- -- --
Record deferred compensation for
issuance of options to non-
employees..................... -- (1,916,000) -- -- --
Amortization of deferred
compensation for employee
stock options................. -- 756,000 -- -- 756,000
Amortization of deferred
compensation for non-employee
stock options................. -- 1,449,000 -- -- 1,449,000
Issuance of warrants to a
bank.......................... -- -- -- -- 63,000
Issuance of warrants for
services...................... -- -- -- -- 554,000
Issuance of warrants for
services...................... -- -- -- -- 182,000
Issuance of warrants for
services...................... 54,000
Issuance of shares to
CareerPath.................... -- -- -- -- 2,000,000
Issuance of shares to
J.P. Morgan................... -- -- -- -- 318,000
Warrants exercised.............. -- -- -- -- 100,000
Options exercised............... -- -- -- -- 10,000
Comprehensive loss..............
Net loss.................... -- -- (29,390,000) -- (29,390,000)
Unrealized holding loss on
short term investments.... -- -- -- (3,000) (3,000)
------------
Comprehensive loss -- -- -- -- (29,393,000)
--------- ----------- ------------ ---------- ------------
Balance at December 31,
1999...................... $(239,000) $(5,469,000) $(30,425,000) $ (3,000) $ 27,727,000
========= =========== ============ ========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
OPUS360 CORPORATION
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Period from
August 17, 1998
(inception) to Year ended
December 31, December 31,
1998 1999
--------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,035,000) $(29,390,000)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 2,000 629,000
Non cash product development expense.................... 95,000 24,000
Non cash compensation expense........................... -- 2,448,000
Non cash advertising expense............................ -- 182,000
Non cash advisory expense............................... -- 369,000
Non cash interest expense associated with issuance of
warrants.............................................. -- 47,000
Expenses paid by stockholder............................ 225,000 58,000
Loss on disposal of equipment........................... -- 8,000
Changes in operating assets and liabilities:
Account receivables................................... (12,000) (1,092,000)
Prepaid expenses and other current assets............. (2,000) (3,848,000)
Other assets.......................................... -- (1,099,000)
Accounts payable...................................... 68,000 5,138,000
Accrued expenses...................................... 339,000 4,478,000
Accrued wages......................................... -- 1,267,000
----------- ------------
Net cash provided by (used in) operating
activities.......................................... $ (320,000) $(20,781,000)
=========== ============
Cash flows from investing activities:
Acquisition of property and equipment..................... (56,000) (3,156,000)
Increase in short term investments........................ -- (27,140,000)
Cash acquired in connection with acquisition of
subsidiary.............................................. -- 129,000
Due from PeopleMover...................................... -- (575,000)
----------- ------------
Net cash used in investing activities............... $ (56,000) $(30,742,000)
=========== ============
Cash flows from financing activities:
Net proceeds from issuance of Series A convertible
preferred stock......................................... $ 5,765,000 $ 4,560,000
Net proceeds from issuance of Series B convertible
preferred stock......................................... -- 39,795,000
Net proceeds from issuance of common stock................ 429,000 2,676,000
----------- ------------
Net cash provided by financing activities........... 6,194,000 47,031,000
----------- ------------
Net increase (decrease) in cash..................... 5,818,000 (4,492,000)
Cash:
Beginning of period....................................... -- 5,818,000
----------- ------------
End of period............................................. $ 5,818,000 $ 1,326,000
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements
(1) Organization and Summary of Accounting Policies
(A) ORGANIZATION AND DESCRIPTION OF BUSINESS
Opus360 Corporation ("Opus" or the "Company") was incorporated on
August 17, 1998, under the laws of Delaware.
Opus provides an integrated web-based business to business solution for
putting people and projects together. The Company's e-commerce solution is
designed to streamline the procurement and management of professional services
and is comprised of two segments.
- FREEAGENT.COM SERVICE--which includes FREEAGENT.COM, a web-site that
enables independent professionals to manage their careers by offering
access to project opportunities and corporate products and services; and,
FREEAGENT E.OFFICE, a back-office and employer service for independent
professionals. Independent professionals who elect to receive FREEAGENT
E.OFFICE services are the Company's contractual employees for federal
income tax purposes and for whom the Company prepares IRS Form W-2's. The
Company enters into contracts with organizations for projects to be
performed by FREEAGENT E.OFFICE employees, processes invoices on their
behalf and, upon receipt of amounts due from the contracting organization
for the services rendered by FREEAGENT E.OFFICE employees, remits the
amount to them after deducting payroll taxes, the fees charged by the
Company and directing amounts to their health insurance and 401(k)
retirement plan, as directed by the FREEAGENT E.OFFICE employees.
- APPLICATION AND PROCUREMENT SERVICES--which includes OPUS XCHANGE, a
web-based platform designed to enable corporations, professional service
firms, staffing vendors and other buyers of project-based labor to procure
these services in an exchange-based environment by using search
technologies to match people with projects; and, OPUSRM, a labor resource
management service designed to centralize resource and project information
and enable organizations to manage their internal and external labor
resources.
On May 27, 1999, the Company acquired The Churchill Benefit Corporation
("Churchill"), a company that provided offline back-office and employer services
similar to those of the Company's online FREEAGENT E.OFFICE service.
(B) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Opus and it's wholly owned subsidiary, The Churchill Benefit Corporation
(collectively, the "Company"). All intercompany account balances and
transactions have been eliminated in consolidation.
The accompanying consolidated financial statements reflect a change in how
the Company's subsidiary, Churchill, recognizes revenue. The Company currently
recognizes as revenue the monthly fees it charges to its FREEAGENT E.OFFICE
employees for providing FREEAGENT E.OFFICE services as these services are
provided. Previously, Churchill recorded as revenue, the gross billings from
services provided by its FREEAGENT E.OFFICE employees to customers with whom
Churchill contracts, invoices and collects on behalf of its FREEAGENT E.OFFICE
employees. Churchill would then record a corresponding charge to cost of
revenues for the same amount less its FREEAGENT E.OFFICE service fee. This
change in Churchill's revenue recognition policy has no effect on historical net
income or loss.
F-7
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
The Company believes its current revenue recognition policy clarifies its
financial position and results of operations and is consistent with the view of
the Securities and Exchange Commission ("SEC") on revenue recognition issued in
Staff Accounting Bulletin No. 101.
In December 1999, the Board of Directors authorized the filing of a
registration statement with the SEC that would permit the Company to sell shares
of the Company's common stock in connection with a proposed initial public
offering ("IPO"). In conjunction with a qualified IPO, all outstanding shares of
Series A and B preferred stock automatically convert into shares of the
Company's common stock on a one for one basis. Accordingly, the effect of the
conversions has been reflected in the accompanying pro forma balance sheet as if
they had occurred as of December 31, 1999. A registration statement relating to
the IPO was filed with the SEC on December 21, 1999, but has not yet become
effective.
(C) USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(D) REVENUE RECOGNITION
To date, the Company has generated revenue principally from charging fees to
independent professionals who receive the Company's FREEAGENT E.OFFICE services,
which include back office and administrative services. Independent professionals
who elect to receive FREEAGENT E.OFFICE services are the Company's contractual
employees for federal income tax purposes and for whom the Company prepares IRS
Form W-2's. The Company enters into contracts with organizations for projects to
be performed by FREEAGENT E.OFFICE employees, processes invoices on their behalf
and, upon receipt of amounts due from the contracting organization for the
services rendered by the FREEAGENT E.OFFICE employees, remits the amount to them
after deducting payroll taxes, the fees charged by the Company and directing
amounts to their health insurance and the Company's 401(k) plan.
The Company recognizes an initial sign-up fee and monthly FREEAGENT E.OFFICE
fees as its services are provided to such FREEAGENT E.OFFICE employees on a
monthly basis. The Company recognizes the initial
sign-up fee over the period of the FREEAGENT E.OFFICE employees' initial
contract term. The FREEAGENT E.OFFICE employee may elect to terminate receiving
the Company's FREEAGENT E.OFFICE services at any time; however, the FREEAGENT
E.OFFICE employee is not entitled to any refund upon termination.
Company revenue from the sale of banner ads or sponsorship fees on
FREEAGENT.COM is recognized ratably in the period in which the advertisement is
displayed or the term of the sponsorship agreement, provided that no significant
Company obligations remain and collection of the resulting receivable is
probable.
FREEAGENT business services revenues will consist of commission-based or
fee-based services for products provided through FREEAGENT.COM by the Company's
business partners. Business service revenues will be recognized as revenues when
the transaction is consummated provided that no significant obligations exist,
including refunds, and collection of the resulting receivable is probable.
Through December 31, 1999, no revenue has been recognized from this service.
F-8
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
Revenue from OPUS XCHANGE project listing will consist of fees that are paid
by organizations that list projects on OPUS XCHANGE and will be recognized over
the applicable period for which the project is listed. Through December 31,
1999, no revenue has been recognized for this service.
Revenue from OPUS XCHANGE project placement will consist of a
transaction-based fee (either variable or fixed), paid when an organization that
has listed a project on OPUS XCHANGE procures the services of a registered free
agent to perform services for the project and will be recognized as revenue
either when a free agent is engaged for a project or over time if the free agent
is a FREEAGENT E.OFFICE employee. Through December 31, 1999, no revenue has been
recognized for this service.
(E) COST OF REVENUE
Cost of revenue consists primarily of salaries paid to staff that help
administer the Company's FREEAGENT E.OFFICE SERVICES. Additional costs of
revenues include costs associated with operating FREEAGENT.COM and OPUS XCHANGE,
including certain technical personnel, equipment leasing costs,
telecommunications charges and depreciation.
(F) INVESTMENT SECURITIES
Investment securities at December 31, 1999 consist of corporate debt
securities and U.S. government agency securities. The Company classifies all of
the debt securities as available-for-sale. Available-for-sale securities are
recorded at fair value. Unrealized holding gains and losses, net of the related
tax effect, on available-for-sale securities are excluded from earnings and are
reported as a separate component of other comprehensive income until realized.
Realized gains and losses from the sale of available-for-sale securities are
determined on a specific identification basis.
A decline in the market value of any available-for-sale security below cost
that is deemed to be other than temporary results in a reduction in the carrying
amount to fair value. The impairment is charged to earnings and a new cost basis
for the security is established. Premiums and discounts are amortized or
accreted over the life of the related available-for-sale security as an
adjustment to yield using the effective interest method. Dividend and interest
income is recognized when earned.
The breakdown of unrealized gains and losses as of December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair Market
Cost Gain Loss Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Government agency debt securities............... $24,787,000 7,000 (14,000) 24,780,000
Corporate debt securities....................... 2,355,000 2,000 -- 2,357,000
----------- ----- ------- ----------
Total........................................... $27,142,000 9,000 (14,000) 27,137,000
=========== ===== ======= ==========
</TABLE>
(G) ADVERTISING COSTS
Advertising costs are expensed as incurred. For the period from August 17,
1998 (inception) to December 31, 1998 and for the year ended December 31, 1999,
advertising expenses amounted to approximately $0 and $4,545,000, respectively.
(H) ACCOUNTS RECEIVABLE AND ACCRUED WAGES PAYABLE
Accounts receivable represents amounts invoiced by the Company on behalf of
its FREEAGENT E.OFFICE employees for services rendered to a customer that has
contracted with the Company. Accrued wages
F-9
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
represents the amounts owed to the Company's FREEAGENT E.OFFICE employees for
services rendered under contracts with third parties.
(I) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the related assets,
generally ranging from three to five years.
(J) IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 121 requires impairment losses to be recorded on long-
lived assets used in operations, including goodwill, when indicators of
impairment are present and the undiscounted future cash flows estimated to be
generated by those assets are less than the assets' carrying amount. If such
assets are impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the fair market value of the
assets. Assets to be disposed of are reported at the lower of the carrying value
or fair market value, less costs to sell.
(K) INTANGIBLE ASSETS
Intangible assets consists of goodwill and is amortized on a straight-line
basis over the expected periods to be benefited, generally 3 years. Accumulated
amortization for the year ended December 31, 1999 was $411,000.
(L) FINANCIAL INSTRUMENTS
The following summary disclosures are made in accordance with the provisions
of SFAS No. 107, Disclosures about Fair Value of Financial Instruments. Fair
market value is defined in the statement as the amount at which an instrument
could be exchanged in a current transaction between willing parties.
The carrying amounts of accounts receivables, prepaid expenses, short-term
investments and other assets, accounts payable and accrued expenses approximate
fair market value due to the short maturity of these instruments.
(M) PRODUCT DEVELOPMENT COSTS
The Company accounts for product development costs in accordance with SFAS
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," under which certain software development costs incurred
subsequent to the establishment of technological feasibility are capitalized and
amortized over the estimated lives of the related products. Technological
feasibility is established upon completion of a working model. Through
December 31, 1999, all development costs have been charged to product
development expense in the accompanying consolidated statements of operations.
(N) INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No, 109,
"Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and
F-10
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
tax bases of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
(O) STOCK BASED COMPENSATION
The Company accounts for stock-based compensation arrangements in accordance
with SFAS No. 123, "Accounting for Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to apply the provisions of Accounting Principles Board ("APB") Opinion
No. 25 and provide pro forma net earnings (loss) disclosures for employee stock
option grants as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.
(P) SEGMENT INFORMATION
The Company discloses information regarding segments in accordance with SFAS
No. 131 "Disclosure about Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for reporting of financial information about
operating segments in annual financial statements and requires reporting
selected information about operating segments in interim financial reports. (See
note 11).
(Q) COMPREHENSIVE INCOME
The Company reports comprehensive income in accordance with SFAS No. 130,
"Reporting Comprehensive Income". SFAS No. 130 establishes rules for the
reporting and display of comprehensive income and its components. SFAS No. 130
requires unrealized holding gains and losses, net of related tax effects, on
available for sale securities to be included in other comprehensive income until
realized.
(R) BASIC AND DILUTED NET LOSS PER SHARE
The Company calculates earnings per share in accordance with SFAS No. 128,
"Computation of Earnings Per Share" and SEC Staff Accounting Bulletin No. 98.
Accordingly, basic earnings per share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during the
period. Pursuant to SAB No. 98, all options, warrants or other potentially
dilutive instruments issued for nominal consideration, prior to the anticipated
effective date of an initial public offering (including the IPO), are required
to be included in the calculation of basic and diluted net loss per share, as if
they were outstanding for all periods presented. As of December 31, 1999, the
Company has recorded the fair market value of all equity instruments issued for
all periods presented and, accordingly, does not have any nominal issuances.
Common equivalent shares consist of the incremental common shares issuable upon
the conversion of the Company's preferred stock (using the if-converted method)
and shares issuable upon the exercise of stock options and warrants (using the
treasury stock method); common equivalent shares are excluded from the
calculation if their effect is anti-dilutive.
(S) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Company adopted the American Institute of Certified
Public Accounts (AICPA) Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1
requires that entities capitalize certain costs related to internal use software
once certain criteria have been met. Adoption of SOP 98-1 did not have a
material impact on the Company's financial condition or results of operations.
F-11
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that all start-up costs
related to new operations must be expensed as incurred. In addition, all
start-up costs that were capitalized in the past must be written off when SOP
98-5 is adopted. The Company implemented SOP 98-5 on January 1, 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. The Company
has not yet analyzed the impact of this pronouncement on its financial
statements.
(2) Acquisition of The Churchill Benefit Corporation
On May 27, 1999, Opus acquired 100% of the outstanding common stock of The
Churchill Benefit Corporation ("Churchill") in exchange for 946,475 shares (the
"Initial Shares") of the Company's common stock valued at approximately $1.849
per share, or $1.75 million.
The former owner of Churchill is potentially entitled to an additional
405,632 shares of the Company's common stock placed in escrow (the "Escrow
Shares") and, commencing 18 months from the date of closing, $850,000 of the
Company's common stock based on the fair market value on May 27, 2000 (the
"Additional Shares").
The Escrow and Additional Shares vest ratably over 3 years from the date of
the agreement based on the continuous employment of the seller and a key
executive and are subject to downward adjustment based on a target number of
free agents subscribing to the Company's FREEAGENT E.OFFICE service one year
from the date of the acquisition agreement.
As of December 31, 1999, the Company could not determine if the former
shareholder of Churchill will be entitled to any Escrow or Additional Shares.
After determination of amounts owed to the former owner of Churchill, the
Company will charge to compensation expense that portion of the Escrow and
Additional Shares which have been earned based on the fair market value of the
Company's common stock on that date. The Company will then amortize to
compensation expense the unvested Escrow and Additional Shares over the
remaining vesting period.
The acquisition has been accounted for using the purchase method and,
accordingly, the results of operations of Churchill are included in the
Company's consolidated financial statements from the date of acquisition. The
purchase price has been preliminarily allocated to the Company's historical
assets and liabilities based on the carrying values of the acquired assets and
liabilities, as these carrying values are estimated to approximate fair market
value of the assets acquired and liabilities assumed. Goodwill of $2,113,000
created as a result of the Churchill transaction is being amortized over three
years and was calculated as follows:
<TABLE>
<S> <C>
Value of Initial Shares..................................... $1,750,000
Acquisition costs........................................... 297,000
Negative net assets acquired................................ 66,000
----------
Excess purchase price over net assets acquired.............. $2,113,000
==========
</TABLE>
On a pro forma basis as if the acquisition of Churchill had taken place on
August 17, 1998 the Company's revenue, net loss, and basic and diluted net loss
per share would have been $300,000 and $717,000, $(1,333,000) and $(29,589,000),
and $(0.20) and $(2.86) per share, for the period and year ended December 31,
1998 and December 31, 1999, respectively.
F-12
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
On February 3, 2000, the Company determined that all contingencies
surrounding the release of the Escrow and Additional Shares potentially due to
the former owner of Churchill have been satisfied and it is probable that the
shareholder will be entitled to all such shares and amounts.
Based on the fair market value of the Company's common stock on the date
that determination of amounts owed is considered probable, the Company would
record deferred compensation of $4,545,000 as these amounts are still subject to
the former owner of Churchill remaining employed by the Company.
Fair Market Value of the Escrow and Additional Shares was calculated as
follows:
<TABLE>
<S> <C>
Escrow Shares--405,632 shares at $9.11 per share............ $3,695,000
Additional Shares--93,300 shares at $9.11 per share......... $ 850,000
----------
$4,545,000
==========
</TABLE>
(3) Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Computer equipment................................. $56,000 $1,946,000
Leasehold improvements............................. -- 1,209,000
Furniture and fixtures............................. -- 54,000
------- ----------
56,000 3,209,000
Less accumulated depreciation...................... (2,000) (219,000)
------- ----------
Total.......................................... $54,000 $2,990,000
======= ==========
</TABLE>
(4) Concentrations
At December 31, 1998 and December 31, 1999 five clients accounted for
approximately $828,000 and $376,000 of accounts receivable, respectively.
(5) Related Party Transactions
A stockholder of the Company provided and charged the Company for product
development consulting the use of office space, equipment as well as certain
administrative personnel. The stockholder does not mark-up these costs to the
Company which aggregated $225,000 and $1,818,000 for the period from August 17,
1998 (inception) to December 31, 1998, and the year ended December 31, 1999,
respectively. As of December 31, 1999, amounts of $255,000 and $258,000,
respectfully were owed to this stockholder and are included in accounts payable.
In August 1999, the Company entered into an agreement with CyberSafe
Corporation, a company whose Chairman and CEO is a member of the Company's board
of directors. The CyberSafe agreement provides for CyberSafe to assist in the
development of the Company's OPUSRM product by implementing a pre-release
version and providing feedback to the Company about the product.
(6) Lines of Credit
In May 1999, the Company entered into a $1,000,000 line of credit with a
bank which provides for: (1) a $750,000 committed revolving line with a term of
one year and (2) a $250,000 committed equipment line with a term of four years.
In connection with this line of credit, the bank received warrants to purchase
22,500 shares of common stock at $0.83 per share. The warrants are immediately
exercisable and expire in
F-13
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
May 2006. The annual interest rate on the revolving and equipment line is equal
to the prime rate plus 1.25%.
On June 11, 1999 the Company issued a letter of credit for $650,000 to a
third party which is guaranteed by the $750,000 committed revolving line.
On August 17, 1999 the Company entered into an additional $1,500,000
equipment facility with the same bank whereby the bank received additional
warrants to purchase 24,000 shares of common stock at $1.85 per share. The
warrants are immediately exercisable and expire on August 17, 2006. Under this
agreement, the Company may borrow in $50,000 increments until December 31, 1999,
and is obligated to repay any amounts borrowed monthly, over a 36 month period.
The annual interest rate on this facility is equal to the three-year Treasury
bill as of the date of funding plus 3%. The Company currently has no outstanding
balance under this line.
Each line requires the maintenance of certain non-financial and financial
covenants, including the maintenance of $2,000,000 of tangible net worth, and
provides that amounts borrowed be collateralized by some of the Company's
assets.
In connection with each issuance of warrants to the bank, the Company
recorded in the aggregate, approximately $63,000 as deferred loan costs,
representing the fair market value of the warrants issued at each date,
calculated using the Black-Scholes pricing model. Deferred loan costs are being
amortized to interest expense over the lives of the respective lines of credit.
(7) Commitments
Registration Rights:
Beginning 180 days after the effective date of the Company's IPO, certain
holders of the Company's common stock and warrants will be entitled to have
their shares registered under the Securities Act of 1933 upon written demand in
certain circumstances. The Company will be responsible for all expenses in
connection with the registration rights.
Operating Leases:
The Company leases certain computer and office equipment and office space
under noncancelable operating leases expiring at various dates through 2002.
On September 13, 1999, the Company signed a new lease for office space which
it intends to occupy in the first half of 2000. In connection with signing the
new lease, the Company provided the landlord a letter of credit for $650,000
which is issued under the Company's line of credit. The table below includes
amounts related to the new lease.
Future minimum annual lease payments under noncancelable operating leases as
of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Operating
Lease
----------
<S> <C>
2000........................................................ $ 471,000
2001........................................................ 248,000
2002........................................................ 175,000
2003........................................................ 100,000
2004........................................................ 100,000
Thereafter.................................................. 475,000
----------
$1,569,000
==========
</TABLE>
Rent expense for the period from August 17, 1998 (inception) to
December 31, 1998 and the year ended December 31, 1999 was $24,000 and $492,000,
respectively.
F-14
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
In December 1999 and January 2000, the Company entered into agreements with
other Internet sites pursuant to which the parties have agreed to promote their
respective content, products and services and jointly develop either a
co-branded website or feature the Company's services within their sites. The
Company has agreed to spend in the aggregate a minimum of approximately
$0.1 million in development costs as well as approximately $5.0 million in
advertising to market the new sites. In addition, the terms of certain of these
agreements require the Company to share revenues generated on the site. The
terms of these agreements vary from one to five years. We have also entered into
an agreement pursuant to which we have agreed to purchase development and
implementation services through September 2000. The aggregate annual commitment
under these agreements does not exceed $4 million in 2000 and $1.5 million
thereafter.
(8) Income taxes
The Company has not recorded a provision for income tax expenses, as it has
incurred a net operating loss in every period since its inception. At
December 31, 1999, the Company had a net operating loss carryforward of
$26.7 million give rise to substantially all of its $11.7 million gross deferred
tax asset. The Company has recorded a valuation allowance in the amount of
$11.7 million to fully eliminate the deferred tax asset.
All net operating losses have a carryforward period of twenty years with
$0.7 million and $26.0 million expiring in 2018 and 2019 respectively, unless
utilized prior to expiration.
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ -------------
<S> <C> <C>
Computed expected tax benefit...................... $(352,000) $(9,542,000)
State and local income tax benefits,
Net of federal income tax........................ (55,000) (1,672,000)
Expenses not deductible for tax purposes........... 36,000 243,000
Others............................................. (25,000) (296,000)
Increase in valuation allowance.................... 396,000 11,267,000
--------- -----------
$ -- $ --
========= ===========
</TABLE>
F-15
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
Temporary differences that give rise to the components of deferred tax
assets as of December 31, 1998 and December 31, 1999 are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward.................. $ 305,000 $10,692,000
Accrued bonus and vacation....................... 66,000 377,000
Fixed assets..................................... 1,000 --
Others........................................... 24,000 25,000
Deferred compensation............................ -- 576,000
--------- -----------
Total gross deferred tax assets................ 396,000 11,670,000
--------- -----------
Less valuation allowance........................... (396,000) (11,663,000)
--------- -----------
Net deferred tax assets........................ $ -- $ 7,000
--------- -----------
Deferred tax liabilities:
Fixed assets..................................... -- 7,000
--------- -----------
Total gross deferred tax liabilities........... -- 7,000
--------- -----------
Net deferred tax............................... $ -- $ --
========= ===========
</TABLE>
The Company recorded a full valuation allowance against its deferred tax
assets since management believes that it is not more likely than not that these
assets will be realized.
(9) Basic and Diluted Net Loss Per Share
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Period from
August 17, 1998 Year
(inception) to Ended
December 31, 1998 December 31, 1999
----------------- ------------------
<S> <C> <C>
Numerator:
Net loss.................................................. $(1,035,000) $(29,390,000)
=========== ============
Denominator:
Basic and diluted loss per share weighted average
shares.................................................. 9,120,348 10,083,563
=========== ============
Basic and diluted net loss per share...................... $ (0.11) $ (2.91)
=========== ============
</TABLE>
Basic and diluted net loss per share excludes the effect of 407,132 escrowed
shares and $850,000 of contingently issuable shares of common stock in
connection with the acquisition of The Churchill Benefit Corporation as the
conditions surrounding the release of such shares had not been satisfied as of
December 31, 1999. Diluted net loss per share for the period from August 17,
1998 (inception) to December 31, 1998 and the year ended December 31, 1999 does
not include the effect of options and warrants to purchase 2,277,000 and
7,060,000 shares of common stock, respectively, or 6,954,000 and 25,442,000
shares of common stock issuable upon the conversion of Series A and B preferred
stock on an "as-if converted" basis, respectively, as the effect of their
inclusion is anti-dilutive for each period.
The following table sets forth the computation of the Company's unaudited
pro forma basic and diluted loss per share. Pro forma basic and diluted loss per
share is computed by assuming the conversion of all
F-16
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
convertible preferred stock into common stock as if such shares were outstanding
from their respective dates of issuance.
<TABLE>
<CAPTION>
Period from
August 17, 1998 Year
(inception) to Ended
December 31, 1998 December 31, 1999
----------------- ------------------
<S> <C> <C>
Numerator:
Net loss................................. $(1,035,000) $(29,390,000)
=========== ============
Denominator:
Weighted average number of common
shares................................. 9,120,348 10,083,563
Assumed conversion of preferred stock
Series A............................... 270,715 11,961,255
Series B............................... -- 4,278,934
----------- ------------
9,391,063 26,323,752
=========== ============
Pro forma basic and diluted net loss per
share.................................. $(0.11) $(1.12)
=========== ============
</TABLE>
(10) Stockholders' Equity
COMMON STOCK:
In , 2000, the Company affected a 3 for 2 split of its common
stock. The accompanying financial statement give retroactive affect for this
split.
Between August and December 1998, the Company sold 9,091,073 shares of
common stock to founders, employees and investors for approximately $535,000 at
prices ranging between $0.03 and $0.23 per share. In connection with the sale of
certain shares to the founders and employees, the Company accepted demand
promissory notes of $106,500, which carry interest of 7%. Amounts due under
these notes of $107,000 and $44,000 as of December 31, 1998 and December 31,
1999, respectively, have been classified as subscription receivables and
deducted from stockholders' equity in the accompanying financial statements.
Pursuant to agreements between the Company's Chairman and CEO, certain
employees who purchased approximately 4,708,500 shares of common stock in August
and September 1998 agreed to sell their shares first to the Company's CEO and
second to the Company, for the same price paid by such employees, in the event
the employees voluntarily leave the Company prior to January 1, 2001. In
September 1999, the Company's CEO exercised his right under one such agreement
and acquired 85,710 shares for approximately $20,000, or $0.23 per share. In
connection with this transaction, the Company recorded compensation expense of
approximately $243,000, or $2.84 per share, representing the difference between
the price paid, of $0.35 per share and the fair market value of the common stock
on that date, $3.07 per share.
In December 1999, the Company and the CEO terminated their repurchase rights
pursuant to these agreements.
In October 1998, the Company entered into an agreement with USWeb
Corporation whereby the Company acquired certain prototype technology in
exchange for 408,000 shares of common stock at a fair value of $0.23 per share,
or $95,000. The Company has expensed this amount in accordance with
SFAS No. 86. The Company's CEO was formerly a senior managing partner of USWeb.
F-17
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
PREFERRED STOCK:
In December 1998, the Company sold 4,636,000 shares of Series A convertible
preferred stock to third parties for $5,795,000, or $1.25 per share. The Series
A preferred stock is convertible on a 1 for 1.5 basis, subject to anti-dilution
protection, and has preference to the Company's common stock in the event of
liquidation. The holders of the Series A preferred stock vote on an
as-if-converted basis, and are entitled to dividends only when and if declared
by the Company.
From January through March 1999, the Company sold an additional 3,648,000
shares of Series A convertible preferred stock to third parties for $4,560,000,
or $1.25 per share. In connection with the sale of 156,000 shares of Series A
preferred stock in March 1999, the Company accepted a promissory note of
$195,000 which carries a 8% interest rate and is payable on February 22, 2002.
Amounts due under this note have been classified as subscription receivable, and
deducted from stockholders' equity in the accompanying consolidated financial
statements.
In connection with advising the Company during the Series A financing,
certain Series A investors also received warrants to purchase 568,000 shares of
common stock at fair market value of $1.25 per share. The warrants are
immediately exercisable and expire December 24, 2005. As these warrants were
issued in connection with the sale of equity, the Company has charged and
recorded a corresponding credit to additional paid-in capital for the fair
market value of the warrants.
On September 3, 1999, the Company sold 8,677,000 shares of Series B
convertible preferred stock to third parties for $40,000,000, or $4.61 per
share. The Series B preferred stock is convertible on a one for one basis,
subject to anti-dilution protection, and has preference to the Company's common
stock in the event of liquidation. The holders of the Series B preferred stock
vote on an as-if-converted basis, and are entitled to dividends only when and if
declared by the Company.
STRATEGIC AND ADVISORY AGREEMENTS
GREENHILL & CO.:
On September 3, 1999, the Company entered into an agreement with Greenhill &
Co. ("Greenhill") whereby Greenhill will act as the Company's mergers and
acquisitions advisor for a period of six months or until the Company has either
acquired two identified targets or completed acquisitions aggregating $30
million (the "Initial Term"). Unless otherwise terminated, the agreement shall
be automatically renewed (a) following the Initial Term and shall continue until
the Company has completed either $250 million of cumulative acquisitions or a
total of four previously identified targets that have an aggregate value of at
least $100 million (the "First Renewal Term") and (b) following the First
Renewal Term, until the Company has completed at least $750 million of
cumulative acquisitions or a total of ten previously identified targets (the
"Second Renewal Term").
As consideration for the above services, Greenhill is entitled to
1) warrants to immediately purchase 450,000 shares of the Company's common stock
at $3.07 per share upon the commencement of the Initial Term, 2) warrants to
immediately purchase 450,000 shares of the Company's common stock at the then
fair market value upon the earlier of the commencement of the First Renewal Term
or the pricing of a qualified IPO, and 3) warrants to immediately purchase
450,000 shares of the Company's common stock at the then fair market value upon
commencement of the Second Renewal Term.
In connection with the issuance of the Greenhill Initial Term warrants, the
Company recorded a pre-paid expense of approximately $554,000 representing the
fair market value of the warrants calculated using the Black-Scholes pricing
model and is amortizing this amount over the Initial Term of the agreement.
F-18
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
In January 2000, the Company completed the acquisitions of Industry Insite
and Ithority Corporation (see Note 13) and accordingly, the Company expensed any
previously unamortized amounts associated with the Initial Term warrants.
Additionally, the Company issued to Greenhill, the First Renewal Term warrants
to purchase 450,000 shares of the Company's common stock at fair market value of
$8.21 per share. In connection with the issuance of the First Renewal Term
warrants the Company recorded a prepaid expense of approximately $832,500
calculated using the Black-Scholes pricing model. The Company will amortize this
amount over one year, which is the Company's best estimate of the length of the
First Renewal Term.
KIRSHENBAUM BOND & PARTNERS:
In June 1999, the Company entered into an agreement with Kirshenbaum Bond
Partners ("KBP") whereby KBP will develop and build an advertising and branding
campaign for the Company in exchange for monthly fees to be paid in cash and
warrants to purchase shares of the Company's common stock. All warrants issued
under this agreement will have a strike price of $0.01, are exercisable upon the
Company's IPO and expire five years from the dates of issuance. The agreement
also provides that, after the Company has completed its IPO, all fees are to be
paid only in cash.
In connection with the KBP agreement, the Company issued 40,500 warrants to
KBP through December 31, 1999, and the Company recorded sales and marketing
expenses of approximately $182,000, representing the fair market value of the
warrants calculated using the Black-Scholes pricing model.
SAPIENT CORPORATION:
In May 1999, the Company entered into an agreement with Sapient Corporation
("Sapient") whereby Sapient will assist the Company in developing its OPUSRM
product for two years in exchange for warrants to immediately purchase 120,000
shares of Common Stock at $0.83. In connection with the granting of warrants to
Sapient, which expire on December 31, 1999, the Company recorded deferred costs
of approximately $54,000, representing the fair market value of the warrants
calculated using the Black-Scholes pricing model, which will be amortized over
the term of the agreement.
CAREERPATH.COM:
On November 21, 1999, the Company entered into an agreement with
CareerPath.com ("CareerPath"), a company that provides career counseling and job
placement services on the Internet. The agreement provides for the Company and
CareerPath to jointly develop a co-branded web-site that will feature the
content and services of both companies. CareerPath and the Company agreed to
equally share up to $90,000 of the costs associated with building the site and
will promote the site to each other's member base. Any costs above $180,000 will
be the responsibility of the Company.
The Company and CareerPath agreed to a revenue sharing arrangement for
transactions conducted through the co-branded site, including subscriptions for
products and services and advertising revenue.
As part of the agreement, the Company agreed to advance $500,000 to
CareerPath against CareerPath's year one share of revenues generated on the
co-branded site and to purchase $1.5 million of advertising on CareerPath's site
as well as their affiliated newspapers.
The Company has agreed to pay the revenue share advance and advertising fees
in restricted common stock at a fair market value of $8.15 per share or 245,355
shares. Upon issuance of the stock to CareerPath, the Company will record the
$500,000 revenue share advance and $1.5 million advertising advance as prepaid
and prepaid advertising, respectively.
F-19
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
J.P. MORGAN:
In December 1999, the Company entered into an agreement with J.P. Morgan &
Co. ("J.P. Morgan") whereby J.P. Morgan will assist the Company for two years in
developing its enhanced OPUS XCHANGE product in exchange for 39,000 shares of
the Company's common stock with a fair value of $8.15 per share, or $318,000.
The Company will charge to product development expense the fair market value of
the shares issued to J.P. Morgan over the term of the agreement.
STOCK OPTIONS:
In October 1998, the Company adopted the 1998 Stock Option Plan ("Plan")
which provides for the granting of non-qualified and incentive stock options to
employees, board members and advisors. The plan authorized the granting of
6 million options and are for periods not to exceed ten years.
For the year ended December 31, 1999, the Company recorded deferred
compensation of approximately $5,758,000 in connection with the granting of
options to employees and board members under the Plan. Deferred compensation
related to options granted to employees and board members is being amortized
over the vesting period of the options, which is generally four years. In
December 1999, the Company fully vested certain options that would have
otherwise vested over a four-year period. Accordingly, the Company charged to
compensation expense any previously unamortized amounts related to these
options. The Company recognized $756,000 as expense during the year ended
December 31, 1999 relating to employee and board member options, which includes
amounts related to the acceleration of certain options.
In January and February 2000, the Company recorded additional deferred
compensation primarily related to options granted to our new president of
$6,476,000 in connection with granting options to employees and board members
under the Plan.
The Company expects to amortize unamortized deferred compensation expense of
$11,480,000 as follows:
<TABLE>
<S> <C>
For the year ended December 31, 2000........................ $4,729,000
For the year ended December 31, 2001........................ $2,922,000
For the year ended December 31, 2002........................ $2,922,000
For the year ended December 31, 2003........................ $ 907,000
</TABLE>
In connection with the granting of stock options in 1999 to non-employees,
the Company recorded deferred compensation expense of approximately $1,916,000
for the year ended December 31, 1999. The Company will amortize deferred
compensation for those options issued to non-employees in accordance with EITF
96-18 and will record expense for the fair market value of the options at each
time interim reporting date over which the options vest.
In December 1999, the Company fully vested certain options to non-employees
which would have otherwise vested over a three-year period. Accordingly, the
Company revalued and immediately expensed the fair value of the accelerated
options and amortized to compensation expense any previously unamortized
deferred compensation related to these options.
The Company recognized expense of $1,449,000 for the year ended
December 31, 1999 relating to non-employee options, which includes amounts
related to the acceleration of certain options. The Company cannot presently
determine the amount of future compensation expense it may record related to the
remaining unvested options issued to non-employees as these amounts are subject
to adjustment based on the fair market value of the Company's common stock at
each reporting date.
F-20
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
The following transactions occurred with respect to the Company's 1998 Stock
Option Plan:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
---------- --------------
<S> <C> <C>
Granted............................................. 1,425,000 $ 0.55
Canceled............................................ -- --
----------
Outstanding, December 31, 1998...................... 1,425,000 0.55
Granted............................................. 4,675,000 1.15
Canceled............................................ (732,000) (0.63)
Exercised........................................... (28,000) 0.33
----------
Outstanding, December 31, 1999...................... 5,340,000 $ 1.09
==========
</TABLE>
The following table summarizes information concerning outstanding options at
December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------ Options Exercisable
Weighted- ----------------------------
Average Weighted- Weighted
Range of Number Remaining Average Number Average
Exercise Price Outstanding Contractual Life Exercise Price Outstanding Exercise Price
-------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.32-$0.45 713,000 9.83 $0.38 32,000 $0.38
$0.50-$0.67 360,000 9.90 $0.61 9,000 $0.58
$0.79-$0.83 352,000 9.98 $0.81 1,000 $0.81
--------- -------
1,425,000 42,000
========= =======
</TABLE>
The following table summarizes information concerning outstanding options at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------ Options Exercisable
Weighted- ----------------------------
Average Weighted- Weighted
Range of Number Remaining Average Number Average
Exercise Price Outstanding Contractual Life Exercise Price Outstanding Exercise Price
-------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.32-$0.45 2,894,000 9.18 $0.37 590,000 $0.37
$0.50-$0.67 360,000 8.90 $0.61 99,000 $0.60
$0.79-$0.83 252,000 9.07 $0.80 78,000 $0.80
$1.47-$1.85 916,000 9.52 $1.83 99,000 $1.81
$2.67-$3.07 894,000 9.76 $2.77 40,000 $2.79
$8.00 24,000 9.98 8.00 -- 8.00
--------- -------
5,340,000 906,000
========= =======
</TABLE>
Pro forma information regarding net loss is required by SFAS No. 123 which
also requires that the information be determined as if the Company has accounted
for its stock options under the fair value method of the statement. The fair
value for these options was estimated using the minimum value method with the
following assumptions:
<TABLE>
<CAPTION>
1998 1999
--------------------- ---------------------
<S> <C> <C>
Average risk-free interest rate............ 4.68% ~ 5.07% 4.63% ~ 5.42%
Dividend yield............................. 0.0% 0.0%
Average life............................... 6.9 years 6.8 years
</TABLE>
F-21
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
Because determination of fair value of all options granted after such time
as the Company becomes a public entity will include an expected volatility
factor in addition to the factors described in the preceding paragraph, the
above results may not be representative of future periods. The Company's pro
forma information is as follows:
<TABLE>
<CAPTION>
1998 1999
------------ -------------
<S> <C> <C>
Pro forma net loss available to common
stockholders................................... $(1,039,000) $(30,272,556)
Pro forma basic and diluted loss per share....... $(0.11) $(3.00)
</TABLE>
(11) Segment Information
In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," the Company's reportable segments are
business units that offer different products and services throughout the United
States.
The Company's reportable segments are as follows:
- FREEAGENT.COM SERVICES--which includes FREEAGENT.COM, a web-site that
enables independent professionals to manage their careers by offering
access to project opportunities and corporate products and services; and,
FREEAGENT E.OFFICE, a back-office and employer service for independent
professionals. Independent professionals who elect to receive FREEAGENT
E.OFFICE services are the Company's contractual employees for federal
income tax purposes and for whom the Company prepares IRS Form W-2's. The
Company enters into contracts with organizations for projects to be
performed by FREEAGENT E.OFFICE employees, process invoices on their
behalf and, upon receipt of amounts due from the contracting organization
for the services rendered by the FREEAGENT E.OFFICE employees, remit the
amount to them after deducting payroll taxes, the fees charged by the
Company and directing amounts to their health insurance and 401(k)
retirement plans, as directed by the FREEAGENT E.OFFICE employee.
- APPLICATION AND PROCUREMENT SERVICES--which includes OPUS XCHANGE, a
web-based platform designed to enable corporations, professional service
firms, staffing vendors and other buyers of project-based labor to procure
these services in an exchange-based environment by using search
technologies to match people with projects; and, OPUSRM, a labor resource
management service designed to centralize resource and project information
and enable organizations to manage their internal and external labor
resources.
The Company's accounting policies for these segments are the same as those
described in the summary of Significant Accounting Policies.
F-22
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
The table below presents information about segments used by the chief
operating decision-maker of Opus for the period from August 17, 1998 (inception)
to December 31, 1998 and the year ended December 31, 1999.
<TABLE>
<CAPTION>
Application
and
Procurement FreeAgent
Services Services Total
----------- ---------- -----------
<S> <C> <C> <C>
1999:
Revenues.............................. $ -- $ 419,000 $ 419,000
Gross (loss) profit................... -- 158,000 158,000
Net loss before equity-based
compensation charges................ (18,943,000) (7,999,000) (26,942,000)
Total assets.......................... 37,864,000 2,852,000 40,716,000
1998:
Revenues.............................. $ -- $ -- $ --
Gross profit.......................... -- -- --
Net income (loss)..................... (1,035,000) -- (1,035,000)
Total assets.......................... 5,886,000 -- 5,886,000
</TABLE>
For the year ended December 31, the reconciliation between segment net loss
and net loss from operations is as follows:
<TABLE>
<S> <C>
Segment net operating loss.................................. $(26,942,000)
Equity-based compensation................................... 2,448,000
Enterprise net operating loss............................... $(29,390,000)
</TABLE>
(12) Employee Benefit Plan
During 1999 and 1998, the Company sponsored a 401(k) Defined Contribution
Retirement Plan ("the Plan") under which substantially all full-time employees
were eligible to participate. The Company made no matching contributions to the
Plan during 1999 and 1998. In addition, the Company's Churchill subsidiary
provides a separate 401(k) plan for FREEAGENT E.OFFICE MEMBERS.
The Churchill plan allows for employees to contribute up to 15% of eligible
compensation and a discretionary match by the Company. The Company's
contribution to the subsidiary's 401(k) plan from May 27, 1999, the date
Churchill was acquired, to December 31, 1999 was $558,000.
The Company does not provide any post retirement or any post employment
benefits.
(13) Subsequent Events
INDUSTRYINSITE:
On January 10, 2000, the Company acquired from BrainStorm Interactive Inc.
all of the related assets and liabilities of IndustryInsite.com
("IndustryInsite.com"), a web-site operated by BrainStorm, for an aggregate
purchase price of $1,000,000. The purchase price was paid as follows:
i) $650,000 on closing and ii) a $350,000 note payable which will be due upon
the earlier of (i) ninety days from closing (ii) three business days after the
completion of the Company's IPO and (iii) a change of control of the Company, as
defined.
F-23
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
ITHORITY CORPORATION:
On January 20, 2000, the Company acquired 100% of the outstanding equity of
Ithority Corporation ("Ithority") in exchange for approximately 243,510 shares
of the Company's common stock valued at $2 million, or $8.21 per share, plus
$250,000 on closing and $250,000 upon the earlier of integration of Ithority's
web-site with the Company's or 120 days subsequent to closing.
The former shareholders of Ithority are also entitled to approximately
182,610 shares, which have been placed in escrow (the "Ithority Escrow Shares")
plus $4 million of the Company's common stock payable one year from the date of
closing based upon the then fair market of the Company's common stock (the
"Ithority Additional Shares"). The Ithority Escrow Share will be released one
year from the date of closing and are subject to certain representations and
warranties provided by the selling shareholders.
Approximately 177,668 of the Ithority Escrow Shares and 97% of Ithority
Additional Shares payable to certain selling shareholders are subject to three
year vesting agreements whereby the Company has the right but not the obligation
to repurchase these shares for $0.01 per share in the event the shareholder is
no longer employed by the Company. The Company will record deferred compensation
expense for the fair market value of the shares, which are subject to
employment, and will amortize such amounts over the vesting period.
Under Rule 3-05 of Regulation S-X, the Company is required to file with the
SEC audited financial statements of Ithority Corporation as soon as possible but
in no event more than 75 days from the consummation of the acquisition.
PEOPLEMOVER, INC.:
On January 28, 2000, the Company entered into an agreement to acquire all of
the outstanding equity of PeopleMover, Inc. ("PeopleMover"). Pursuant to the
terms of the agreement, the PeopleMover shareholders' are entitled to receive
0.1845 of a share of Opus360 common stock for each issued and outstanding share
of PeopleMover (the "Initial Exchange Ratio"). Additionally, the Company will
exchange options to purchase its common stock for outstanding stock options to
purchase PeopleMover common stock at the Initial Exchange Ratio. The Initial
Exchange Ratio may be adjusted (i) downwards if PeopleMover incurs certain
liabilities between the signing of the agreement and the closing date which is
expected to occur by February 14, 2000, and (ii) upwards if PeopleMover executes
certain potential customer agreements prior to the closing date. In no event can
the Adjusted Exchange Ratio exceed 0.2239.
Based on Adjusted Exchange Ratio of 0.2239 and PeopleMovers' capitalization
as of January 30, 2000, the acquisition of PeopleMover will consist of the
following:
- 2,620,000 shares of Opus360 common shares with valued at approximately
$23,876,000, or $9.11 per share;
- the assumption by Opus360 of options to purchase shares of PeopleMover
common stock, to be exchanged for options to purchase approximately
1,212,000 shares of Opus360 common stock. The options have been valued at
approximately $8,028,000 using the Black-Scholes pricing model. Such
shares have an aggregate exercise price of approximately $985,000; and
- the Company also anticipates acquisition costs of approximately $300,000
related to the merger.
Approximately 350,000 shares issued to the PeopleMover shareholders are
subject to a three-year restricted stock vesting agreement, whereby, the Company
has the right but not the obligation to repurchase these shares for $0.01 per
share in the event the shareholder is no longer employed by the Company.
F-24
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
The value of the 350,000 shares, which are subject to the three-year vesting
agreement, approximately 3,190,000 and will be recorded to deferred compensation
expense and amortized over the term of the vesting agreement.
In connection with its negotiations to acquire PeopleMover, the Company
entered into an interim funding agreement with PeopleMover pursuant to which the
Company agreed to provide loans to PeopleMover through the earlier of March 3,
2000 or the date that the acquisition agreement is signed. The aggregate amount
of the loans, which have a stated interest rate of 18% cannot exceed
$3.0 million. If the acquisition agreement is executed during the loan period,
the aggregate amount of any outstanding principal and accrued interest will
reduce the purchase price of the acquisition on a dollar for dollar basis. If
the loan period expires without a closing of the acquisition, the note will
convert into common stock of PeopleMover at the lowest price paid by any
investor during a subsequent equity financing. As of December 31, 1999, the
Company had outstanding loans of $575,000 to PeopleMover.
The Company intends to account for the acquisition of PeopleMover using the
purchase method and, accordingly, the results of operations of PeopleMover will
be included in the Company's consolidated financial statements from the date of
acquisition. The purchase price will be preliminarily allocated to PeopleMover's
historical assets and liabilities based on the carrying values of the the assets
acquired and liabilities assumed.
The following pro forma financial statements represent the preliminary
allocation of purchase price over historical net book values of the acquired
assets and assumed liabilities of PeopleMover at December 31, 1999, and are for
illustrative purposes only. Goodwill and other intangibles expected to be
created, as a result of the PeopleMover acquisition will be amortized over three
years. Actual fair values will be based on financial information as of the
acquisition date. Assuming the transaction had occurred on December 31, 1999,
the preliminary allocation would have been as follows:
<TABLE>
<S> <C>
Value of shares not subject to restricted stock vesting
agreement $20,680,000
Value of stock options issued measure using Black-Scholes
pricing model 8,028,000
Estimated costs associated with acquisition 300,000
Conversion of redeemable preferred stock (5,425,000)
Conversion of notes payable into equity (1,375,000)
Negative net assets acquired, as of December 31, 1999 9,371,000
-----------
Excess purchase price over net assets acquired $31,579,000
</TABLE>
This allocation is preliminary and may be subject to change upon evaluation
of the fair value of PeopleMover's acquired assets and liabilities as of the
acquisition date as well as the potential identification of certain intangible
assets, including customer lists and in-process technology.
EMPLOYMENT AGREEMENTS:
In connection with the Ithority and PeopleMover transactions, the Company
entered into various three-year employment contracts with certain former
employees which obligate the Company to annual salaries totaling approximately
$630,000 plus the opportunity to participate in the Company's bonus and benefit
plans.
On January 21, 2000, the Company entered into a three-year employment
agreement with Mr. Richard S. Miller, who will assume the role of President and
Chief Operating Officer, which obligates the Company to pay an annual salary of
$250,000. The Agreement further provides that Mr. Miller will be eligible for
annual bonuses of not less than $100,000 per year if certain performance
criteria are met.
F-25
<PAGE>
OPUS360 CORPORATION
Notes to Financial Statements (Continued)
In connection with the January 21, 2000 employment agreement, Mr. Miller has
been granted incentive stock options to purchase 32,918 shares of Opus common
stock at fair market value or $9.11 per share and non-qualified stock options to
purchase 1,474,582 shares of common stock of which 300,000 have a strike price
of $2.67 and are immediately vested, 600,000 have a strike price of $2.67 and
vest over 3 years and the remaining 574,582 have a strike price of $8.00 and
vest over 3 years. The Company will record deferred compensation of $6,425,000
in connection with Mr. Miller's option grants and will amortize this amount to
compensation expense over the three-year vesting term of Mr. Miller's options.
The Company has entered into three-year agreements with several of its
employees, who are also stockholders, which obligates the Company to annual
salaries totalling approximately $3.2 million. Pursuant to the terms of some of
these agreements, the Company has the right to purchase 3,787,500 shares for
approximately $140,000 from these individuals at the employees original cost if
these employees are either terminated for cause or resign during the year ended
December 31, 2000.
LUCENT:
In February 2000, the Company entered into a strategic relationship with
Lucent, whereby the Company issued to Lucent two warrants to purchase shares of
its common stock. John L. Drew, a member of the Company's board, is the chief
executive officer of the NetCare Professional Services Division of Lucent and an
executive vice president of Lucent. The first warrant entitles Lucent to
purchase up to 150,000 shares of the Company's common stock at the exercise
price of $5.00 per share for one year from the date of grant, subject to
extension if the Company's IPO does not close by March 31, 2000. The second
warrant will be exercisable for a three-year period commencing on the 240th day
after the effective date of the Company's IPO. The exercise price of the second
warrant will be equal to the average market price of the Company's common stock
during the 10 trading days immediately preceding the date the warrant first
becomes exercisable. The number of shares issuable upon the exercise of the
second warrant will be determined by dividing $2,655,000 by the present value of
a warrant to purchase one share of the Company's common stock, as determined by
the Black-Scholes option-pricing model, with the strike price assumed to be the
actual exercise price and the volatility rate assumed to be 100%.
F-26
<PAGE>
Independent Auditors' Report
To the Stockholder
The Churchill Benefit Corporation
We have audited the accompanying balance sheets of The Churchill Benefit
Corporation as of December 31, 1997 and 1998 and the related statements of
operations, stockholder's equity and cash flows for the years then ended. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Churchill Benefit
Corporation as of December 31, 1997 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
New York, New York
October 8, 1999
F-27
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Balance Sheets
December 31, 1997 and 1998
<TABLE>
<CAPTION>
March 31,
1997 1998 1999
---------- ---------- -----------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash................................................... $ 3,000 $ 84,000 $ 591,000
Accounts receivable.................................... 1,436,000 1,793,000 1,837,000
Other current assets................................... -- 5,000 4,000
---------- ---------- ----------
Total current assets................................. 1,439,000 1,882,000 2,432,000
Property and equipment, net of accumulated depreciation
of $8,000 in 1997 and $27,000 in 1998.................. 10,000 7,000 6,000
---------- ---------- ----------
$1,449,000 $1,889,000 $2,438,000
========== ========== ==========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable and accrued expenses.................. $ 30,000 $ 11,000 $ 5,000
Accrued wages.......................................... 1,198,000 1,646,000 2,279,000
---------- ---------- ----------
Total current liabilities............................ 1,228,000 1,657,000 2,284,000
---------- ---------- ----------
Stockholder's equity:
Common stock, $1 par value, 1,000 shares authorized,
issued and outstanding............................... 1,000 1,000 1,000
Retained earnings...................................... 220,000 231,000 153,000
---------- ---------- ----------
Total stockholder's equity........................... 221,000 232,000 154,000
---------- ---------- ----------
Commitments.............................................. $1,449,000 $1,889,000 $2,438,000
========== ========== ==========
</TABLE>
See the accompanying notes to financial statements.
F-28
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Statements of Operations
Years ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
March 31, March 31,
1997 1998 1998 1999
-------- -------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues........................................... $658,000 $799,000 $200,000 $177,000
Cost of revenues................................... 17,000 68,000 17,000 18,000
-------- -------- -------- --------
Gross profit..................................... 641,000 731,000 183,000 159,000
General and administrative expenses................ 525,000 524,000 131,000 237,000
-------- -------- -------- --------
Operating income................................. 116,000 207,000 52,000 (78,000)
Interest income.................................... 3,000 3,000 -- --
-------- -------- -------- --------
Net income....................................... $119,000 $210,000 $ 52,000 $(78,000)
======== ======== ======== ========
Basic and diluted net loss per share............... $ 119.00 $ 210.00 $ 52.00 $ (78.00)
======== ======== ======== ========
Weighted average shares outstanding used in basic
and fully diluted net loss....................... 1,000 1,000 1,000 1,000
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Statements of Stockholder's Equity
Years ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Common Stock Total
------------------- Retained Stockholder's
Shares Amount Earnings Equity
-------- -------- --------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.......................... 1,000 $1,000 $ 185,000 $ 186,000
Distribution to stockholder........................... -- -- (84,000) (84,000)
Net income............................................ -- -- 119,000 119,000
----- ------ --------- ---------
Balance at December 31, 1997.......................... 1,000 1,000 220,000 221,000
Distribution to stockholder........................... -- -- (199,000) (199,000)
Net income............................................ -- -- 210,000 210,000
----- ------ --------- ---------
Balance at December 31, 1998.......................... 1,000 $1,000 $ 231,000 $ 232,000
===== ====== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Statements of Cash Flows
Years ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Three Months Three Months
Ended March 31 Ended March 31
1997 1998 1998 1999
--------- --------- -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows provided by operating
activities:
Net income.............................. $ 118,000 $ 210,000 $ 52,000 $ 17,000
Adjustment to reconcile net income to
net cash provided by operating
activities:
Depreciation.......................... 5,000 19,000 1,000 5,000
Cash provided by (used for) changes
in:
Accounts and unbilled receivables... (426,000) (357,000) 177,000 (44,000)
Other current assets................ -- (5,000) -- 1,000
Accounts payable and accrued
expenses.......................... (13,000) (19,000) (30,000) (6,000)
Accrued labor....................... 517,000 448,000 50,000 633,000
--------- --------- --------- ---------
Net cash provided by operating
activities...................... 201,000 296,000 250,000 606,000
--------- --------- --------- ---------
Cash flows used in investing activities:
Additions to property and equipment..... -- (16,000) -- (4,000)
--------- --------- --------- ---------
Net cash used in investing
activities...................... -- (16,000) -- (4,000)
--------- --------- --------- ---------
Cash flows used in financing activities:
Repayment of stockholder loan........... (22,000) -- -- --
Distributions to stockholders........... (84,000) (199,000) -- (95,000)
--------- --------- --------- ---------
Net cash used in financing
activities (106,000) (199,000) -- (95,000)
Net increase in cash and cash
equivalents..................... 95,000 81,000 250,000 507,000
Cash and cash equivalents at beginning of
year.................................... (92,000) 3,000 3,000 84,000
--------- --------- --------- ---------
Cash and cash equivalents at end of
year.................................... $ 3,000 $ 84,000 $ 253,000 $ 591,000
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Notes to Financial Statements
December 31, 1997 and 1998
(1) Summary of Significant Accounting Policies
(A) OPERATIONS
The Churchill Benefit Corporation (the "Company") was incorporated in 1986
under the laws of New Jersey and maintains its headquarters in Florida. The
Company has reincorporated in the state of Delaware. The Company is an
S-corporation and is owned by one individual.
The Company was organized to provide back office services to independent
professionals, including billing and collection, in exchange for a monthly fee.
The Company treats each of these individuals as an employee for federal income
tax purposes ("Contract Employees"). The monthly fee charged by the Company has
varied over the years.
The Company's Contract Employees are primarily information technology
professionals and are responsible for finding their own customers. The Company
then contracts, invoices and collects from the customers on behalf of the
Contract Employees. As part of its agreement with the Contract Employees, the
Company is not obligated to remit any money to the Contract Employee until it
has collected from the customer for whom the Contract Employee has performed
services. Upon collection, the Company remits the money to the employees after
withholding the appropriate payroll taxes, the health and retirement benefits
which the Contract Employee has elected to receive, and the Company's monthly
fee. In certain cases, the Company will pay the employee prior to collection of
the related receivable.
BASIS OF PRESENTATION
The accompanying financial statements reflect a change in how the Company
recognizes revenue. The Company currently recognizes as revenue the monthly fee
it charges to its Contract Employees for providing its E.OFFICE services as
these services are provided. Previously, the Company recorded as revenue the
gross billings from services provided by its Contract Employees to customers
with whom the Company contracts, invoices and collects on behalf of its Contract
Employees. The Company would then record a corresponding charge to cost of
revenues for the same amount less its service fee. This change in the Company's
revenue recognition policy has no effect on historical net income or loss.
The Company believes its current revenue recognition policy clarifies its
financial position and result of operations and is consistent with the view of
the Securities and Exchange Commission on revenue recognition issued in Staff
Accounting Bulletin No. 101. (See footnote 7).
(B) INTERIM FINANCIAL INFORMATION (UNAUDITED)
The statements of operations, and cash flows of the Company for the three
months ended March 31, 1998 and 1999 are unaudited. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial position and
results of operations and cash flows, have been included in such unaudited
financial statements. The results of operations for the three months ended
March 31, 1998 and 1999 are not necessarily indicative of the results to be
expected for the entire year.
F-32
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Notes to Financial Statements (Continued)
December 31, 1997 and 1998
(C) CASH
The Company considers all highly liquid securities with original maturities
of three months or less to be cash equivalents.
(D) ACCOUNTS RECEIVABLE AND ACCRUED WAGES PAYABLE
Accounts receivable represents amounts invoiced by the Company on behalf of
its Contract Employees for services rendered to a customer that has contracted
with the Company. Included in accounts receivable is approximately $462,000 and
$509,000 as of December 31, 1997 and 1998, respectively, representing services
performed by the Company's Contract Employees prior to year-end and invoiced
shortly thereafter. Accrued wages represents the amounts owed to the Company's
Contract Employees for services rendered under contracts with third parties.
(E) REVENUE RECOGNITION
The Company recognizes as revenue the fees it charges to its contract
employees in the period in which it provides its services.
(F) COST OF REVENUES
Cost of revenues primarily includes salaries paid to the Company's staff
that help administer the Company's services.
(G) PROPERTY AND EQUIPMENT
Furniture and equipment consists of office furniture and computer equipment,
and is being depreciated using the straight-line method over the estimated
useful lives of the related assets, which range from three to seven years.
Depreciation expense totaled $5,000 and $20,000 for the years ended
December 31, 1997 and 1998, respectively.
(H) ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.
(I) INCOME TAXES
The Company operates as an S-corproration under the Internal Revenue Code
and therefore, was not subject to federal and state corporate income taxes.
Under the S-corporation provision of the Code, the shareholders of the Company
include their share of the Company's income on their personal income tax
returns. Accordingly, these financial statements contain no provision or benefit
and no assets or liabilities for federal or state income taxes.
For the years ended December 31, 1997 and 1998, net income would have been
approximately $71,000 and $126,000, respectively, assuming the Company's income
before taxes was subject to a combined federal and state income tax rate of 40%.
F-33
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Notes to Financial Statements (Continued)
December 31, 1997 and 1998
(J) RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income" which establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. The adoption of this standard has had no impact on
the Company's financial statements. Accordingly, the Company's comprehensive net
loss is equal to its net loss for all periods presented.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1") which provides guidance for
determining whether computer software is internal-use software and on accounting
for the proceeds of computer software originally developed or obtained for
internal use and then subsequently sold to the public. It also provides guidance
on capitalization of the costs incurred for computer software developed or
obtained for internal use. The Company has not yet determined the impact, if
any, of adopting SOP 98-1, which will be effective for the Company's year ending
December 31, 1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" which establishes standards for the way
that a public enterprise reports information about operating segments in annual
financial statements, and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. In the initial
year of application, comparative information for earlier years must be restated.
The Company has determined that it does not have any separately reportable
business segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. The Company
has not yet analyzed the impact of this pronouncement on its financial
statements.
(2) Furniture and Equipment
Furniture and equipment at December 31, 1997 and 1998 consist of the
following:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Office equipment......................................... $ 5,000 $ 10,000
Office furniture......................................... 6,000 6,000
Computer equipment....................................... 7,000 18,000
-------- --------
Total.................................................. 18,000 34,000
Less accumulated depreciation............................ (8,000) (27,000)
-------- --------
Furniture and equipment, net........................... $ 10,000 $ 7,000
======== ========
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1998 totaled
approximately $5,000 and $19,000, respectively, and is included in general and
administrative expense in the accompanying statements of operations.
F-34
<PAGE>
THE CHURCHILL BENEFIT CORPORATION
Notes to Financial Statements (Continued)
December 31, 1997 and 1998
(3) Commitments
The Company is obligated under various non-cancelable lease agreements
primarily for office space that expire over the next two years. Future minimum
rental payments under non-cancelable operating leases as of December 31, 1998
are:
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1999........................................................ $28,000
2000........................................................ 16,000
-------
Total minimum lease payments................................ $44,000
=======
</TABLE>
Rental expense for the years ended December 31, 1997 and 1998 were $17,000
and $23,000 respectively.
(4) Retirement Plans
The Company has a 401(k) defined contribution retirement plan. The plan
allows for employees to contribute up to 15% of eligible compensation and a
discretionary match by the Company. The Company elected not to make any matching
contributions for the years ended December 31, 1997 and 1998.
(5) Concentrations
At December 31, 1997 and 1998, five clients accounted for $558,000 and
$828,000 of unbilled and billed accounts receivable respectively.
(6) Subsequent Events
On May 27, 1999, the Company entered into an agreement with the Opus360
Corporation ("Opus360"), whereby the sole shareholder of the Company sold 100%
of the issued and outstanding shares of the Company in exchange for common stock
of Opus360. Subsequent to sale, the Company became a wholly owned subsidiary of
Opus360.
(7) Change in Accounting Policy
The following table shows the impact of the Company's change in accounting
policy regarding revenue recognition for the years ended December 31, 1997 and
1998.
<TABLE>
<CAPTION>
1997 1998
---------------------- ----------------------
Current Previous Current Previous
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Revenue........................ $658,000 $13,220,000 $799,000 $19,682,000
Cost of revenue................ 17,000 12,562,000 68,000 18,883,000
Gross profit................... 641,000 658,000 731,000 799,000
Net income..................... $119,000 $ 119,000 $210,000 $ 210,000
</TABLE>
F-35
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of common stock being registered. All of the amounts shown are estimated except
the Securities and Exchange Commission registration fee, the National
Association of Securities Dealers, Inc. filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $23,378
NASD filing fee............................................. 9,355
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Transfer agent and registrar fees........................... *
Miscellaneous fees and expenses............................. *
-------
Total................................................... $ *
=======
</TABLE>
- ------------------------
* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a court to award, or a corporation's board of directors to grant, indemnity to
directors, officers and certain other persons in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities Act
of 1933, as amended (the "Securities Act").
The Registrant's restated certificate of incorporation and by laws will
provide that, to the fullest extent permitted by the laws of the State of
Delaware, no director will be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Furthermore, the Registrant's certificate of incorporation provides that, except
as prohibited by law, each of the Registrant's directors and officers is
entitled to be indemnified by the Registrant against all expenses and liability
incurred in connection with any legal proceeding brought against him or her by
virtue of his or her position as a director or officer. This right to
indemnification may extend to a person serving as an employee or other
representative of the Registrant or a subsidiary of the Registrant. A person
entitled to indemnification thereunder is entitled to have the Registrant
advance to him or her the expenses of a legal proceeding brought against him or
her.
These provisions of the Registrant's certificate of incorporation and by
laws do not eliminate the fiduciary duties of the directors and officers of the
Registrant, and in appropriate circumstances, equitable remedies such as
injunctive or other forms of relief will remain available under the laws of the
State of Delaware. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, and for dividends or approval of stock repurchases or
redemptions that are unlawful under the laws of the State of Delaware. This
provision does not affect a director's responsibilities under any other law,
such as federal securities laws or state or federal environmental laws.
The DGCL also allows the Registrant to purchase insurance covering the
Registrant's directors and officers against liability asserted against them in
their capacity as directors and officers. The Registrant
II-1
<PAGE>
expects to obtain directors' and officers' liability insurance. The underwriting
agreement to be entered into between the Registrant and FleetBoston Robertson
Stephens Inc., Bear, Stearns & Co. Inc., J.P. Morgan & Co. and E*OFFERING Corp.,
as representatives of the underwriters, also provides for the indemnification of
officers, directors and controlling persons of the Registrant against certain
liabilities.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted. The Registrant is not aware of any threatened litigation
or proceeding that may result in a claim for such indemnification.
Item 15. Recent Sales of Unregistered Securities
All share information set forth below has been adjusted to reflect a 3-for-2
stock split to be effective prior to completion of this offering.
The Registrant has issued and sold the securities set forth below since its
inception in August 1998.
1. On August 20, 1998, the Registrant issued 1.5 share of common stock to Ari
B. Horowitz, the Registrant's founders as the initial capitalization of the
Registrant.
2. On December 24, 1998, the Registrant sold 9,498,731 shares of common stock,
at prices ranging from $.03 per share to $.23 per share, to its founders,
officers and employees.
3. On December 24, 1998 the Registrant sold 408,000 shares of common stock to
USWeb/Cks Corporation in exchange for certain prototype technology valued at
.
4. On December 24, 1998, the Registrant issued warrants to purchase 852,000
shares of common stock at an exercise price of $0.83 per share to six
investors.
5. Between December 24, 1998 and April 15, 1999, the Registrant sold 8,284,000
shares of Series A preferred stock, at a price of $1.25 per share, to
fifty-two accredited investors, including directors and former directors of
the Registrant and their affiliates and family members of officers of the
Company.
6. On February 24, 1999, the Registrant issued a warrant to purchase 2,400
shares of common stock at an exercise price of $0.83 per share to an
individual in consideration for services (valued at $1,008) rendered to the
Registrant.
7. On May 3, 1999, the Registrant issued a warrant to purchase 120,000 shares
of common stock at an exercise price of $0.83 per share to Sapient
Corporation.
8. On May 14, 1999, the Registrant issued a warrant to purchase 22,500 shares
of common stock at an exercise price of $0.83 per share to Silicon Valley
Bank.
9. On May 27, 1999, the Registrant issued 946,475 shares of common stock to the
former owner of the Churchill Benefits Corporation in connection with the
acquisition of Churchill. An additional 405,632 shares of common stock were
issued and placed in escrow in connection with the acquisition.
10. On July 5, 1999, the Registrant issued a warrant to purchase 3,788 shares of
common stock at an exercise price of $1.85 per share to an individual in
consideration for services (valued at $3,447) rendered to the Registrant.
11. On August 17, 1999, the Registrant issued a warrant to purchase 24,000
shares of common stock at an exercise price of $1.85 per share to Silicon
Valley Bank.
12. On August 31, 1999, the Registrant issued a warrant to purchase 29,675
shares of common stock at an exercise price of $.01 per share to Kirshenbaum
Bond & Partners in consideration for advertising services (valued at
$89,915) rendered to the Registrant.
II-2
<PAGE>
13. In September and October 1999, the Registrant sold 8,676,727 shares of
Series B preferred stock, at a price of $4.61 per share, to eighty-seven
accredited investors, including directors and former directors of the
Registrant and their affiliates and family members of officers of the
Company.
14. On October 15, 1999, the Registrant issued a warrant to purchase 450,000
shares of common stock at an exercise price of $3.07 per share to Greenhill
& Co. L.L.C. in consideration for and in connection with financial advisory
services (valued at $554,000) rendered to the Registrant.
15. On November 30, 1999, the Registrant issued a warrant to purchase 11,186
shares of common stock at an exercise price of $.01 per share to Kirshenbaum
Bond & Partners in consideration for advertising services (valued at
$91,125) rendered to the Registrant.
16. On December 21, 1999, the Registrant issued 120,000 shares of common stock
to Sapient Corporation upon exercise of a warrant.
17. On December 15, 1999, the Registrant issued 245,355 shares of common stock
to CareerPath.com in connection with the establishment of a strategic
alliance.
18. On December 15, 1999, the Registrant issued 39,000 shares of common stock to
J.P. Morgan Corporation in connection with establishment of a strategic
alliance.
19. On December 30, 1999, the Registrant issued 28,437 shares of common stock to
a former employee upon exercise of an option.
20. On January 5, 2000, the Registrant issued 30,000 shares of common stock to
the father of its Chairman and Chief Executive Officer upon exercise of a
warrant.
21. On January 10, 2000, the Registrant issued an aggregate of 720,000 shares of
common stock to two directors and a former director upon exercise of
warrants.
22. On January 12, 2000, the Registrant issued 90,000 shares to a partnership of
which one of the Registrant's directors is the general partner upon exercise
of a warrant.
23. On January 20, 2000, the Registrant issued 243,510 shares of common stock to
the former owners of Ithority Corporation in connection with the acquisition
of Ithority. An additional 182,610 shares of common stock were issued and
placed in escrow in connection with the acquisition.
24. On January 20, 2000, the Registrant issued a warrant to purchase 450,000
shares of common stock at an exercise price of $8.21 per share to
Greenhill & Co., L.L.C. in consideration for and in connection with
financial advisory services (valued at $832,500) rendered to the Registrant.
25. On January 28, 2000, the Registrant issued 30,000 shares of common stock to
a former employee upon exercise of an option.
26. On January 31, 2000, the Registrant issued 30,000 shares of common stock to
a former director upon exercise of an option.
27. On February 7, 2000, the Registrant issued to Lucent Technologies, Inc. a
warrant to purchase 225,000 shares of common stock at an exercise price of
$3.33 per share in connection with the establishment of a strategic
alliance.
28. On February 7, 2000, the Registrant issued to Lucent Technologies, Inc. in
connection with the establishment of the strategic alliance, a second
warrant to purchase shares of the Registrant's Common Stock, commencing on
the 240th day after the effective date of this registration statement,
exercisable for that number of shares of common stock having a fair value no
greater than $2,655,000 using the Black-Scholes option-pricing model, at an
exercise price equal to the average market price of the common stock during
the 10 trading days immediately prior to the date the warrant first becomes
exercisable.
II-3
<PAGE>
Between October 14, 1998 and February 2, 2000, the Registrant granted stock
options to purchase 7,226,824 of shares of common stock at exercise prices
ranging from $0.33 to $9.25 per share to employees, consultants, officers and
directors.
The sales and issuances of the shares of common stock and options and
warrants to purchase common stock discussed above were made by us in reliance
upon the exemptions from registration provided under Section 4(2) of the
Securities Act of 1933, Regulation D and Rule 701 promulgated thereunder. The
offers and sales were made to either accredited investors as defined in
Rule 501(a) under the Securities Act or the persons referred to in Rule 701(c)
under the Securities Act pursuant to a written compensatory benefit plan (or a
written compensation contact) established by the Registrant; with respect for
offers and sales pursuant to Section 4(2) and Regulation D, no general
solicitation was made by either the Registrant or any person acting in its
behalf; the securities sold are subject to transfer restrictions, and the
certificates for the shares contained an appropriate legend stating such
securities have not been registered under the Securities Act and may not be
offered or sold absent registration or pursuant to an exemption therefrom. No
underwriters were involved in connection with the sales of securities referred
to in this Item 15.
Item 16(a). Exhibits and Financial Statement Schedules
<TABLE>
<S> <C>
1.1** Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Certificate of Incorporation of the
Registrant.
3.3 Bylaws of the Registrant.
3.4* Amended Bylaws of the Registrant.
4.1** Certificate for Shares.
5.1** Opinion of O'Sullivan Graev & Karabell, LLP.
10.1 Lease Agreement dated August 10, 1999, between the
Registrant and Samson Associates, LLC as amended.
10.2 Modification and Extension of Lease dated August 6, 1999,
between the Registrant and Royal Realty Corp.
10.3 Employment Agreement dated April 1, 1999, between the
Registrant and Ari B. Horowitz.
10.4** Amended and Restated Employment Agreement dated February 7,
2000, between the Registrant and Carlos B. Cashman.
10.5 Loan and Security Agreement dated May 19, 1999, between
Silicon Valley Bank and the Registrant.
10.6 Loan and Security Agreement dated August 17, 1999, between
Silicon Valley Bank and the Registrant.
10.7* Form of Amended and Restated Registration Rights Agreement
dated , 2000, among the Registrant and the
Securityholders thereto.
10.8 The Registrant's 1998 Stock Option Plan.
10.9(+ ) Letter Agreement dated October 15, 1999, between the
Registrant and J.P. Morgan Corporation.
10.10(+ ) Letter Agreement dated November 21, 1999, between the
Registrant and CareerPath.com, Inc.
10.11 Standard Form of FREEAGENT E.OFFICE services agreement.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
10.12 Series A Securities Purchase Agreement dated December 24,
1998, among the Registrant and the signatories thereto.
10.13 Series B Securities Purchase Agreement dated September 3,
1999, among the Registrant and the purchasers of the Series
B Convertible Preferred Stock.
10.14 Agreement and Plan of Merger dated May 27, 1999, among the
Registrant, The Churchill Benefit Corporation, William Bahr
and Churchill Acquisition Corp.
10.15* Agreement and Plan of Merger dated January 30, 2000 among
the Registrant, Opus PM Acquisition Corp., PeopleMover, Inc.
and the other parties thereto.
10.16* Agreement and Plan of Merger dated January 19, 2000 among
the Registrant, Ithority Corporation and the other parties
thereto.
10.17* Asset Purchase Agreement dated as of January 12, 2000 among
Brainstorm Interactive, Inc., the Registrant and the other
parties thereto.
10.18** Escrow Agreement for PeopleMover.
10.19* Escrow and Pledge Agreement dated as of January 19, 2000
among SunTrust Bank, the Registrant and the other parties
thereto.
10.20* Amended and Restated Employment Agreement dated February 2,
2000, between the Registrant and Richard S. Miller.
10.21** Employment Agreement dated , 2000, between the
Registrant and Richard McCann.
10.22** Employment Agreement dated , 2000, between the
Registrant and Allen Berger.
10.23* Strategic Partner Registration Rights Agreement dated
February 7, 2000 between the Registrant and Lucent
Technologies Inc.
10.24** The Registrant's 2000 Stock Option Plan.
10.25** The Registrant's 2000 Stock Option Plan for Non-Employee
Directors.
10.26* The Registrant's 2000 Employee Stock Purchase Plan.
10.27* Form of Registration Rights Agreement dated , 2000
between the Registrant and the PM Securityholders.
21.1* Subsidiaries of the Registrant.
23.1** Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5.1).
23.2* Consent of KPMG, LLP, independent accountants.
23.3* Consent of PricewaterhouseCoopers LLP, independent
accountants.
24.1 Powers of Attorney (included on signature page).
27.1* Financial Data Schedule.
99.1* Form of letter to holders of more than 100 shares of
Safeguard Scientifics, Inc. describing the Safeguard
Subscription Program for Opus360 Corporation.
99.2* Form of Letter to Brokers describing the Safeguard
Subscription Program.
99.3* Form of Subscription Agreement for the Safeguard
Subscription Program.
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
99.4* Stock Purchase Agreement between the Registrant and
Safeguard Scientifics relating to the Safeguard Subscription
Program.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
+ We have requested confidential treatment of certain provisions of this
exhibit pursuant to Rule 406 of the Securities Act of 1933. The entire
agreement has been filed separately with the Securities and Exchange
Commission.
Item 17. Undertakings.
The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by 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,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Opus360 Corporation has duly caused this Amendment No. 1 to Registration
Statement to be signed on its behalf by the undersigned, thereunder duly
authorized, in the City of New York, State of New York, on February 9, 2000.
<TABLE>
<S> <C> <C>
OPUS360 CORPORATION
By: /s/ ARI B. HOROWITZ
-----------------------------------------
Ari B. Horowitz
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and/or officers of Opus360 Corporation (the
"Registrant"), hereby severally constitute and appoint Ari B. Horowitz and
Richard McCann, and each of them individually, with full powers of substitution
and resubstitution, our true and lawful attorneys, with full powers to each of
them to sign for us, in our names and in the capacities indicated below, the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of the Registrant, and to file or cause to be filed the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby ratifying and
confirming all that said attorneys, and each of them, or their substitute or
substitutes, shall do or cause to be done by virtue of this Power of Attorney.
This power of attorney may be executed in counterparts.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ARI B. HOROWITZ Chairman of the Board and Chief
- ------------------------------------ Executive Officer (Principal February 9, 2000
Ari B. Horowitz Executive Officer)
/s/ RICHARD S. MILLER President, Chief Operating Officer
- ------------------------------------ and Director February 9, 2000
Richard S. Miller
Senior Vice President, Chief
/s/ RICHARD MCCANN Financial Officer, and Assistant
- ------------------------------------ Secretary (Principal Financial February 9, 2000
Richard McCann Officer and Principal Accounting
Officer)
/s/ JAMES CANNAVINO Director
- ------------------------------------ February 9, 2000
James Cannavino
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ IRWIN LIEBER Director
- ------------------------------------ February 9, 2000
Irwin Lieber
/s/ ROGER J. WEISS Director
- ------------------------------------ February 9, 2000
Roger J. Weiss
/s/ BARRY RUBENSTEIN Director
- ------------------------------------ February 9, 2000
Barry Rubenstein
/s/ WILLIAM R. NUTI Director
- ------------------------------------ February 9, 2000
William R. Nuti
/s/ JOHN K. HALVEY Director
- ------------------------------------ February 9, 2000
John K. Halvey
/s/ JOHN L. DREW Director
- ------------------------------------ February 9, 2000
John L. Drew
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- --------------------- ------------------------------------------------------------ --------
<S> <C> <C>
1.1** Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Certificate of Incorporation of the
Registrant.
3.3 Bylaws of the Registrant.
3.4* Amended Bylaws of the Registrant.
4.1** Certificate for Shares.
5.1** Opinion of O'Sullivan Graev & Karabell, LLP.
10.1 Lease Agreement dated August 10, 1999, between the
Registrant and Samson Associates, LLC as amended.
10.2 Modification and Extension of Lease dated August 6, 1999,
between the Registrant and Royal Realty Corp.
10.3 Employment Agreement dated April 1, 1999, between the
Registrant and Ari B. Horowitz.
10.4** Amended and Restated Employment Agreement dated February 7,
2000, between the Registrant and Carlos B. Cashman.
10.5 Loan and Security Agreement dated May 19, 1999, between
Silicon Valley Bank and the Registrant.
10.6 Loan and Security Agreement dated August 17, 1999, between
Silicon Valley Bank and the Registrant.
10.7* Form of Amended and Restated Registration Rights Agreement
dated , 2000, among the Registrant and the
Securityholders thereto.
10.8 The Registrant's 1998 Stock Option Plan.
10.9(+ ) Letter Agreement dated October 15, 1999, between the
Registrant and J.P. Morgan Corporation.
10.10(+ ) Letter Agreement dated November 21, 1999, between the
Registrant and CareerPath.com, Inc.
10.11 Standard Form of FREEAGENT E.OFFICE services agreement.
10.12 Series A Securities Purchase Agreement dated December 24,
1998, among the Registrant and the signatories thereto.
10.13 Series B Securities Purchase Agreement dated September 3,
1999, among the Registrant and the purchasers of the Series
B Convertible Preferred Stock.
10.14 Agreement and Plan of Merger dated May 27, 1999, among the
Registrant, The Churchill Benefit Corporation, William Bahr
and Churchill Acquisition Corp.
10.15* Agreement and Plan of Merger dated January 30, 2000 among
the Registrant, Opus PM Acquisition Corp., PeopleMover, Inc.
and the other parties thereto.
10.16* Agreement and Plan of Merger dated January 19, 2000 among
the Registrant, Ithority Corporation and the other parties
thereto.
10.17* Asset Purchase Agreement dated as of January 12, 2000 among
Brainstorm Interactive, Inc., the Registrant and the other
parties thereto.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Page
- --------------------- ------------------------------------------------------------ --------
<S> <C> <C>
10.18** Escrow Agreement for PeopleMover.
10.19* Escrow and Pledge Agreement dated as of January 19, 2000
among SunTrust Bank, the Registrant and the other parties
thereto.
10.20* Amended and Restated Employment Agreement dated February 2,
2000, between the Registrant and Richard S. Miller.
10.21** Employment Agreement dated , 2000, between the
Registrant and Richard McCann.
10.22** Employment Agreement dated , 2000, between the
Registrant and Allen Berger.
10.23* Strategic Partner Registration Rights Agreement dated
February 7, 2000 between the Registrant and Lucent
Technologies Inc.
10.24** The Registrant's 2000 Stock Option Plan.
10.25** The Registrant's 2000 Stock Option Plan for Non-Employee
Directors.
10.26* The Registrant's 2000 Employee Stock Purchase Plan.
10.27* Form of Registration Rights Agreement dated , 2000
between the Registrant and the PM Securityholders.
21.1* Subsidiaries of the Registrant.
23.1** Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5.1).
23.2* Consent of KPMG, LLP, independent accountants.
23.3* Consent of PricewaterhouseCoopers LLP, independent
accountants.
24.1 Powers of Attorney (included on signature page).
27.1* Financial Data Schedule.
99.1* Form of letter to holders of more than 100 shares of
Safeguard Scientifics, Inc. describing the Safeguard
Subscription Program for Opus360 Corporation.
99.2* Form of Letter to Brokers describing the Safeguard
Subscription Program.
99.3* Form of Subscription Agreement for the Safeguard
Subscription Program.
99.4* Stock Purchase Agreement between the Registrant and
Safeguard Scientifics relating to the Safeguard Subscription
Program.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
+ We have requested confidential treatment of certain provisions of this
exhibit pursuant to Rule 406 of the Securities Act of 1933. The entire
agreement has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OPUS360 CORPORATION
ARTICLE I
The name of the corporation is Opus360 Corporation (the
"Corporation").
ARTICLE II
The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended ("Delaware Law") and to possess and exercise all of the
powers and privileges granted by such law and any other law of the State of
Delaware.
ARTICLE III
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 175,000,000 consisting of (a)
150,000,000 shares of Common Stock, par value $.001 per share (the "Common
Stock"), and (b) 25,000,000 shares of Preferred Stock, par value $.001 per share
(the "Preferred Stock").
The Board of Directors is hereby empowered to authorize by
resolution or resolutions from time to time the issuance of one or more classes
or series of Preferred Stock and to fix the designations, powers, preferences
and relative, participating, optional and other rights, if any, and the
qualifications, limitations and restrictions thereof, if any, including, without
limitation, the number of shares constituting each such class or series,
dividend rights, conversion rights, redemption privileges, voting powers, full
or limited or no voting powers, and liquidation preferences, and to increase or
decrease the size of any such class or series (but not below the number of
shares of any class or series of Preferred Stock then outstanding) to the extent
permitted by Delaware Law. Without limiting the generality of the foregoing, the
<PAGE>
resolution or resolutions providing for the establishment of any class or series
of Preferred Stock may, to the extent permitted by law, provide that such class
or series shall be superior to, rank equally with or be junior to the Preferred
Stock of any other class or series. Except as otherwise expressly provided in
the resolution or resolutions providing for the establishment of any class or
series of Preferred Stock, no vote of the holders of shares of Preferred Stock
or Common Stock shall be a prerequisite to the issuance of any shares of any
class or series of the Preferred Stock authorized by and complying with the
conditions of this Certificate of Incorporation.
ARTICLE IV
(i) 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 or nor more than 15 directors, the exact number of directors to be
determined from time to time solely by resolution adopted by the affirmative
vote of a majority of the entire Board of Directors.
(ii) The directors shall be divided into three classes,
designated 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 constituting
the entire Board of Directors. Each director shall serve for a term ending on
the date of the third annual meeting of stockholders next following the annual
meeting at which such director was elected, provided that directors initially
designated as Class I directors shall serve for a term ending on the date of the
2001 annual meeting, directors initially designated as Class II directors shall
serve for a term ending on the date of the 2002 annual meeting, and directors
initially designated as Class III directors shall serve for a term ending on the
date of the 2003 annual meeting. Notwithstanding the foregoing, each director
shall hold office until such director's successor shall have been duly elected
and qualified or until such director's earlier death, resignation or removal. In
the event of any change in the number of directors, the Board of Directors shall
apportion any newly created directorship among, or reduce the number of
directorships in, such class or classes as shall equalize, as nearly as
possible, the number of directors in each class. In no event will a decrease in
the number of directors shorten the term of any director.
(iii) The names and mailing addresses of the persons who are
to serve initially as directors of each class are:
Name Mailing Address
---- ---------------
Class I
Class II
Class III
<PAGE>
(iv) There shall be no cumulative voting in the election of
directors. Election of directors need not be by written ballot unless the bylaws
of the Corporation so provide.
(v) Vacancies on the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the number of directors may be filled solely by a majority of
the directors then in office (although less than a quorum) or by the sole
remaining director, and each director so elected shall hold office for a term
that shall coincide with the term of the Class to which such director shall have
been elected.
(vi) No director may be removed from office by the
stockholders except for cause with the affirmative vote of the holders of not
less than 66 2/3 % of the total voting power of all outstanding securities of
the Corporation then entitled to vote generally in the election of directors,
voting together as a single class.
(vii) Notwithstanding the foregoing, whenever the holders of
one or more classes or series of Preferred Stock shall have the right, voting
separately as a class or series, to elect directors, the election, term of
office, filling of vacancies, removal and other features of such directorships
shall be governed by the terms of the resolution or resolutions adopted by the
Board of Directors pursuant to ARTICLE III applicable thereto, and such
directors so elected shall not be subject to the provisions of this ARTICLE IV
unless otherwise provided therein.
ARTICLE V
The Board of Directors shall have the power to adopt, amend or
repeal the bylaws of the Corporation by the majority vote of the directors then
in office. The stockholders may adopt, amend or repeal the bylaws only with the
affirmative vote of the holders of not less than 66 2/3 % of the total voting
power of all outstanding securities of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
ARTICLE VI
Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken only upon the vote of stockholders
at an annual or special meeting duly noticed and called in accordance with
Delaware Law as amended from time to time, and may not be taken by written
consent of stockholders without a meeting.
ARTICLE VII
Special meetings of the stockholders may be called by the Board of
Directors or the Chairman of the Board of Directors, the Chief Executive Officer
or the President of the Corporation and may not be called by any other person.
Notwithstanding the foregoing, whenever holders of one or more classes or series
of Preferred Stock shall have the right, voting separately as a class or series,
to elect directors, such holders may call, pursuant to the terms of
<PAGE>
the resolution or resolutions adopted by the Board of Directors pursuant to
ARTICLE III hereto, special meetings of holders of such Preferred Stock.
ARTICLE VIII
(i) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, to the fullest extent permitted by Delaware Law.
(ii) (a) Each person (and the heirs, executors or
administrators of such person) who was or is a party or is threatened to be made
a party to, or is involved in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, partnership, joint venture, limited liability
company, trust or other enterprise, shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by Delaware Law. The right to
indemnification conferred in this ARTICLE VIII shall also include the right to
be paid by the Corporation the expenses incurred in connection with any such
proceeding in advance of its final disposition to the fullest extent authorized
by Delaware Law. The right to indemnification conferred in this ARTICLE VIII
shall be a contract right.
(b) The Corporation may, by action of its Board of
Directors, provide indemnification to such of the officers, employees and agents
of the Corporation and such other persons serving at the request of the
Corporation as officers, employees and agents of another corporation,
partnership, joint venture, limited liability company, trust or other enterprise
to such extent as is permitted by Delaware Law and the Board of Directors shall
determine to be appropriate.
(iii) The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, limited liability company, trust or other enterprise
against any expense, liability or loss incurred by such person in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under Delaware Law.
(iv) The rights and authority conferred in this ARTICLE VIII
shall not be exclusive of any other right which any person may otherwise have or
hereafter acquire.
(v) Neither the amendment nor repeal of this ARTICLE VIII, nor
the adoption of any provision of this Certificate of Incorporation or the bylaws
of the Corporation, nor, to the fullest extent permitted by Delaware Law, any
modification of law, shall eliminate or reduce the effect of this ARTICLE VIII
in respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification.
<PAGE>
ARTICLE IX
The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its stock or
other securities or property, rights entitling the holders thereof to purchase
from the Corporation shares of stock or other securities of the Corporation or
any other corporation. The times at which and the terms upon which such rights
are to be issued shall be determined by the Board of Directors and set forth in
the contracts or instruments that evidence such rights. The authority of the
Board of Directors with respect to such rights shall include, but not be limited
to, determination of the following:
(i) the initial purchase price per share or other unit of the
stock or other securities or property to be purchased upon exercise of
such rights;
(ii) provisions relating to the times at which and the
circumstances under which such rights may be exercised or sold or
otherwise transferred, either together with or separately from, any other
stock or securities of the Corporation;
(iii) provisions which adjust the number or exercise price of
such rights, or amount or nature of the stock or other securities or
property receivable upon exercise of such rights, in the event of a
combination, split or recapitalization of any stock of the Corporation, a
change in ownership of the Corporation's stock or other securities or a
reorganization, merger, consolidation, sale of assets or other occurrence
relating to the Corporation or any stock of the Corporation, and
provisions restricting the ability of the Corporation to enter into any
such transaction absent an assumption by the other party or parties
thereof of the obligations of the Corporation under such rights;
(iv) provisions which deny the holder of a specified
percentage of the outstanding stock or other securities of the Corporation
the right to exercise such rights and/or cause the rights held by such
holder to become void;
(v) provisions which permit the Corporation to redeem such
rights; and
(vi) the appointment of a rights agent with respect to such
rights.
ARTICLE X
The address of the Corporation's registered office in the State of
Delaware is 9 East Lockerman Street, City of Dover, County of Kent. The
Corporation's registered agent at such address is National Register Agents, Inc.
[Need to confirm if this is correct]
ARTICLE XI
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the state of Delaware may, on the
<PAGE>
application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers or
trustees in dissolution appointed for the Corporation under the provisions of
Delaware Law, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such matter as the said court directs. If a majority in
number representing 3/4 in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of the
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE XII
The Corporation reserves the right to amend this Certificate of
Incorporation in any manner permitted by the Delaware Law and all rights and
powers conferred upon stockholders, directors and officers herein are granted
subject to this reservation. Notwithstanding the foregoing, the provisions set
forth in ARTICLES IV, V, VI, VII, VIII and IX and this ARTICLE XII may not be
repealed or amended in any respect, and no other provision may be adopted,
amended or repealed which would have the effect of modifying or permitting the
circumvention of the provisions set forth in ARTICLES IV, V, VI, VII, VIII and
IX and this ARTICLE XII unless such action is approved by the affirmative vote
of the holders of not less than 66 2/3 % of the total voting power of all
outstanding securities of the Corporation then entitled to vote generally in the
election of directors, voting together as a single class.
* * * * * *
<PAGE>
Exhibit 3.4
================================================================================
Opus360 Corporation
Incorporated under the laws
of the State of Delaware
---------------------------
AMENDED BY-LAWS
---------------------------
As adopted on _______, 2000
Effective as Provided in Section 6.6
================================================================================
<PAGE>
AMENDED BY-LAWS
OF
OPUS360 CORPORATION
ARTICLE I
OFFICES
1.1 Registered Office.
The registered office of Opus360 Corporation (the "Corporation") in the
State of Delaware shall be at 9 East Loockerman Street, City of Dover, County of
Kent 19901, and the registered agent in charge thereof shall be National
Registered Agents, Inc. [Need to confirm]
1.2 Other Offices.
The Corporation may also have an office or offices at any other place or
places within or outside the State of Delaware as the Board of Directors (the
"Board") may from time to time determine or the business of the Corporation may
require.
1.3 Books.
The books of the Corporation may be kept within or without of the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
2.1 Time and Place of Meetings.
All meetings of stockholders shall be held at such place, either within or
without of the State of Delaware, on such date and at such time as may be
determined from time to time by the Board of Directors (or the Chairman of the
Board of Directors in the absence of a designation by the Board of Directors).
2.2 Annual Meetings.
Annual meetings of the stockholders, commencing with the year [2001] shall
be held for the election of directors and for the transaction of such other
business as may properly come before the meeting.
1
<PAGE>
2.3 Special Meetings.
Special meetings of the stockholders for any purpose or purposes may be
called by the Board, the Chairman of the Board of Directors, the Chief Executive
Officer or the President and may not be called by any other person.
Notwithstanding the foregoing, whenever holders of one or more classes or series
of Preferred Stock shall have the right, voting separately as a class or series,
to elect directors, such holders may call special meetings of such holders
pursuant to the terms of the certificate of designation for such classes or
series.
2.4 Notice of Meetings and Adjourned Meetings; Waivers of Notice.
(a) Except as otherwise provided by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended ("Delaware
Law"), the Certificate of Incorporation of the Corporation (the "Certificate")
or these By-laws, notice of each annual or special meeting of the stockholders
shall be given to each stockholder of record entitled to vote at such meeting
not less than 10 nor more than 60 days before the day on which the meeting is to
be held, by delivering written notice thereof to such stockholder personally, or
by mailing a copy of such notice, postage prepaid, directly to the stockholder
at such stockholder's address as it appears in the records of the Corporation,
or by transmitting such notice thereof at such address by telegraph, cable or
other telephonic transmission. Every such notice shall state the place, the date
and hour of the meeting, and, in case of a special meeting, the purpose or
purposes for which the meeting is called. Unless these By-laws otherwise
require, when a meeting is adjourned to another time or place (whether or not a
quorum is present), notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. Notwithstanding the
foregoing, if the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
(b) A written waiver of any such notice signed by the person
entitled thereto, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise provided in these By-laws, neither the
business to be transacted at, nor the purpose of, any meeting of the
stockholders need be specified in any such notice or waiver of notice. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
2.5 Quorum.
Unless otherwise provided by the Certificate or these By-laws and subject
to Delaware Law, at each meeting of stockholders the holders of a majority of
the issued and outstanding shares of capital stock of the Corporation entitled
to vote at such meeting, present in person or represented by proxy, shall
constitute a quorum for the transaction of business.
2
<PAGE>
2.6 Organization.
Unless otherwise determined by the Board, at each meeting of the
stockholders, the Chairman of the Board, if one shall have been elected, (or in
his absence or if one shall not have been elected, the Chief Executive Officer,
or in his absence or if one shall not have been elected, the President) shall
act as chairman of the meeting. The Secretary (or in his absence or inability to
act, the person whom the chairman of the meeting shall appoint secretary of the
meeting) shall act as secretary of the meeting and keep the minutes thereof.
2.7 Order of Business.
The order of business at each meeting of the stockholders shall be
determined by the chairman of such meeting.
2.8 Voting.
(a) Unless otherwise provided in the Certificate of Incorporation
and subject to Delaware Law, each stockholder shall be entitled to one vote in
person or by proxy for each outstanding share of capital stock of the
Corporation held by such stockholder. Any shares of capital stock of the
Corporation held by the Corporation shall have no voting rights. Persons holding
stock in a fiduciary capacity shall be entitled to vote the shares so held. A
person whose stock is pledged shall be entitled to vote, unless in the transfer
by the pledgor on the books of the Corporation, such person has expressly
empowered the pledgee to vote thereon, in which case only the pledgee or such
pledgee's proxy may represent such stock and vote thereon. If shares or other
securities having voting power 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 have
the same fiduciary relationship respecting the same shares, unless the Secretary
of the Corporation shall be given written notice to the contrary and furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect:
(i) if only one votes, such person's act binds all;
(ii) if more than one votes, the act of the majority so voting
binds all; and
(iii) if more than one votes, but the vote is evenly split on
any particular matter, such shares shall be voted in the manner provided
by Delaware Law.
If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purposes of this Section 2.8 shall
be a majority or even-split in interest. The Corporation shall not vote directly
or indirectly any share of its own capital stock.
(b) Unless otherwise provided in Delaware Law, the Certificate of
Incorporation or these By-laws, in all matters other than the election of
directors, the affirmative vote of a majority of the shares of capital stock of
the Corporation present, in person or by proxy, at a meeting of stockholders and
entitled to vote on the subject matter shall be the act of the
3
<PAGE>
stockholders. Directors shall be elected by a plurally of the votes of the
shares present in person or by proxy at the meeting and entitled to vote on the
election of directors.
(c) Each stockholder entitled to vote at a meeting of stockholders
may authorize another person or persons to act for such stockholder by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period.
(d) Without limiting the manner in which a stockholder may authorize
another person or persons to act for such stockholder as proxy pursuant to
subsection (c) of this Section 2.8, the following shall constitute a valid means
by which a stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing another
person or persons to act for such stockholder as proxy. Execution may be
accomplished by the stockholder or such stockholder's authorized officer,
director, employee or agent signing such writing or causing such person's
signature to be affixed to such writing by any reasonable means including,
but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or persons to
act for such stockholder as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic
transmission to the person who will be the holder of the proxy or to a
proxy solicitation firm, proxy support service organization or like agent
duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram, cablegram or
other means of electronic transmission must either set forth or be
submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or other
electronic transmissions are valid, the inspectors or, if there are no
inspectors, such other persons making that determination shall specify the
information upon which they relied.
(e) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to subsection (d)
of this Section 2.8 may be substituted or used in lieu of the original writing
or transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
2.9 Inspectors of Elections.
Preceding any meeting of the stockholders, the Corporation shall appoint
one or more persons to act as inspectors at the meeting and make a written
report thereof. The Corporation may designate one or more alternate inspectors
to replace any inspector who fails to act. In the event no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of the duties of an inspector,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of such inspector's ability. The
inspectors shall:
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(a) ascertain the number of shares outstanding and the voting power
of each,
(b) determine the shares represented at a meeting and the validity
of proxies and ballots,
(c) count all votes and ballots,
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(e) certify their determination of the number of shares represented
at the meeting, and his or her count of all votes and ballots.
The inspector(s) may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties of inspector.
In determining the shares represented and the validity and counting
of proxies and ballots, the inspector shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any information provided in
accordance with Section 2.8 of these By-laws, ballots and the regular books and
records of the Corporation. The inspector may consider other reliable
information for the limited purpose of reconciling proxies and ballots submitted
by or on behalf of banks, brokers or their nominees or a similar person which
represent more votes than the holder of a proxy is authorized by the record
owner to cast or more votes than the stockholder holds of record. If the
inspector considers other reliable information for the limited purpose permitted
by this paragraph, the inspector, at the time of his or her certification
pursuant to (e) of this Section 2.9, shall specify the precise information
considered, the person or persons from whom the information was obtained, when
this information was obtained, the means by which the information was obtained,
and the basis for the inspector's belief that such information is accurate and
reliable.
2.10 Opening and Closing of Polls.
The date and time of the opening and closing of the polls for each matter
to be voted upon at a stockholder meeting shall be announced at the meeting. The
inspector of the election shall be prohibited from accepting any ballots,
proxies or votes or any revocations thereof or changes thereto after the closing
of the polls, unless the Court of Chancery upon application by a stockholder
shall determine otherwise.
2.11 List of Stockholders.
It shall be the duty of the Secretary or other officer of the Corporation
who shall have charge of its stock ledger to prepare and make, at least 10 days
before every meeting of the stockholders, a complete list of the stockholders
entitled to vote thereat, 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 any such meeting, during ordinary business hours, for
a period of at least 10 days prior to such meeting, either at a place within the
city where such meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place
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where the meeting is to be held. Such 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.
2.12 Action by Consent.
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only upon the vote of stockholders at an
annual or special meeting duly noticed and called in accordance with Delaware
Law and may not be taken by written consent of stockholders without a meeting.
2.13 Nomination of Directors.
Only persons who are nominated in accordance with the procedures set forth
in these By-laws shall be eligible to serve as directors. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of stockholders (a) by or at the direction of the Board of Directors or
(b) by any stockholder of the Corporation who is a stockholder of record at the
time of giving of notice provided for in this Section 2.13, who shall be
entitled to vote for the election of directors at the meeting and who complies
with the notice procedures set forth in this Section 2.13. Such nominations,
other than those made by or at the direction of the Board of Directors, must be
made pursuant to timely notice in writing to the secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 90
days nor more than 120 days prior to the first anniversary of the previous
year's annual meeting. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934 (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible to
serve as a director of the Corporation unless nominated in accordance with the
procedures set forth in this By-law. The chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by the By-laws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions of
this Section 2.13, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, and the rules and
regulations thereunder with respect to the matters set forth in this Section.
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2.14 Notice of Business.
At any meeting of the stockholders, only such business shall be conducted
as shall have been brought before the meeting (a) by or at the direction of the
Board of Directors or (b) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of the notice provided for in this
Section 2.14, who shall be entitled to vote at such meeting and who complies
with the notice procedures set forth in this Section 2.14. For business to be
properly brought before a stockholder meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
90 days nor more than 120 days prior to the first anniversary of the previous
year's annual meeting. A stockholder's notice to the secretary shall set forth
as to each matter the stockholder proposes to bring before the meeting (a) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in the By-laws to the
contrary, no business shall be conducted at a stockholder meeting except in
accordance with the procedures set forth in this Section 2.14. The chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of the By-laws, and if he should so determine, he shall so
declare to the meeting any such business not properly brought before the meeting
shall not be transacted. Notwithstanding the foregoing provisions of this
Section 2.14, a stockholder shall also comply with all applicable requirements
of the Securities Exchange Act of 1934, and the rules and regulations thereunder
with respect to the matters set forth in this Section 2.14.
ARTICLE III
BOARD OF DIRECTORS
3.1 General Powers.
Except as otherwise provided by Delaware Law or the Certificate, the
business, property and affairs of the Corporation shall be managed by or under
the direction of the Board, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Certificate directed or required to be exercised or done by the stockholders.
3.2 Number, Classes and Term of Office.
The Board of Directors shall consist of not less than three nor more than
[ten] directors, with the exact number of directors to be determined from time
to time solely by resolution adopted by the affirmative vote of a majority of
the entire Board of Directors. The directors shall be divided into three
classes, designated 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
constituting the entire Board of Directors. Except as otherwise provided in the
Certificate of Incorporation, each director shall serve for a term ending on the
date of the third annual meeting of stockholders next
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following the annual meeting at which such director was elected. Notwithstanding
the foregoing, each director shall hold office until such director's successor
shall have been duly elected and qualified or until such director's earlier
death, resignation or removal. Directors need not be stockholders.
3.3 Resignation.
Any director may resign at any time by giving written notice to the Board
or the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein or, if the time be not specified, upon receipt thereof;
and unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
3.4 Vacancies.
Unless otherwise provided in the Certificate of Incorporation, vacancies
on the Board of Directors resulting from death, resignation, removal or
otherwise and newly created directorships resulting from any increase in the
number of directors may be filled solely by a majority of the directors then in
office (although less than a quorum) or by the sole remaining director. Each
director so elected shall hold office for a term that shall coincide with the
term of the Class to which such director shall have been elected. If there are
no directors in office, then an election of directors may be held in accordance
with Delaware Law. Unless otherwise provided in the Certificate of
Incorporation, when one or more directors shall resign from the Board, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective, and each director so chosen shall hold office as provided in
the filling of the other vacancies.
3.5 Removal.
No director may be removed from office by the stockholders except for
cause with the affirmative vote of the holders of not less than 66 2/3% of the
total voting power of all outstanding securities of the Corporation then
entitled to vote generally in the election of directors, voting together as a
single class.
3.6 Compensation.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, the Board of Directors shall have authority to fix the compensation of
directors, including fees and reimbursement of expenses.
3.7 Meetings and Conduct Thereof
(a) Time and Place of Meetings. The Board may hold its meetings at
such place or places within or outside the State of Delaware, and at such times,
as may from time to time be determined by the Board (or the Chairman in the
absence of a determination by the Board).
(b) Annual Meetings. As soon as practicable after each annual
meeting of stockholders, the Board shall meet for the purpose of organization,
the election of officers and
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the transaction of other business, on the same day and at the same place where
such annual meeting shall be held unless it shall have transacted all such
business by written consent pursuant to Section 3.8 of this Article III. Notice
of such meeting need not be given. In the event such annual meeting is not so
held, the annual meeting of the Board of Directors may be held at such place
either within or without the State of Delaware, on such date and at such time as
shall be specified in a notice thereof given as hereinafter provided in Section
3.7(d) of this Article III or in a waiver of notice thereof signed by any
director who chooses to waive the requirement of notice.
(c) Regular Meetings. After the place and time of regular meetings
of the Board of Directors shall have been determined and notice thereof shall
have been once given to each member of the Board of Directors, regular meetings
may be held without further notice being given.
(d) Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board and shall be called by the Chairman of
the Board or the Secretary on the written request of three directors. Notice of
special meetings of the Board of Directors shall be given to each director at
least three days before the date of the meeting in such manner as is determined
by the Board of Directors.
(e) Waiver of Notice. A written waiver of any notice signed by the
person entitled thereto, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise provided in these By-laws, neither the
business to be transacted at, nor the purpose of, any meeting of directors need
be specified in any such notice or waiver of notice.
(f) Quorum and Manner of Acting. Unless the Certificate of
Incorporation or these By-laws require a greater number, a majority of the total
number of directors then in office shall be present in person at any meeting of
the Board in order to constitute a quorum for the transaction of business at
such meeting, and the affirmative vote of a majority of those directors present
at any such meeting at which a quorum is present shall be necessary for the
passage of any resolution or act of the Board. When a meeting is adjourned to
another time or place (whether or not a quorum is present), notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Board of Directors may transact any business which might have been transacted at
the original meeting. If a quorum shall not be present at any meeting of the
Board of Directors the directors present thereat may adjourn the meeting, from
time to time, without other than announcement at the meeting, until a quorum
shall be present.
(g) Organization. At each meeting of the Board, one of the following
shall act as chairman of the meeting and preside thereat, in the following order
of precedence:
(i) the Chairman, if any;
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(ii) the President (if a director); or
(iii) any director designated by a majority of the directors
present.
The Secretary or, in the case of his absence, an Assistant Secretary, if an
Assistant Secretary has been appointed and is present, or any person whom the
chairman of the meeting shall appoint shall act as secretary of such meeting and
keep the minutes thereof.
3.8 Directors' Consent in Lieu of Meeting.
Unless otherwise restricted by the Certificate of Incorporation or these
By-laws, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting,
if all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
3.9 Action by Means of Conference Telephone or Similar Communications Equipment.
Unless otherwise restricted by the Certificate of Incorporation or these
By-laws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board or such committee,
as the case may be, by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other,
and participation in a meeting by such means shall constitute presence in person
at such meeting.
3.10 Committees.
The Board of Directors may designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to the following
matter: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by Delaware Law to be submitted to the
stockholders for approval or (ii) adopting, amending or repealing any bylaw of
the Corporation. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
3.11 Preferred Directors.
Notwithstanding anything else contained herein, whenever the holders of
one or more classes or series of Preferred Stock shall have the right, voting
separately as a class or series, to
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elect directors, the election, term of office, filing of vacancies, removal and
other features of such directorships shall be governed by the terms of the
resolutions applicable thereto adopted by the Board of Directors pursuant to the
Certificate of Incorporation, and such directors so elected shall not be subject
to the provisions of Sections 3.2, 3.4 and 3.5 of this Article III unless
otherwise provided therein.
ARTICLE IV
OFFICERS
4.1 Principal Officers.
The principal officers of the Corporation shall be a Chairman, if one is
appointed by the Board (and any references to the Chairman shall not apply if a
Chairman has not been appointed), a Chief Executive Officer, a President, one or
more Vice Presidents, a Treasurer, and a Secretary who shall have the duty,
among other things, to record the proceedings of the meetings of stockholders
and directors in a book kept for that purpose. The Corporation may also have
such other principal officers, including one or more controllers, as the Board
may in its discretion appoint. One person may hold the offices and perform the
duties of any two or more of said offices, except that no one person shall hold
the offices and perform the duties of Chief Executive Officer or President and
Secretary.
4.2 Authority and Duties.
The officers, of the Corporation shall have such powers and perform such
incident to each of their respective offices and such other duties as may be
provided in these By-laws or as may from time to time be conferred upon or
assigned to them by the Board
4.3 Subordinate Officers.
In addition to the principal officers enumerated in Section 4.1 of this
Article IV, the Corporation may have such other subordinate officers, agents and
employees as the Board may deem necessary, including one or more Assistant
Secretaries, one or more Assistant Treasurers and one or more Assistant
Controllers, each of whom shall hold office for such period, have such authority
and perform such duties as the Board, the Chairman or the President may from
time to time determine. The Board may delegate to any principal officer the
power to appoint and define the authority and duties of, or remove, any such
officers, agents or employees.
4.4 Term of Office, Resignation, Removal and Remuneration.
The principal officers of the Corporation shall be elected annually by the
Board at the annual meeting thereof, or at such other times as the Board of
Directors shall deem appropriate. Each such officer shall hold office until such
officer's successor has been elected or appointed and qualified or until his
earlier death or resignation or removal. The remuneration of all officers of the
Corporation shall be fixed from time to time by the Board of Directors unless
otherwise delegated by the Board to a particular committee of the Board. Any
vacancy in any office shall be filled in such manner as the Board shall
determine. The Board may require any officer to give security for the faithful
performance of his duties.
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Any officer may resign at any time by giving written notice to the Board,
the Chairman, the President or the Secretary. Such resignation shall take effect
at the time specified therein or, if the time be not specified, at the time of
receipt of notice thereof; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Except as otherwise permitted by Section 4.3 of this Article IV, any
officer may be removed, with or without cause, at any time, by resolution
adopted by the Board of Directors.
4.5 The Chairman.
The Chairman shall give counsel and advice to the Board and the officers
of the Corporation on all subjects concerning the welfare of the Corporation and
the conduct of its business and shall perform such other duties as the Board may
from time to time determine. The Chairman shall preside at meetings of the Board
and of the stockholders at which he is present.
4.6 The President and the Chief Executive Officer.
Unless otherwise determined by the Board, the President shall be the chief
executive officer of the Corporation. The President (or in the event the Board
separately appoints a Chief Executive Officer, the person appointed as such
Chief Executive Officer) shall have supervision, direction and control of the
business and affairs of the Corporation subject to the control of the Board and
shall see that all orders and resolutions of the Board are carried into effect.
The President (or in the event the Board separately appoints a Chief Executive
Officer, the person appointed as such Chief Executive Officer) shall from time
to time make such reports of the affairs of the Corporation as the Board of
Directors may require and shall perform such other duties as the Board may from
time to time determine.
If the Board has separately appointed a Chief Executive Officer and a
President, in the absence or disability of the Chief Executive Officer, the
President, unless otherwise determined by the Board, shall have the authority,
and shall perform the duties, of the Chief Executive Officer.
4.7 The Secretary.
The Secretary shall, to the extent practicable, attend all meetings of the
Board and all meetings of the stockholders and shall record all votes and the
minutes of all proceedings in a book to be kept for that purpose. The Secretary
may give, or cause to be given, notice of all meetings of the stockholders and
of the Board, and all other notices required by law or by these By-laws. The
Secretary shall keep in safe custody the seal of the Corporation and affix the
same to any duly authorized instrument requiring it and, when so affixed, it
shall be attested by his signature or by the signature of the Treasurer or, if
appointed, an Assistant Secretary or an Assistant Treasurer. The Secretary shall
keep in safe custody the certificate books and stockholder records and such
other books and records as the Board may direct, and shall perform all other
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him by the Board, the Chairman or the Chief Executive
Officer.
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4.8 The Treasurer.
The Treasurer shall have the care and custody of the corporate funds and
other valuable effects, including securities, shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board or the Chief Executive Officer, taking proper vouchers for
such disbursements, shall render to the Chairman, the Chief Executive Officer
and directors, at the regular meetings of the Board or whenever they may request
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation and shall perform all other duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the Board, the Chairman or the Chief Executive Officer.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
5.1 Execution of Documents.
The Board shall designate, by either specific or general resolution, the
officers, employees and agents of the Corporation who shall have the power to
execute and deliver deeds, contracts, mortgages, bonds, debentures, checks,
drafts and other orders for the payment of money and other documents for and in
the name of the Corporation, and may authorize such officers, employees and
agents to delegate such power (including authority to redelegate) by written
instrument to other officers, employees or agents of the Corporation.
5.2 Deposits.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation or otherwise as the Board or
Treasurer, or any other officer of the Corporation to whom power in this respect
shall have been given by the Board, shall select.
5.3 Proxies with Respect to Stock or Other Securities of Other Corporations.
The Board shall designate the officers of the Corporation who shall have
authority from time to time to appoint an agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other securities in any
other corporation, and to vote or consent with respect to such stock or
securities. Such designated officers may instruct the person or persons so
appointed as to the manner of exercising such powers and rights, and such
designated officers may execute or cause to be executed in the name and on
behalf of the Corporation and under its corporate seal or otherwise, such
written proxies, powers of attorney or other instruments as they may deem
necessary or proper in order that the Corporation may exercise its powers and
rights.
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ARTICLE VI
GENERAL PROVISIONS
6.1 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, the Board may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board, and which record date shall be not more than 60 nor less than 10
days before the date of such meeting. If no record date is fixed by the Board,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than 60 days prior to such action. If no
record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto.
6.2 Dividends.
Subject to limitations contained in Delaware Law and the Certificate of
Incorporation, the Board of Directors may declare and pay dividends upon the
shares of capital stock of the Corporation, which dividends may be paid either
in cash, in property or in shares of the capital stock of the Corporation.
6.3 Fiscal Year.
The fiscal year of the Corporation shall commence on January 1 and end on
December 31 of each year.
6.4 Corporate Seal.
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
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6.5 Amendments.
These By-laws or any of them, may be altered, amended or repealed, or new
By-laws may be made, by the stockholders entitled to vote thereon at any annual
or special meeting thereof or by the Board of Directors.
6.6 Effective Date.
These By-laws shall become effective currently with the effectiveness of
the Corporation's Amended and Restated Certificate of Incorporation approved by
the Board of Directors and the stockholders of the Corporation in connection
with the Corporation's initial public offering and filed with the Secretary of
State of the State of Delaware on _____________, 2000.
* * * * *
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Exhibit 10.7
Form of Amended and Restated Registration Rights Agreement
AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT dated as of February __,
2000, among OPUS360 CORPORATION, a Delaware
corporation (the "Corporation"), and the
PRE-IPO SECURITYHOLDERS (as herein defined).
The Corporation and the Pre-IPO Securityholders have entered into a
Registration Rights Agreement dated as of December 24, 1998 (as amended by that
certain Amendment No. 1 dated September 1, 1999 and as otherwise heretofore
amended or modified, the "Original Registration Rights Agreement"). The
Corporation desires to amend and restate the Original Registration Rights
Agreement in its entirety as and pursuant to this Agreement. Effective upon the
execution of this Agreement by those Pre-IPO Securityholders with the requisite
power and authority to amend and restate the Original Registration Rights
Agreement pursuant to the terms of Section 19 thereof, this Agreement shall
amend and restate the Original Registration Rights Agreement in its entirety as
and pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Corporation and the Pre-IPO
Securityholders agree that the Original Registration Rights Agreement shall be
amended and restated in its entirety to read as follows:
1. Definitions.
As used herein, the following terms shall have the following
respective meanings:
"Additional Registrable Shares" means, at any time with respect to any
Additional Securityholder, the Registrable Shares held by such Additional
Securityholder (but only if such Additional Securityholder is entitled (but not
pursuant to this Agreement) to the registration of such Registrable Shares by
the Corporation under the Securities Act for sale to the public).
"Additional Securityholder" means any holder of Restricted Securities who
or which is entitled (but not pursuant to this Agreement) to the registration of
such Restricted Securities by the Corporation under the Securities Act for sale
to the public.
"Agreement" means this Amended and Restated Registration Rights Agreement.
"Business Day" means any day, other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Corporation (and such other class of common stock of the Corporation, or any
successor thereto, into which the Common Stock may be converted or reclassified,
and all references herein to the Common Stock shall mean such other class of
common stock, if applicable).
"Conversion Shares" means the Series A Conversion Shares and the Series B
Conversion Shares.
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"Corporation" has the meaning assigned to such term in the caption
to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC promulgated thereunder, all as the same may from time to time be in effect.
"Governmental Entity" means any government or political subdivision
or department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local or foreign.
"Initial Common Shares" means the Registrable Shares that are (i)
shares of Common Stock issued or issuable to Ari Horowitz, Carlos Cashman, Shawn
Kreloff, William Bahr, Brett Prager, Richard McCann, Alex Lapins, Anthony
Schmitz, Bruce Gilpin, Wayne Tsuchitani or USWeb/CKS Corporation, or (ii) shares
of Common Stock issued on or with respect to the shares of Common Stock referred
to in clause (i) above.
"Initial Warrants" means (i) the warrants dated May 19, 1999 and
August 17, 1999 issued by the Corporation to Silicon Valley Bank to purchase
shares of Common Stock, (ii) the warrants dated December 24, 1998 issued by the
Corporation to each of Gerald Cashman, G&R Partnership, LP, Leonard Horowitz,
Irwin Lieber and Barry Rubenstein to purchase shares of Common Stock, and (iii)
the warrants dated September 3, 1999 and January 15, 2000 issued by the
Corporation to Greenhill & Co., LLC.
"Law" means any foreign, federal, state or local law, statute,
treaty, rule, directive, regulation, ordinance or similar provision having the
force or effect of law or any Order.
"Majority of Registering Pre-IPO Securityholders" means, with
respect to any registration of Pre-IPO Registrable Shares, those Pre-IPO
Securityholders who or which hold in the aggregate in excess of 50% of all of
the Pre-IPO Registrable Shares included in such registration.
"Material Transaction" shall mean any material transaction in which
the Corporation or any of its Subsidiaries proposes to engage or is engaged,
including a purchase or sale of assets or securities, financing, merger,
consolidation, tender offer or any other transaction or event that would require
disclosure pursuant to the Exchange Act if the Corporation were a reporting
company thereunder, and with respect to which the Board of Directors of the
Corporation reasonably has determined in good faith that compliance with this
Agreement may reasonably be expected to either materially interfere with the
Corporation's or such Subsidiary's ability to consummate such transaction in a
timely fashion or require the Corporation to disclose material, non-public
information prior to such time as it would otherwise be required to be
disclosed.
"Orders" means any enforceable judgments, writs, decrees,
declarations, injunctions, orders, stipulations, compliance agreement or
settlement agreements issued or imposed by, or entered into with, a Governmental
Entity.
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"Original Registration Rights Agreement" has the meaning assigned to
such term in the preamble to this Agreement.
"Other Shares" means, at any time, those shares of Common Stock
which do not constitute Primary Shares, Pre-IPO Registrable Shares or Additional
Registrable Shares.
"Person" shall be construed as broadly as possible and shall include
an individual, a corporation, a company, an association, a joint stock company,
a partnership (including a limited liability partnership), a limited liability
company, a joint venture, a trust or an unincorporated organization and a
Governmental Entity.
"Pre-IPO Registrable Shares" means the Registrable Shares that are
Initial Common Shares, Series A Conversion Shares, Series B Conversion Shares
and Warrant Shares.
"Pre-IPO Securityholders" means, collectively, (i) any Persons
listed on Schedule I on the effective date hereof, (ii) any other Persons listed
on Schedule I from time to time, and (iii) any purchaser, assignee or other
transferee of Restricted Securities held by any of the foregoing in a purchase,
assignment or other transfer permitted under Section 19 and in which such
purchaser, assignee or other transferee has complied in full with the joinder
requirements set forth in Section 19. Upon the addition of each new Pre-IPO
Securityholder as a party to this Agreement, the Corporation shall amend
Schedule I solely to reflect the name and address of such new Pre-IPO
Securityholder, and the Corporation shall distribute to the Pre-IPO
Securityholders such amended Schedule I.
"Primary Shares" means, at any time, the authorized but unissued
shares of Common Stock or Common Stock held by the Corporation in its treasury.
"Prospectus" means the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Pre-IPO Registrable Shares
and, in each case, by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein.
"Public Offering" means a public offering of Common Stock pursuant
to a registration statement declared effective under the Securities Act, except
that a Public Offering shall not include an offering of securities to be issued
as consideration in connection with a business acquisition or an offering of
securities issuable pursuant to an employee benefit plan.
"Registering Pre-IPO Securityholders" means, with respect to any
registration of Pre-IPO Registrable Shares, those Pre-IPO Securityholders who or
which hold the Pre-IPO Registrable Shares included in such registration.
"Registrable Shares" means, at any time with respect to any Pre-IPO
Securityholder or Additional Securityholder, the shares of Common Stock held by
such Pre-IPO Securityholder or Additional Securityholder that constitute
Restricted Securities. For purposes of this definition, a Pre-IPO Securityholder
or Additional
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Securityholder shall be deemed to be the holder of shares of Common Stock
whenever such Pre-IPO Securityholder or Additional Securityholder has the right
acquire, directly or indirectly, such Common Stock upon the conversion or
exercise of Restricted Securities (but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"Registration Date" means the date upon which the registration
statement pursuant to which the Corporation shall have initially registered
shares of Common Stock under the Securities Act for sale to the public shall
have been declared effective.
"Registration Statement" means any registration statement of the
Corporation which covers any of the Pre-IPO Registrable Shares, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Restricted Securities" means, at any time, with respect to any
Person, the shares of Common Stock, the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock, the Initial Warrants and any other
securities which by their terms are directly or indirectly exercisable or
exchangeable for or convertible into any of the foregoing securities, and any
securities received on or with respect to any of the foregoing securities, in
each case which are held by such Person. As to particular securities
constituting Restricted Securities, such securities shall cease to be Restricted
Securities when (A) they have been registered under the Securities Act, the
Registration Statement in connection therewith has been declared effective and
such Restricted Securities have been disposed of pursuant to and in the manner
described in such effective Registration Statement, (B) they are eligible to be
sold or distributed by the holder thereof pursuant to Rule 144 within any
consecutive three-month period (including, without limitation, Rule 144(k))
without volume limitations, (C) they have been otherwise transferred and new
certificates or other evidences of ownership for them not bearing a restrictive
legend and not subject to any stop transfer order or other restriction on
transfer shall have been delivered by the Corporation or the issuer of other
securities issued in exchange for the Restricted Securities, or (D) they have
ceased to be outstanding.
"SEC" means the United States Securities and Exchange Commission.
"securities" means, with respect to any Person, such Person's
"securities," as defined in Section 2(1) of the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same may from time to time be in effect.
"Series A Conversion Shares" means the Registrable Shares that are
(i) shares of Common Stock issued or issuable upon the conversion of Series A
Preferred Stock, (ii) shares of Common Stock issued on or with respect to the
shares of Common Stock referred to in clause (i) above or (iii) shares of Common
Stock issued on or with respect to the Series A Preferred Stock.
"Series A Preferred Stock" means the Corporation's Series A
Convertible Preferred Stock, par value $.001 per share.
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"Series B Conversion Shares" means the Registrable Shares that are
(i) shares of Common Stock issued or issuable upon the conversion of Series B
Preferred Stock, (ii) shares of Common Stock issued on or with respect to the
shares of Common Stock referred to in clause (i) above or (iii) shares of Common
Stock issued on or with respect to the Series B Preferred Stock.
"Series B Preferred Stock" means the Corporation's Series B
Convertible Preferred Stock, par value $.001 per share.
"Shares" means the Registrable Shares, the Pre-IPO Registrable
Shares, the Additional Registrable Shares, the SP Registrable Shares, the
Initial Common Shares, the Conversion Shares and the Warrant Shares.
"SP Registrable Shares" means (i) any Additional Registrable Shares
issued by the Corporation to any Strategic Partner in connection with such
Strategic Partner's entry into a strategic arrangement with the Corporation for
the provision by either party to the other party of goods, services, technology,
expertise or other value and (ii) any other Additional Registrable Shares issued
on or with respect to the Additional Registrable Shares referred to in clause
(i) above.
"Strategic Partner" means a Person who or which, at the time in
question, has entered into, or is simultaneously entering into or has agreed to
enter into, a strategic arrangement with the Corporation for the provision by
either party to the other party of goods, services, technology, expertise or
other value.
"Subsidiary" means, as to any Person, any other Person of which more
than 50% of the shares of the voting stock or other voting interests are owned
or controlled, or the ability to select or elect 50% or more of the directors or
similar managers is held, directly or indirectly, by such first Person or one or
more of its Subsidiaries.
"Warrant Shares" means the Registrable Shares that are (i) shares of
Common Stock issued or issuable upon the exercise of the Initial Warrants, (ii)
shares of Common Stock issued on or with respect to the shares of Common Stock
referred to in clause (i) above or (iii) shares of Common Stock issued on or
with respect to the Initial Warrants.
2. Required Registration.
(a) If, at any time at least 180 days after the Registration Date,
Pre-IPO Securityholders who or which hold in the aggregate Pre-IPO Registrable
Shares that constitute not less than 25% of (1) the Initial Common Shares, (2)
the Series A Conversion Shares, or (3) the Series B Conversion Shares shall
notify the Corporation in writing that such Pre-IPO Securityholders desire to
sell any of such Pre-IPO Registrable Shares in the public securities market and
request that the Corporation effect the registration under the Securities Act of
Pre-IPO Registrable Shares having an anticipated aggregate gross offering price
(before underwriting discounts and commissions) of at least $5,000,000, the
Corporation shall:
(i) promptly give written notice of the proposed registration
to all other Pre-IPO Securityholders, who or which shall have the right,
subject to the applicable terms of this Agreement, to include in such
registration Pre-IPO Registrable Shares held
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<PAGE>
by them (exercisable by delivering to the Corporation a written notice
specifying the number of Pre-IPO Registrable Shares requested to be
included within 30 days after receipt of such notice of such registration
from the Corporation); and
(ii) use its best efforts to effect the registration under the
Securities Act of the Pre-IPO Registrable Shares which the Corporation has
been so requested to register.
(b) Anything contained in Section 2(a) to the contrary
notwithstanding, the Corporation shall not be obligated to effect pursuant to
Section 2(a) any registration under the Securities Act except in accordance with
the following provisions:
(i) The Corporation shall not be obligated to use its best
efforts to file and cause to become effective (A) (i) more than one
Registration Statement requested pursuant to Section 2(a)(1), (ii) more
than two Registration Statements requested pursuant to Section 2(a)(2), or
(iii) more than two Registration Statements requested pursuant to Section
2(a)(3), in each case on Form S-1 promulgated under the Securities Act or
any successor form thereto, or (B) any Registration Statement during any
period in which any other registration statement (other than on Form S-4
or Form S-8 promulgated under the Securities Act or any successor forms
thereto) pursuant to which Primary Shares are to be or were sold has been
filed and not withdrawn or has been declared effective within the prior 90
days.
(ii) The Corporation may delay the filing or effectiveness of
any Registration Statement for a period of up to 90 days after the date of
a request for registration pursuant to Section 2(a) if at the time of such
request the Corporation (A) is engaged, or has fixed plans to engage
within 90 days of the time of such request, in a firm commitment,
underwritten public offering of Primary Shares in which the holders of
Pre-IPO Registrable Shares may include Pre-IPO Registrable Shares pursuant
to Section 3 or (B) is engaged in a Material Transaction.
(iii) With respect to any registration of Pre-IPO Registrable
Shares pursuant to Section 2(a), the Corporation shall give notice of such
registration to the holders of all Additional Registrable Shares and Other
Shares which are entitled to registration rights and the Corporation may
include in such registration any Primary Shares, Additional Registrable
Shares or Other Shares; provided, however, that if the managing
underwriter advises the Corporation that the inclusion of all of the
Pre-IPO Registrable Shares, Primary Shares, Additional Registrable Shares
and/or Other Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of all of such
securities, then the number of Pre-IPO Registrable Shares, Primary Shares,
Additional Registrable Shares and/or Other Shares proposed to be included
in such registration shall be included in the following order:
(A) first, the Pre-IPO Registrable Shares constituting
Conversion Shares or Warrant Shares requested by the Pre-IPO
Securityholders to be included in such registration (or, if
necessary, such Shares pro rata among all such Pre-IPO
Securityholders based upon the aggregate number of Pre-IPO
Registrable Shares
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<PAGE>
constituting Conversion Shares and Warrant Shares held by each such
Pre-IPO Securityholder at the time of registration);
(B) second, the Pre-IPO Registrable Shares constituting
Initial Common Shares requested by the Pre-IPO Securityholders to be
included in such registration (or, if necessary, such Shares pro
rata among all such Pre-IPO Securityholders based upon the number of
Pre-IPO Registrable Shares constituting Initial Common Shares held
by each such Pre-IPO Securityholder at the time of registration);
(C) third, the Additional Registrable Shares
constituting SP Registrable Shares requested by the Additional
Securityholders to be included in such registration (or, if
necessary, such Shares allocated among all such Additional
Securityholders in accordance with the applicable provisions of any
agreements between the Corporation and such Additional
Securityholders, as amended, supplemented or otherwise modified from
time to time and in effect at the time of registration, or, in the
absence of any applicable provisions, pro rata among all such
Additional Securityholders based upon the number of Additional
Registrable Shares constituting SP Registrable Shares held by each
such Additional Securityholder at the time of registration);
(D) fourth, Primary Shares;
(E) fifth, the Additional Registrable Shares not
constituting SP Registrable Shares requested by the Additional
Securityholders to be included in such registration (or, if
necessary, such Shares allocated among all such Additional
Securityholders in accordance with the applicable provisions of any
agreements between the Corporation and such Additional
Securityholders, as amended, supplemented or otherwise modified from
time to time and in effect at the time of registration, or, in the
absence of any applicable provisions, pro rata among all such
Additional Securityholders based upon the number of Additional
Registrable Shares not constituting SP Registrable Shares held by
each such Additional Securityholder at the time of registration);
and
(F) sixth, the Other Shares.
(c) If the Majority of Registering Pre-IPO Securityholders in a
registration requested pursuant to Section 2(a) or Section (4) intend to
distribute the Pre-IPO Registrable Shares covered by their request by means of
an underwriting, they shall so advise the Corporation as a part of their request
for registration. In such event, the Majority of Registering Pre-IPO
Securityholders shall select one or more nationally recognized firms of
investment bankers reasonably acceptable to the Corporation to act as the lead
managing underwriter or underwriters in connection with such offering. The right
of any Registering Pre-IPO Securityholder to registration pursuant to Section
2(a) or Section 4 shall be conditioned upon such Registering Pre-IPO
Securityholder's participation in such underwriting and the inclusion of such
Registering Pre-IPO Securityholder's Pre-IPO Registrable Shares in the
underwriting (unless otherwise mutually agreed by the Majority of Registering
Pre-IPO Securityholders and
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such Registering Pre-IPO Securityholder) to the
extent provided herein. The Corporation and the Registering Pre-IPO
Securityholders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement which is reasonable and
in customary form with the underwriters of such offering.
(d) A requested registration under Section 2(a) or Section 4 may be
rescinded prior to the related Registration Statement being declared effective
by the SEC by written notice to the Corporation from the Majority of Registering
Pre-IPO Securityholders requesting such registration; provided, however, if such
registration was requested pursuant to Section 2(a), such registration shall not
count as a Registration Statement requested pursuant thereto for purposes of
clause (A) of Section 2(b)(i) if (x) such request for withdrawal shall have been
caused by, or made in response to, the material adverse effect of an event on
the business, operations, assets, condition (financial or otherwise) or
operating results of the Corporation and its Subsidiaries taken as a whole or
(y) the Corporation shall have been reimbursed for all out-of-pocket expenses
incurred by the Corporation in connection with such rescinded registration.
3. Piggyback Registration.
If the Corporation proposes for any reason to register Primary
Shares, Additional Registrable Shares or Other Shares under the Securities Act
at any time after the closing of an initial Public Offering of Common Stock
(other than on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto), it shall give written notice to the Pre-IPO
Securityholders of its intention to so register such Primary Shares, Additional
Registrable Shares or Other Shares at least 30 days before the initial filing of
the registration statement for such Primary Shares, Additional Registrable
Shares or Other Shares and, upon the written request, given within 20 days after
delivery of any such notice by the Corporation, of any Pre-IPO Securityholder to
include in such registration Pre-IPO Registrable Shares (which request shall
specify the number of Pre-IPO Registrable Shares proposed to be included in such
registration and shall state the desire of such Pre-IPO Securityholder to sell
such Pre-IPO Registrable Shares in the public securities markets), the
Corporation shall use its best efforts to cause all such Pre-IPO Registrable
Shares to be included in such registration on the same terms and conditions as
the Primary Shares, the Additional Registrable Shares or Other Shares otherwise
being sold in such registration; provided, however, if the managing underwriter
advises the Corporation that the inclusion of all of the Pre-IPO Registrable
Shares, Primary Shares, Additional Registrable Shares and/or Other Shares
proposed to be included in such registration would interfere with the successful
marketing (including pricing) of all of such securities, then the number of
Pre-IPO Registrable Shares, Primary Shares, Additional Registrable Shares and/or
Other Shares proposed to be included in such registration shall be included in
the following order:
(i) If such registration is initiated by the Corporation to
register Primary Shares, Other Shares or Additional Registrable Shares not
constituting SP Registrable Shares, or by any holder of the foregoing:
(A) first, the Primary Shares;
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(B) second, the Additional Registrable Shares
constituting SP Registrable Shares requested by the Additional
Securityholders to be included in such registration and the Pre-IPO
Registrable Shares requested by the Pre-IPO Securityholders to be
included in such registration, or, if necessary, such Shares
allocated between (x) the Additional Securityholders who or which
have requested the inclusion of SP Registrable Shares in such
registration on the one hand and (y) the Pre-IPO Securityholders who
or which have requested the inclusion of Pre-IPO Registrable Shares
in such registration on the other hand, in proportion to the
aggregate number of Shares held by each such group of Persons at the
time of registration, with (i) the aggregate number of Shares
allocated to the Additional Securityholders described in clause (x)
above further allocated among such Additional Securityholders in
accordance with the applicable provisions of any agreements between
the Corporation and such Additional Securityholders, as amended,
supplemented or otherwise modified from time to time and in effect
at the time of registration, or, in the absence of any applicable
provisions, pro rata among all such Additional Securityholders based
upon the number of Additional Registrable Shares constituting SP
Registrable Shares held by each such Additional Securityholder at
the time of registration and (ii) the aggregate number of Shares
allocated to the Pre-IPO Securityholders described in clause (y)
above further allocated among such Pre-IPO Securityholders in the
following order:
(1) first, the Pre-IPO Registrable Shares
constituting Conversion Shares or Warrant Shares requested by
the Pre-IPO Securityholders to be included in such
registration (or, if necessary, such Pre-IPO Registrable
Shares pro rata among all such Pre-IPO Securityholders based
upon the aggregate number of Pre-IPO Registrable Shares
constituting Conversion Shares and Warrant Shares held by each
such Pre-IPO Securityholder at the time of registration); and
(2) second, the Pre-IPO Registrable Shares
constituting Initial Common Shares requested by the Pre-IPO
Securityholders to be included in such registration (or, if
necessary, such Pre-IPO Registrable Shares pro rata among all
such Pre-IPO Securityholders based upon the number of Pre-IPO
Registrable Shares constituting Initial Common Shares held by
each such Pre-IPO Securityholder at the time of registration);
(C) third, the Additional Registrable Shares not
constituting SP Registrable Shares requested by the Additional
Securityholders to be included in such registration (or, if
necessary, such Shares allocated among all such Additional
Securityholders in accordance with the applicable provisions of any
agreements between the Corporation and such Additional
Securityholders, as amended, supplemented or otherwise modified from
time to time and in effect at the time of registration, or, in the
absence of any applicable provisions, pro rata among all such
Additional Securityholders based upon the number of Additional
Registrable Shares not constituting SP Registrable Shares held by
each such Additional Securityholder at the time of registration);
and
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(D) fourth, the Other Shares.
(ii) If such registration is initiated by Additional Securityholders
who or which request the inclusion of their Additional Registrable Shares
constituting SP Registrable Shares in such registration:
(A) first, the Additional Registrable Shares
constituting SP Registrable Shares requested by the Additional
Securityholders to be included in such registration (or, if
necessary, such Shares allocated among all such Additional
Securityholders in accordance with the applicable provisions of any
agreements between the Corporation and such Additional
Securityholders, as amended, supplemented or otherwise modified from
time to time and in effect at the time of registration, or, in the
absence of any applicable provisions, pro rata among all such
Additional Securityholders based upon the number of Additional
Registrable Shares constituting SP Registrable Shares held by each
such Additional Securityholder at the time of registration);
(B) second, the Pre-IPO Registrable Shares constituting
Conversion Shares or Warrant Shares requested by the Pre-IPO
Securityholders to be included in such registration (or, if
necessary, such Shares pro rata among all such Pre-IPO
Securityholders based upon the aggregate number of Pre-IPO
Registrable Shares constituting Conversion Shares and Warrant Shares
held by each such Pre-IPO Securityholder at the time of
registration);
(C) third, the Pre-IPO Registrable Shares constituting
Initial Common Shares requested by the Pre-IPO Securityholders to be
included in such registration (or, if necessary, such Shares pro
rata among all such Pre-IPO Securityholders based upon the number of
Pre-IPO Registrable Shares constituting Initial Common Shares held
by each such Pre-IPO Securityholder at the time of registration);
(D) fourth, the Primary Shares;
(E) fifth, the Additional Registrable Shares not
constituting SP Registrable Shares requested by the Additional
Securityholders to be included in such registration (or, if
necessary, such Shares allocated among all such Additional
Securityholders in accordance with the applicable provisions of any
agreements between the Corporation and such Additional
Securityholders, as amended, supplemented or otherwise modified from
time to time and in effect at the time of registration, or, in the
absence of any applicable provisions, pro rata among all such
Additional Securityholders based upon the --- ---- number of
Additional Registrable Shares not constituting SP Registrable Shares
held by each such Additional Securityholder at the time of
registration); and
(F) sixth, the Other Shares.
4. Registrations on Form S-3.
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Anything contained in Section 2 to the contrary notwithstanding, at
such time after the Registration Date as the Corporation shall be qualified for
the use of Form S-3 promulgated under the Securities Act (or any successor form
thereto) for the sale to the public of Pre-IPO Registrable Shares held by the
Pre-IPO Securityholders, the Pre-IPO Securityholders shall have the right to
request in writing of the Corporation an unlimited number of registrations on
Form S-3 (or any successor form thereto) of their Pre-IPO Registrable Shares
with an anticipated aggregate gross offering price (before underwriting
discounts and commissions) of at least $250,000, which request or requests shall
(i) specify the number of Pre-IPO Registrable Shares intended to be sold or
disposed of and the holders thereof and (ii) state the intended method of
disposition of such Pre-IPO Registrable Shares. A registration on Form S-3 (or
any such successor form thereto) requested by any Pre-IPO Securityholder
pursuant to this Section 4 shall not count as a Registration Statement requested
pursuant to Section 2(a) for purposes of clause (A) of Section 2(b)(i), but
shall otherwise be subject in all respects to Section 2(b) as if such
registration was requested pursuant to Section 2(a).
5. Holdback Agreement.
If the Corporation at any time shall register shares of Common Stock
under the Securities Act (including any registration pursuant to Section 2, 3 or
4) for sale to the public, no Pre-IPO Securityholder shall sell publicly, make
any short sale of, grant any option for the purchase of, or otherwise dispose
publicly of, any capital stock of the Corporation (other than those shares of
Common Stock included in such registration pursuant to Section 2, 3 or 4)
without the prior written consent of the Corporation, for a period designated by
the Corporation in writing to the Pre-IPO Securityholders, which period shall
begin not more than 10 days prior to the effectiveness of the registration
statement pursuant to which such public offering shall be made and shall not
last more than 180 days after the date on which such registration statement
became effective, whether or not such Pre-IPO Securityholder participates in
such registration. The Corporation shall obtain the agreement of any Person
permitted to sell shares of capital stock of the Corporation in a registration
to be bound by and to comply with the requirements of this Section 5 as if such
Person was a party to this Agreement and a Pre-IPO Securityholder hereunder;
provided, however, subject to the provisions of Section 16, the Corporation
shall not be required to obtain any such agreement from any Strategic Partner to
which the Corporation may issue shares of its capital stock or other securities
which by their terms are directly or indirectly exercisable or exchangeable for
or convertible into such shares. Each Pre-IPO Securityholder agrees that the
Corporation may instruct its transfer agent to place stop transfer notations on
its records to enforce this Section 5.
6. Preparation and Filing.
If and whenever the Corporation is under an obligation pursuant to
the provisions of this Agreement to use its best efforts to effect the
registration of, and keep effective a Registration Statement, for any Pre-IPO
Registrable Shares, the Corporation shall, as expeditiously as practicable:
(a) use its best efforts to cause a Registration Statement that
registers such Pre-IPO Registrable Shares to become and remain effective for a
period of 90 days or until all of such Pre-IPO Registrable Shares have been
disposed of (if earlier);
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(b) furnish, at least five Business Days before filing a
Registration Statement that registers such Pre-IPO Registrable Shares, a
Prospectus relating thereto and any amendments or supplements relating to such
Registration Statement or Prospectus, to one counsel selected by the Majority of
Registering Pre-IPO Securityholders (the "Pre-IPO Securityholders' Counsel"),
copies of all such documents proposed to be filed (it being understood that such
five Business Day period need not apply to successive drafts of the same
document proposed to be filed so long as such successive drafts are supplied to
the Pre-IPO Securityholders' Counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the circumstances);
(c) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective for at least a
period of 90 days or until all of such Pre-IPO Registrable Shares have been
disposed of (if earlier) and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of such Pre-IPO Registrable
Shares;
(d) notify the Pre-IPO Securityholders' Counsel promptly in writing
of (i) any comments by the SEC with respect to such Registration Statement or
Prospectus, or any request by the SEC for the amending or supplementing thereof
or for additional information with respect thereto, (ii) the issuance by the SEC
of any stop order suspending the effectiveness of such Registration Statement or
Prospectus or any amendment or supplement thereto or the initiation or
threatening of any proceedings for that purpose (and the Corporation shall use
its best efforts to prevent the issuance thereof or, if issued, to obtain its
withdrawal) and (iii) the receipt by the Corporation of any notification with
respect to the suspension of the qualification of such Pre-IPO Registrable
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purposes;
(e) use its best efforts to register or qualify such Pre-IPO
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any Registering Pre-IPO Securityholder may reasonably request,
to keep such registrations or qualifications in effect for so long as such
Registration Statement covering such Pre-IPO Registrable Shares remains in
effect and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Registering Pre-IPO Securityholder to
consummate the disposition in such jurisdictions of the Pre-IPO Registrable
Shares owned by such Registering Pre-IPO Securityholder; provided, however, that
the Corporation will not be required to qualify generally to do business, to
subject itself to general taxation or consent to general service of process in
any jurisdiction where it would not otherwise be required to do so but for this
Section 6(e) or to provide any material undertaking or make any changes in its
Bylaws or Certificate of Incorporation which its Board of Directors determines
to be contrary to the best interests of the Corporation;
(f) furnish to each Registering Pre-IPO Securityholder such number
of copies of a summary Prospectus, if any, or other Prospectus, including a
preliminary Prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Registering Pre-IPO Securityholder may
reasonably request in order to facilitate the public sale
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or other disposition of the Pre-IPO Registrable Shares held by Registering
Pre-IPO Securityholder;
(g) use its best efforts to cause such Pre-IPO Registrable Shares to
be registered with or approved by such other Governmental Entities as may be
necessary by virtue of the business and operations of the Corporation to enable
the Registering Pre-IPO Securityholders to consummate the disposition of such
Pre-IPO Registrable Shares;
(h) notify on a timely basis each Registering Pre-IPO Securityholder
at any time when a Prospectus relating to such Pre-IPO Registrable Shares is
required to be delivered under the Securities Act within the appropriate period
mentioned in Section 6(a), of the happening of any event known to the
Corporation as a result of which the Prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing and, at the request of such Registering Pre-IPO Securityholder, prepare
and furnish to such Registering Pre-IPO Securityholder 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 offerees of such Pre-IPO Registrable
Shares, such Prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;
(i) subject to the execution of confidentiality agreements in form
and substance satisfactory to the Corporation, make available, upon reasonable
notice and during normal business hours, for inspection by the Registering
Pre-IPO Securityholders any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
agent retained by the Registering Pre-IPO Securityholders or underwriter
(collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Corporation (collectively,
the "Records"), as shall be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause the Corporation's officers,
directors and employees to supply all information (together with the Records,
the "Information") reasonably requested by any such Inspector in connection with
such Registration Statement (any of the Information which the Corporation
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, shall not be disclosed by the Inspectors, unless (i)
the disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the Registration Statement, (ii) the release of such
Information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or, upon the written advice of counsel, is otherwise
required by law, or (iii) such Information has been made generally available to
the public, and each Registering Pre-IPO Securityholder agrees that it will,
upon learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Corporation and allow the
Corporation, at the Corporation's expense, to undertake appropriate action to
prevent disclosure of the Information deemed confidential);
(j) use its best efforts to obtain from its independent certified
public accountants "cold comfort" letters in customary form and at customary
times and covering matters of the type customarily covered by cold comfort
letters;
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(k) use its best efforts to obtain from its counsel an opinion or
opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same
Person and which may be the Corporation) for such Pre-IPO Registrable Shares;
(m) issue to any underwriter to which any Registrable Pre-IPO
Securityholder may sell such Pre-IPO Registrable Shares in such offering,
certificates evidencing such Pre-IPO Registrable Shares;
(n) list such Pre-IPO Registrable Shares on any national securities
exchange on which any shares of Common Stock are listed or, if Common Stock is
not listed on a national securities exchange, use its best efforts to qualify
such Pre-IPO Registrable Shares for inclusion on the national automated
quotation system of the National Association of Securities Dealers, Inc. (the
"NASD"), or such other national securities exchange as the holders of a majority
of such Pre-IPO Registrable Shares shall reasonably request;
(o) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its securityholders, as
soon as reasonably practicable, earnings statements (which need not be audited)
covering a period of 12 months beginning within three months after the effective
date of the Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(p) subject to all of the other provisions of this Agreement, use
its best efforts to take all other steps necessary to effect the registration of
such Pre-IPO Registrable Shares contemplated hereby.
Each Registering Pre-IPO Securityholder, upon the receipt of any
notice from the Corporation of any event of the kind described in Section 6(h),
shall forthwith discontinue disposition of Pre-IPO Registrable Shares pursuant
to the Registration Statement until such Registering Pre-IPO Securityholder's
receipt of copies of the supplemented or amended Prospectus contemplated by
Section 6(h), and, if so directed by the Corporation, such Registering Pre-IPO
Securityholder shall deliver to the Corporation all copies, other than permanent
file copies then in such Pre-IPO Securityholder's possession, of the Prospectus
covering such Pre-IPO Registrable Shares at the time of receipt of such notice.
7. Expenses.
All expenses incurred by the Corporation in complying with Section
6, including, without limitation, all registration and filing fees (including
all expenses incident to filing with the NASD), fees and expenses of complying
with securities and blue sky laws, printing expenses, fees and expenses of the
Corporation's counsel and accountants and fees and expenses of the Pre-IPO
Securityholders' Counsel, shall be paid by the Corporation; provided, however,
that all underwriting discounts and selling commissions applicable to the
Pre-IPO Registrable Shares shall not be borne by the Corporation and shall be
borne by the Registering Pre-IPO Securityholders selling such Registrable
Securities, in proportion to the number of Pre-IPO Registrable Shares sold by
each such Registering Pre-IPO Securityholder.
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8. Indemnification.
(a) In connection with any registration of any Pre-IPO Registrable
Shares under the Securities Act pursuant to this Agreement, the Corporation
shall indemnify and hold harmless each holder of such Pre-IPO Registrable
Shares, each underwriter, broker or any other Person acting on behalf of any
such holder and each other Person, if any, who controls any of the foregoing
Persons within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, (or actions in respect thereof) to
which any of the foregoing Persons may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement under which such Pre-IPO Registrable Shares were registered under the
Securities Act, any preliminary Prospectus or final Prospectus contained therein
or otherwise filed with the SEC, any amendment or supplement thereto or any
document incident to registration or qualification of any Pre-IPO Registrable
Shares, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any Prospectus,
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, or any violation by the Corporation of the
Securities Act or state securities or blue sky laws applicable to the
Corporation and relating to action or inaction required of the Corporation in
connection with such registration or qualification under such state securities
or blue sky laws, and the Corporation shall promptly reimburse each such holder,
underwriter, broker or other Person acting on behalf of any such holder and each
such controlling Person for any legal or other expenses incurred by any of them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Corporation shall not be liable
to any such Person to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said Registration Statement, preliminary
Prospectus, amendment, supplement or document incident to registration or
qualification of any Pre-IPO Registrable Shares in reliance upon and in
conformity with information furnished to the Corporation, or a Person duly
acting on the Corporation's behalf, through an instrument duly executed by such
Person, or a Person duly acting on such Person's behalf, specifically for use in
connection with the preparation thereof; provided further, however, that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any untrue statement, allegedly untrue statement, omission or alleged
omission made in any preliminary Prospectus but eliminated or remedied in the
final Prospectus (filed pursuant to Rule 424 of the Securities Act), such
indemnity agreement shall not inure to the benefit of any indemnified party from
whom the Person asserting any loss, claim, damage, liability or expense
purchased the Pre-IPO Registrable Shares which are the subject thereof, if a
copy of such final Prospectus had been timely made available to such indemnified
Person and such final Prospectus was not delivered to such Person with or prior
to the written confirmation of the sale of such Pre-IPO Registrable Shares to
such Person.
(b) In connection with any registration of Pre-IPO Registrable
Shares under the Securities Act pursuant to this Agreement, each holder of
Pre-IPO Registrable Shares shall, severally and not jointly, indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
8(a)) the Corporation, each director of the Corporation, each officer of the
Corporation who signs such Registration Statement, each other holder of Pre-IPO
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Registrable Shares, Additional Registrable Shares or Other Shares included in
such Registration Statement (provided, that the holder shall be entitled to
indemnification of a similar nature from such other holder to at least the same
extent as the indemnification given by the holder pursuant to this Section
8(b)), each underwriter, broker or any other Person acting on behalf of any such
holder and each other Person, if any, who controls any of the foregoing Persons
within the meaning of the Securities Act with respect to any statement or
omission from such Registration Statement, any preliminary Prospectus or final
Prospectus contained therein or otherwise filed with the SEC, any amendment or
supplement thereto or any document incident to registration or qualification of
any Pre-IPO Registrable Shares, if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Corporation or such underwriter through an instrument duly executed by such
holder, or a Person duly acting on such holder's behalf, specifically for use in
connection with the preparation of such Registration Statement, preliminary
Prospectus, final Prospectus, amendment, supplement or document; provided,
however, that the maximum amount of liability in respect of such indemnification
shall be limited, in the case of each holder of Pre-IPO Registrable Shares, to
an amount equal to the net proceeds actually received by such holder from the
sale of Pre-IPO Registrable Shares effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 8(a) or
Section 8(b), such indemnified party will, if a claim in respect thereof is made
against an indemnifying party, give written notice to the latter of the
commencement of such action (provided that an indemnified party's failure to
give such notice in a timely manner shall only relieve the indemnification
obligations of an indemnifying party to the extent such indemnifying party is
prejudiced by such failure). In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
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 responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that if any indemnified party shall have
reasonably concluded that there may be one or more legal or equitable defenses
available to such indemnified party which are in addition to or conflict with
those available to the indemnifying party, or that such claim or litigation
involves or could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 8, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
Person controlling such indemnified party for that portion of the fees and
expenses of any one lead counsel (plus appropriate special and local counsel)
retained by the indemnified party which are reasonably related to the matters
covered by the indemnity agreement provided in this Section 8. The indemnifying
party shall not be liable to indemnify any indemnified party for any settlement
of any claim or action effected without the consent of the indemnifying party.
The indemnifying party may not settle any claim or action brought against an
indemnified party unless such indemnified party is released from all and any
liability as part of such settlement.
(d) If the indemnification provided for in this Section 8 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim,
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damage, liability or action referred to herein, then the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to the
amounts paid or payable by such indemnified party as a result of such loss,
claim, damage, liability or action in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements or
omissions which resulted in such loss, claim, damage, liability or action as
well as any other relevant equitable considerations; provided, however, that the
maximum amount of liability in respect of such contribution shall be limited, in
the case of each holder of Pre-IPO Registrable Shares, to an amount equal to the
net proceeds actually received by such holder from the sale of Pre-IPO
Registrable Shares effected pursuant to such registration. 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. The parties agree that it
would not be just and equitable if contribution pursuant hereto were determined
by pro rata allocation or by any other method or allocation which does not take
account of the equitable considerations referred to herein. No person guilty of
fraudulent misrepresentation shall be entitled to contribution from any person.
(e) The indemnification and contribution provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and will survive the transfer of
securities.
9. Underwriting Agreement.
Notwithstanding the provisions of Sections 5 through 8, to the
extent that the Pre-IPO Securityholders shall enter into an underwriting or
similar agreement, which agreement contains provisions covering one or more
issues addressed in such Sections, the provisions contained in such Sections
addressing such issue or issues shall be of no force or effect with respect to
such registration, but this provision shall not apply to the Corporation if the
Corporation is not a party to the underwriting or similar agreement.
10. Suspension.
Anything contained in this Agreement to the contrary
notwithstanding, the Corporation may (but not more than once with respect to
each Registration Statement), by notice in writing to each holder of Pre-IPO
Registrable Shares to which a Prospectus relates, require such holder to
suspend, for up to 90 days (the "Suspension Period"), the use of any Prospectus
included in a Registration Statement filed under Section 2, 3 or 4 if a Material
Transaction exists that would require an amendment to such Registration
Statement or supplement to such Prospectus (including any such amendment or
supplement made through incorporation by reference to a report filed under
Section 13 of the Exchange Act). The period during which such Prospectus must
remain effective shall be extended by a period equal to the Suspension Period.
The Corporation may (but shall not be obligated to) withdraw the effectiveness
of any Registration Statement subject to this provision.
11. Information by Holder.
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Each holder of Pre-IPO Registrable Shares to be included in any such
registration shall furnish to the Corporation and the managing underwriter such
written information regarding such holder and the distribution proposed by such
holder as the Corporation or the managing underwriter may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
12. Exchange Act Compliance.
From the Registration Date or such earlier date as a registration
statement filed by the Corporation pursuant to the Exchange Act relating to any
class of the Corporation's securities shall have become effective, the
Corporation shall comply with all of the reporting requirements of the Exchange
Act applicable to it (whether or not it shall be required to do so, but
specifically excluding Section 14 of the Exchange Act if not then applicable to
the Corporation) and shall comply with all other public information reporting
requirements of the SEC which are conditions to the availability of Rule 144 for
the sale of the Common Stock. The Corporation shall cooperate with the Pre-IPO
Securityholders in supplying such information as may be necessary for the
Pre-IPO Securityholders to complete and file any information reporting forms
presently or hereafter required by the SEC as a condition to the availability of
Rule 144.
13. Legends on Certificates.
(a) Each certificate issued after the effective date of this
Agreement that represents Restricted Securities shall (unless otherwise
permitted by the provisions of this Section 13) be stamped or otherwise
imprinted with a legend in substantially the following form (in addition to any
other legend required by law or applicable agreement):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT
SUCH REGISTRATION IS NOT REQUIRED."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT DATED AS OF FEBRUARY __, 2000,
AMONG OPUS360 CORPORATION AND CERTAIN SECURITYHOLDERS OF SUCH
COMPANY, AS THE SAME MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE
MODIFIED AND IN EFFECT FROM TIME TO TIME. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
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SECRETARY OF SUCH COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE."
The Corporation agrees to remove the legend set forth in this
Section 13(a) from a certificate representing securities issued by the
Corporation if such securities are sold pursuant to an effective registration
statement under the Securities Act or there is delivered to the Corporation an
opinion of nationally recognized counsel experienced in such matters in form and
substance reasonably satisfactory to the Corporation that the securities
represented thereby need no longer be subject to restrictions on resale under
the Securities Act.
(b) Each Pre-IPO Securityholder consents to the Corporation making a
notation on its records and giving instructions to any transfer agent of such
Pre-IPO Securityholder's Restricted Securities in order to implement the
restrictions on transfer established in this Section 13.
14. Mergers, Etc.
The Corporation shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Corporation shall not be
the surviving corporation unless the surviving corporation shall, prior to such
merger, consolidation or reorganization, agree in writing to assume the
obligations of the Corporation under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to include the
shares of common stock, if any, that holders of Registrable Shares would be
entitled to receive in exchange for Common Stock under any such merger,
consolidation or reorganization; provided, however, that, to the extent holders
of Registrable Shares receive securities that are by their terms convertible
into shares of common stock of the issuer thereof, then only such shares of
common stock as are issued or issuable upon conversion of said convertible
securities shall be included within the definition of "Registrable Shares."
15. Nominees for Beneficial Owners.
If Registrable Shares are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its option, be treated as the
holder of such Registrable Shares for purposes of any request or other action by
any holder or holders of Registrable Shares pursuant to this Agreement (or any
determination of any number of percentage of shares constituting Registrable
Shares held by any holder or holders of Registrable Shares contemplated by this
Agreement); provided, however, that the Corporation shall have received
assurances reasonably satisfactory to it of such beneficial ownership.
16. No Conflict of Rights.
The Corporation shall not, after the date hereof, grant any
registration rights which conflict with the registration rights granted hereby.
17. Termination.
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This Agreement shall terminate and be of no further force or effect
when there shall no longer be any Pre-IPO Registrable Shares or Additional
Registrable Shares outstanding, provided, however, that Section 7 and Section 8
shall survive the termination of this Agreement.
18. Successors and Assigns.
This Agreement shall bind and inure to the benefit of the
Corporation and the Pre-IPO Securityholders and, subject to Section 19, the
respective successors and assigns of the Corporation and the Pre-IPO
Securityholders.
19. Assignment.
Each Pre-IPO Securityholder may sell, assign or otherwise transfer
its rights hereunder to any purchaser, assignee or other transferee of the
Pre-IPO Registrable Shares of such Pre-IPO Securityholder; provided, however,
that any such purchaser, assignee or other transferee, if not already a party to
this Agreement, shall, as a condition to the effectiveness of such sale,
assignment or other transfer, be required to execute a written joinder to this
Agreement agreeing to be treated as a Pre-IPO Securityholder under this
Agreement, and to be bound by and comply with all of the applicable terms and
provisions hereof, whereupon such purchaser, assignee or transferee shall have
the benefits of, and shall be subject to the restrictions contained in, this
Agreement as if such purchaser or transferee was originally a Pre-IPO
Securityholder and had originally been a party hereto.
20. Notices.
All notices, requests, demands, claims, consents or other
communications that are given or made hereunder to any party hereto shall be in
writing and shall be given or made by physical delivery, U.S. mail (registered
or certified mail, postage prepaid, return receipt requested) or overnight
courier or by transmission by facsimile or electronic mail to such party at its,
his or her address (or facsimile number or electronic mail address) set forth
below, or such other address (or facsimile number or electronic mail address) as
shall have been specified by like notice by such party:
(i) if to the Corporation, to
Opus360 Corporation
733 Third Avenue, 17th Floor
New York, NY 10017
Attention: Richard McCann, Chief Financial Officer
Telephone: (212) 301-2218
Facsimile: (212) 301-2842
E-Mail: [email protected]
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with a copy (which shall not constitute notice) to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telephone: (212) 408-2400
Facsimile: (212) 728-5950
E-Mail: [email protected]
(ii) if to any Pre-IPO Securityholder, to such Pre-IPO
Securityholder at the address set forth on Schedule I
immediately below the name of such Pre-IPO
Securityholder.
Each such notice, demand or other communication hereunder shall be
effective upon receipt in the case of physical delivery or overnight courier,
upon confirmation of receipt by or on behalf of the addressee in the case of
transmission by facsimile or electronic mail if received prior to 5:00 p.m. New
York City time, and, if received after 5:00 p.m., on the date after such
confirmation, and three (3) days after deposit in the U.S. mails in the case of
mailing.
21. Entire Agreement.
Effective upon the execution of this Agreement by the Corporation
and those Pre-IPO Securityholders with the requisite power and authority to
amend and restate the Original Registration Rights Agreement pursuant to the
terms of Section 19 thereof, this Agreement shall amend and restate the Original
Registration Rights Agreement in its entirety, and this Agreement shall contain
the sole and entire agreement among the Corporation and the Pre-IPO
Securityholders with respect to the subject matter hereof and thereof and shall
supersede all prior or contemporaneous arrangements or understandings with
respect hereto or thereto, and the Corporation and the Pre-IPO Securityholders
shall forever release, waive and disclaim any and all rights thereunder.
22. Amendment.
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to a writing signed by
(i) the Corporation, (ii) the Pre-IPO Securityholders who or which hold in the
aggregate Pre-IPO Registrable Shares that constitute in excess of 50% of all of
the Initial Common Shares, (iii) the Pre-IPO Securityholders who or which hold
in the aggregate Pre-IPO Registrable Shares that constitute in excess of 50% of
all of the Series A Conversion Shares, and (iv) the Pre-IPO Securityholders who
or which hold in the aggregate Pre-IPO Registrable Shares that constitute in
excess of 50% of all of the Series B Conversion Shares; provided, however, that
no such written consent shall be required for the amendment of Schedule I solely
to reflect the name and address of any new Pre-IPO Securityholder who has become
a party to this Agreement in accordance with the terms and conditions hereof. No
waiver by any party hereto of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or
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affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. Each holder of any Restricted Securities outstanding at or after the
time of any modification or amendment of, or waiver of any provisions of this
Agreement, shall be bound by any consent authorized by this Section 22, whether
or not such Restricted Securities shall have been marked to indicate such
consent.
23. Severability.
It is the desire and intent of the parties hereto that the
provisions of this Agreement be enforced to the fullest extent permissible under
the Laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular provision of this Agreement shall be
adjudicated by a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
24. Counterparts; Facsimile Signatures.
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. This Agreement and
each other agreement or instrument entered into in connection herewith or
contemplated hereby, and any amendments hereto or thereto, to the extent signed
and delivered by means of a facsimile machine, shall be treated in all manner
and respects as an original agreement or instrument and shall be considered to
have the same binding legal effect as if it were the original signed version
thereof delivered in person. At the request of any party hereto or to any such
agreement or instrument, each other party hereto or thereto shall reexecute
original forms thereof and deliver them to all other parties.
25. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
26. Interpretation; Construction.
The headings contained in this Agreement and in the table of
contents to this Agreement are for convenience of reference only and shall not
govern or affect in any way the meaning or interpretation of any of the terms or
provisions of this Agreement. Except when the context requires otherwise, any
reference in this Agreement to any Section, clause or Schedule shall be to the
Sections and clauses of, and Schedules to, this Agreement. The words "include,"
"includes" and "including" are deemed to be followed by the phrase "without
limitation." Any reference to the masculine, feminine or neuter gender shall
include such other genders and any
22
<PAGE>
reference to the singular or plural shall include the other, in each case unless
the context otherwise requires. Schedule I annexed hereto is hereby incorporated
in and made a part of this Agreement as if set forth in full herein. Where
specific language is used to clarify by example a general statement contained
herein, such specific language shall not be deemed to modify, limit or restrict
in any manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
27. Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ITS, HIS OR HER
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE
SUJBECT MATTER HEREOF.
28. Attorney's Fees.
If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover such reasonable attorneys fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled, as may be ordered in connection with such proceeding.
* * * * *
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement as of the date first written
above.
OPUS360 CORPORATION
By:________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement as of the date first written
above.
ANTARES INVESTMENTS PARTNERS
By:_________________________________________
Name:
Title:
APPLEGREEN PARTNERS
By:_________________________________________
Name:
Title:
ARISTA CAPITAL PARTNERS, LP
BY: ARISTA CAPITAL MANAGEMENT LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By:_________________________________________
Name:
Title:
ARKAP PARTNERS, LP
By:_________________________________________
Name:
Title:
____________________________________________
Eric Aroesty
____________________________________________
Matthew Arpano
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
ARTHUR SACHS INSURANCE AGENCY, INC.
RETIREMENT PLAN F/B/O ARTHUR SACHS
By:_________________________________________
Name:
Title:
____________________________________________
William Bahr
BANCBOSTON VENTURES
By:_________________________________________
Name:
Title:
BCIP ASSOCIATES II
By:_________________________________________
Name:
Title:
BLACK MARLIN INVESTMENTS, LLC
By:_________________________________________
Name:
Title:
____________________________________________
Alexander L. Bolen
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement as of the date first written
above.
HEATHER MARIE BOOSE TRUST 30
By:________________________________________________
Name:
Title:
SUSAN BROWN & GREG BROWN,
AS JOINT TENANTS WITH RIGHT OF
SURVIVORSHIP
___________________________________________________
Susan Brown, as joint tenant with right of
survivorship
___________________________________________________
Greg Brown, joint tenant with right of survivorship
___________________________________________________
Jeff Buckalew
___________________________________________________
V.M. Buckalew
___________________________________________________
Marco Cardamone
___________________________________________________
Ric Calvillo, Jr.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
CAMBRIDGE TECHNOLOGY CAPITAL
FUND I L.P.
BY: CAMBRIDGE TECHNOLOGY GPLP, L.P.
BY: CAMBRIDGE TECHNOLOGY CGP, INC.
By:_________________________________________
Name:
Title:
____________________________________________
Carlos Cashman
____________________________________________
Gerald Cashman, Sr.
CDI CORPORATION
By:_________________________________________
Name:
Title:
____________________________________________
Robert I. Choi
COMPUCOM SYSTEMS, INC.
By:_________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
CROSSPOINT VENTURE PARTNERS
By:_________________________________________
Name:
Title:
CROSSPOINT VENTURE PARTNERS 1997, L.P.
By:_________________________________________
Name:
Title:
CROSSPOINT VENTURE PARTNERS LS 1999, L.P.
By:_________________________________________
Name:
Title:
____________________________________________
Frank Cutler
DALEWOOD ASSOCIATES, L.P.
BY: DALEWOOD ASSOCIATES, INC.
By:_________________________________________
Name:
Title:
____________________________________________
James P. Deccio
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Adam Dell
____________________________________________
Steven J. Dell, M.D.
____________________________________________
John Drew
____________________________________________
Jonathan D. Eilian
____________________________________________
Barry Fingerhut
____________________________________________
Stephen Finkel
____________________________________________
Michael Finkelstein
____________________________________________
Jake Foley III
____________________________________________
Hadley Ford
ARNOLD FRIEDMAN TRUST
By:_________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
G&R PARTNERSHIP, LP
By:_________________________________________
Name:
Title:
____________________________________________
John Gallagher
____________________________________________
Eric Gertler
____________________________________________
James S. Gertler
____________________________________________
Bruce Gilpin
____________________________________________
Robert Gladstone
GREENHILL O360 HOLDINGS, LLC
By:_________________________________________
Name:
Title:
PAUL & TROY GREGORY,
JOINT TENANTS
____________________________________________
Paul Gregory, as Joint Tenant
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Troy Gregory, as Joint Tenant
____________________________________________
Ron Gutfleish
____________________________________________
Ron Hoffner
____________________________________________
Ari Horowitz
LEONARD & JANET HOROWITZ,
JOINT TENANTS
____________________________________________
Leonard Horowitz, as Joint Tenant
____________________________________________
Janet Horowitz, as Joint Tenant
____________________________________________
Ruthanne Iselin
JAL, LLC
By:_________________________________________
Name:
Title:
____________________________________________
Rick Juarez
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Scott Kabak
____________________________________________
Harvey Klein, M.D.
____________________________________________
Michael S. Kramer
____________________________________________
Shawn Kreloff
____________________________________________
Alex Lapins
____________________________________________
Tony Lechich
____________________________________________
Seth Lieber
____________________________________________
Irwin Lieber
____________________________________________
Jonathan Lieber
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
MSD PORTFOLIO, L.P. INVESTMENTS
BY: MSD CAPITAL, L.P., ITS GENERAL
PARTNER
By:_________________________________________
Name:
Title:
____________________________________________
Burt Manning
____________________________________________
Andrew Marshak
____________________________________________
Daisy McCann
____________________________________________
Hugh McCann, Jr.
____________________________________________
Richard McCann
____________________________________________
Thomas McCann
TOM MCCANN - IRA CIBC WORLD MARKETS CORP.,
AS CUSTODIAN
By:_________________________________________
Thomas McCann
____________________________________________
Raj Mehra
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Doug Mellinger
____________________________________________
Michael A. Monteleone
____________________________________________
Michael J. Murray
____________________________________________
David M. Nussbaum
ODEON CAPITAL PARTNERS
By:_________________________________________
Name:
Title:
OPUS FRIENDS, LLC
By:_________________________________________
Shary Moalemzadeh
Partner
____________________________________________
Lonny J. Orona
O'SULLIVAN GRAEV & KARABELL, LLP
PROFIT SHARING PLAN
By:_________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Eli Oxenhorn
PENNSYLVANIA EARLY STAGE PARTNERS, L.P.
BY: PENNSYLVANIA EARLY STAGE PARTNERS GP,
L.L.C., ITS GENERAL PARTNER
By:_________________________________________
Name:
Title:
____________________________________________
Robert M. Pillar
____________________________________________
John G. Popp
____________________________________________
Brett Prager
RECKSON SERVICE INDUSTRIES, INC.
By:_________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
RH CAPITAL ASSOCIATES NUMBER
ONE, L.P.
BY: RH CAPITAL ASSOCIATES LLC,
ITS GENERAL PARTNER
By:_________________________________________
Name:
Title:
____________________________________________
Ennis Rimawi
THE ROMAN ARCH FUND, L.P.
By:_________________________________________
Name:
Title:
THE ROMAN ARCH FUND II L.P.
By:_________________________________________
Name:
Title:
____________________________________________
Brian Roberts
____________________________________________
Sanford R. Robertson
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
RSA VENTURES
By:_________________________________________
Name:
Title:
RT PARTNERS
By:_________________________________________
Name:
Title:
____________________________________________
Barry Rubenstein
____________________________________________
Fred Ryan
SAFEGUARD 99 CAPITAL L.P.,
a Delaware limited partnership
By:_________________________________________
Name:
Title:
____________________________________________
January Sarasohn
____________________________________________
Anthony Schmitz
____________________________________________
Barry Schwartz
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
SENECA VENTURES
By:_________________________________________
Name:
Title:
SI VENTURE ASSOCIATES, LLC
By:_________________________________________
Name:
Title:
SILICON VALLEY BANK
By:_________________________________________
Name:
Title:
____________________________________________
Nicholas F. Smith
____________________________________________
Gene Spence
JAMES L. SULLIVAN & MARY ELLEN
SUNLAN SULLIVAN, JOINT TENANTS
____________________________________________
James L. Sullivan, as Joint Tenant
____________________________________________
Mary Ellen Sunlan Sullivan, as Joint Tenant
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Ben Taylor
____________________________________________
Peter Teed
____________________________________________
J. Robert Tolchin
____________________________________________
Scott Tolchin
____________________________________________
Stuart Topkis
TREISTMAN PARTNERS
By:_________________________________________
Name:
Title:
____________________________________________
Wayne Tsuchitani
USWEB/CKS CORPORATION
By:_________________________________________
Name:
Title:
VERMEER INVESTMENTS, LLC
By:_________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Philip Waterman, Jr.
JONATHAN SCOTT WEISS TRUST 30
By:_________________________________________
Name:
Title:
MICHAEL DAVID WEISS TRUST 30
By:_________________________________________
Name:
Title:
NATHALIE C. WEISS TRUST 30
By:_________________________________________
Name:
Title:
RACHEL WEISS & GREG WEISS,
JOINT TENANTS
____________________________________________
Rachel Weiss, as Joint Tenant
____________________________________________
Greg Weiss, as Joint Tenant
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
WESTBURY EQUITY PARTNERS, L.P.
BY: JG FOGG & CO., INC. ITS GENERAL PARTNER
By:_________________________________________
Name:
Title:
WHEATLEY FOREIGN PARTNERS, L.P.
BY: WHEATLEY PARTNERS, LLC,
ITS GENERAL PARTNER
By:_________________________________________
Name:
Title:
WHEATLEY PARTNERS, L.P.
BY: WHEATLEY PARTNERS, LLC,
ITS GENERAL PARTNER
By:_________________________________________
Name:
Title:
WOODLAND VENTURE FUND
By:_________________________________________
Name:
Title:
____________________________________________
Sanford Yosowitz
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amended and Restated Registration Rights Agreement on the date first written
above.
____________________________________________
Andy Zimmerman
____________________________________________
Mortimer Zuckerman
<PAGE>
SCHEDULE I
Pre-IPO Securityholders
<PAGE>
Exhibit 10.15
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OPUS360 CORPORATION,
OPUS PM ACQUISITION CORP.,
STOCKHOLDER REPRESENTATIVE,
PEOPLEMOVER, INC.
AND
STOCKHOLDERS OF PEOPLEMOVER
(AS TO ARTICLE II, SECTION 4.2
AND ARTICLE IX, AND AS TO
CERTAIN STOCKHOLDERS, ARTICLE VIII)
DATED AS OF JANUARY 30, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
SECTION 1.1 The Merger 1
SECTION 1.2 Closing 2
SECTION 1.3 Effective Time 2
SECTION 1.4 Effects of the Merger 2
SECTION 1.5 Certificate of Incorporation and By-laws 2
SECTION 1.6 Board of Directors and Officers 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1 Conversion of Capital Stock 4
SECTION 2.2 Exchange of Certificates 9
SECTION 2.3 Stock Options 12
SECTION 2.4 Appraisal Rights 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of PeopleMover 14
SECTION 3.2 Representations and Warranties of Opus360 and Sub 36
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business 40
SECTION 4.2 No Solicitation by PeopleMover 46
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PeopleMover Financial Statements; PeopleMover
Stockholders' Written Consent 47
i
<PAGE>
SECTION 5.2 Written Consent of PeopleMover's Accountants 48
SECTION 5.3 Access to Information; Confidentiality 48
SECTION 5.4 Commercially Reasonable Best Efforts 49
SECTION 5.5 Indemnification, Exculpation and Insurance 49
SECTION 5.6 Fees and Expenses 51
SECTION 5.7 Public Announcements 52
SECTION 5.8 Stockholder Litigation 52
SECTION 5.9 Tax Treatment 52
SECTION 5.10 Appointment of Opus360 Board of Directors/Member 52
SECTION 5.11 Consents 52
SECTION 5.12 Closing Date Balance Sheet 52
SECTION 5.13 Revenue Readjustment 53
SECTION 5.14 Additional Option Grant 53
SECTION 5.15 Release and/or Assumption of Personal Guaranties 53
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation To Effect the Merger 54
SECTION 6.2 Additional Conditions to Obligations of Opus360 and Sub 54
SECTION 6.3 Conditions to Obligations of PeopleMover 59
SECTION 6.4 Frustration of Closing Conditions 59
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination 60
SECTION 7.2 Effect of Termination 61
SECTION 7.3 Amendment 61
SECTION 7.4 Extension; Waiver 61
SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver 62
ARTICLE VIII
INDEMNIFICATION AND ESCROW
SECTION 8.1 Survival 62
SECTION 8.2 Indemnification by Stockholders of PeopleMover 62
SECTION 8.3 Indemnification By Opus360 63
ii
<PAGE>
SECTION 8.4 Opus360 Indemnified Party Claims Procedure 63
SECTION 8.5 Stockholder Representative 66
SECTION 8.6 PeopleMover Claims Procedure 66
SECTION 8.7 Loss; Claims for Losses 67
SECTION 8.8 Insurance Proceeds 68
SECTION 8.9 Certain Limitations 68
SECTION 8.10 Exclusive Remedy 69
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Notices 70
SECTION 9.2 Definitions 71
SECTION 9.3 Interpretation 72
SECTION 9.4 Counterparts 72
SECTION 9.5 Entire Agreement; No Third-Party Beneficiaries 72
SECTION 9.6 Governing Law 73
SECTION 9.7 Assignment 73
SECTION 9.8 Enforcement 73
SECTION 9.9 Headings 74
SECTION 9.10 Severability 74
SECTION 9.11 Further Assurances 74
SECTION 9.12 No Strict Construction 74
SECTION 9.13 Legend 74
SCHEDULES
SCHEDULE A
SCHEDULE B
EXHIBITS
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER (this " Agreement"), dated as of
January 30, 2000, by and among Opus360 Corporation, a Delaware corporation ("
Opus360"), Opus PM Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Opus360 (" Sub" and together with Opus360, the " Constituent
Corporations"), PeopleMover, Inc., a Delaware corporation (" PeopleMover"), the
Stockholder Representative (as defined in Section 8.5 hereof) and the other
parties hereto.
WHEREAS, the respective Boards of Directors of the Constituent
Corporations and PeopleMover have approved this Agreement and deem it advisable
and in the best interests of each corporation and its respective stockholders to
enter into this Agreement and the other agreements contemplated hereunder and
consummate the transactions contemplated hereby and thereby;
WHEREAS, the Constituent Corporations and PeopleMover desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger (as defined in Section 1.1 hereof) and also to prescribe various
conditions to the Merger; and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization under the provisions
of Section 368(a) of the Internal Revenue Code of 1986, as amended from time to
time (the " Code"), and that this Agreement constitutes a plan of reorganization
for purposes of Section 368 of the Code.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound, the parties hereby agree as follows:
1 ARTICLE THE MERGER ARTICLE
1 THE MERGER
1.1 SECTION The Merger . Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the Delaware General Corporation Law,
as amended from time to time (the " DGCL"), Sub shall be merged with and into
PeopleMover (the " Merger") at the Effective Time (as defined in Sec-
<PAGE>
tion 1.3 hereof). As a result of the Merger, the outstanding shares of capital
stock of Sub and PeopleMover shall be converted or canceled in the manner
provided in Article II of this Agreement and following the Effective Time,
PeopleMover shall be the surviving corporation (the " Surviving Corporation")
and shall succeed to and assume all the rights and obligations of Sub in
accordance with the DGCL and shall continue to be governed by the laws of the
State of Delaware.
1.2
1.3 SECTION Closing . The closing of the Merger (the " Closing") shall take
place at 10:00 a.m., Eastern Time, on a date to be specified in writing by
Opus360 and PeopleMover (the " Closing Date"), which date shall be no later than
the third (3) business day after satisfaction (or waiver in accordance with
Section 7.4 hereof) of the conditions set forth in Article VI hereof (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions), unless another time
or date is agreed to in writing by Opus360 and PeopleMover. The Closing will be
held at the offices of Skadden, Arps, Slate, Meagher & Flom, LLP, Four Times
Square, New York, New York 10036.
1.4
1.5 SECTION Effective Time . Subject to the provisions of this Agreement, as
soon as practicable on or after the Closing Date, Opus360 shall prepare and duly
file a certificate of merger or other appropriate documents (in any such case,
the " Certificate of Merger") executed and filed in accordance with the DGCL and
shall make all other filings or recordings required under the DGCL. The Merger
shall become effective upon the later of: (a) the date and time of filing the
Certificate of Merger with the Secretary of State of the State of Delaware or
(b) at such subsequent date or time as Opus360 and PeopleMover shall agree and
specify in the Certificate of Merger (the time the Merger becomes effective
being hereinafter referred to as the " Effective Time").
1.6
1.7 SECTION Effects of the Merger . The Merger shall have the effects set forth
in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all of the properties, rights, privileges,
powers and franchises of PeopleMover and Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of PeopleMover and Sub shall
become the debts, liabilities and duties of the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by the Surviving Corporation.
1.8
1.1
<PAGE>
(a) SECTION Certificate of Incorporation and By-laws . At the Effective Time,
the certificate of incorporation of Sub, as in effect immediately prior to the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended in accordance with the terms thereof and in
accordance with the DGCL.
(b)
(c) At the Effective Time, the by-laws of Sub, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended in accordance with the terms thereof and in accordance with
the DGCL.
(d)
(e) SECTION Board of Directors and Officers . The directors of Sub immediately
prior to the Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and by-laws of the Surviving Corporation and in
each case until their respective successors are duly elected or appointed and
qualify for such election or until their earlier death, resignation or removal
in accordance with the certificate of incorporation and by-laws of the Surviving
Corporation.
(f)
(g) The persons listed below shall hold the position in the Surviving
Corporation set forth immediately opposite their name, each to hold office in
accordance with the certificate of incorporation and by-laws of the Surviving
Corporation and subject to the terms of their respective employment agreements
and in each case until their respective successors are duly appointed or until
their earlier death, resignation or removal in accordance with the certificate
of incorporation and by-laws of the Surviving Corporation:
(h)
Name Position in the Surviving Corporation
---- -------------------------------------
James Jonassen Senior Vice President, Application and
Procurement Services Group reporting to the
President and Chief Operating Officer for
Opus360
Ali Benham Director, Client Services - Western Region
reporting to the Senior Vice President,
Operations for Opus360
<PAGE>
John Simonelli Vice President, Financial Operations reporting
to the Senior Vice President, Application and
Procurement Services Group for the Surviving
Corporation
Patrick Moore Vice President, Business Development reporting
to the Senior Vice President, Application and
Procurement Services Group for the Surviving
Corporation
Dan Duddridge Regional Director, Sales - Western Region
reporting to the Senior Vice President, Sales
for Opus360
Kai Mildenberger Vice President, Development reporting to the
Senior Vice President, Development for Opus360
1 ARTICLE CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
ARTICLE 1 CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
1.1 SECTION Conversion of Capital Stock . As of the Effective Time, by virtue of
the Merger and without any action on the part of PeopleMover or the holder of
any shares of capital stock of the Constituent Corporations (other than
Dissenting Shares (as defined in Section 2.4 hereof)):
(a) Conversion of Capital Stock of Sub. Each issued and outstanding share of
common stock, par value $0.001 per share, of Sub shall be converted into and
become one fully-paid and nonassessable share of common stock, $0.001 par value
per share, of the Surviving Corporation.
(b)
(c) Cancellation of Treasury Stock and Opus360-Owned Stock. All shares of common
stock, par value $0.001 per share (the " PeopleMover Common Stock"), of
PeopleMover that are owned by PeopleMover as treasury stock, Opus360 shall
automatically be canceled and retired and shall cease to exist, and no capital
stock of Opus360 or other consideration shall be delivered in exchange therefor.
(d)
(e) Conversion of PeopleMover Common Stock.
<PAGE>
(f)
(i) Subject to Section 2.1(d) hereof, Section 2.1(f) hereof and Section
2.2(e) hereof, each issued and outstanding share of PeopleMover Common
Stock (other than shares to be canceled in accordance with Section 2.1(b)
hereof and Dissenting Shares) shall be converted into 0.12298 (the "
Initial Exchange Ratio") shares of validly issued, fully paid and
nonassessable shares of common stock, par value $0.001 per share (the "
Opus360 Common Stock"), of Opus360 (the " Merger Consideration").
(i) The Merger Consideration shall be segregated into two separate
tranches as follows: "Tranche A Shares" and "Tranche B Shares". Subject to
Section 2.1(d) hereof, Section 2.1(f) hereof, Section 2.1(g) hereof and
Section 2.2(e) hereof, the Tranche A Shares shall be allocated as set
forth on Schedule A to this Agreement and the Tranche B Shares shall be
allocated as set forth on Schedule B to this Agreement.
(a) Adjusted Exchange Ratio. During the period from the date of this Agreement
to the Closing Date, the calculation of the Initial Exchange Ratio is subject to
adjustment on a dollar for dollar basis, (i) downward to reflect the sum of: (A)
the outstanding principal amount of loans (the " Loans") which have been
consummated other than in the ordinary course of business to fund PeopleMover's
day-to-day business operations and working capital needs (for purposes of
clarification any loans consummated in respect of retiring any outstanding
amounts under the PeopleMover Credit Agreement (as defined herein) shall not be
considered in the ordinary course of business and working capital needs)
subsequent to the date of this Agreement and prior to the Closing Date which
remain outstanding as of the Closing Date pursuant to that certain Interim
Funding Agreement (the " Interim Funding Agreement"), dated as of December 14,
1999, by and between Opus360 and PeopleMover plus (B) the aggregate amount of
all nonworking capital debt or nonworking capital liabilities of PeopleMover as
of the Closing Date as specifically reflected on a balance sheet of PeopleMover,
dated as of the Closing Date (the " Closing Date Balance Sheet"); for purposes
of this subsection (d)(i) " nonworking capital debt or nonworking capital
liabilities" shall mean and include any and all borrowings, advances, payables
or other outstanding credit extensions incurred by PeopleMover other than in the
ordinary course of business and consistent with past practice and shall include,
among other amounts, any balance exceeding $1,000,000 that is due, payable or
owed (including all interest, fees and penalties) to
<PAGE>
Imperial Bank under the credit agreement, dated as of June 10, 1999, by and
between PeopleMover and Imperial Bank, as amended from time to time (the "
PeopleMover Credit Agreement"), as reflected on the Closing Date Balance Sheet
whether outstanding under any (1) nonconverting revolving credit extensions, (2)
converting revolving credit extensions, (3) equipment line of credit, (4)
accounts receivable line of credit or (5) letter of credit, in each case with
Imperial Bank; provided that any fees, expenses and disbursements incurred by
PeopleMover in connection with the Merger as described in Section 5.06 hereof
shall be excluded for purposes of the calculation of nonworking capital debt and
nonworking capital liabilities and (ii) upward (in the dollar amount specified
below) to reflect the execution of definitive agreements in respect of the
specific term sheets and proposals described in subsections (A) through (E)
below, such definitive agreements to contain all of the material terms contained
in each of the proposals and terms sheets (and not containing any other material
terms) contained in Exhibit A, Exhibit B, Exhibit C, Exhibit D and Exhibit E to
this Agreement, respectively, in respect of subsections A, B, C, D and E below,
respectively, and such definitive agreements to be executed by an authorized
representative of PeopleMover and an authorized representative of the other
party thereto as specified in subsections A, B, C, D and E below in the event a
definitive agreement is executed by both parties in respect of:
(b)
(A) the letter of intent, by and between BEA Systems, Inc. and
PeopleMover, dated as of January 14, 2000; the dollar amount
attributable to a fully executed definitive agreement in respect of
this letter of intent shall be $3,386,231;
(A) the PeopleMover term sheet executed by Re:sources Connection on
January 14, 2000; the dollar amount attributable to a fully executed
definitive agreement in respect of this term sheet shall be
$491,944;
(A) the PeopleMover proposal executed by Global Employment
Solutions, Inc. on January 14, 2000; the dollar amount attributable
to a fully executed definitive agreement in respect of this proposal
shall be $369,457;
(A) the PeopleMover proposal executed by DM Stone Professional
Staffing on January 14, 2000;
<PAGE>
the dollar amount attributable to a fully executed definitive
agreement in respect of this proposal shall be $141,093; and
(A) the PeopleMover proposal executed by Dunhill Staffing Systems,
Inc. on January 12, 2000; the dollar amount attributable to a fully
executed definitive agreement in respect of this proposal shall be
$1,009,210.
The Initial Exchange Ratio as adjusted downward by the calculations set
forth in subsection (i) above and as adjusted upward by the calculations set
forth in subsection (ii) above, in each case, as calculated immediately prior to
Closing shall yield the exchange ratio as adjusted (the " Adjusted Exchange
Ratio").
(a) Effect on PeopleMover Common Stock. As of the Effective Time, all shares of
PeopleMover Common Stock converted in accordance with Section 2.1(c) hereof
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
PeopleMover Common Stock (the " Certificates") shall cease to have any rights
with respect thereto, except the right to receive (i) certificates representing
the number of whole shares of Opus360 Common Stock into which such shares have
been converted (the " Opus360 Certificates") and (ii) certain dividends and
distributions in accordance with Section 2.2(c) hereof.
(b)
(c) Adjustment of Number of Shares of Opus360 Common Stock for Dilution and
Other Matters. If at any time during the period between the date of this
Agreement and the Closing, any change in the outstanding shares of Opus360
Common Stock shall occur by reason of any reclassification, recapitalization,
split-up, stock dividend, stock combination, exchange of shares, readjustment or
otherwise, the Merger Consideration shall be appropriately adjusted to provide
holders of shares of PeopleMover Common Stock with the same economic effect as
contemplated by this Agreement if such event is consummated or has a record date
which is on or prior to the Effective Time.
(d)
(e) Escrow of Shares of Opus360 Common Stock. As soon as reasonably practicable
after the Effective Time, Opus360 or the Exchange Agent (as defined in Section
2.2(a) hereof) on behalf of Opus360 shall deposit Opus360 Certificates
representing the number of Tranche B Shares as set forth on Schedule B of this
Agreement designated as subject to escrow by each of Jim Jona-
<PAGE>
ssen and Ali Benham (collectively, the " Escrow Stockholders") to be received as
Merger Consideration pursuant to this Section 2.1 (the " Escrow Shares") with
SunTrust Bank, as escrow agent (the " Escrow Agent") to be held and disposed of
by the Escrow Agent in accordance with the escrow agreement, dated as of the
Closing Date, by and among Opus360, the Escrow Agent and the Escrow Stockholders
(the " Escrow Agreement"). To the extent any Opus360 Indemnified Party (as
defined in Section 8.2 hereof) is entitled to indemnification out of the Escrow
Shares pursuant to Article VIII hereof and subject to the conditions and
limitations thereof, such Opus360 Indemnified Party shall set off and apply
against Losses (as defined in Section 8.7 hereof) the Escrow Shares in
accordance with the terms hereof and of the Escrow Agreement. Such set off shall
occur (on a several basis as provided in Section 8.2 hereof) to the full extent
of the remaining Escrow Shares prior to any other remedy (including any request
for indemnification in cash) being pursued, but shall not limit any right of an
Opus360 Indemnified Party to seek or collect the deficiency. Pursuant to the
terms of the Escrow Agreement, the Escrow Shares shall be valued for purposes of
set off against any Losses at $13.67 (the " Opus360 Stock Price").
(f)
(g) Opus360 Restricted Stock Vesting Agreements. Subject to Section 2.1(g)
hereof, the Tranche B Shares to be received as Merger Consideration pursuant to
this Section 2.1 by each of the Escrow Stockholders shall also be subject to the
restrictions set forth in their respective restricted stock vesting agreements,
in each case, dated as of the Closing Date, by and between Opus360 on the one
hand and each of the Employee Stockholders on the other hand (the " Opus360
Restricted Stock Vesting Agreements").
(h)
(i) Underwriter's Lock-up Letter. The Tranche A Shares and Tranche B Shares to
be received as Merger Consideration pursuant to this Section 2.1 by each holder
of outstanding shares of PeopleMover Common Stock (a " PeopleMover Stockholder"
and collectively, the " PeopleMover Stockholders") shall be subject to an
underwriters' lock-up letter, by and between BancBoston Robertson Stephens Inc.,
J.P. Morgan & Co., Bear Stearns & Co. Inc. and E*OFFERING Corp. on the one hand
and each PeopleMover Common Stockholder on the other hand (the " Underwriters'
Lock-up Letter").
<PAGE>
1.1 SECTION Exchange of Certificates .
1.2
(a) Exchange Agent. As of the Closing Date, Opus360 shall enter into an
agreement with such bank or trust company as may be designated by Opus360 and as
shall be reasonably acceptable to PeopleMover (the " Exchange Agent"), which
shall provide that Opus360 shall deposit with the Exchange Agent as of the
Effective Time, for the benefit of the holders of shares of PeopleMover Common
Stock, for exchange in accordance with this Article II, through the Exchange
Agent, Opus360 Certificates representing the whole number of shares of Opus360
Common Stock (such shares of Opus360 Common Stock, together with any dividends
or distributions with respect thereto with a record date after the Effective
Time, being hereinafter referred to as the " Exchange Fund") issuable pursuant
to Section 2.1 hereof in exchange for outstanding shares of PeopleMover Common
Stock.
(a) Exchange Procedures. Subject to Section 2.1(g) hereof, as soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a Certificate whose shares were converted into Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of (A) the Certificates or (B) an affidavit in accordance
with Section 2.2(h) hereof to the Exchange Agent and shall be in such form and
have such other provisions as Opus360 may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates or affidavit
in exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as reasonably may be requested by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefore an Opus360 Certificate representing that number of whole
shares of Opus360 Common Stock which such holder has the right to receive
pursuant to Section 2.1(c) hereof and certain dividends or other distributions
in accordance with Section 2.2(c) hereof, and the Certificate so surrendered
shall immediately be canceled. All Escrow Shares shall be delivered by Opus360
or the Exchange Agent directly to the Escrow Agent as described in Section
2.1(g) hereof. In the event of a transfer of ownership of PeopleMover Common
Stock which is not registered in the transfer records of PeopleMover as of the
Effective Time, an Opus360 Certificate may be issued to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person re-
<PAGE>
questing such issuance shall pay any transfer or other Taxes (as defined in
Section 3.1(k) hereof) required by reason of the issuance of shares of Opus360
Common Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of Opus360 that such Tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender Opus360 Certificates representing
the number of whole shares of Opus360 Common Stock into which the shares of
PeopleMover Common Stock formerly represented by such Certificate have been
converted, certain dividends or other distributions in accordance with Section
2.2(c) hereof.
(b)
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Opus360 Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate or
affidavit pursuant to Section 2.2(h) hereof with respect to the shares of
Opus360 Common Stock represented thereby and all such dividends and other
distributions shall be paid by Opus360 to the Exchange Agent and shall be
included in the Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Section 2.2. Subject to the effect of
applicable escheat or similar laws, following surrender of any such Certificate,
there shall be paid to the holder of the Opus360 Certificates representing whole
shares of Opus360 Common Stock issued in exchange therefore, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Opus360 Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Opus360
Common Stock.
(d)
(e) No Further Ownership Rights in PeopleMover Common Stock. All shares of
Opus360 Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Section 2.2 shall be deemed to have been
issued in full satisfaction of all rights pertaining to the shares of
PeopleMover Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been authorized or made by PeopleMover on such shares of PeopleMover Common
Stock which remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the
<PAGE>
shares of PeopleMover Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Act for any reason, they shall be
canceled and exchanged as provided in this Section 2.2, except as otherwise
provided by law.
(f)
(g) No Fractional Shares. No Opus360 Certificates or scrip representing
fractional shares of Opus360 Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Opus360 shall relate to
such fractional share interests and such fractional share interests shall not
entitle the owner thereof to vote or to any rights of a stockholder of Opus360.
The shares of Opus360 Common Stock to be received upon the exchange of
Certificates by a former holder of PeopleMover Common Stock shall be rounded (up
or down) to the nearest whole share.
(h)
(i) Termination of Exchange Fund. Any portion of the Exchange Fund which remains
undistributed to the holders of the Certificates for one (1) year after the
Effective Time shall be delivered to Opus360, upon demand, and any holders of
Certificates who have not theretofore complied with this Section 2.2 shall
thereafter look only to Opus360 for payment of their claim for Opus360 Common
Stock and any dividends or distributions with respect to Opus360 Common Stock.
(j)
(k) No Liability. None of the Exchange Agent, the Constituent Corporations,
PeopleMover or the Surviving Corporation shall be liable to any person in
respect of shares of PeopleMover Common Stock (or dividends or distributions
with respect thereto), in each case, delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to seven (7) years after the Effective
Time (or immediately prior to such earlier date on which any Merger
Consideration or any dividends or distributions payable to the holder of such
Certificate would otherwise escheat to or become the property of any
governmental body or authority) any such Merger Consideration, dividends or
distributions in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any person previously entitled thereto.
(l)
(m) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
<PAGE>
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate, the applicable Merger Consideration and, if applicable, unpaid
dividends or distributions on shares of Opus360 Common Stock deliverable in
respect thereof pursuant to this Agreement.
1.1 SECTION Stock Options .
1.2
(a) As of the Effective Time, (i) each option (each, a " PeopleMover Option") to
purchase PeopleMover Common Stock granted under the PeopleMover, Inc. 1999 Stock
Incentive Plan and any other option to purchase PeopleMover Common Stock granted
to an employee or former employee or director or former director of PeopleMover
(including any PeopleMover Options issued pursuant to the Additional Option
Grant described in Section 5.14 hereof) (the " PeopleMover Option Plan") shall
be converted into an option (an " Adjusted Option" and collectively, the "
Adjusted Options") to purchase the number of shares of Opus360 Common Stock
equal to the number of shares of PeopleMover Common Stock subject to such
PeopleMover Option immediately prior to the Effective Time multiplied by the
Adjusted Exchange Ratio (rounded down to the nearest whole number of shares of
Opus360 Common Stock), at an exercise price per share equal to the exercise
price for each such share of PeopleMover Common Stock subject to such
PeopleMover Option divided by the Adjusted Exchange Ratio (rounded up to the
nearest whole cent), and all references in each such option to PeopleMover shall
be deemed to refer to Opus360, where appropriate; provided, however, that the
adjustments provided in this clause (i) with respect to any options which are "
incentive stock options" (as defined in Section 422 of the Code) shall be
affected in a manner consistent with the requirements of Section 424(a) of the
Code and (ii) Opus360 shall assume the obligations of PeopleMover under the
Adjusted Options. The other terms of each Adjusted Option, and the agreements
under which they were issued, shall continue to apply in accordance with their
terms.
(a) PeopleMover shall take all action necessary (including but not limited to
amending the PeopleMover Option Plan, to the extent necessary) to reflect the
transactions contemplated by this Agreement, including, without limitation, the
conversion of shares of PeopleMover Common Stock into shares of Opus360 Common
Stock on a basis consistent with the transactions contemplated by
<PAGE>
this Agreement. PeopleMover shall take all such steps as are necessary to
terminate the PeopleMover Option Plan as of the Closing Date.
(b)
(c) Opus360 shall reserve for issuance the number of shares of Opus360 Common
Stock that will become subject to the Adjusted Options.
(d)
1.2 SECTION Appraisal Rights . Notwithstanding anything in this Agreement to the
contrary, shares of PeopleMover Common Stock (the " Dissenting Shares") that are
issued and outstanding immediately prior to the Effective Time and which are
held by PeopleMover Stockholders who did not vote (or assent by written consent
pursuant to Section 228 of the DGCL) in favor of the Merger and who comply with
all of the relevant provisions of Section 262 of the DGCL (the " Dissenting
Stockholders") shall not be converted into or be exchangeable for the right to
receive the Merger Consideration, unless and until such holders shall have
failed to perfect or shall have effectively withdrawn or lost their rights to
appraisal under the DGCL. PeopleMover shall give Opus360 (i) immediate oral
notice followed by prompt written notice of any written demands for appraisal of
any shares of PeopleMover Common Stock, attempted withdrawals of any such
demands and any other instruments served pursuant to the DGCL and received by or
on behalf of PeopleMover relating to PeopleMover Stockholders' rights of
appraisal and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal of shares of PeopleMover Common Stock
under the DGCL. Neither PeopleMover nor the Surviving Corporation shall, except
with the prior written consent of Opus360 in each instance, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. If any Dissenting Stockholder shall fail to perfect or shall have
effectively withdrawn or lost the right to appraisal, the shares of PeopleMover
Common Stock held by such Dissenting Stockholder shall thereupon be treated as
though such shares had been converted into the right to receive the Merger
Consideration pursuant to Section 2.1(c) hereof.
1.3
<PAGE>
1 ARTICLE REPRESENTATIONS AND WARRANTIESARTICLE
1 REPRESENTATIONS AND WARRANTIES
1.1 SECTION Representations and Warranties of PeopleMover . Except as disclosed
in the PeopleMover disclosure schedule delivered by PeopleMover to Opus360 prior
to the execution of this Agreement (the " PeopleMover Disclosure Schedule") and
making reference to the particular subsection of this Agreement to which
exception is being taken, PeopleMover represents and warrants to Opus360 and Sub
as follows:
(a) Organization, Standing and Corporate Power . Except as set forth on Section
3.1(a) of the PeopleMover Disclosure Schedule, PeopleMover is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now being conducted and proposed to be conducted.
PeopleMover is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership,
leasing, licensing or operation of its properties makes such qualification or
licensing necessary. PeopleMover has provided to Opus360 prior to the execution
of this Agreement true and complete copies of its amended and restated
certificate of incorporation and by-laws each of which are in full force and
effect on the date hereof. As of the date hereof, PeopleMover is not a
participant in any joint venture or partnership with any other person.
(b)
(c) Subsidiaries . PeopleMover does not directly or indirectly beneficially own
or hold any securities or other ownership interests in any other person.
PeopleMover has never formed or incorporated any subsidiary.
(d)
(e) Capital Structure . As of the date of this Agreement and with reference to
Section 3.1(c) of the PeopleMover Disclosure Schedule, the authorized capital
stock of PeopleMover consists of (i): 25,000,000 shares of PeopleMover Common
Stock, of which (A) 4,916,514 shares are outstanding (a schedule of the holders
of PeopleMover Common Stock and the number of shares of PeopleMover Common Stock
held of record on the date of this Agreement are set forth on Section
3.1(c)(i)(A) of the PeopleMover Disclosure Schedule); (B) 5,421,433 shares of
PeopleMover Common Stock are reserved for issuance upon conversion of the
PeopleMover Series A Preferred Stock (as defined herein) (a schedule of the
<PAGE>
holders of PeopleMover Series A Preferred Stock held of record on the date of
this Agreement, the number of outstanding shares of PeopleMover Series A
Preferred Stock and the number of shares of PeopleMover Common Stock into which
such shares are convertible and the conversion price thereof are set forth on
Section 3.1(c)(i)(B) of the PeopleMover Disclosure Schedule); (C) 687,111 shares
of PeopleMover Common Stock are reserved for issuance upon conversion of the
outstanding convertible subordinated notes of PeopleMover (the " PeopleMover
Convertible Notes") (a schedule of the holders of PeopleMover Convertible Notes,
the aggregate outstanding principal amount of each PeopleMover Convertible Note
and the number of shares of PeopleMover Common Stock into which such note is
convertible and the conversion price thereof are set forth on Section
3.1(c)(i)(C) of the PeopleMover Disclosure Schedule); (D) 166,219 shares of
PeopleMover Common Stock are reserved for issuance upon exercise of the
outstanding warrants of PeopleMover (the " PeopleMover Warrants") (a schedule of
the holders of PeopleMover Warrants, the number of outstanding PeopleMover
Warrants and the number of shares of PeopleMover Common Stock into which such
warrant is exercisable and the exercise price thereof are set forth on Section
3.1(c)(i)(D) of the PeopleMover Disclosure Schedule); (E) 508,857 shares of
PeopleMover Common Stock are reserved for issuance upon exercise of the service
provider options of PeopleMover (the " PeopleMover Service Options") (a schedule
of the holders of PeopleMover Service Options, the number of outstanding
PeopleMover Service Options and the number of shares of PeopleMover Common Stock
into which such service options are exercisable and the exercise price thereof
are set forth on Section 3.1(c)(i)(E) of the PeopleMover Disclosure Schedule);
and (F) 5,414,375 shares of PeopleMover Common Stock are reserved for issuance
upon the exercise of PeopleMover Options pursuant to the PeopleMover Option Plan
in effect as of the date of this Agreement (a schedule of the holders of
PeopleMover Options, the number of options held by each person and the exercise
prices thereof are set forth on Section 3.1(c)(i)(F) of the PeopleMover
Disclosure Schedule); and (ii) 15,000,000 shares of preferred stock, par value
$0.001 per share of PeopleMover of which 6,000,000 shares have been designated
as Series A Convertible Preferred Stock (the " PeopleMover Series A Preferred
Stock" and together with the PeopleMover Common Stock, the " PeopleMover Capital
Stock") of which 4,935,847 shares of PeopleMover Series A Preferred Stock are
outstanding. As of the date of this Agreement, no shares of PeopleMover Common
Stock were reserved for issuance, except for (i) 5,421,433 shares of PeopleMover
Common Stock reserved for issuance upon conversion of the PeopleMover Series A
Preferred Stock, (ii) 687,111 shares of PeopleMover Common Stock reserved for
issuance upon conversion of the PeopleMover Convertible Notes, (iii) 166,219
shares of PeopleMover Common Stock reserved for issuance upon ex-
<PAGE>
ercise of the PeopleMover Warrants, (iv) 508,857 shares of PeopleMover Common
Stock reserved for issuance upon exercise of the PeopleMover Service Options and
(v) 5,414,375 shares of PeopleMover Common Stock reserved for issuance upon
exercise of PeopleMover Options pursuant to the PeopleMover Option Plan. As of
the date of this Agreement, there are no outstanding stock appreciation rights
(" SARs") or rights (other than the PeopleMover Stock Options) to receive shares
of PeopleMover Common Stock on a deferred basis granted under the PeopleMover
Option Plan or otherwise. As of the date of this Agreement, PeopleMover has
delivered to Opus360 a true and complete list of the number of shares of
PeopleMover Common Stock subject to PeopleMover Options granted under the
PeopleMover Option Plan along with the names of such optionholders and the
exercise prices thereof. As of the date of this Agreement, other than the
PeopleMover Series A Preferred Stock, the PeopleMover Convertible Notes, the
PeopleMover Warrants, the PeopleMover Service Options and the PeopleMover
Options, no equity instruments, bonds, debentures, notes, derivative instruments
or other equity securities or indebtedness of PeopleMover having the right to
vote (or convertible into, exchangeable, redeemable or exercisable for
securities having the right to vote) on any matters on which stockholders of
PeopleMover may vote are issued or outstanding. All outstanding shares of
PeopleMover Capital Stock are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to any preemptive rights. Except as set forth in this Section 3.1(c) and
except for changes since December 31, 1999 resulting from the issuance of shares
of PeopleMover Common Stock as a result of the exercise of PeopleMover Options
outstanding as of December 31, 1999 in accordance with the terms of the
PeopleMover Option Plan, and pursuant to the PeopleMover Options issued after
the date hereof as expressly permitted by Section 4.1(a)(ii)(A) and (C) hereof
and Section 5.14 hereof, (x) there are not issued, reserved for issuance or
outstanding (A) any shares of PeopleMover Capital Stock or other voting
securities of PeopleMover, (B) any equity or debt securities of PeopleMover
convertible into, exchangeable, redeemable or exercisable for shares of
PeopleMover Capital Stock or other voting securities of PeopleMover, (C) any
warrants, calls, options or other rights to acquire from PeopleMover and no
obligation of PeopleMover to issue, any PeopleMover Capital Stock, voting
securities or securities convertible into, exchangeable, redeemable or
exercisable for PeopleMover Capital Stock or other voting securities of
PeopleMover and (y) as of the date of this Agreement, there are not any
outstanding obligations of PeopleMover to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. PeopleMover is not a party to any voting
agreement, voting trust proxies or other agreements or understandings with
respect to the voting of any such securities.
<PAGE>
(f)
(g) Authority; Noncontravention . PeopleMover has full corporate power and
authority to enter into this Agreement and, subject to the PeopleMover
Stockholder Approval (as defined in Section 3.1(l) hereof), to consummate the
Merger and the other transactions contemplated by this Agreement. The execution
and delivery of this Agreement by PeopleMover and the consummation by
PeopleMover of the Merger and the other transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of PeopleMover and its Board of Directors, subject, in the case of the
Merger, to the PeopleMover Stockholder Approval and no other corporate or
stockholder action is necessary to authorize the execution, delivery, and
performance of this Agreement. This Agreement has been duly executed and
delivered by PeopleMover and, assuming the due authorization, execution and
delivery by Opus360, Sub, the PeopleMover Stockholders and the Stockholder
Representative, constitutes a legal, valid and binding obligation of
PeopleMover, enforceable against PeopleMover in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation to pay or loss of a benefit
under, or result in the creation of any pledge, claim, lien, charge,
encumbrance, security interest of any kind or nature whatsoever (collectively, "
Liens") upon any of the properties or assets of PeopleMover under, (i) the
amended and restated certificate of incorporation or by-laws of PeopleMover,
(ii) except as set forth on Section 3.1(d)(ii) of the PeopleMover Disclosure
Schedule, any terms, conditions or provisions of any loan or credit agreement,
promissory note, note, bond, mortgage, deed of trust, sale-leaseback agreement,
indenture, lease, letter of credit, line of credit, derivative instrument,
factor agreement or other evidence of indebtedness or pledge, guarantee,
keep-well letter or other agreement, instrument, contract, permit, order,
arrangement, concession, franchise, license or other instrument or obligation
applicable to PeopleMover or its properties or assets or (iii) any order,
injunction, judgment, decree, statute, law, ordinance, rule or regulation of any
foreign, United States, state or local governmental entity or municipality or
subdivision thereof or court, tribunal, commission, board, bureau, agency or
legislative, executive, governmental or regulatory authority or agency (a "
Governmental Entity") applicable to PeopleMover or its properties or assets. No
consent, approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to PeopleMover in connection with the Merger or the execution
and delivery of this Agreement by PeopleMover or the consummation by
<PAGE>
PeopleMover of the transactions contemplated by this Agreement, except for the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which PeopleMover is qualified to do business and such filings with the
Governmental Entities to satisfy the applicable requirements of the California
Code (as defined in Section 3.1(l) or "blue sky" laws, if any.
(h)
(i) Financial Statements . (i) PeopleMover shall deliver or cause to be
delivered on or prior to Closing to Opus360 the PeopleMover Financial Statements
(as defined in Section 5.1(a) hereof) of as and for the fiscal year ended
December 31, 1999. The PeopleMover Financial Statements shall have been prepared
in accordance with United States Generally Accepted Accounting Principles
applied on a consistent basis during the period involved (except as may be
indicated in the notes thereto) and shall fairly present in all material
respects the financial position of PeopleMover as of the date thereof and the
results of its operations and cash flows for the period then ended. Except as
reflected in the PeopleMover Financial Statements or in the notes thereto,
PeopleMover shall not have any liabilities or obligations which are required to
be reflected on such financial statements or notes thereto in accordance with
United States Generally Accepted Accounting Principles.
(j)
(a)
(i) PeopleMover shall deliver the Closing Date Balance Sheet on the
Closing Date to Opus360. The Closing Date Balance Sheet shall have been
prepared in accordance with the accounting policies of PeopleMover applied
on a consistent basis during the period involved (except as may be
indicated in the notes thereto) and shall fairly present in all material
respects the financial position of PeopleMover as of the Closing Date.
Except as reflected on the Closing Date Balance Sheet or in the notes
thereto, PeopleMover shall not have any liabilities or obligations which
are required to be reflected on such financial statements or notes thereto
in accordance with the accounting policies of PeopleMover.
(a) Absence of Certain Changes or Events . Except for liabilities incurred in
the ordinary cause of business and consistent with past practice or in
connection with this Agreement or the transactions contemplated hereby, since
December 31, 1999 and through the date of this Agreement, PeopleMover has
conducted its business only in the ordinary course of business and consistent
with past
<PAGE>
practice, and there has not been (i) except as disclosed on Section 3.1(f)(i) of
the PeopleMover Disclosure Schedule, any material adverse change in the
business, results of operations, prospects or financial condition PeopleMover,
(ii) any declaration, setting aside or payment of any dividend, bonus or other
distribution (whether in cash, stock or property) with respect to any of
PeopleMover's Capital Stock, (iii) any split, combination or reclassification of
any of PeopleMover's Capital Stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of PeopleMover's Capital Stock, (iv) (A) any granting by PeopleMover
to any current or former director, executive officer or other key employee of
PeopleMover of any increase in compensation, bonus or other benefits payable or
to become payable by PeopleMover, except for normal increases in cash
compensation in the ordinary course of business consistent with past practice or
as was required under any employment agreements of PeopleMover in effect on
December 31, 1999 and previously delivered to Opus360, (B) any granting by
PeopleMover to any current or former director, executive officer or key employee
of PeopleMover of any increase in severance or termination pay, except as set
forth in Section 3.1(f)(iv)(B) of the PeopleMover Disclosure Schedule and
occurring in the ordinary course of business and consistent with past practice,
(C) except as set forth on Section 3.1(f)(iv)(C) of the PeopleMover Disclosure
Schedule, any entry by PeopleMover into, or any amendments of, any employment,
deferred compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, executive officer or key
employee of or consultant to PeopleMover or (D) any amendment to, or
modification of, any PeopleMover Option, (v) except insofar as may have been
required by a change in United States Generally Accepted Accounting Principles
or as specifically permitted pursuant to Section 5.13 hereof, any change by
PeopleMover in accounting methods, principles or practices by PeopleMover
materially affecting its assets, liabilities or business, (vi) any material Tax
election or any settlement or compromise of any material Tax liability or (vii)
except as disclosed on Section 3.1(f)(vii) of the PeopleMover Disclosure
Schedule, any agreement or understanding to do any of the foregoing by
PeopleMover.
(b)
(c) Litigation . Except as set forth on Section 3.1(g) of the PeopleMover
Disclosure Schedule, as of the date of this Agreement, there is no claim,
action, suit, demand, written notice, arbitration or other proceeding pending or
to the knowledge of PeopleMover threatened, by or against PeopleMover, that
names PeopleMover as a party or which names a person that is a party to an
indemnification agreement with PeopleMover covering such subject matter or is
otherwise by or before any Governmental Entity or that challenges the validity
of this Agreement or the
<PAGE>
ability of PeopleMover to perform its obligations under this Agreement. There is
no outstanding order, judgment, injunction, award or decree of any Governmental
Entity or any settlement agreement that names PeopleMover as a party or is
otherwise binding upon PeopleMover.
(d)
(e) Compliance with Applicable Laws . (i) Except as set forth on Section
3.1(h)(i) of the PeopleMover Disclosure Schedule, PeopleMover and its employees
hold all permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation of
the businesses of PeopleMover (the " PeopleMover Permits"). (ii) Except as set
forth on Section 3.1(h)(ii) of the PeopleMover Disclosure Schedule, PeopleMover
is in compliance with the terms of the PeopleMover Permits and all applicable
statutes, laws, ordinances, rules and regulations. (iii) No action, demand,
requirement or investigation by any Governmental Entity and no suit, action or
proceeding by any person, in each case with respect to PeopleMover or any of its
properties, is pending or to the knowledge of PeopleMover, threatened.
(f)
(g) Absence of Changes in Plans . Except as set forth in Section 3.1(i) of the
PeopleMover Disclosure Schedule, since December 31, 1999, there has not been any
adoption or amendment in any respect by PeopleMover of any Plans (as defined in
Section 3.1(j) hereof), or any change by PeopleMover in any actuarial or other
assumption used to calculate funding obligations with respect to any PeopleMover
pension plans, or any change in the manner in which contributions to any
PeopleMover pension plans are made or the basis on which such contributions are
determined.
(h)
(ii) ERISA Compliance . Section 3.1(j) of the PeopleMover Disclosure Schedule
sets forth a true and complete list of each deferred compensation and each bonus
or other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other "
welfare" plans, fund or program (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder (" ERISA")); each profit-sharing, stock bonus
or other " pension" plan, fund or program (within the meaning of Section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed to
by PeopleMover or by any trade or business, whether or not incorporated (an "
ERISA Af-
<PAGE>
filiate"), that together with PeopleMover would be deemed a " single employer"
within the meaning of Section 4001(b) of ERISA, or to which PeopleMover or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
director, employee or former employee of PeopleMover (the " Plans"). Neither
PeopleMover nor any ERISA Affiliate has any commitment or formal plan, whether
legally binding or not, to create any additional Plan or modify or change any
existing Plan that would affect any employee or former employee of PeopleMover.
(iii)
(iv) With respect to each Plan, PeopleMover has heretofore delivered or
made available to Opus360 true and complete copies of each of the
following documents:
(A) a copy of the Plan and any amendments thereto (or if the Plan is
not a written Plan, a description thereof);
(A) a copy of the two most recent annual reports and actuarial
reports, if required under ERISA, and the most recent report
prepared with respect thereto in accordance with Statement of
Financial Accounting Standards No. 87;
(A) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto;
(A) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof; and
(A) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under
Section 401 of the Code.
(ii) No Plan is subject to Section 302 or Title IV of ERISA or Section 412
of the Code. No Plan is a " multiemployer pension plan," as defined in
Section 3(37) of ERISA. No
<PAGE>
liability under Title IV or Section 302 of ERISA has been incurred by
PeopleMover or any ERISA Affiliate that has not been satisfied in full.
(ii) All contributions required to be made with respect to any Plan on or
prior to the Closing Date have been timely made or are reflected on the
balance sheet.
(ii) Neither PeopleMover, any Plan, any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in
connection with which PeopleMover, any Plan, any such trust, or any
trustee or administrator thereof, or any party dealing with any Plan or
any such trust could be subject to either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to
Section 4975 or 4976 of the Code.
(ii) Each Plan has been operated and administered in all material respects
in accordance with its terms and applicable law, including but not limited
to ERISA and the Code.
(ii) Each Plan intended to be " qualified" within the meaning of Section
401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code.
(ii) No Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of
PeopleMover or any subsidiary for periods extending beyond their
retirement or other termination of service, other than (A) coverage
mandated by applicable law, (B) death benefits under any " pension plan,"
or (C) benefits the full cost of which is borne by the current or former
employee (or his beneficiary). No condition exists that would prevent
PeopleMover from amending or terminating any Plan providing health or
medical benefits in respect of any active employee of PeopleMover.
(ii) Except as set forth on Section 3.1(j)(ix) of the PeopleMover
Disclosure Schedule, the consummation
<PAGE>
of the transactions contemplated by this Agreement will not, either alone
or in combination with another event, (A) entitle any current or former
employee or officer of PeopleMover or any ERISA Affiliate to severance
pay, unemployment compensation or any other payment, except as expressly
provided in this Agreement or (B) accelerate the time of payment or
vesting, or increase the amount of compensation due any employee or
officer or PeopleMover or any ERISA Affiliate.
(ii) There has been no material failure of a Plan that is a group health
plan (as defined in Section 5000(b)(1) of the Code) to meet the
requirements of Section 4980B(f) of the Code with respect to a qualified
beneficiary (as defined in Section 4980B(g) of the Code).
(ii) Except as set forth on Section 3.1(j)(xi) of the PeopleMover
Disclosure Schedule, there are no pending, threatened or anticipated
claims by or on behalf of any Plan, by any employee or beneficiary covered
under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(ii) No amounts payable under the Plans will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code.
(ii) Except as set forth on Section 3.1(j)(xiii) of the PeopleMover
Disclosure Schedule, no options to purchase PeopleMover Common Stock that
are outstanding on the date hereof or any PeopleMover Options that will be
issued pursuant to the Additional Option Grant shall become exercisable in
full or in part as a result of or in connection with the execution or
delivery of this Agreement or the transactions contemplated hereby.
(ii) Taxes . Except as set forth on Section 3.1(k)(i) of the PeopleMover
Disclosure Schedule, PeopleMover has duly and timely filed all Tax Returns
required to be filed by them, and all such Tax Returns (as defined herein) are
true and complete. Except as set forth on Section 3.1(k)(i) of the PeopleMover
Disclosure Schedule, PeopleMover has timely paid all Taxes due and owing and has
established adequate reserves in its financial statements for any Taxes
<PAGE>
accrued but not yet due and owing. PeopleMover has complied in all respects with
all applicable laws, rules and regulations relating to Taxes required to be
withheld or collected, including, without limitation, Taxes required to be
withheld pursuant to Sections 1441 and 1442 of the Code and Taxes required to be
withheld from employee wages. Any provision for Taxes payable and reflected on
the Closing Date Balance Sheet is adequate for payment of any and all Tax
liabilities for periods ending on or before the date of the Closing Date Balance
Sheet and there are no Tax liens on any assets of PeopleMover except Liens for
current Taxes not yet due.
(iii)
(iv) There has not been any audit of any Tax Return filed by PeopleMover
and no audit of any such Tax Return is in progress and PeopleMover has not
been notified by any tax authority that any such audit is contemplated or
pending. No Tax deficiency or claim for additional Taxes has been asserted
or threatened to be asserted against PeopleMover by any taxing authority.
No extension of time with respect to any date on which a Tax Return was or
is to be filed by PeopleMover is in force, and no waiver or agreement by
PeopleMover is in force for the extension of time for the assessment or
payment of any Tax. PeopleMover has not been informed by any jurisdiction
that the jurisdiction believes that PeopleMover was required to file any
Tax Return that was not filed.
(ii) PeopleMover has not agreed to, and is not required to, make any
adjustments under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(ii) PeopleMover (i) is not a " consenting corporation" within the meaning
of Section 341(f) of the Code, and none of the assets of PeopleMover are
subject to an election under Section 341(f) of the Code; (ii) has not been
a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(l)(A)(ii) of the Code; or (iii) has not had actual or
potential liability for any Taxes of any person (other than a current
member of the affiliated group of corporations (within the meaning of
Section 1504(a)(1) of the Code) of which PeopleMover is the common parent)
under Treasury Regulation Section 1.1502-6 (or any similar provision of
law in any jurisdiction), or as a transferee or successor, by contract, or
otherwise.
<PAGE>
(ii) Except as set forth on Section 3.1(k)(v) of the PeopleMover
Disclosure Schedule, there has been no change in the ownership of
PeopleMover prior to the Merger that would limit the Surviving
Corporation's ability to utilize the net operating losses recognized by
PeopleMover since August 31, 1998.
(ii) PeopleMover is not and has not been (A) a member of a group of
corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns (other than the current
affiliated group of corporations (within the meaning of Section 1504(a)(1)
of the Code) of which PeopleMover is the common parent) or (B) a party to
or bound by any Tax indemnity, Tax sharing or Tax allocation agreement.
(ii) PeopleMover has been a " C corporation" for federal, state and local
income tax purposes at all times since its date of incorporation through
the date hereof.
(ii) PeopleMover has delivered to Opus360 true and complete copies of all
of its Tax Returns.
(ii) For purposes of this Agreement, the term " Tax" includes all federal,
state, local and foreign taxes or assessments, including income, sales,
gross receipts, excise, use, transfer, value added, royalty, franchise,
payroll, withholding, property and import taxes and any additions to tax,
interest or penalties applicable thereto. For purposes of this Agreement,
the term " Tax Return" means any report, return, statement, declaration or
other written information required to be supplied to a taxing authority in
connection with Taxes (collectively " returns") and any amended returns.
(a) Voting Requirements . The vote in the (i) affirmative of no less than 75% of
the outstanding equity securities of PeopleMover entitled to vote on the Merger
and this Agreement voting in favor of the Merger and the adoption of this
Agreement (the " PeopleMover Stockholder Approval") pursuant to the PeopleMover
Stockholders' Written Consent (as defined in Section 5.1(b) hereof) in
accordance with Section 25103(h) of the California Corporate Securities Law (the
" California Code"), and (ii) negative of no more than 10% of the outstanding
equity
<PAGE>
securities of PeopleMover entitled to vote on the Merger and this Agreement
voting against the Merger and the adoption of this Agreement pursuant to the
PeopleMover Stockholders' Written Consent in accordance with Section 25103(h) of
the California Code, is the only vote of the holders of any class or series of
PeopleMover Capital Stock necessary to approve (or vote against in the case of
subsection (ii) above) the Merger and adopt this Agreement and the transactions
contemplated hereby.
(b)
(c) State Anti-Takeover Statutes . The Board of Directors of PeopleMover
(including the disinterested directors thereof) has unanimously approved the
terms of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement and such approval constitutes
approval of the Merger and the other transactions contemplated by this Agreement
by the PeopleMover Board of Directors under the provisions of Section 203 of the
DGCL. No other state takeover statute that is applicable to PeopleMover applies
to the Merger or the other transactions contemplated by this Agreement.
(d)
(e) Brokers . No agent, broker, investment banker, financial advisor or other
person is or shall be entitled to any broker's, finder's or any other similar
fee or commission in connection with any of the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of PeopleMover.
(f)
(g) Intellectual Property; Proprietary Software . Section 3.1(o) of the
PeopleMover Disclosure Schedule sets forth a true and complete list of all
Proprietary Software (as defined herein) and Intellectual Property (as defined
herein). The foregoing, together with the rights of enforcement for both known
and unknown past infringement, and licenses thereof and thereto, is a true and
complete list of all Proprietary Software and Intellectual Property that is
being used by PeopleMover in the operation of its vertical information portal
located on the Internet at http://www.peoplemover.com which includes a graphical
user interface and proprietary Internet software that service organizations use
to deliver, manage, and procure the skills of knowledge workers in the
marketplace (the " Business").
(h)
(ii) Except as set forth on Section 3.1(o)(i) of the PeopleMover
Disclosure Schedule, PeopleMover owns, or is licensed or otherwise
possesses legally enforceable rights to use the Proprietary Software and
Intellectual Property, including all required computer software licenses.
<PAGE>
(ii) Except as set forth on Section 3.1(o)(ii) of the PeopleMover
Disclosure Schedule, as of the date of this Agreement, there are no
oppositions, cancellations, invalidity proceedings, interferences or
re-examination proceedings presently pending by any Governmental Entity
with respect to the Proprietary Software and Intellectual Property.
(ii) Except as set forth on Section 3.1(o)(iii) of the PeopleMover
Disclosure Schedule, if applicable, each item of Proprietary Software and
Intellectual Property has been used with the authorization of every other
claimant thereto and to the knowledge of PeopleMover, the execution,
delivery and performance of this Agreement will not impair the use by the
Constituent Corporations.
(ii) Except as set forth on Section 3.01(o)(iv) of the PeopleMover
Disclosure Schedule, as of the date of this Agreement, PeopleMover has not
interfered with, infringed upon, misappropriated or otherwise come into
conflict with any intellectual property rights of any third party with
respect to the Proprietary Software and Intellectual Property, and
PeopleMover has not received any charge, complaint, claim, demand or
notice of any such interference, infringement, misappropriation or
violation (including any claim that PeopleMover must refrain from using
any intellectual property rights of any third party) with respect to the
Proprietary Software or Intellectual Property.
(ii) Except as set forth on Section 3.01(o)(v) of the PeopleMover
Disclosure Schedule, as of the date of this Agreement, no third party has
interfered with, infringed upon or misappropriated or otherwise come into
conflict with any Proprietary Software and Intellectual Property rights of
PeopleMover.
(ii) Except as set forth on Section 3.01(o)(vi) of the PeopleMover
Disclosure Schedule, as of the date of this Agreement, there are no
pending claims, including litigation, arbitration, opposition proceedings,
petitions to cancel, interferences, administrative proceedings, demand
letters, cease and desist letters, or other demands, challenges or
disputes of any nature, challenging, im-
<PAGE>
pacting or involving the Proprietary Software and Intellectual Property
rights of PeopleMover.
(ii) The Proprietary Software and Intellectual Property do not infringe,
or constitute an infringement or misappropriation of any person's or
entity's patent right, design right, copyright, trademark, service mark
(and any application or registration respecting the foregoing), database
right, trade secret, know-how and/or other present or future intellectual
property right of any type, wherever in the world enjoyable or other
similar rights of any third party.
(ii) As of January 1, 2000, the Proprietary Software did not and will not,
due to the Year 2000 century date change: (A) have any operational
impediments; (B) malfunction; (C) cease to perform; (D) generate incorrect
or ambiguous data or results with respect to leap years, same-century and
multi-century formulas, functions, and data; nor (E) produce incorrect or
ambiguous results with respect to leap years, same-century and
multi-century formulas, functions, data values and date-data interfaces
(collectively, " Y2K Issues"). Additionally, PeopleMover has not received
any notification from any supplier of any Y2K Issues related to the
supplier's business hereof.
(ii) The Proprietary Software does not contain any (A) back door, time
bomb, drop dead device, or other software routine designed to disable a
computer program automatically, with the passage of time or under the
positive control of PeopleMover or (B) any virus, Trojan horse, worm, or
other software routine or hardware component designed to permit
unauthorized access, to disable, erase, modify or otherwise harm any
software, hardware or data or to perform any other such actions hereof.
For the purposes of this Section 3.1(o), the term "
Intellectual Property" means any and all of the following and all statutory
and/or common law rights throughout the world in, arising out of, or associated
therewith: (i) all patents and applications therefor, including docketed patent
disclosures awaiting filing, reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof; (ii) all
inventions (whether patentable or not), in-
<PAGE>
ventions disclosures and improvements, all trade secrets, confidential business
information (including research and development, know how, compositions,
designs, specifications, pricing and cost information and business and market
plans and proposals), proprietary information, manufacturing, engineering and
technical drawings and specifications, processes, designs and technology; (iii)
all works of authorship, copyrights (including derivative works thereof), mask
works, copyright and mask work registrations and applications therefor; (iv) all
trade names, trade dress, logos, product names, collective marks, collective
membership marks, trademarks, certification marks and service marks, trademark
and service mark registrations and applications together with the good will of
the business symbolized by the names and the marks; (v) all Uniform Resource
Locators, World Wide Web site addresses and domain names related to the
Business; (vi) all rights to use computer software including all source code
(including custom and off-the-shelf, hard copy and soft copy), as well as all
data and related documents, object code, databases, passwords, encryption
technology, firmware, development tools, files, records and data, and all media
on which any of the foregoing is recorded; (vii) any similar, corresponding or
equivalent rights to any of the foregoing; (viii) all documentation related to
any of the foregoing; and (ix) all goodwill associated with any of the foregoing
owned, used or licensed by PeopleMover that are related to the Business, as more
fully set forth on Section 3.1(o) of the PeopleMover Disclosure Schedule.
For the purpose of this Section 3.1(o), the term "
Proprietary Software" means all proprietary software, as well as the interface,
look-and-feel and functionality thereof, used in the functioning of the
peoplemover.com Website developed by, at the direction of or on behalf of
PeopleMover (including, without limitation, PeopleMover's two Internet based
solutions: PeopleMover/Staffing and PeopleMover/Service Automation) as more
fully set forth on Section 3.1(o) of the PeopleMover Disclosure Schedule.
(a) Noncompetition . Neither PeopleMover nor any of its employees is a party to
or bound by any noncompetition agreement or any other similar agreement or
obligation which purports to limit in any respect the manner in which, or the
localities in which, all or any material portion of the business of PeopleMover
is conducted.
<PAGE>
(a) Real Properties; Title to and Condition of Assets .
(b)
(ii) Neither PeopleMover nor any subsidiary of PeopleMover now owns or at
any time in the past has owned any fee interest in fee estates.
(ii) Section 3.1(q) of the PeopleMover Disclosure Schedule sets forth a
true and complete list of all Real Property leased, subleased, licensed,
used or occupied by PeopleMover pursuant to the Leases (" Leased Real
Property") setting forth information sufficient to identify specifically
such Leased Real Property and terms of the Leases with respect thereto.
For purposes of this Agreement, " Leases" means the Real Property leases,
subleases, licenses and use or occupancy agreements pursuant to which
PeopleMover is the Lessee, sublessee, licensee, user or occupant of Real
Property, or interests therein, including any amendments, modifications or
supplements to such Leases and any schedules or exhibits thereto. Each
Lease grants the Lessee under the Lease the right to use and occupy the
premises and rights demised thereunder in accordance with the terms
thereof, free and clear of any Liens, other than Liens for current Taxes,
assessments and other governmental charges not yet due and payable or that
may subsequently be paid without penalty or that are being contested in
good faith by appropriate proceedings. PeopleMover has good and valid
title to the leasehold estate or other interest created under its Leases
free and clear of any Liens. In the case of easements, rights of access,
rights-of-way, licenses and other interests included in the Real Property,
PeopleMover has such title or other interest as is necessary to permit the
use and enjoyment of such properties substantially in the manner such
properties are used and are contemplated to be used.
(ii) The Leased Real Property constitutes all the leasehold and other
interests in Real Property held by PeopleMover and constitutes all of the
leasehold and other interests in Real Property necessary for the conduct
of, or otherwise material to, the business of PeopleMover as it is
currently conducted.
<PAGE>
(ii) The Real Property has been maintained in compliance with (A) all
applicable laws, treaties, statutes, ordinances, codes, rules or
regulations of Governmental Entities, including, without limitation, local
zoning and subdivision ordinances, (B) all applicable judgments, decrees,
orders, writs, awards, injunctions or determinations of an arbitrator or
court or other Governmental Entity and (C) all applicable licenses. None
of the Real Property is subject to any decree or order of any Governmental
Entity to be sold or is being condemned, expropriated or otherwise taken
by any Governmental Entity.
(ii) As used herein, " Real Property" means all the leasehold and fee
simple interests in all fee estates, and all buildings, fixtures, and all
other improvements located thereon, leasehold interests in real estate,
private easements, private rights to access, private rights-of-way, and
other real property interests including, without limitation, head-end
sites which are owned, leased or used by PeopleMover in the conduct of its
business.
(ii) PeopleMover has good and marketable title to, or valid leasehold or
other interests in, and possession or valid use of, all of its assets and
properties, free and clear of all Liens. Such assets and properties are in
good operating condition and repair, ordinary wear and tear excepted. Such
assets and properties constitute all property and rights, real and
personal, tangible and intangible, necessary or required to operate the
business of PeopleMover.
(a) Agreements, Contracts and Commitments . (i) The applicable subsection of
Section 3.1(r) of the PeopleMover Disclosure Schedule sets forth a true and
complete list of all the following agreements, arrangements or understandings,
whether written or oral, to which PeopleMover is a party, (A) agreements
relating to indebtedness for borrowed money (whether incurred, assumed,
guaranteed, secured by any asset or otherwise), (B) agreements for the lease of
personal property to or from any person, (C) agreements concerning a partnership
or joint venture, (D) agreements concerning confidentiality or noncompetition
other than with respect to confidentiality agreements entered into in the
ordinary course of business for the benefit of PeopleMover's vendors or
potential investors or agreements with customers of PeopleMover, (E) profit
sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other material plans
<PAGE>
or arrangements for the benefit of the current or former employees or directors
of PeopleMover, (F) collective bargaining agreements, (G) agreements for the
employment or retention of any individual on a full-time, part-time, consulting,
or other basis not terminable on less than thirty (30) days notice without
penalty or cost, (H) agreements under which it has advanced or loaned any amount
in excess of $500 to any of the employees or affiliates of PeopleMover, (I)
agreements providing for indemnification of or by PeopleMover, (J) agreements by
PeopleMover providing products or services to any person for consideration other
than cash or receiving consideration from any person in products or services in
lieu of cash, (K) agreements for the purchase of materials, software, supplies,
goods, services, equipment or other assets that provide for either annual or
aggregate payments by PeopleMover of $10,000 or more, (L) sales, distribution or
other similar agreements providing for the sale by PeopleMover of materials,
supplies, goods, services, equipment, Proprietary Software or other assets that
provide for either annual or aggregate payments by PeopleMover of $10,000 or
more, (M) agreements or term sheets relating to the acquisition or disposition
of any business or assets of PeopleMover (whether by merger, sale of stock, sale
of assets or otherwise), excluding documentation relating to this Agreement, (N)
option, license, franchise or similar agreements, (O) agency, dealer, sales
representative, marketing or other similar agreements, (P) formal or informal
partnership arrangements with any merchant or service or web content provider
and (Q) other agreements material to PeopleMover (collectively the " Material
Agreements").
(b)
(a)
(ii) PeopleMover has delivered to Opus360 a true and complete copy of each
written Material Agreement and a written summary setting forth the terms
and conditions of each oral Material Agreement.
(ii) Each Material Agreement is in full force and effect, has not been
modified or amended and constitutes the legal, valid and binding
obligation of PeopleMover enforceable in accordance with its terms and
will continue to be so on identical terms immediately following the
consummation of the transactions contemplated by this Agreement, and
PeopleMover is not in default under any of such agreements, nor has any
event or circumstance occurred that, with notice or lapse of time or both,
would constitute any event of default by PeopleMover. No other party to
any of the Material Agreements (A) is, to the knowledge of PeopleMover, in
default in
<PAGE>
the performance of any covenant or obligation to be performed by it
pursuant to any such Material Agreement or (B) has given notice that it
intends to terminate, or alter in any way adverse to PeopleMover, its
performance under such Material Agreement. None of the Material Agreements
contains any revenue sharing provisions and to the extent any such
agreements contain such provisions, the schedule shall describe the
revenue sharing information with respect to such agreements.
(a) Environmental Matters .
(b)
(ii) PeopleMover is in compliance with all applicable Environmental Laws
(as defined herein) which compliance includes, but is not limited to, the
possession by PeopleMover of all permits and other governmental
authorizations required under applicable Environmental Laws, which are in
full force and effect, and compliance with the terms and conditions
thereof. As of the date of this Agreement, PeopleMover and its predecessor
by merger have not received since January 1, 1995 any written
communication, whether from a Governmental Entity, citizens' group,
employee or otherwise, alleging that PeopleMover is not in such
compliance.
(ii) There is no Environmental Claim (as defined herein) pending or
threatened against PeopleMover or against any person or entity whose
liability for any Environmental Claim PeopleMover has or may have retained
or assumed either contractually or by operation of law.
(ii) There have been no Releases (as defined herein) of Hazardous
Materials (as defined herein) at any of the Real Property or at any other
location.
(ii) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the
Release or presence of any Hazardous Material, which could form the basis
of any Environmental Claim against PeopleMover or against any person or
entity whose liability for any Environmental Claim PeopleMover has or may
have retained or assumed either contractually or by operation of law.
<PAGE>
(ii) As used herein, (A) " Environmental Claim" means any claim, action,
cause of action, investigation or notice (written or oral) by any person
or entity alleging any actual or potential liability arising out of, based
on or resulting from (x) the presence or Release of any Hazardous
Materials at any location, whether or not owned or operated by PeopleMover
or (y) circumstances forming the basis of any violation of any
Environmental Law, (B) " Environmental Laws" means all federal, state,
local and foreign laws and regulations relating to pollution, protection
of human health or the environment, including, without limitation, those
relating to Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, transport or handling of Hazardous Materials, (C) "
Hazardous Materials" means all substances defined as Hazardous Substances,
Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined as
such by, or regulated as such under, any Environmental Law and (D) "
Release" means any release, spill, emission, discharge, leaking, pumping,
pouring, dumping, injection, deposit, disposal, dispersal, leaching or
migration of Hazardous Materials into the environment (including, without
limitation, ambient air, surface water, groundwater and surface or
subsurface strata).
(a) Transactions with Affiliates . Except as set forth on Section 3.1(t) of the
PeopleMover Disclosure Schedule, PeopleMover is not involved with any of its
officers, directors, affiliates, employees or stockholders in any contract,
loan, commitment, transaction or in any other situation which may Generally be
characterized as a " conflict of interest," including, without limitation, any
direct or indirect interest in the business of competitors, suppliers or
customers of PeopleMover. PeopleMover directors, officers or employees do not
own more than 3% of any direct or indirect competitor of Opus360 or PeopleMover
nor do they hold any directorship, office or advisory position with any such
entity. PeopleMover's current or former directors, officers, employees,
stockholders or affiliates do not have any indemnification agreements with or
that bind PeopleMover other than those set forth on items 1 through 9 of
subsection I. on Section 3.1(r) of the PeopleMover Disclosure Schedule which
agreements shall be terminated prior to Closing.
(b)
<PAGE>
(c) Labor Matters . (i) PeopleMover is not a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of PeopleMover; (ii) PeopleMover does not have any
knowledge of any current union organizing activities among the employees of
PeopleMover, nor does any question concerning representation exist concerning
employees or former employees of PeopleMover; (iii) there is no labor strike,
dispute, slowdown, stoppage or lockout actually pending, or to the knowledge of
PeopleMover, threatened against or affecting PeopleMover and there has not been
any such action; (iv) PeopleMover is, and has at all times been, in material
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable law
or regulation; (v) there is no unfair labor practice charge or complaint against
PeopleMover pending or, to the knowledge of PeopleMover, threatened before the
National Labor Relations Board or any similar state or foreign agency; (vi) no
charges with respect to PeopleMover are pending or, to the knowledge of
PeopleMover threatened before the Equal Employment Opportunity Commission or any
other agency responsible for the prevention of unlawful employment practices;
(vii) PeopleMover has not received notice of the intent of any federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws to conduct an investigation with respect to or relating to PeopleMover and
no such investigation is in progress; (viii) except as set forth on Section
3.1(u)(viii) of the PeopleMover Disclosure Schedule, there are no complaints,
lawsuits or other proceedings pending or to the knowledge of PeopleMover
threatened in any forum by or on behalf of any present or former employee, or
class or group of employees, of PeopleMover, any applicant for employment or
classes of the foregoing alleging breach of any express or implied contract or
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship; (ix) except as set forth on Section 3.1(u)(ix) of
the PeopleMover Disclosure Schedule, there are no employment contracts, offer
letters, consulting agreements or severance agreements with any employees of or
consultants to PeopleMover; (x) except as set forth on Section 3.1(u)(x) of the
PeopleMover Disclosure Schedule, copies of which have been delivered to Opus360,
there are no employee handbooks, written policies, rules or procedures
applicable to employees of or consultants to PeopleMover; and (xi) since the
enactment of the WARN Act, PeopleMover has not effectuated (A) a " plant
closing" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employ-
<PAGE>
ment or facility of PeopleMover; or (B) a " mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of PeopleMover; nor has
PeopleMover been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state or
local law. None of PeopleMover's employees have suffered an " employment loss"
(as defined in the WARN Act) within six (6) months of the date of this
Agreement.
(d)
(e) Registered Securities . PeopleMover does not have any securities registered,
or required to be registered, under Section 12 of the Securities Exchange Act of
1934, as amended.
(f)
1.2 SECTION Representations and Warranties of Opus360 and Sub . Except as
disclosed in the Opus360 Form S-1 or as disclosed in the Opus360 disclosure
schedule delivered by Opus360 to PeopleMover prior to the execution of this
Agreement (the " Opus360 Disclosure Schedule") and making reference to the
particular subsection of this Agreement to which exception is being taken;
provided that certain information (including the Initial Exchange Ratio and the
Adjusted Exchange Ratio) contained in this Agreement and the related sections of
the Opus360 Disclosure Schedule reflects the acquisition of Ithority
Corporation, a California corporation, by Opus360 through the merger of a wholly
owned subsidiary of Opus360 with and into Ithority Corporation with Ithority
Corporation remaining as the surviving corporation reflects the consummation of
such acquisition as if it had occurred as of the date hereof, Opus360 and Sub
represent and warrant to PeopleMover as follows:
1.3
(a) Organization, Standing and Corporate Power . Each of Opus360, Sub and their
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions which recognize
such concept) under the laws of the jurisdiction in which it is organized and
has the requisite corporate or other power, as the case may be, and authority to
carry on its business as now being conducted, except for those jurisdictions
where the failure to be so organized, existing or in good standing individually
or in the aggregate is not reasonably likely to have a material adverse effect
on Opus360. Each of Opus360 and its subsidiaries is duly qualified or licensed
to do business and is in good standing (with respect to jurisdictions which
recognize such concept) in each jurisdiction in which the nature of its business
or the ownership, leasing, licensing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good standing individually or
in the aggregate is not reasonably likely to have a material
<PAGE>
adverse effect on Opus360. Opus360 has made available to PeopleMover prior to
the execution of this Agreement true and complete copies of its amended and
restated certificate of incorporation and by-laws and the certificate of
incorporation and by-laws of Sub, each of which are in full force and effect on
the date hereof.
(b)
(c) Capital Structure . The authorized capital stock of Opus360 consists of
45,000,000 shares of Opus360 Common Stock and 25,000,000 shares of preferred
stock, par value $0.001 per share, of Opus360 (the " Opus360 Authorized
Preferred Stock"), of which 8,400,000 shares have been designated as Series A
Convertible Preferred Stock and 8,700,000 shares have been designated as Series
B Convertible Preferred Stock (collectively, the " Opus360 Convertible Preferred
Stock" and together with the Opus360 Common Stock, the " Opus360 Capital
Stock"). At the close of business on January 28, 2000, (i) 8,366,495 shares of
Opus360 Common Stock were issued and outstanding, (ii) approximately 3,829,275
shares of Opus360 Common Stock were reserved for issuance pursuant to
outstanding stock options or other rights to purchase or receive Opus360 Common
Stock granted under the Opus360 Corporation 1998 Stock Option Plan (the "
Opus360 Stock Plan"), (iii) 16,960,727 shares of Opus360 Convertible Preferred
Stock were issued and outstanding, (iv) 16,960,727 shares of Opus360 Common
Stock were reserved for issuance upon conversion of the Opus360 Convertible
Preferred Stock and (v) 1,638,015 shares of Opus360 Common Stock were issuable
upon exercise of Opus360 warrants and nonqualified stock options of Opus360
issued outside the Opus360 Stock Plan. Except as set forth on Section 3.2(b) of
the Opus360 Disclosure Schedule, as of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Opus360 having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which the stockholders of Opus360 may vote are issued or
outstanding. Except as set forth on Section 3.2(b) of the Opus360 Disclosure
Schedule, all outstanding shares of capital stock of Opus360 when issued were
duly authorized, validly issued, fully paid and nonassessable.
(d)
(e) Authority; Noncontravention . Each of Opus360 and Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Opus360 and Sub and the consummation by Opus360 and Sub of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Opus360 and Sub, as applicable. This
Agreement has been duly executed and delivered by Opus360 and Sub and, assuming
the due authorization, execution and delivery by PeopleMover, the Peo-
<PAGE>
pleMover Stockholders and the Stockholder Representative constitutes a legal,
valid and binding obligation of Opus360 and Sub, enforceable against each of
them in accordance with its terms, except as such enforcement may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting creditor's rights Generally and (ii) except as set forth on
Section 3.2(c)(ii) of the Opus360 Disclosure Schedule, availability of equitable
remedies. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under, or result in the creation of any Lien
upon any of the properties or assets of Opus360 or Sub or any of Opus360's other
subsidiaries under, (i) the certificate of incorporation or by-laws of Opus360
or Sub or the comparable organizational documents of any of Opus360's other
subsidiaries, (ii) any of the terms, conditions or provisions of any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or similar authorization
applicable to Opus360 or Sub or any of Opus360's other subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the proceeding clause any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Opus360 or Sub or any
of Opus360's other subsidiaries or their respective properties or assets. No
consent, approval, order or authorization of, action by, or in respect of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Opus360 or Sub or any of Opus360's other subsidiaries in
connection with the execution and delivery of this Agreement by Opus360 and Sub
or the consummation by Opus360 and Sub of the transactions contemplated by this
Agreement, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other States in which Opus360 is qualified to do
business and such filings with Governmental Entities to satisfy the applicable
requirements of the California Code or "blue sky" laws, if any and (ii) such
consents, approvals, orders or authorizations the failure of which to be made or
obtained individually or in the aggregate is not reasonably likely to have a
material adverse effect on Opus360.
(f)
(g) Litigation . Except as set forth on Section 3.2(d) of the Opus360 Disclosure
Schedule, there is no suit, action or proceeding pending or, to the knowledge of
Opus360, threatened against or affecting Opus360 or any of its subsidiaries
that, individually or in the aggregate, is reasonably likely to have a material
adverse effect on Opus360 nor is there any judgment, decree, injunction, rule
<PAGE>
or order of any Governmental Entity or arbitrator outstanding against Opus360 or
any of its subsidiaries having, or which is reasonably likely to have,
individually or in the aggregate, a material adverse effect on Opus360.
(h)
(i) Compliance with Applicable Laws . Except as set forth on Section 3.2(e) of
the Opus360 Disclosure Schedule, Opus360 and its subsidiaries hold all material
permits, licenses, variances, exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the operation of the businesses
of Opus360 and its subsidiaries (the " Opus360 Permits"), except where the
failure to have any such Opus360 Permits individually or in the aggregate would
not reasonably likely to have a material adverse effect on Opus360. Opus360 and
its subsidiaries are in compliance with the terms of the Opus360 Permits and all
applicable statutes, laws, ordinances, rules and regulations, except where the
failure so to comply individually or in the aggregate is not reasonably likely
to have a material adverse effect on Opus360. No action, demand, requirement or
investigation by any Governmental Entity and no suit, action or proceeding by
any person, in each case with respect to Opus360 or any of its subsidiaries or
any of their respective properties, is pending or, to the knowledge of Opus360,
threatened, other than, in each case, those the outcome of which individually or
in the aggregate are not reasonably likely to have a material adverse effect on
Opus360 and its subsidiaries, taken as a whole.
(j)
(k) Merger Consideration. The shares of Opus360 Common Stock to be issued in the
Merger in exchange for shares of PeopleMover Common Stock have been duly
authorized and reserved for issuance and when issued and delivered in accordance
with the terms of this Agreement will have been validly issued, fully paid and
nonassessable.
(l)
(m) Voting Requirements . No vote of the holders of shares of Opus360 Common
Stock or any other class or series of capital stock of Opus360 is necessary to
approve the Merger and adopt this Agreement and the transactions contemplated
hereby.
(n)
(o) Negotiations. As of the date of this Agreement, Opus360 is not currently in
ongoing negotiations nor has it executed a definite term sheet with any person
that could result in a material acquisition which would include all or a portion
of the consideration to be paid or satisfied in Opus360 Common Stock which would
close after the date of this Agreement but prior to the Effective Time;
provided, however, nothing in this subsection (h) shall prevent or impede
<PAGE>
Opus360 and its Board of Directors from satisfying their fiduciary duties in
respect of any potential or actual corporate opportunity.
(p)
(q) Brokers . No agent, broker, investment banker, financial advisor or other
person, other than Greenhill & Co. LLC, the fees and expenses of which will be
satisfied by Opus360, is entitled to any broker's or finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Opus360.
(r)
(s) Interim Operations of Sub . (i) Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby; (ii) Sub has engaged in no
other business activities; (iii) Sub has no liabilities except as set forth in
this Agreement and as pursuant to applicable law; and (iv) Sub has conducted its
operations only as contemplated hereby.
(t)
1 ARTICLE COVENANTS RELATING TO CONDUCT OF BUSINESS
ARTICLE 1 COVENANTS RELATING TO CONDUCT OF BUSINESS
(a) SECTION Conduct of Business . Conduct of Business by PeopleMover . Except as
otherwise expressly contemplated by this Agreement or as set forth on the
applicable subsection of Section 4.1 of the PeopleMover Disclosure Schedule or
as consented to by Opus360 in writing in each instance, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to Article VII hereof and the Effective Time,
PeopleMover shall carry on its business in the ordinary course and consistent
with past practice and in compliance with all applicable laws and regulations
and, to the extent consistent therewith, use reasonable commercial efforts to
preserve intact its current business organizations, use reasonable commercial
efforts to keep available the services of its current officers, employees and
consultants and preserve its relationships with those persons, customers,
suppliers and vendors having business dealings with it to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time and
without limiting the generality of the foregoing, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to Article VII hereof or the Effective Time, PeopleMover
shall not:
<PAGE>
(ii) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of PeopleMover Capital Stock, (B) split, combine
or reclassify PeopleMover Capital Stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of PeopleMover Capital Stock, except upon exercise of rights or
options issued pursuant to the Plan or (C) except as set forth on Section
4.1(i)(C) of the PeopleMover Disclosure Schedule, purchase, redeem or
otherwise acquire any shares of PeopleMover Capital Stock or any other
securities of PeopleMover or any rights, warrants, options or calls to
acquire any such shares or other securities of PeopleMover;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject to any
Lien any shares of PeopleMover Capital Stock, any other voting securities
or any securities convertible into, or any rights, warrants, options or
calls to acquire, any shares of PeopleMover Common Stock, voting
securities or convertible securities of PeopleMover (other than (A) the
issuance of PeopleMover Options granted consistent with past practice to
new or promoted employees (other than executive officers) of PeopleMover
representing in the aggregate not more than 115,000 shares of PeopleMover
Common Stock and as set forth on Section 3.1(j) of the PeopleMover
Disclosure Schedule and Exhibit 3.1(j) to the PeopleMover Disclosure
Schedule; provided that the vesting of such PeopleMover Options shall not
be accelerated in full or in part as a result of or in connection with the
execution or delivery of this Agreement or the transactions contemplated
hereby, (B) the issuance of PeopleMover Common Stock upon the conversion
of PeopleMover Convertible Notes or PeopleMover Series A Preferred Stock
or upon the exercise of PeopleMover Warrants, PeopleMover Service Options
or, subject to Section 2.3 hereof, PeopleMover Options outstanding as of
the date hereof in accordance with their present terms, or upon the
exercise of the PeopleMover Options referred to in clause (A) above in
accordance with their present terms, or (C) the issuance of PeopleMover
Options under the Additional Option Grant in accordance with Section 5.14
hereof; provided that the vesting of such PeopleMover Options issued
pursuant to the Additional Option Grant described in Section 5.14 hereof
shall not be accelerated in full or in part as a re-
<PAGE>
sult of or in connection with the execution or delivery of this Agreement
or the transactions contemplated hereby.
(ii) amend its amended and restated certificate of incorporation or
by-laws;
(ii) acquire or agree to acquire by merging or consolidating with, or by
purchasing assets of, or by any other manner, any business or any person,
other than purchases of raw materials or supplies in the ordinary course
of business consistent with past practice;
(ii) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets
(including securitizations);
(ii) (A) except pursuant to the terms of the Interim Funding Agreement,
incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities,
warrants, calls or other rights to acquire any debt securities of
PeopleMover, any debt securities of another person, enter into any "keep
well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of
any of the foregoing, except for short-term borrowings incurred in the
ordinary course of business consistent with past practice or (B) make any
loans, advances or capital contributions to, or investments in, any other
person;
(ii) make or agree to make any new capital expenditure or expenditures, or
enter into any agreement or agreements providing for payments which,
individually, are in excess of $5,000 or, in the aggregate, are in excess
of $20,000;
(ii) settle or compromise or agree to settle or compromise any material
Tax liability or make any material Tax election;
(ii) pay, discharge, settle or satisfy any material claims, liabilities,
obligations or litigation (absolute, accrued,
<PAGE>
asserted or unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction, in the ordinary course of business
or in accordance with their terms, of liabilities recognized or disclosed
in the PeopleMover Financial Statements provided to Opus360 or incurred
since the date of such financial statements, or waive the benefits of, or
agree to modify in any manner, any standstill or similar agreement to
which PeopleMover is a party;
(ii) except as required by law or contemplated hereby and except for labor
agreements negotiated in the ordinary course, enter into, adopt or amend
in any material respect or terminate any Plan or similar policy or
agreement involving PeopleMover and one or more of its directors,
officers, employees or agents, or materially change any actuarial or other
assumption used to calculate funding obligations with respect to any
pension plan, or change the manner in which contributions to any pension
plan are made or the basis on which such contributions are determined;
(ii) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of PeopleMover, or as
contemplated hereby or by the terms of any employment agreement or offer
letter in existence on the date hereof which have been set forth on
Section 3.1(j) of the PeopleMover Disclosure Schedule, increase the cash
compensation of any director, executive officer, employee or agent of or
consultant to PeopleMover or pay any benefit or amount not required by a
plan or arrangement as in effect on the date of this Agreement to any such
person;
(ii) transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Intellectual Property of PeopleMover
other than in the ordinary course of business consistent with past
practice or on a nonexclusive basis not materially different from past
practices;
(ii) change in any material respect its method of Tax accounting or Tax
practice, or except as permitted pursuant to Section 5.13 hereof, its
accounting policies, methods or procedures;
<PAGE>
(ii) enter into any agreement with any stockholder of PeopleMover or
amend, modify or change the terms and conditions of the Stockholders
Agreement, dated as of December 18, 1998, by and among PeopleMover, Avalon
Technology, LLC, DynaFund, L.P., DynaFund International, L.P., Windward
Ventures, L.P. and the other parties named on the signature pages thereto,
as amended (the " PeopleMover Stockholders' Agreement");
(ii) use any form of service contract other than the form of Opus360
service contract substantially in the form set forth on Section 4.1(xv) of
the Opus360 Disclosure Schedule when entering into agreements with new
customers or modifying a relationship with an existing customer;
(ii) modify, amend, alter or change terms, provisions or rights and
obligations of any Material Contract set forth on Section 3.1(r) of the
PeopleMover Disclosure Schedule;
(ii) do any act or omit to do any act which would cause a breach of any
contract, commitment or obligation if the result would, individually or in
the aggregate, have a material adverse effect on PeopleMover;
(ii) take any action which could reasonably be expected to adversely
affect or delay the ability of any of the parties to obtain any approval
of any Governmental Entity required to consummate the transactions
contemplated hereby;
(ii) take any action that would prevent or impede the Merger from
qualifying as a tax-free exchange described in Section 368 of the Code;
(ii) take any action that would cause the representations and warranties
set forth in Section 3.1 hereof to no longer be true and correct as so
qualified, by materiality, where applicable; or
<PAGE>
(ii) authorize, or commit or agree to take, any of the foregoing actions.
(a) Conduct of Business by Opus360 . Except as otherwise expressly contemplated
by this Agreement, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, Opus360 shall not (i) make any acquisition of assets or
businesses which would cause a material delay of the Merger, (ii) do any act or
omit to do any act which would cause a breach of any contract, commitment or
obligation if the result would, individually or in the aggregate, have a
material adverse effect on Opus360, (iii) take any action which could reasonably
be expected to adversely affect or delay the ability of any of the parties to
obtain any approval of any Governmental Entity required to consummate the
transactions contemplated hereby, (iv) take any action that would cause the
representations and warranties set forth in Section 3.2 hereof to no longer be
true or complete as so qualified by materiality, where applicable or (v)
authorize, or commit or agree to take, any of the foregoing actions.
(b)
(c) Other Actions . Except as required by applicable law, PeopleMover and
Opus360 shall not, and Opus360 shall not permit any of its subsidiaries to,
voluntarily take any action that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties of such party set forth
in this Agreement that are qualified as to materiality becoming untrue at the
Effective Time, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect at the Effective Time or (iii)
any of the conditions to the Merger set forth in Article VI not being satisfied.
(d)
(e) Advice of Changes . PeopleMover and Opus360 shall promptly advise the other
party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it (and, in the case of Opus360, made by Sub)
contained in this Agreement becoming untrue or inaccurate in any respect where
the failure of such representation to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect" set
forth therein), individually or in the aggregate, has had or is reasonably
likely to have a material adverse effect on it, (ii) the failure by it (and, in
the case of Opus360, by Sub) to comply in any material respect with or satisfy
in any material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement and (iii) any change or event having, or
which is reasonably likely to have, a material adverse effect on such party or
on the truth of their respective representations and warranties or the ability
of the conditions set forth in Article VI to be
<PAGE>
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement.
(f)
(g) SECTION No Solicitation by PeopleMover . For a period of ninety (90) days
from December 3, 1999 or the earlier termination of the Interim Funding
Agreement (the " No Solicitation Period"), PeopleMover shall not nor shall it
authorize or permit any of its directors, officers, employees or stockholders or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly through another person,
(i) solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making of
any proposal which constitutes a Takeover Proposal (as defined herein) or (ii)
participate in any discussions or negotiations regarding any Takeover Proposal.
In the event a Takeover Proposal is presented to PeopleMover or a representative
of PeopleMover, PeopleMover shall and shall instruct its representatives to
issue a "no interest at this time" response during the No Solicitation Period.
For purposes of this Agreement, " Takeover Proposal" means any inquiry, proposal
or offer from any person relating to any direct or indirect acquisition or
purchase of PeopleMover Capital Stock, all or substantially all of the assets of
PeopleMover, or any merger, consolidation, business combination,
recapitalization, reorganization, liquidation, dissolution or similar
transaction involving PeopleMover, other than the transactions contemplated by
this Agreement.
(h)
(i) PeopleMover shall immediately advise Opus360 orally and in writing of any
request for information or of any Takeover Proposal, the material terms and
conditions of such request or Takeover Proposal and the identity of the person
making such request or Takeover Proposal.
(j)
<PAGE>
1 ARTICLE ADDITIONAL AGREEMENTS ARTICLE
1 ADDITIONAL AGREEMENTS
(a) SECTION PeopleMover Financial Statements; PeopleMover Stockholders' Written
Consent . As soon as practicable following the date of this Agreement,
PeopleMover shall prepare and deliver or caused to be prepared and delivered
audited financial statements prepared in accordance with United States Generally
Accepted Accounting Principles and meeting the requirements of Regulation S-X of
the Securities Act, as required by the rules and regulations of Form S-1 under
the Securities Act, which financial statements (the " PeopleMover Financial
Statements") shall be included as part of one or more amendments or supplements
to the Opus360 Form S-1 filed with the Securities and Exchange Commission (the "
Commission"). PeopleMover shall furnish or cause to be furnished to Opus360 all
information concerning PeopleMover and its stockholders and, at the expense of
Opus360, shall take such other action as Opus360 may reasonably request in
connection with the filing by Opus360 of the Opus360 Form S-1 and the issuance
of Opus360 Common Stock in the Merger. If at any time prior to the Effective
Time any information relating to the PeopleMover Financial Statements should be
discovered by PeopleMover or Opus360 which should be set forth in an amendment
or supplement to the Opus360 Form S-1, so that the Opus360 Form S-1 would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such information
shall promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the
Commission.
(a) PeopleMover shall, as soon as practicable following the date of this
Agreement, solicit an action by written consent in lieu of a meeting as
permitted by Section 228(a) of the DGCL (the " PeopleMover Stockholders' Written
Consent") for the purpose of obtaining the PeopleMover Stockholder Approval and
shall, through its Board of Directors, recommend to its stockholders the
approval of the Merger and adoption of this Agreement and the other transactions
contemplated hereby in each case in accordance with Section 25103(h) of the
California Code and Section 251(c) of the DGCL. PeopleMover agrees that its
obligations pursuant to the first sentence of this Section 5.1(b) shall not be
affected by the commencement, proposal or communication to PeopleMover of any
Takeover Proposal.
<PAGE>
(b)
(c) SECTION Written Consent of PeopleMover's Accountants . PeopleMover shall use
commercially reasonable best efforts to cause to be delivered to Opus360 a
written consent from PeopleMover's independent accountants, within five (5)
business days prior to the date on which the Opus360 Form S-1 shall initially
include the PeopleMover Financial Statements as filed with the Commission in
form and substance reasonably satisfactory to Opus360 and customary in scope and
substance for written consents delivered by independent public accountants in
connection with registration statements similar to the Opus360 Form S-1.
(d)
(e) PeopleMover and its directors, officers, employees and representatives shall
provide full cooperation to each of Opus360's independent accountants and
PeopleMover's independent accountants to enable PeopleMover's independent
accounts to deliver the written consent referred to in Section 5.2(a) hereof.
(f)
1.2 SECTION Access to Information; Confidentiality . Subject to the
Non-disclosure Agreement dated November 19, 1999, by and between Opus360 and
PeopleMover (the " Confidentiality Agreement"), each of Opus360 and PeopleMover
shall, and Opus360 shall cause each of its subsidiaries to, afford to the other
party and to the officers, employees, accountants, counsel, financial advisors
and other representatives of such other party, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of PeopleMover and Opus360 shall, and Opus360 shall
cause each of its subsidiaries to, furnish promptly to the other party (a) a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal or state
securities laws, as applicable and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
Neither Opus360, PeopleMover nor any subsidiary of Opus360 shall be required to
provide access to or disclose information where such access or disclosure would
contravene any law, rule, regulation, order or decree. No review pursuant to
this Section 5.3 shall have an effect for the purpose of determining the
accuracy of any representation or warranty given by either party hereto to the
other party hereto. Each of PeopleMover and Opus360 will hold, and will cause
its respective officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information in
accordance with the terms of the Confidentiality Agreement.
1.3
<PAGE>
(a) SECTION Commercially Reasonable Best Efforts . Except as otherwise
specifically set forth in this Agreement, upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
commercially reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement, including (i) the obtaining
of all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
and the taking of all steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
(b)
(c) In connection with and without limiting the foregoing, PeopleMover and
Opus360 shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Merger,
this Agreement or any of the other transactions contemplated by this Agreement
and (ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, this Agreement or any other transaction contemplated
by this Agreement, take all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
(d)
(e) SECTION Indemnification, Exculpation and Insurance . Opus360 agrees that all
rights to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the current
or former directors or officers of PeopleMover as provided in its amended and
restated certificate of incorporation or by-laws of PeopleMover, the existence
of which does not constitute a breach of this Agreement, shall be assumed by the
Surviving Corporation in the Merger, without further action, as of the Effec-
<PAGE>
tive Time and shall survive the Merger and shall continue in full force and
effect in accordance with their terms, and Opus360 shall cause the Surviving
Corporation to honor all such rights.
(f)
(g) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, Opus360 shall cause proper provision
to be made so that the successors and assigns of the Surviving Corporation
assume the obligations set forth in this Section 5.5.
(h)
(i) For three (3) years after the Effective Time, Opus360 shall maintain in
effect PeopleMover's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with respect to
those persons who are currently covered by PeopleMover's directors' and
officers' liability insurance policy on terms with respect to such coverage and
amount no less favorable than those of such policy in effect on the date hereof;
provided that Opus360 may substitute therefore policies of Opus360 or its
subsidiaries containing terms with respect to coverage and amount no less
favorable to such directors or officers; provided further, that if the existing
or substituted directors' and officers' liability insurance expires, is
terminated or canceled during such three (3) year period, Opus360 shall obtain
as much directors' and officers' liability insurance as can be obtained for the
remainder of such period for a premium not in excess of 100% of the aggregate
premiums paid by PeopleMover in 1999 on an annualized basis for such purpose and
that in no event shall Opus360 be required to pay aggregate premiums for
insurance under this Section 5.5(c) in excess of 100% of the amount of aggregate
premiums paid by PeopleMover in 1999 on an annualized basis for such purpose.
(j)
(k) The provisions of this Section 5.5: (i) are intended to be for the benefit
of, and shall be enforceable by, each indemnified party, or his or her heirs and
his or her representatives; and (ii) are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such person
may have by contract or otherwise.
(l)
(m) Opus360 agrees to use reasonable commercial efforts to add each of the
officers of the Surviving Corporation set forth in Section 1.6(b) hereof to its
existing directors' and officers' liability insurance policy; provided,
<PAGE>
however, in no event shall Opus360 be required to pay any additional amounts (on
a pro rata basis) above its latest premium payment for Opus360 directors' and
officers' liability insurance policy which it considers based on the facts and
circumstances to be unreasonable or to substantially modify the terms and
conditions of its existing directors' and officers' liability insurance policy
for such purpose; provided further to the extent that in the reasonable judgment
of Opus360 such coverage is duplicative of the coverage under the directors' and
officers' liability insurance policy described in Section 5.5(c) hereof, Opus360
may terminate the coverage of such former officer of PeopleMover under such
insurance policy, as such policy may be amended from time to time.
(n)
1.4 SECTION Fees and Expenses . Except as provided in this Section 5.6, all
reasonable fees and reasonable expenses and reasonable disbursements incurred by
PeopleMover (and only PeopleMover) in connection with the Merger, this Agreement
and the transactions contemplated by this Agreement shall be paid by Opus360;
provided that Opus360, Sub, PeopleMover or the Surviving Corporation shall not
be responsible for any fees or expenses of any stockholder, director or employee
(or former employee) of PeopleMover in connection with the Merger, this
Agreement or the transactions contemplated hereby, including, without
limitation, the fees, costs and disbursements of any counsel separately engaged
by the officers of the Surviving Corporation listed in Section 1.6(b). At the
Closing, PeopleMover shall provide to Opus360 a list of counsel, accountants and
any other advisors employed or retained in connection with the Merger, including
the basis of their remuneration and the amounts owing and unpaid to such
advisors as of the day immediately preceding the Closing Date, as well as a
reasonable estimate of the fees, expenses and disbursements of each such advisor
required to finalize the documentation required to be prepared, executed and
delivered and, if applicable, filed in connection with the transactions
contemplated by this Agreement. In addition, Opus360 shall file any return with
respect to, and shall pay, any state or local taxes (including any penalties or
interest with respect thereto), if any, which are attributable to the transfer
of the beneficial ownership of PeopleMover's real property (collectively, the "
Real Estate Transfer Taxes") as a result of the Merger (other than any such
taxes that are solely the obligations of any stockholder, director or employee
(or former employee) of PeopleMover, in which case such affected person shall
promptly pay any such taxes). PeopleMover shall cooperate with Opus360 in the
filing of such returns including, in the case of PeopleMover, supplying in a
timely manner a complete list of all real property interests held by PeopleMover
and any information with respect to such property that is reasonably necessary
to complete such returns. The fair market value of any real property of
PeopleMover subject to
<PAGE>
the Real Estate Transfer Taxes shall be as agreed to between Opus360 and
PeopleMover.
1.5
1.6 SECTION Public Announcements . Except as set forth below, no press release
or announcement concerning the existence of this Agreement or the transactions
contemplated hereby or thereby shall be issued by any party without the prior
written consent of the other party, except that in the event Opus360 shall deem
such press release or announcement to be required by law, rule or regulation
(including applicable Federal and State securities laws, rules and regulations
and applicable stock exchange or Nasdaq rules).
1.7
1.8 SECTION Stockholder Litigation . PeopleMover shall give Opus360 the
opportunity to participate in the defense of any stockholder litigation against
PeopleMover and/or its directors relating to the transactions contemplated by
this Agreement.
1.9
1.10 SECTION Tax Treatment . Each of Opus360 and PeopleMover shall use
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368(a) of the Code.
1.11
1.12 SECTION Appointment of Opus360 Board of Directors/Member . Opus360 agrees
to use its reasonable best efforts to appoint one (1) representative nominated
by the Board of Directors of PeopleMover to the Board of Directors of Opus360
which such representative shall be reasonably acceptable to Opus360. PeopleMover
has provided written notice to Opus360 that Brian Plug is PeopleMover's initial
appointment to the Board of Directors of Opus360.
1.13
1.14 SECTION Consents . Each of Opus360 and PeopleMover shall use reasonable
commercial best efforts to obtain all necessary consents, waivers and approvals,
and to make all necessary notifications or filings under any of Opus360's or
PeopleMover's material agreements, contracts, insurance policies, licenses or
leases, whether oral or written, as may be necessary or advisable to consummate
the Merger and the other transactions contemplated by this Agreement,
specifically including as to PeopleMover the agreements, contracts, licenses and
leases set forth on Section 5.11 of the PeopleMover Disclosure Schedule.
1.15
1.16 SECTION Closing Date Balance Sheet . PeopleMover shall prepare or cause to
be prepared a Closing Date Balance Sheet dated as of the
<PAGE>
Closing Date and prepared as described in Section 3.1(e)(ii) hereof and in form
and substance reasonably acceptable to Opus360.
1.17
1.18 SECTION Revenue Readjustment . PeopleMover shall use reasonable commercial
efforts to restate or cause to be restated revenue recognized under PeopleMover
service contracts that had been previously recognized on the financial
statements of PeopleMover as booked revenue to be recognized over a three-year
period as service revenues in accordance with the current stated accounting
policies of Opus360. PeopleMover agrees to fully cooperate with its independent
accountants and Opus360 and its independent accountants in order to, where
possible, reflect such booked revenues as service revenues in accordance with
the accounting policies of Opus360.
1.19
1.20 SECTION Additional Option Grant . PeopleMover shall have granted
PeopleMover Options to the PeopleMover officers and employees set forth on
Section 5.14 of the PeopleMover Disclosure Schedule in the aggregate number and
at the exercise price set forth opposite such person's name prior to the
Effective Time. In addition to such other terms as shall be set forth in the
applicable option agreements: (a) each such PeopleMover Option shall have an
exercise price per share equal to $2.05 (prior to adjustment for the Merger
pursuant to Section 2.3 hereof); (b) except as otherwise specifically set forth
in the respective employment agreements of the Escrow Stockholders, such
PeopleMover Options shall vest with respect to 25% of the shares covered thereby
on the first anniversary of the date of such grant and such PeopleMover Options
shall cumulatively vest with respect to the remaining 75% of the shares covered
thereby in thirty-six equal monthly installments beginning on the first
anniversary of the date of grant; and (iii) the exercisability of such
PeopleMover Options shall not accelerate in connection with the transactions
contemplated by this Agreement.
1.21
1.22 SECTION Release and/or Assumption of Personal Guaranties . Opus360 agrees
to use its reasonable commercial efforts to secure a release from (i) or assume
the obligations of the personal guaranties in respect of each of the contracts
set forth on Section 5.15 of the PeopleMover Disclosure Schedule and (ii) any
personal guarantees in respect of PeopleMover contracts entered into at the time
of such contract by an officer of PeopleMover on behalf of PeopleMover who
immediately prior to the Closing remains an officer of PeopleMover; provided,
however, in no event shall Opus360 be obligated to pay any amounts as an advance
or deposit, grant a Lien over any of its property (including the subject matter
of such contracts) or subject itself to any other burdensome obligation
(including the substi-
<PAGE>
tution of any Opus360 director, officer, employee or stockholder for such
personal guaranty obligation).
1.23
1 ARTICLE CONDITIONS PRECEDENTARTICLE
1 CONDITIONS PRECEDENT
1.1 SECTION Conditions to Each Party's Obligation To Effect the Merger . The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) PeopleMover Stockholder Approval . The PeopleMover Stockholder Approval
shall have been obtained in accordance with Section 25103(h) of the California
Code and be in effect.
(b)
(c) No Litigation . No judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court or
other Governmental Entity of competent jurisdiction or other legal restraint or
prohibition (collectively, " Restraints") shall be in effect, and there shall
not be pending any suit, action or proceeding by any Governmental Entity (i)
preventing the consummation of the Merger or (ii) which otherwise is reasonably
likely to have a material adverse effect on PeopleMover or Opus360, as
applicable; provided, however, prior to invoking this condition, the party so
invoking this condition shall have used its reasonable efforts to prevent the
entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(d)
(e) All authorizations, consents, orders or approvals of any Governmental Entity
required to consummate the transactions contemplated by this Agreement shall
have been obtained and be in effect.
(f)
1.2 SECTION Additional Conditions to Obligations of Opus360 and Sub . The
obligation of Opus360 and Sub to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
1.3
(a) Representations and Warranties . The representations and warranties of
PeopleMover set forth herein shall be true and correct both when made and at and
as of the Closing Date, as if made at and as of such time (ex-
<PAGE>
cept to the extent expressly made as of an earlier date, in which case as of
such date), except in each case as qualified by materiality or material adverse
effect and Opus360 shall have received a certificate executed on behalf of
PeopleMover by the chief executive officer or the chief financial officer of
PeopleMover to that effect;
(b)
(c) Performance of Obligations of PeopleMover . PeopleMover shall have performed
in all respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date and Opus360 shall have received a
certificate executed on behalf of PeopleMover by the chief executive officer or
the chief financial officer of PeopleMover to that effect;
(d)
(e) all issued and outstanding shares of PeopleMover Series A Preferred Stock
shall have been converted into shares of PeopleMover Common Stock;
(f)
(g) all issued and outstanding PeopleMover Convertible Notes shall have been
converted into shares of PeopleMover Common Stock;
(h)
(i) all issued and outstanding PeopleMover Warrants shall have been exercised
for shares of PeopleMover Common Stock;
(j)
(k) all issued and outstanding PeopleMover Service Options shall have been
exercised for shares of PeopleMover Common Stock;
(l)
(m) PeopleMover shall have completed the issuance of PeopleMover Options under
the Additional Option Grant pursuant to Section 5.14 hereof;
(n)
(o) the action by written consent of the PeopleMover Stockholders as permitted
by Section 228(a) of the DGCL approving the Merger and the adoption of this
Agreement and the transactions contemplated hereby in accordance with Section
25103(h) of the California Code and Section 251(c) of the DGCL, certified as
true, complete and correct on the Closing Date in a certificate executed on
behalf of PeopleMover by the chief executive officer or the chief financial
officer of PeopleMover shall have been delivered to Opus360;
(p)
(q) resolutions of the Board of Directors of PeopleMover pursuant to Section
141(f) of the DGCL authorizing and approving the Merger and the adoption of this
Agreement and the transactions contemplated hereby in compli-
<PAGE>
ance with Section 251 of the DGCL, certified as true, complete and correct on
the Closing Date in a certificate executed on behalf of PeopleMover by the chief
executive officer or the chief financial officer of PeopleMover shall have been
delivered to Opus360;
(r)
(s) a copy of the amended and restated certificate of incorporation of
PeopleMover dated as of a date within two (2) business days of the Closing Date,
certified in a certificate executed on behalf of PeopleMover by the chief
executive officer or the chief financial officer of PeopleMover as not having
been amended, and no document with respect to an amendment to it having been
filed in the office of the Secretary of State of the State of Delaware since the
respective date thereof and no action having been taken by or on behalf of
PeopleMover in contemplation of any such amendment or the dissolution, merger or
consolidation of PeopleMover shall have been delivered to Opus360, except as
contemplated by this Agreement shall have been delivered to Opus360;
(t)
(u) a copy of the Long-Form Good Standing Certificate of PeopleMover dated as of
the business day immediately prior to the Closing Date from the Secretary of
State of the State of Delaware accompanied by a Bring-Down Good Standing
Certificate of PeopleMover dated as of the Closing Date from the Secretary of
State of the State of Delaware, in each case, certified as true, complete and
correct on the date set forth thereon in a certificate executed on behalf of
PeopleMover by the chief executive officer or the chief financial officer of
PeopleMover shall have been delivered to Opus360;
(v) a copy of the by-laws of PeopleMover, certified in a certificate executed on
behalf of PeopleMover by the chief executive officer or the chief financial
officer of PeopleMover as not having been amended since the date thereof and no
action having been taken by or on behalf of PeopleMover in contemplation of any
such amendment shall have been delivered to Opus360;
(w)
(x) PeopleMover shall have completed its Revenue Adjustment in accordance with
Section 5.13 hereof;
(y)
(z) each of the persons listed in Section 1.6(b) hereof shall have entered
into noncompetition and confidentiality agreements and except for the person set
forth on Section 6.2(n) of the PeopleMover Disclosure Schedule, employment
agreements, in each case, with the Surviving Corporation and acceptable to the
Surviving Corporation and Opus360 and such person shall have delivered a copy
thereof to Opus360 and such agreements shall be in full force and effect;
<PAGE>
(aa)
(bb) the Escrow Agreements shall have been executed and delivered to Opus360 by
each of the Escrow Stockholders;
(cc)
(dd) the Opus360 Restricted Stock Vesting Agreements shall have been executed
and delivered to Opus360 by each of the Employee Stockholders;
(ee)
(ff) an Underwriters' Lock-up Letter shall have been executed and delivered to
Opus360 by each holder of (i) PeopleMover Common Stock who is to receive Merger
Consideration or (ii) PeopleMover Options;
(gg)
(hh) each of the PeopleMover Stockholders who shall receive Tranche A Shares as
Merger Consideration shall have become additional signatories to the Opus360
Stockholders' Agreement with respect to the Tranche A Shares and agree to be
subject to the obligations thereunder and delivered a copy of such executed
agreement to Opus360;
(ii)
(jj) each of the PeopleMover directors shall have executed and delivered to
Opus360 a written instrument tendering their unconditional and unilateral
resignation as a director of PeopleMover to become effective as of the Effective
Time whether or not accepted by Opus360, Sub, PeopleMover or the Surviving
Corporation;
(kk)
(ll) each of the written consents in respect of the contracts set forth on
Section 5.11 of the PeopleMover Disclosure Schedule shall have been fully
executed and delivered by PeopleMover to Opus360;
(mm)
(nn) an executed copy by each of PeopleMover and Pamela Foster of the assignment
from Pamela Foster to PeopleMover of the "Talent Scout" trademark as filed with
the United States Patent and Trademark Office shall have been delivered to
Opus360;
(oo)
(pp) the Closing Date Balance Sheet shall have been delivered to Opus360 and
Opus360 shall have received a certificate from the chief financial officer of
PeopleMover as to the accuracy and completeness of the Closing Date Balance
Sheet;
(qq)
<PAGE>
(rr) each of the PeopleMover Stockholders shall have executed and delivered to
Opus360 an investment letter;
(ss)
(tt) the PeopleMover Financial Statements shall have been delivered to Opus360;
(uu)
(vv) each PeopleMover Stockholder shall have executed and delivered to Opus360
the consent to be bound by certain provisions of this Agreement and to the
appointment of the Stockholder Representative;
(ww)
(xx) no more than 10% of the outstanding equity securities of PeopleMover
entitled to vote on the Merger and this Agreement shall have voted against the
Merger and this Agreement pursuant to the PeopleMover Stockholders' Written
Consent;
(yy)
(zz) each of the persons set forth on Section 6.2(aa) of the PeopleMover
Disclosure Schedule shall have executed and delivered to Opus360 a letter
agreement waiving any and all acceleration provisions of their respective option
or other agreements in respect of the PeopleMover Options held by such person
and agreeing to continue to be bound by the other terms of such option or other
agreement;
(aaa)
(bbb) the person listed on Section 6.2(n) of the PeopleMover Disclosure Schedule
shall have executed and delivered to Opus360 a memorandum of understanding
relating to his employment acceptable to Opus360;
(ccc)
(ddd) each of the persons (including PeopleMover) who is a party to the
PeopleMover Stockholders' Agreement shall have executed and delivered to Opus360
a written acknowledgment of termination of such agreement as of the Effective
Time;
(eee)
(fff) each of the persons (including PeopleMover) who is a party to the
Registration Rights Agreement, dated as of December 18, 1998, by and among
PeopleMover, Avalon Technology, LLC, Dyna Fund, L.P., Dyna Fund International,
L.P., Windward Ventures, L.P. and the other parties named on the signature pages
thereto shall have executed and delivered to Opus360 a written acknowledgment of
termination of such agreement as of the Effective Time;
(ggg)
<PAGE>
(hhh) each of the persons set forth on Section 6.2(ee) of the PeopleMover
Disclosure Schedule shall have executed and delivered to Opus360 a written
acknowledgment of termination of their respective indemnification agreements
previously entered into with Micro J Systems, Inc. (and previously assumed by
PeopleMover), such termination to be effective as of the Effective Time; and
(iii)
(jjj) an advisors list and fees, expenses and disbursements summary prepared in
accordance with Section 5.6 hereof.
(kkk)
1.4 SECTION Conditions to Obligations of PeopleMover . The obligation of
PeopleMover to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
1.5
(a) Representations and Warranties . The representations and warranties of
Opus360 and Sub set forth herein shall be true and correct both when made and at
and as of the Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such date),
except in each case as qualified by materiality or material adverse effect and
PeopleMover shall have received a certificate signed on behalf of Opus360 by the
chief executive officer or the chief financial officer of Opus360 to that
effect.
(b)
(c) Performance of Obligations of Opus360 and Sub . Opus360 and Sub shall have
performed in all respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date and PeopleMover shall have
received a certificate executed on behalf of the chief executive officer or the
chief financial officer of Opus360 to that effect.
(d)
1.6 SECTION Frustration of Closing Conditions . Neither Opus360, Sub nor
PeopleMover may rely on the failure of any condition set forth in Section 6.1,
6.2 or 6.3 hereof, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable efforts to consummate the
Merger and the other transactions contemplated by this Agreement, as required by
and subject to Section 5.4 hereof.
1.7
<PAGE>
1 ARTICLE TERMINATION, AMENDMENT AND WAIVER
ARTICLE 1 TERMINATION, AMENDMENT AND WAIVER
1.1 SECTION Termination . This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the PeopleMover Stockholder
Approval:
(a) by mutual written consent of Opus360, Sub and PeopleMover;
(b)
(c) by either Opus360 or PeopleMover:
(d)
(ii) if the Merger shall not have been consummated by 5:00 p.m., Pacific
Time, on March 3, 2000; provided, however, that the right to terminate
this Agreement pursuant to this Section 7.1(b)(i) shall not be available
to any party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by such
time;
(ii) if the PeopleMover Stockholder Approval shall not have been obtained
pursuant to the PeopleMover Stockholders' Written Consent on or prior to
February 14, 2000; or
(ii) if any Restraint having any of the effects set forth in Section
6.1(b) shall be in effect and shall have become final and nonappealable;
provided that the party seeking to terminate this Agreement pursuant to
this Section 7.1(b)(iii) shall have used reasonable efforts to prevent the
entry of and to remove such Restraint;
(a) by Opus360, if PeopleMover shall have breached or failed to perform in any
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.2(a) through (ff), and
(B) is incapable of being cured by PeopleMover within fifteen (15) calendar
days;
(b)
<PAGE>
(c) by Opus360, if PeopleMover or any of its directors, officers, employees or
stockholders or any investment banker, financial advisor, attorney, accountant
or other representative retained by it, directly or indirectly through another
person shall participate in discussions or negotiations in breach of Section 4.2
hereof; or
(d)
(e) by PeopleMover, if Opus360 shall have breached or failed to perform in any
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.3(a) or (b) hereof,
and (B) is incapable of being cured by Opus360 within fifteen (15) calendar
days.
(f)
1.2 SECTION Effect of Termination . In the event of termination of this
Agreement by either PeopleMover or Opus360 as provided in Section 7.1 hereof,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Opus360 or PeopleMover, other than the
provisions of Section 5.7, this Section 7.2 and Article IX, which provisions
survive such termination, and except to the extent that such termination results
from the willful breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
1.3
1.4 SECTION Amendment . This Agreement may be amended by the parties at any time
before or after the PeopleMover Stockholder Approval; provided, however, that
after any such approval, there shall not be made any amendment that by law
requires further approval by the stockholders of PeopleMover or the approval of
the stockholders of Opus360 without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
1.5
1.6 SECTION Extension; Waiver . At any time prior to the Effective Time, a party
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3 hereof, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert
<PAGE>
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
1.7
1.8 SECTION Procedure for Termination, Amendment, Extension or Waiver . A
termination of this Agreement pursuant to Section 7.1 hereof, an amendment of
this Agreement pursuant to Section 7.3 hereof or an extension or waiver pursuant
to Section 7.4 hereof shall, in order to be effective, require, in the case of
Opus360 or PeopleMover, action by their respective Board of Directors or, with
respect to any amendment to this Agreement, the duly authorized committee of
their respective Board of Directors to the extent permitted by the DGCL.
1.9
1 ARTICLE INDEMNIFICATION AND ESCROWARTICLE
1 INDEMNIFICATION AND ESCROW
1.1 SECTION Survival . All of the representations and warranties of Opus360, Sub
and PeopleMover in this Agreement, the PeopleMover Disclosure Schedule, the
Opus360 Disclosure Schedule and the other documents delivered pursuant to this
Agreement shall survive the Effective Time and continue in full force and effect
until twelve (12) months from the Effective Time (the " Survival Period");
provided that each of the representations and warranties set forth in Sections
3.1(c) and (d) hereof and the related sections of the PeopleMover Disclosure
shall survive indefinitively; each of the representations and warranties set
forth in Sections 3.1(k) and (s) hereof and the related sections of the
PeopleMover Disclosure Schedule shall survive until six (6) months after the
expiration of the applicable statute of limitations (including any extensions
thereof); and the covenants and agreements of the parties hereto shall survive
the Effective Time in accordance with their terms. In the event that notice of a
claim for indemnification pursuant to this Article VIII is given on or prior to
the expiration of the Survival Period, such representations and warranties and
covenants and agreements shall survive indefinitely only for the purpose of such
claim until such claim is finally resolved.
1.1 SECTION Indemnification by Stockholders of PeopleMover . From and after the
Effective Time and subject to this Article VIII, the stockholders of PeopleMover
set forth on Section 8.2 of the PeopleMover Disclosure Schedule (the "
PeopleMover Indemnifying Stockholders") shall, on a several basis and subject to
the limitations of Section 8.9(b) hereof, indemnify, defend and hold harmless
Opus360 and Sub and their respective directors, officers, employees, stock-
<PAGE>
holders, affiliates, controlling persons, agents and representatives and their
successors and assigns (each an " Opus360 Indemnified Party") from and against
any and all Losses to the extent caused by, resulting from, arising from or
relating to, (a) any breach of any representation or warranty of PeopleMover or,
as applicable, any PeopleMover Stockholder, made in this Agreement, the
PeopleMover Disclosure Schedule or the certificates delivered in accordance with
Article VI hereof, except in each case as qualified by materiality or material
adverse effect or (b) any failure to perform any covenant or agreement of
PeopleMover or, as applicable, any PeopleMover Stockholder made in this
Agreement.
1.2
1.3 SECTION Indemnification By Opus360 . From and after the Effective Time and
subject to this Article VIII, Opus360 shall indemnify, defend and hold harmless
subject to the limitations of Section 8.9(b) hereof the PeopleMover Indemnifying
Stockholders and their successors and assigns from and against any and all
Losses to the extent caused by, resulting from, arising from, relating to, (a)
any breach of any representation or warranty of Opus360 or Sub made in this
Agreement, the Opus360 Disclosure Schedule or the certificates delivered in
accordance with Article VI hereof, except in each case as qualified by
materiality or material adverse effect or (b) any failure to perform any
covenant or agreement of Opus360 or Sub made in this Agreement.
1.4
1.5 SECTION Opus360 Indemnified Party Claims Procedure . The following procedure
shall govern any claims which may be brought pursuant to Section 8.2 hereof:
1.6
(a) In the event that any action, proceeding, complaint or litigation is
commenced by a third party involving a claim for which the PeopleMover
Indemnifying Stockholders may be liable to an Opus360 Indemnified Party
hereunder (an " Asserted Liability"), the Opus360 Indemnified Party shall
promptly notify the Stockholder Representative in writing of such Asserted
Liability (the " Claim Notice"); provided that no delay on the part of an
Opus360 Indemnified Party in giving any such Claim Notice shall relieve the
PeopleMover Indemnifying Stockholders of any indemnification obligation
hereunder unless (and then solely to the extent that) such stockholders are
materially prejudiced by such delay. The Stockholder Representative shall have
twenty (20) days (or less if the nature of the Asserted Liability requires) from
its receipt of the Claim Notice (the " Notice Period") to notify the Opus360
Indemnified Party whether or not the Stockholder Representative desires, at the
sole cost and expense and by counsel of the Stockholder Representative's
choosing, which shall be reasonably satisfactory to the Opus360 Indemnified
Party, to defend against such Asserted Liability. If the Stockholder
Representative undertakes to defend against such Asserted Liability, (i) the
Stockholder Representative shall use its commercially reasonable best efforts to
defend and protect the interests of the Opus360 Indemnified Party with respect
to such Asserted Liability, (ii) the Opus360 Indemnified Party, prior to or
during the period in which the Stockholder Representative assumes the defense of
such matter, may take such reasonable actions as the Opus360
<PAGE>
Indemnified Party deems necessary to preserve any and all rights with respect to
such matter, without such actions being construed as a waiver of the Opus360
Indemnified Party's rights to defense and indemnification pursuant to this
Agreement, (iii) the Stockholder Representative shall not, without the prior
written consent of the Opus360 Indemnified Party, consent to any settlement
which (A) does not contain an unconditional release of the Opus360 Indemnified
Party from the subject matter of the settlement, (B) imposes any liabilities or
obligations on the Opus360 Indemnified Party or (C) with respect to any
nonmonetary provision of such settlement, could, in the Opus360 Indemnified
Party's sole judgment, have a material adverse effect on the business
operations, assets, financial condition, properties or prospects of Opus360 or
the Surviving Corporation or the Opus360 Indemnified Party (for purposes of this
clause (iii) an effect shall be deemed " material" if it involves a claim or
potential claim, that when aggregated with all other similar claims totals
$50,000 or more), and (iv) in the event that the Stockholder Representative
undertakes to defend against such Asserted Liability, unless otherwise agreed to
in a prior writing between Opus360 and the Stockholder Representative, the
PeopleMover Indemnifying Stockholders shall be deemed to have agreed that they
will indemnify the Opus360 Indemnified Party pursuant and subject to the
conditions and limitations set forth in this Article VIII. Notwithstanding the
foregoing, in any event, the Opus360 Indemnified Party shall have the right to
control, pay or settle any Asserted Liability which the Stockholder
Representative shall have undertaken to defend so long as the Opus360
Indemnified Party shall also waive any right to indemnification therefore by the
PeopleMover Indemnifying Stockholders. If the Stockholder Representative
undertakes to defend against such Asserted Liability, the Opus360 Indemnified
Party shall cooperate to the extent reasonable (during regular business hours)
with the Stockholder Representative and its counsel in the investigation,
defense and settlement thereof. If the Stockholder Representative does not
undertake within the Notice Period to defend against such Asserted Liability,
then the Stockholder Representative shall have the right to participate in any
such defense at the PeopleMover Indemnifying Stockholders' sole cost and
expense, but, in such case, the Opus360 Indemnified Party shall control the
investigation and defense and may settle or take any other actions that the
Opus360 Indemnified Party reasonably deems advisable (subject in the event of
settlement, to
<PAGE>
the consent of the Stockholder Representative, which consent shall not be
unreasonably withheld or delayed), without in any way waiving or otherwise
affecting the Opus360 Indemnified Party's rights to indemnification pursuant to
this Agreement. The Opus360 Indemnified Party and the Stockholder Representative
agree to make available to each other, their respective counsel and other
representatives all information and documents available to them which relate to
such claim or demand. The Opus360 Indemnified Party and the Stockholder
Representative and PeopleMover on behalf of itself and its directors and
employees also agree to render to each other such assistance and cooperation as
may reasonably be required to ensure the proper and adequate defense of such
claim or demand.
(b)
(c) The Opus360 Indemnified Party seeking indemnification shall promptly give
written notice to the PeopleMover Indemnifying Stockholders of all claims
between the Opus360 Indemnified Party and such stockholders that could
constitute a claim for indemnification under this Section 8.4. The written
notice shall specify to the extent known by the Opus360 Indemnified Party, (i)
the factual basis for such claim and (ii) the amount of or estimated amount of
such claim (which estimate shall not be conclusive of the final amount of such
claim); provided that no delay on the part of the Opus360 Indemnified Party, in
giving such written notice shall not relieve the PeopleMover Indemnifying
Stockholders of any indemnification obligation hereunder unless (and then solely
to the extent that) the PeopleMover Indemnifying Stockholders are materially
prejudiced by such delay.
(d)
(e) With respect to claims between the parties, following receipt of notice from
the Opus360 Indemnified Party of any such claim, the PeopleMover Indemnifying
Stockholders shall have twenty (20) days to make such investigation of the claim
as the PeopleMover Indemnifying Stockholders deem reasonably necessary or
desirable. For the purposes of such investigation, the Opus360 Indemnified Party
agrees to make available to the PeopleMover Indemnifying Stockholders and/or
their authorized representative(s) the information relied upon by the Opus360
Indemnified Party to substantiate the claim, as well as any other information
bearing thereon reasonably requested by the PeopleMover Indemnifying
Stockholders. If the Opus360 Indemnified Party and the PeopleMover Indemnifying
Stockholders agree at or prior to the expiration of the twenty-day period to the
validity and amount of such claim, the PeopleMover Indemnifying Stockholders
shall immediately pay to the Opus360 Indemnified Party the full amount of the
claim in immediately available funds.
(f)
<PAGE>
1.7 SECTION Stockholder Representative . Each PeopleMover Indemnifying
Stockholder shall have designated and appointed Lee Williams with full power of
substitution (the " Stockholder Representative") as the representative of such
stockholder to perform any and all such acts as are required, authorized or
contemplated by this Agreement and the Escrow Agreement, as the case may be, to
be performed by such stockholders (including any matters referred to in this
Article VIII) and hereby acknowledge that the Stockholder Representative shall
be the only person authorized to take any action so required, authorized or
contemplated by this Agreement and the Escrow Agreement, as the case may be, on
behalf of such stockholder. Each PeopleMover Indemnifying Stockholder is thereby
deemed to have further acknowledged that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive the
death or incapacity of such stockholder. Each PeopleMover Indemnifying
Stockholder is thereby deemed to have authorized the other parties hereto to
disregard any notice or other action taken by such stockholder pursuant to this
Agreement and the Escrow Agreement, as the case may be, except for such notice
or action of the Stockholder Representative. The other parties hereto are and
shall be entitled to rely on any action so taken or any notice given by the
Stockholder Representative and are and will be entitled and authorized to give
notices only to the Stockholder Representative for any notice contemplated by
this Agreement or the Escrow Agreement, as the case may be, to be given to any
such stockholder.
1.8
1.9 SECTION PeopleMover Claims Procedure . The following procedure shall govern
any claims which may be brought pursuant to Section 8.3 of this Agreement:
1.10
1.1
(a) The PeopleMover Indemnifying Stockholder seeking indemnification shall
promptly give written notice to Opus360 of all claims, whether between such
stockholder and Opus360 or raised by a third party, that could constitute a
claim for indemnification under this Section 8.6. The written notice shall
specify to the extent known by the PeopleMover Indemnifying Stockholder, (i) the
factual basis for such claim and (ii) the amount of or estimated amount of such
claim (which estimate shall not be conclusive of the final amount of such
claim); provided that no delay on the part of the PeopleMover Indemnifying
Stockholder, in giving such written notice shall not relieve Opus360 of any
indemnification obligation hereunder unless (and then solely to the extent that)
Opus360 is materially prejudiced by such delay.
(b)
<PAGE>
(c) With respect to claims between the parties, following receipt of notice from
the PeopleMover Indemnifying Stockholder of any such claim, Opus360 shall have
twenty (20) days to make such investigation of the claim as Opus360 deems
reasonably necessary or desirable. For the purposes of such investigation, the
PeopleMover Indemnifying Stockholder agrees to make available to Opus360 and/or
its authorized representative(s) the information relied upon by the PeopleMover
Indemnifying Stockholder to substantiate the claim, as well as any other
information bearing thereon reasonably requested by Opus360. If the PeopleMover
Indemnifying Stockholder and Opus360 agree at or prior to the expiration of the
twenty-day period to the validity and amount of such claim, Opus360 shall
immediately pay to the PeopleMover Indemnifying Stockholder the full amount of
the claim in immediately available funds.
(d)
(e) With respect to any claim by a third party as to which the PeopleMover
Indemnifying Stockholder is entitled to indemnification hereunder, Opus360 may,
and upon request of the PeopleMover Indemnifying Stockholder shall, retain
counsel reasonably satisfactory to the PeopleMover Indemnifying Stockholder to
represent the PeopleMover Indemnifying Stockholder and any others Opus360 may
designate in connection with such claim or demand (including other indemnified
parties) and shall promptly pay the fees and disbursements of such counsel with
regard thereto. In the event Opus360 shall retain such counsel, the PeopleMover
Indemnifying Stockholder shall have the right to retain its own counsel, but the
fees and disbursements of such counsel shall be at the expense of the
PeopleMover Indemnifying Stockholder unless (i) Opus360 and the PeopleMover
Indemnifying Stockholder shall have mutually agreed to the retention of such
counsel or (ii) representation of the PeopleMover Indemnifying Stockholder by
the counsel retained by Opus360 would be, in the reasonable judgment of the
PeopleMover Indemnifying Stockholder, inappropriate due to actual or potential
differing interests between the PeopleMover Indemnifying Stockholder and any
other party represented by such counsel in such proceeding. Opus360 shall be
liable to the PeopleMover Indemnifying Stockholder for any settlement of any
action or claim without the consent of the PeopleMover Indemnifying Stockholder
which consent shall not be unreasonably withheld or delayed, subject to the next
sentence. Opus360 shall not, without the prior written consent of the
PeopleMover Indemnifying Stockholder, settle or compromise any claim or consent
to the entry of any judgment that does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the PeopleMover
Indemnifying Stockholder a release from all liability in respect of such claim.
(f)
<PAGE>
1.11 SECTION Loss; Claims for Losses . For purposes of this Agreement, " Loss"
means any action, cost, damage, disbursement, expense, liability, loss, injury,
deficiency, penalty, diminution in value, settlement or obligation of any kind
or nature (collectively, " Claims For Losses"), including but not limited to
interest, penalties, fines, legal, accounting, and other professional fees and
expenses incurred in the investigation, collection, prosecution, determination
and defense of Claims For Losses, amounts paid in settlement, any incidental or
consequential damages and any punitive damages payable to third parties that may
be imposed on or otherwise incurred or suffered by the specified person.
1.12
1.13 SECTION Insurance Proceeds . The amount of any Losses by an indemnified
person under this Article VIII shall be reduced by any insurance recoveries
which such indemnified party or its representative actually receives in respect
of or as a result of such Losses.
1.14
1.15 SECTION Certain Limitations .
1.16
(a) No indemnification shall be available to any Opus360 Indemnified Party or
PeopleMover Indemnifying Stockholder, as the case may be, for Losses arising
pursuant to Section 8.2 hereof or Section 8.3 hereof until the aggregate amount
of such Losses equals or exceeds $500,000 and then only to the extent of such
excess; provided, however, that there shall be indemnification for the full
amount of any Losses caused by, resulting from, arising from or relating to any
amounts (i) required to be paid by Opus360 or the Surviving Corporation in
excess of the dollar amount reserved for sales tax liability on the Closing Date
Balance Sheet and as specified on item 2 of Section 3.1(k) of the PeopleMover
Disclosure Schedule, (ii) required to be paid by Opus360 or the Surviving
Corporation in excess of the total dollar amount set forth on Exhibit 3.1(f) of
the PeopleMover Disclosure Schedule in respect of software license fees that are
in arrears on the Closing Date or (iii) paid in settlement, judgment,
arbitration or otherwise in connection with, any and all claims, demands, or
causes of action brought by or on behalf of either of the persons set forth on
Section 8.9(a) of the PeopleMover Disclosure Schedule including any and all
claims, demands or causes of action relating to his employment with PeopleMover
and/or his ownership or rights thereof to PeopleMover Capital Stock and/or
PeopleMover Options under any written agreements or oral arrangements with
PeopleMover.
(b)
(c) In no event shall the aggregate indemnification to be provided by any
PeopleMover Indemnifying Stockholder pursuant to this Article
<PAGE>
VIII exceed the aggregate value of the Merger Consideration (as valued at the
time of the Merger at the Opus360 Stock Price) received by such stockholder. The
liability of each PeopleMover Indemnifying Stockholder pursuant to this Article
VIII in respect of any Loss shall be equal to such stockholder's percentage
ownership of the shares of PeopleMover Common Stock immediately prior to the
Effective Time. In no event shall the aggregate indemnification to be provided
by Opus360 to any PeopleMover Indemnifying Stockholder pursuant to this Article
VIII exceed the aggregate value of the Merger Consideration (as valued at the
time of the Merger at the Opus360 Stock Price) received by such stockholder.
(d)
1.17 SECTION Exclusive Remedy .
1.18
(a) This Article VIII sets forth the sole and exclusive remedies for the Opus360
Indemnified Parties and their respective successors and assigns for any claim,
suit, action or proceeding any of them may assert or attempt to assert against
any PeopleMover Indemnifying Stockholder to the extent the claim, action, suit
or proceeding in any way relates to (i) this Agreement or its negotiation,
execution, delivery or performance, any alleged breach of or default under this
Agreement, or any of the transactions contemplated hereby, regardless of whether
such claim or action is based in tort or contract (except for intentional
breaches and fraud) or arises at law or in equity and (ii) any action or
omission of (A) any director, officer or employee of PeopleMover or (B) any
PeopleMover Indemnifying Stockholder as a director, officer or employee of
PeopleMover. Each Opus360 Indemnified Party agrees that it will not institute
any claim, action, suit or proceeding against any PeopleMover Indemnifying
Stockholder or assert any claim, with respect to this Agreement, or its
negotiation, execution, delivery or performance, any alleged breach of or
default under this Agreement, or any of the transactions contemplated hereby,
except in accordance with this Article VIII.
(b)
(c) This Article VIII sets forth the sole and exclusive remedies for the
PeopleMover Indemnifying Stockholders and their respective successors and
assigns for any claim, suit, action or proceeding any of them may assert or
attempt to assert against Opus360 to the extent the claim, action, suit or
proceeding in any way relates to (i) this Agreement or its negotiation,
execution, delivery or performance, any alleged breach of or default under this
Agreement, or any of the transactions contemplated hereby, regardless of whether
such claim or action is based in tort or contract (except for intentional
breaches and fraud) or arises at law or in equity and (ii) any action or
omission of any director, officer or employee of Opus360. Each PeopleMover
Indemnifying Stockholder agrees that it will not in-
<PAGE>
stitute any claim, action, suit or proceeding against Opus360 or assert any
claim, with respect to this Agreement, or its negotiation, execution, delivery
or performance, any alleged breach of or default under this Agreement, or any of
the transactions contemplated hereby, except in accordance with this Article
VIII; provided that nothing contained in this subsection (b) shall impose a
limitation on a PeopleMover Indemnifying Stockholder which would cause the
Merger and the transactions contemplated hereby not to comply with the
eligibility requirements of Section 25103(h) of the California Code and the
related sections of the California Code required to be complied therewith.
(d)
1 ARTICLE GENERAL PROVISIONS ARTICLE
1 GENERAL PROVISIONS
1.1 SECTION Notices . All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered by facsimile (which is confirmed) or sent by overnight
(providing proof of delivery) to the parties at the following (or at such other
address for a party as shall be specified like notice):
(a) if to Opus360 or Sub, to:
(b)
(c) Opus360 Corporation
(d) Attention: Ari Horowitz, Chief Executive Officer
(e) 733 Third Avenue
(f) 17th Floor
(g) New York, New York 10017
Facsimile: (212) 599-8481
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Attention: Thomas H. Kennedy, Esquire
Four Times Square
New York, New York 10036
Facsimile: (212) 735-2000
(a) if to PeopleMover, to:
(b)
(c) PeopleMover
(d) Attention: Jim Jonassen, Chief Executive Officer
(e) 1500 Rosecrans
(f) Third Floor
Manhattan Beach, California 90266
Facsimile: (310) 819-1901
(a) if to the Stockholder Representative, to:
(b)
(c) Lee Williams
(d) c/o Williams & Kilkowski
(e) 1900 Avenue of the Stars
(f) 25th Floor
(g) Los Angeles, California 90067
(h) Facsimile: (310) 282-8930
(i)
1.2 SECTION Definitions . For purposes of this Agreement:
1.3
(a) an " affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where " control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
(b)
(c) " material adverse change" or " material adverse effect" means, when used in
connection with PeopleMover or Opus360, any change,
<PAGE>
effect, event, occurrence or state of facts that is, or is reasonably likely to
be, materially adverse to the business, financial condition or results of
operations of such party and, in the case of Opus360, its subsidiaries taken as
a whole, other than any change, effect, event, occurrence, state of facts or
development (i) relating to the economy in general, (ii) relating to the
industries in which such party operates in general or (iii) arising out of or
resulting from actions contemplated by the parties in connection with, or which
is attributable to, the announcement of this Agreement and the transactions
contemplated hereby;
(d)
(e) " person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity;
(f)
(g) a " subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person;
(h)
(i) " knowledge" of any person which is not an individual means, with respect to
any specific matter, the knowledge of such person's executive officers and other
officers having primary responsibility for such matter, in each case obtained in
the conduct of their duties in the ordinary course without special inquiry; and
(j)
(k) " business day" means any day other than Saturday, Sunday or any other day
on which banks are legally permitted to be closed in New York.
(l)
1.4 SECTION Interpretation . When a reference is made in this Agreement to an
Article, Section, Schedule or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the phrase "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of Agreement. The phrase "made available" in
this Agreement
<PAGE>
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. The phrases "the
date of this Agreement" and "the date hereof," and phrases of similar import,
unless the context otherwise requires, shall be deemed to refer to the date
first above written. All terms defined in this Agreement shall have the meanings
when used in any certificate or other document made or pursuant hereto unless
otherwise defined therein. The definitions in this Agreement are applicable to
the singular as well as plural forms of such terms and to the masculine as well
as the feminine and neuter genders of such term. Any agreement, or statute
defined or referred to herein or in any agreement instrument that is referred to
herein means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns.
1.5
1.6 SECTION Counterparts . This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that not all
parties need to sign the same counterpart.
1.7
1.8 SECTION Entire Agreement; No Third-Party Beneficiaries . This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article VIII hereof, are not intended to confer upon any person
other than the parties any rights or remedies.
1.9
1.10 SECTION Governing Law . This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflict of laws
thereof.
1.11
1.12 SECTION Assignment . Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preced-
<PAGE>
ing two sentences, this Agreement will be binding upon, inure to the benefit of,
and be enforceable by, the parties and their respective successors and assigns.
1.13
1.14 SECTION Enforcement . The parties agree that irreparable damage would occur
and that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any federal court located in the Borough of Manhattan, City
of New York or any New York state court located in the Borough of Manhattan,
City of New York, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the Borough of Manhattan, City of New York or any New York state
court located in the Borough of Manhattan, City of New York in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and waives, to the fullest extent permitted by law, any objection which it may
now or hereafter have to the laying of venue of any such suit, action or
proceeding which is brought in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum and (c) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this Agreement in any
court other than a federal court located in the Borough of Manhattan, City of
New York or any New York state court located in the Borough of Manhattan, City
of New York. Process, in any such suit, action or proceeding may be served on
any party anywhere in the world, whether within or without the jurisdiction of
any such court. Without limiting the foregoing, each party agrees that service
of process on such party as provided in Section 9.1 shall be deemed effective
service of process on such party.
1.15
1.16 SECTION Headings . The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
1.17
1.18 SECTION Severability . It is the desire and intent of the parties hereto
that the provisions of this Agreement be enforced to the fullest extent
permissible under the law and public policies applicable in each jurisdiction in
which
<PAGE>
enforcement is sought. Accordingly, in the event that any provision of this
Agreement is held in any jurisdiction to be invalid, prohibited, unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity of enforceability of such provisions in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provisions in any other jurisdiction.
1.19
1.20 SECTION Further Assurances . From time to time after the Closing Date, at
the request of any party hereto and at the expense of such party, the parties
hereto shall execute and deliver to such requesting party such documents and
take such other action as such requesting party may reasonably request in order
to consummate more effectively the transactions contemplated by this Agreement.
1.21
1.22 SECTION No Strict Construction . The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rules of strict construction shall be applied against any
party.
1.23
1.24 SECTION Legend . Each Opus360 Certificate representing shares of Opus360
Common Stock to be delivered pursuant to the provisions of Article II of this
Agreement as Merger Consideration shall be inscribed with the following legend,
in addition to any other legends inscribed thereon:
1.25
1.26 "THE SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE OF OPUS360
CORPORATION (THE "COMMON STOCK") REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. THE SALE, TRANSFER,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR ENCUMBRANCE OF THE COMMON STOCK REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVIDED FOR IN
THE UNDERWRITER'S LOCK-UP LETTER, A COPY OF WHICH IS ON FILE AT THE EXECUTIVE
OFFICES OF THE CORPORATION AND WILL BE FURNISHED WITHOUT
<PAGE>
CHARGE TO THE HOLDER OF SUCH COMMON STOCK UPON WRITTEN REQUEST TO OPUS360
CORPORATION."
1.27
1.28
<PAGE>
IN WITNESS WHEREOF, Opus360, Sub and PeopleMover have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized, all as of the date first above written.
OPUS360 CORPORATION
By: /s/ Ari B. Horowitz
------------------------
Name: Ari B. Horowitz
Title:
OPUS PM ACQUISITION CORP.
By: /s/ Ari B. Horowitz
------------------------
Name: Ari B. Horowitz
Title:
PEOPLEMOVER, INC.
By: /s/ James L. Jonassen
------------------------
Name: James L. Jonassen
Title: Chief Executive Officer
The undersigned hereby acknowledges his/her appointment as
Stockholder Representative and his/her willingness to fulfill the duties of
Stockholder Representative as contemplated by this Agreement and the Escrow
Agreement.
STOCKHOLDER REPRESENTATIVE
By: /s/ Lee Williams
------------------------
Lee Williams
<PAGE>
PEOPLEMOVER STOCKHOLDERS' CONSENT
The undersigned, being the holder of such number of shares of
PeopleMover Common Stock as set forth below opposite such holder's name, hereby
consents to the Merger and agrees to be bound by the provisions of Article II,
Section 4.2, Article VIII (in the case of persons set forth on Section 8.2 of
the PeopleMover Disclosure Schedule) and Article IX of the Agreement. The
undersigned further represents that it is authorized to enter into this consent
and that this consent is a valid, binding and enforceable obligation of the
undersigned.
Number of Shares of
Name Address for Notice PeopleMover Common Stock
---- ------------------ ------------------------
<PAGE>
SCHEDULE A
- --------------------------------------------------------------------------------
Number of Tranche A
Shares to be Received as
Name Address Merger Consideration
- --------------------------------------------------------------------------------
Jim Jonassen (1)
- --------------------------------------------------------------------------------
David Sanders (1)
- --------------------------------------------------------------------------------
Ali Benham (1)
- --------------------------------------------------------------------------------
Tom Utsch (1)
- --------------------------------------------------------------------------------
Williams & Kilkowski (1)
- --------------------------------------------------------------------------------
Hutt Bush (1)
- --------------------------------------------------------------------------------
William Woodward (1)
- --------------------------------------------------------------------------------
Tolchin Family Trust (1)
- --------------------------------------------------------------------------------
William Bestor (1)
- --------------------------------------------------------------------------------
Pedram Abrari (1)
- --------------------------------------------------------------------------------
Troop, Steuber, Pasich,
Reddick & Tobey, LLP (1)
- --------------------------------------------------------------------------------
Avalon Technology, LLC (1)
- --------------------------------------------------------------------------------
DynaFund, LP (1)
- --------------------------------------------------------------------------------
Dynafund
International, LP (1)
- --------------------------------------------------------------------------------
Windward Ventures, LP (1)
- --------------------------------------------------------------------------------
Tom Fricks (1)
- --------------------------------------------------------------------------------
Kenneth Deemer (1)
- --------------------------------------------------------------------------------
Yves Biehaut (1)
- --------------------------------------------------------------------------------
Joseph Monte (1)
- --------------------------------------------------------------------------------
Kimberly Caccavo (1)
- --------------------------------------------------------------------------------
Stephen Tolchin (1)
- --------------------------------------------------------------------------------
Neil Donahu (1)
- --------------------------------------------------------------------------------
Robert Gulovsen (1)
<PAGE>
- --------------------------------------------------------------------------------
Carl Bressler (1)
- --------------------------------------------------------------------------------
Robert Morris
- --------------------------------------------------------------------------------
Artemis Ventures, LLC (1)
- --------------------------------------------------------------------------------
Peter Halper (1)
- --------------------------------------------------------------------------------
Paul Chan (1)
- --------------------------------------------------------------------------------
Brian Plug (1)
- --------------------------------------------------------------------------------
Christian & Timbers (1)
- --------------------------------------------------------------------------------
Eric Bergen (1)
- --------------------------------------------------------------------------------
Bridgegate, LLC (1)
- --------------------------------------------------------------------------------
Marclin Group (1)
- --------------------------------------------------------------------------------
Two Roads Professional
Resources, Inc. (1)
- --------------------------------------------------------------------------------
Russell Sutton (1)
- --------------------------------------------------------------------------------
Silicon Valley Bank (1)
- --------------------------------------------------------------------------------
Imperial Bank (1)
- --------------------------------------------------------------------------------
James Morris (1)
- --------------------------------------------------------------------------------
John Buckley (1)
- --------------------------------------------------------------------------------
Jeff White (1)
- --------------------------------------------------------------------------------
IT Services Advisory (1)
- --------------------------------------------------------------------------------
- ----------
(1) subject to Underwriters' Lockup Letter
<PAGE>
SCHEDULE B
- --------------------------------------------------------------------------------
Number of Tranche B
Shares to be Received as
Name Address Merger Consideration
- --------------------------------------------------------------------------------
Jim Jonassen (1), (2), (3)
- --------------------------------------------------------------------------------
David Sanders (1)
- --------------------------------------------------------------------------------
Ali Benham (1), (2), (3)
- --------------------------------------------------------------------------------
Tom Utsch (1)
- --------------------------------------------------------------------------------
Williams & Kilkowski (1)
- --------------------------------------------------------------------------------
Hutt Bush (1)
- --------------------------------------------------------------------------------
William Woodward (1)
- --------------------------------------------------------------------------------
Tolchin Family Trust (1)
- --------------------------------------------------------------------------------
William Bestor (1)
- --------------------------------------------------------------------------------
Pedram Abrari (1)
- --------------------------------------------------------------------------------
Troop, Steuber,
Pasich, Reddick &
Tobey, LLP (1)
- --------------------------------------------------------------------------------
Avalon Technology, LLC (1)
- --------------------------------------------------------------------------------
DynaFund, LP (1)
- --------------------------------------------------------------------------------
Dynafund
International, LP (1)
- --------------------------------------------------------------------------------
Windward Ventures, LP (1)
- --------------------------------------------------------------------------------
Tom Fricks (1)
- --------------------------------------------------------------------------------
Kenneth Deemer (1)
- --------------------------------------------------------------------------------
Yves Biehaut (1)
- --------------------------------------------------------------------------------
Joseph Monte (1)
- --------------------------------------------------------------------------------
Kimberly Caccavo (1)
- --------------------------------------------------------------------------------
Stephen Tolchin (1)
- --------------------------------------------------------------------------------
Neil Donahu (1)
- --------------------------------------------------------------------------------
Robert Gulovsen (1)
<PAGE>
- --------------------------------------------------------------------------------
Carl Bressler (1)
- --------------------------------------------------------------------------------
Robert Morris (1)
- --------------------------------------------------------------------------------
Artemis Ventures, LLC (1)
- --------------------------------------------------------------------------------
Peter Halper (1)
- --------------------------------------------------------------------------------
Paul Chan (1)
- --------------------------------------------------------------------------------
Brian Plug (1)
- --------------------------------------------------------------------------------
Christian & Timbers (1)
- --------------------------------------------------------------------------------
Eric Bergen (1)
- --------------------------------------------------------------------------------
Bridgegate, LLC (1)
- --------------------------------------------------------------------------------
Marclin Group (1)
- --------------------------------------------------------------------------------
Two Roads Professional
Resources, Inc. (1)
- --------------------------------------------------------------------------------
Russell Sutton (1)
- --------------------------------------------------------------------------------
Silicon Valley Bank (1)
- --------------------------------------------------------------------------------
Imperial Bank (1)
- --------------------------------------------------------------------------------
James Morris (1)
- --------------------------------------------------------------------------------
John Buckley (1)
- --------------------------------------------------------------------------------
Jeff White (1)
- --------------------------------------------------------------------------------
IT Services Advisory (1)
- --------------------------------------------------------------------------------
- -------------------
(1) subject to Underwriters' Lockup Letter
(2) subject to Restricted Stock Vesting Agreement
(3) subject to Escrow Agreement
<PAGE>
EXHIBIT A
BEA Systems, Inc. Letter of Intent
(attached)
<PAGE>
EXHIBIT B
Re:sources Connection Term Sheet
(attached)
<PAGE>
EXHIBIT C
Global Employment Solutions, Inc. Proposal
(attached)
<PAGE>
EXHIBIT D
DM Stone Professional Staffing Proposal
(attached)
<PAGE>
EXHIBIT E
Dunhill Staffing Systems, Inc. Proposal
(attached)
<PAGE>
ANNEX I
Index of Defined Terms
Term Page
- ---- ----
Adjusted Exchange Ratio 7
Adjusted Option 12
Adjusted Options 12
affiliate 71
Agreement 1
Asserted Liability 63
Business 26
business day 72
C corporation 25
California Code 26
Certificate of Merger 2
Certificates 7
Claim Notice 63
Claims For Losses 67
Closing 2
Closing Date 2
Closing Date Balance Sheet 5
Code 1
Commission 47
Confidentiality Agreement 48
conflict of interest 34
consenting corporation 24
Constituent Corporations 1
control 71
DGCL 1
Dissenting Shares 13
Dissenting Stockholders 13
Effective Time 2
employment loss 36
Environmental Claim 33
Environmental Laws 34
ERISA 20
ERISA Affiliate 21
Escrow Agent 8
Escrow Agreement 8
<PAGE>
Escrow Shares 8
Escrow Stockholders 8
Exchange Agent 9
Exchange Fund 9
Governmental Entity 17
Hazardous Materials 34
incentive stock options 12
Initial Exchange Ratio 5
Intellectual Property 28
Interim Funding Agreement 5
knowledge 71
Leased Real Property 30
Leases 30
Liens 17
Loans 5
Loss 67
mass layoff 35
material 64
material adverse change 71
material adverse effect 71
Material Agreements 32
Merger 1
Merger Consideration 5
multiemployer pension plan 22
No Solicitation Period 46
nonworking capital debt or nonworking capital liabilities 5
Notice Period 63
Opus360 1
Opus360 Authorized Preferred Stock 37
Opus360 Capital Stock 37
Opus360 Certificates 7
Opus360 Common Stock 5
Opus360 Convertible Preferred Stock 37
Opus360 Disclosure Schedule 36
Opus360 Indemnified Party 63
Opus360 Permits 39
Opus360 Restricted Stock Vesting Agreements 8
Opus360 Stock Plan 37
Opus360 Stock Price 8
<PAGE>
pension 20
pension plan 22
PeopleMover 1
PeopleMover Capital Stock 15
PeopleMover Common Stock 4
PeopleMover Convertible Notes 15
PeopleMover Credit Agreement 6
PeopleMover Disclosure Schedule 14
PeopleMover Financial Statements 47
PeopleMover Indemnifying Stockholders 62
PeopleMover Option 12
PeopleMover Option Plan 12
PeopleMover Permits 20
PeopleMover Series A Preferred Stock 15
PeopleMover Service Options 15
PeopleMover Stockholder 8
PeopleMover Stockholder Approval 25
PeopleMover Stockholders 8
PeopleMover Stockholders' Agreement 44
PeopleMover Stockholders' Written Consent 47
PeopleMover Warrants 15
person 71
Plans 21
plant closing 35
Proprietary Software 29
qualified 22
Real Estate Transfer Taxes 51
Real Property 31
Release 34
Restraints 54
returns 25
SARs 16
single employer 21
Stockholder Representative 66
Sub 1
subsidiary 71
Survival Period 62
Surviving Corporation 2
Takeover Proposal 46
<PAGE>
Tax 25
Tax Return 25
Underwriters' Lock-up Letter 8
welfare 20
Y2K Issues 28
<PAGE>
Exhibit 10.16
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 19, 2000
AMONG
OPUS360 CORPORATION,
ITHORITY CORPORATION
AND
THE OTHER PARTIES HERETO
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Article I THE MERGER...........................................................1
1.1 The Merger...........................................................1
1.2 Effective Time of the Merger.........................................2
1.3 Effect of the Merger.................................................2
1.4 Charter; By-Laws; Officers and Directors of Surviving Corporation....2
1.5 Authorization of the Merger Documents................................2
1.6 Tax-Free Reorganization..............................................3
1.7 Taking of Necessary Action; Further Assurances.......................3
1.8 The Closing..........................................................3
Article II EFFECT ON SHARES, WARRANTS AND OPTIONS..............................3
2.1 Effect of the Merger on Capital Stock................................3
2.2 Delivery of Closing Amount; Exchange of Certificates.................7
2.3 Delivery of Deferred Amount..........................................8
2.4 Escrow; Merger Share Reserved Shares.................................8
2.5 Additional Shares....................................................8
2.6 Fractional Shares....................................................9
2.7 No Further Ownership.................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
INDEMNIFYING SELLERS..............................................10
3.1 Organization; Good Standing; Qualification and Power................10
3.2 Authorization.......................................................10
3.3 Non-contravention...................................................11
3.4 Capitalization of the Company.......................................11
3.5 Equity Investments..................................................12
3.6 Bankruptcy, Etc.....................................................12
3.7 Financial Statements................................................12
3.8 Events Subsequent to the Balance Sheet..............................13
3.9 Liabilities.........................................................14
3.10 Legal Compliance....................................................14
3.11 Title to Properties.................................................14
3.12 Tax Matters.........................................................16
3.13 Intellectual Property...............................................17
3.14 Contracts and Commitments...........................................18
3.15 Insurance...........................................................20
3.16 Litigation..........................................................20
3.17 Employees...........................................................20
3.18 Employee Benefits...................................................21
3.19 Environment and Safety..............................................23
3.20 Related Party Transactions..........................................23
3.21 Directors and Officers..............................................23
-i-
<PAGE>
3.22 Offering Exemption..................................................23
3.23 Accounts and Notes Receivable.......................................24
3.24 Brokers.............................................................24
3.25 Disclosure..........................................................24
3.26 Year 2000...........................................................24
Article IV REPRESENTATIONS AND WARRANTIES OF THE INDEMNIFYING SELLERS.........25
4.1 Title to the Merger Shares..........................................25
4.2 Authority; Noncontravention.........................................25
4.3 Legal Compliance....................................................26
4.4 Brokers.............................................................26
4.5 Registration Rights.................................................27
4.6 No Security Interests...............................................27
4.7 Compliance with Applicable Laws.....................................27
4.8 Experience..........................................................27
4.9 Investment..........................................................28
4.10 Rule 144............................................................28
4.11 No Public Market....................................................28
4.12 Legend on Stock Certificates........................................28
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB........29
5.1 Organization; Good Standing; Qualification and Power................29
5.2 Authorization.......................................................29
5.3 Non-contravention...................................................30
5.4 Capitalization of Parent............................................30
5.5 Capitalization of Acquisition Sub...................................31
5.6 Subsidiaries........................................................31
5.7 Financial Statements................................................32
5.8 Events Subsequent to the Balance Sheet..............................32
5.9 Offering Exemption..................................................32
5.10 Brokers.............................................................32
5.11 Litigation..........................................................32
ARTICLE VI COVENANTS..........................................................33
6.1 Conduct Pending Closing.............................................33
6.2 Efforts to Consummate...............................................34
6.3 Exclusivity.........................................................34
6.4 Notice of Prospective Breach........................................35
6.5 Access to Records and Properties of the Acquired Companies..........35
6.6 Release by Sellers..................................................35
ARTICLE VII CLOSING CONDITIONS................................................36
7.1 Conditions to Each Party's Obligations to Effect the Merger.........36
-ii-
<PAGE>
7.2 Conditions to Obligations of Parent and Acquisition Sub.............36
7.3 Conditions to Obligations of the Company and the Sellers............39
ARTICLE VIII TERMINATION; EFFECT OF TERMINATION...............................40
8.1 Termination.........................................................40
8.2 Effect of Termination...............................................41
ARTICLE IX ADDITIONAL AGREEMENTS OF THE INDEMNIFYING SELLERS..................41
9.1 Sellers' Representative.............................................41
9.2 Lock-Up Agreement...................................................43
9.3 Stockholders' Agreement.............................................43
9.4 Non-Competition; Non-Solicitation...................................43
9.5 Confidentiality.....................................................44
9.6 Public Announcements................................................45
9.7 Cooperation Regarding Tax Filings...................................46
9.8 Customer Relations..................................................46
ARTICLE X INDEMNIFICATION.....................................................46
10.1 Indemnification Generally; Etc......................................46
10.2 Assertion of Claims Tax Claims......................................48
10.3 Notice and Defense of Third Party Claims............................49
10.4 Forfeiture of Shares................................................51
10.5 Survival of Certain Indemnification Claims..........................52
10.6 Losses Net of Insurance, etc........................................52
10.7 Taxable Periods.....................................................53
Article XI MISCELLANEOUS......................................................53
11.1 Transaction Expenses and Taxes......................................53
11.2 No Third Party Beneficiaries........................................54
11.3 Entire Agreement....................................................54
11.4 Successors and Assigns..............................................54
11.5 Counterparts........................................................54
11.6 Notices.............................................................54
11.7 Governing Law.......................................................56
11.8 Amendments and Waivers..............................................56
11.9 Incorporation of Schedules and Exhibits.............................56
11.10 Construction........................................................56
11.11 Interpretation......................................................56
11.12 Independence of Covenants and Representations and Warranties........57
11.13 Remedies............................................................57
11.14 Severability........................................................57
11.15 Waiver of Jury Trial................................................57
-iii-
<PAGE>
Annexes
Annex I - Definitions
Annex II - Additional Shares
Schedules
Schedule I - Company Common Stock and Consideration to be Exchanged
Schedule II - Integration Test
Schedule 3.3 - Noncontravention
Schedule 3.4 - Agreements Relating to Capital Stock of Company
Schedule 3.5 - Equity Investments
Schedule 3.7 - Company Financial Statements
Schedule 3.8 - Events Subsequent to the Balance Sheet
Schedule 3.10 - Permits
Schedule 3.11 - Title to Properties
Schedule 3.12(a) - Tax Matters
Schedule 3.12(b) - Tax Matters Exceptions
Schedule 3.13(a) - Intellectual Property
Schedule 3.13(b) - Infringement of Intellectual Property
Schedule 3.13(c) - Intellectual Property Filings
Schedule 3.14(a) - Contracts and Commitments
Schedule 3.14(b) Defaults
Schedule 3.15(a) - Insurance Policies
Schedule 3.15(b) - Payment of Premiums
Schedule 3.16 - Company Litigation
Schedule 3.17 - Related Employee Matters
Schedule 3.18 - Employee Benefit Plans
Schedule 3.20 - Related Party Transactions
Schedule 3.21 - Directors and Officers
Schedule 3.23 - Accounts and Notes Receivable
Schedule 3.24 - Company Brokers
Schedule 5.3 - Parent Noncontravention
Schedule 5.4 - Capitalization of Parent
Schedule 5.6 - Subsidiaries
Schedule 5.7 - Parent Financial Statements
Schedule 5.10 - Parent Brokers
Schedule 5.11 - Parent Litigation
-iv-
<PAGE>
Exhibits
Exhibit A - Form of Certificate of Merger
Exhibit B - Form of Opinion of Company Counsel
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Employment Agreement
-v-
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF
MERGER, dated as of January 19, 2000
among OPUS360 CORPORATION, a
Delaware corporation ("Parent"),
ITHORITY ACQUISITION CORP., a
Delaware corporation and wholly
owned subsidiary of Parent
("Acquisition Sub"), ITHORITY
CORPORATION, a California
corporation (the "Company"), and
those other Persons named on the
signature page attached hereto
(each, an "Indemnifying Seller" and
collectively, the " Indemnifying
Sellers").
The Company and Parent have determined to engage in a business
combination transaction on the terms set forth herein. The respective boards of
directors of the Company and Parent have approved and deemed it advisable and in
the best interests of their respective shareholders to consummate the
transactions contemplated by this Agreement and Plan of Merger (this
"Agreement") and the short form agreement of merger in substantially the form of
Exhibit A attached hereto (the "Certificate of Merger"), pursuant to which the
businesses of the Company and Parent would be combined by means of a proposed
merger (the "Merger") of Acquisition Sub with and into the Company in accordance
with, and subject to, the terms and conditions of this Agreement, the
Certificate of Merger and the California General Corporation Law (the
"California Statute"). As a result of the Merger the Company will become a
wholly-owned subsidiary of Parent. It is the intention of the parties to this
Agreement that the Merger shall qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
for federal income tax purposes. Capitalized terms used but not defined herein
have the meanings set forth in Annex I hereto.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
In accordance with, and subject to, the provisions of this Agreement, the
Certificate of Merger and the California Statute, Acquisition Sub shall be
merged with and into the Company, which, at and after the Effective Time, shall
be and is hereinafter sometimes referred to as the "Surviving Corporation."
Acquisition Sub and the Company are hereinafter sometimes collectively referred
to as the "Constituent Corporations."
<PAGE>
1.2 Effective Time of the Merger.
The Merger shall become effective upon the filing by the Surviving
Corporation of the Certificate of Merger with the Secretary of State of the
State of California. The Certificate of Merger shall be executed and delivered
in the manner provided under the California Statute. The time when the Merger
shall become effective is referred to herein as the "Effective Time."
1.3 Effect of the Merger.
Except as specifically set forth herein or in the Certificate of Merger,
at the Effective Time, the identity, existence, corporate organization,
purposes, powers, objects, franchises, privileges, rights, immunities,
restrictions, debts, liabilities and duties (collectively, the "Corporate
Rights") of the Company shall continue in effect and be unimpaired by the
Merger, and the Corporate Rights of Acquisition Sub shall be merged with and
into the Company, which shall, as the Surviving Corporation, be fully vested
therewith. At the Effective Time, the separate existence and corporate
organization of Acquisition Sub shall cease, and Acquisition Sub shall be merged
with and into the Surviving Corporation.
1.4 Charter; By-Laws; Officers and Directors of Surviving Corporation.
From and after the Effective Time, (a) the certificate of incorporation of
the Company shall be amended and restated in its entirety as determined by
Parent and Acquisition Sub and, as so amended, such certificate of incorporation
shall be the certificate of incorporation of the Surviving Corporation until
altered, amended or repealed as provided in the California Statute; (b) the
By-laws of Acquisition Sub shall become the By-laws of the Surviving
Corporation, unless and until altered, amended or repealed as provided in the
California Statute, the Surviving Corporation's certificate of incorporation or
such By-laws; and (c) the officers and directors of Acquisition Sub shall become
the officers and directors of the Surviving Corporation, respectively, unless
and until removed or until their respective terms of office shall have expired
in accordance with the California Statute or the Surviving Corporation's
certificate of incorporation or By-laws, as applicable.
1.5 Authorization of the Merger Documents.
(a) Simultaneously with, or prior to, the execution and delivery of
this Agreement, the Sellers, being the holders of all of the shares of the
capital stock of the Company, shall execute a written consent in lieu of a
meeting, and Parent, as the sole shareholder of Acquisition Sub, shall execute a
written consent in lieu of a meeting, each of which written consents shall
include resolutions approving and adopting the Merger, this Agreement, the
Related Documents and the consummation of the transactions contemplated hereby,
in each case as required by the California Statute.
(b) The Company shall take, and the Sellers shall cause the Company
to take, as promptly as practicable, all such other actions as may be necessary
or advisable under the California Statute and any other applicable Law or
regulation in connection with the Merger, this Agreement or the Related
Documents. The Company shall prepare and distribute any written
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notice or other materials relating to the shareholder action contemplated by
Section 1.5(a) required to be delivered pursuant to the Company's certificate of
incorporation or By-laws, the California Statute or any other Federal or state
Law applicable to the Merger, this Agreement, the Related Documents or such
shareholder action (collectively, the "Seller Materials"); provided, however,
that Parent, Acquisition Sub and their counsel shall have a reasonable
opportunity to review all Seller Materials, which shall be reasonably
satisfactory in form and substance to Parent, Acquisition Sub and their counsel.
1.6 Tax-Free Reorganization.
(a) For Federal income tax purposes, the parties intend that the
Merger be treated as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code, by reason of Section 368(a)(2)(E) of the Code. The
parties shall not take a position on any tax return inconsistent with this
Section 1.6.
(b) None of the parties hereto shall take any action or fail to take
any action that would prevent the Merger from qualifying as a tax-free
reorganization under Section 368(a) of the Code, either before or after the
consummation of the Merger.
1.7 Taking of Necessary Action; Further Assurances.
Prior to the Effective Time, and subject to the terms and conditions
contained in this Agreement, the parties hereto shall take or cause to be taken
all such actions as may be necessary or appropriate in order to effectuate, as
expeditiously as reasonably practicable, the Merger.
1.8 The Closing.
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of O'Sullivan Graev & Karabell, LLP,
30 Rockefeller Plaza, New York, New York 10112 on a date (the "Closing Date") to
be mutually agreed upon by the parties, which date shall be no later than the
fifth Business Day after all of the conditions set forth in Article VIII have
been satisfied or waived (other than those conditions which by their terms are
intended to be satisfied at the Closing). On the Closing Date, the Surviving
Corporation shall file the Certificate of Merger with the Secretary of State of
the State of California pursuant to Section 1.2 hereof.
ARTICLE II
EFFECT ON SHARES, WARRANTS AND OPTIONS
2.1 Effect of the Merger on Capital Stock.
(a) The following terms used in this Agreement shall have the
following respective meanings:
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"Accrued Bonus Amount" means the aggregate amount of all accrued but
unpaid bonus amounts due to employees of the Company as of the Closing Date,
which amount equals $52,333.63.
"Additional Shares" means that number of shares of Parent Common
Stock determined by dividing (x) an amount equal to $4,000,000 by (y) the Parent
Additional Share Price.
"Cash Consideration" means the sum of the Closing Amount and the
Deferred Amount.
"Closing Amount" means $250,000.
"Closing Shares" means that number of shares of Parent Common Stock
determined by dividing (i) an amount equal to $2,000,000 by (ii) the Parent
Initial Share Price.
"Deferred Amount" means $250,000.
"Deferred Payment" means an amount equal to the Deferred Amount less
the Accrued Bonus Amount.
"Merger Consideration" means the Cash Consideration and the Stock
Consideration.
"Merger Share Additional Shares" means the Additional Shares less
the Nonconsenting Share Additional Shares.
"Merger Share Number" means the Share Number less the Nonconsenting
Share Number.
"Merger Share Reserved Shares" means the Reserved Shares less the
Nonconsenting Share Reserved Shares.
"Merger Shares" means the Shares beneficially owned by the
Indemnifying Sellers.
"Nonconsenting Seller" means any Seller not a party to this
Agreement.
"Nonconsenting Share Additional Shares" means the Per Nonconsenting
Share Additional Shares times the Nonconsenting Share Number.
"Nonconsenting Share Number" means the number of Nonconsenting
Shares plus the number of shares of Company Common Stock issuable upon exercise
of the Options and Warrants held by Nonconsenting Sellers.
"Nonconsenting Share Reserved Shares" means the Per Nonconsenting
Share Reserved Shares times the Nonconsenting Share Number.
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"Nonconsenting Shares" means the Shares beneficially owned by any
Nonconsenting Seller.
"Options" means the options to purchase shares of Company Common
Stock under the Company's 1998 Stock Plan that are outstanding immediately prior
to the Effective Time.
"Parent Additional Share Price" as of the Escrow Release Date, means
the value of a share of Parent Common Stock determined in accordance with the
following: (i) if the Parent Common Stock is then listed on the NASDAQ Stock
Market, the average closing price per share of Parent Common Stock as reported
by the NASDAQ Stock Market for the ten trading days immediately preceding the
Escrow Release Date or, if there have been no sales on any such day, the average
of the highest bid and lowest asked prices as reported by the NASDAQ Stock
Market at the end of such day; or (ii) if the Parent Common Stock is not then
listed on the NASDAQ Stock Market, the fair market value of a share of Parent
Common Stock as determined by the Board of Directors of Parent in good faith at
such time.
"Parent Initial Share Price" of a share of Parent Common Stock means
$350,000,000 divided by the number of shares of Parent Common Stock outstanding
on a Fully Diluted Basis immediately prior to the Effective Time, using the
treasury method of accounting.
"Per Merger Share Additional Shares" means a number of shares of
Parent Common Stock equal to (i) the number of Additional Shares less the
Nonconsenting Share Additional Shares divided by (ii) the Merger Share Number.
"Per Merger Share Reserved Shares" means a number of shares of
Parent Common Stock equal to the number of Merger Share Reserved Shares divided
by the Merger Share Number.
"Per Nonconsenting Share Additional Shares" means a number of shares
of Parent Common Stock equal to the number of Additional Shares divided by the
Share Number.
"Per Nonconsenting Share Reserved Shares" means a number of shares
of Parent Common Stock equal to the number of Reserved Shares divided by the
Share Number.
"Per Share Closing Amount" means an amount in cash equal to the
quotient obtained by dividing Closing Amount by the Share Number, rounded to the
nearest $.0001.
Per Share Closing Shares" means a number of shares of Parent Common
Stock equal to the number of Closing Shares divided by the Share Number.
"Reserved Shares" means that number of shares of Parent Common Stock
determined by dividing an amount equal to $1,500,000 by the Parent Initial Share
Price.
"Share Number" means the number of Shares plus the number of shares
of Company Common Stock issuable upon exercise of the Options and Warrants.
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"Shares" means the shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time that are owned by any
Person other than the Company.
"Stock Consideration" means the Closing Shares, the Reserved Shares
and the Additional Shares.
"Warrants" means the warrants to purchase shares of Company Common
Stock that are outstanding immediately prior to the Effective Time.
(b) The manner and basis of converting, exchanging or canceling the
shares of capital stock of each of the Constituent Corporations into or for cash
(or the contingent right to receive cash) or securities of the Surviving
Corporation shall be as follows:
(i) each share of common stock, $.01 par value, of Acquisition
Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one share of common stock, $.01 par value, of the
Surviving Corporation;
(ii) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned directly or indirectly
by the Company (whether as treasury stock or otherwise) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
canceled and no consideration shall be delivered in exchange therefor;
(iii) each Merger Share shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be
outstanding and be converted into (A) the right to receive, at the
Effective Time, the Per Share Closing Amount; (B) the right to receive, at
the Effective Time, the Per Share Closing Shares; (C) the right to
receive, pursuant to Section 2.3 hereof an amount equal to the Deferred
Payment divided by the Share Number; (D) the right to receive, subject to
the terms and conditions of this Agreement and the Escrow Agreement, the
Per Merger Share Reserved Shares, if any; and (E) the right to receive,
subject to the terms and conditions of this Agreement, the Per Merger
Share Additional Shares, if any;
(iv) each Nonconsenting Share shall, by virtue of the Merger
and without any action on the part of the holder thereof, cease to be
outstanding and be converted into (A) the right to receive, at the
Effective Time, the Per Share Closing Amount; (B) the right to receive, at
the Effective Time, the Per Share Closing Shares; (C) the right to
receive, pursuant to Section 2.3 hereof an amount equal to the Deferred
Payment divided by the Share Number; (D) the right to receive at the
Effective Time, subject to the terms and conditions of this Agreement, the
Per Nonconsenting Share Reserved Shares; and (E) the right to receive,
subject to the terms and conditions of this Agreement, the Per
Nonconsenting Share Additional Shares;
(v) each Option shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into (A) the right
to receive, at the Effective
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Time, an amount in cash equal to (1) the Per Share Closing Amount per
share of Company Common Stock issuable upon the exercise of such Option
less (2) the exercise price for each such share, which exercise price will
be deducted from the amount of Closing Amount otherwise payable to the
holder thereof; (B) the right to receive, the Per Share Closing Shares per
share of Company Common Stock issuable upon the exercise of such Option;
(C) the right to receive, pursuant to Section 2.3 hereof, an amount in
cash equal to the Deferred Payment divided by the Share Number per share
of Company Common Stock issuable upon the exercise of such Option; (D) the
right to receive, subject to the terms and conditions of this Agreement
and the Escrow Agreement, the Per Merger Share Reserved Shares, if any; or
the Per Nonconsenting Share Reserved Shares, as applicable, per share of
Company Common Stock issuable upon the exercise of such Option and (E) the
right to receive, subject to the terms and conditions of this Agreement,
the Per Merger Share Additional Shares, if any, or the Per Nonconsenting
Share Additional Shares, as applicable, per share of Company Common Stock
issuable upon the exercise of such Option; and
(vi) each Warrant shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into (A) the
right to receive, at the Effective Time, an amount in cash equal to (1)
the Per Share Closing Amount per share of Company Common Stock issuable
upon the exercise of such Warrant less (2) the exercise price for each
such share, which exercise price will be deducted from the amount of
Closing Amount otherwise payable to the holder thereof; (B) the right to
receive, the Per Share Closing Shares per share of Company Common Stock
issuable upon the exercise of such Warrant; (C) the right to receive,
pursuant to Section 2.3 hereof, an amount in cash equal to the Deferred
Payment divided by the Share Number per share of Company Common Stock
issuable upon the exercise of such Warrant; (D) the right to receive,
subject to the terms and conditions of this Agreement and the Escrow
Agreement, the Per Merger Share Reserved Shares, if any, or the Per
Nonconsenting Share Reserved Shares, as applicable, per share of Company
Common Stock issuable upon the exercise of such Warrant; and (E) the right
to receive, subject to the terms and conditions of this Agreement, the Per
Merger Share Additional Shares, if any, or the Per Nonconsenting Share
Additional Shares, as applicable, per share of Company Common Stock
issuable upon the exercise of such Warrant.
2.2 Delivery of Closing Amount; Exchange of Certificates.
At the Effective Time, upon surrender by each Seller to the Surviving
Corporation of the certificate(s) which, immediately prior to the Effective
Time, represented Shares and Options and Warrants, Parent shall deliver to each
such Seller in exchange therefor (a) an amount equal to the Closing Amount due
such Seller; (b) a certificate representing the number of Closing Shares due
such Seller; (c) if such Seller is a Nonconsenting Seller, a certificate
representing the number of Nonconsenting Share Reserved Shares due such Seller;
and (d) pursuant to the provisions of Section 2.6, cash in lieu of fractional
shares which such Seller would otherwise have the right to receive; provided
that the Sellers' Representative may direct Parent to deliver a portion of the
Closing Amount to certain third parties for fees, expenses, costs or other
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obligations arising out of or in connection with the transactions contemplated
in this Agreement. Until surrendered as contemplated by this Section 2.2 and the
Certificate of Merger, each certificate representing Shares and each Option and
Warrant shall be deemed, at and after the Effective Time, to represent only the
right to receive upon such surrender cash and shares of Parent Common Stock as
contemplated by this Article II, the Certificate of Merger and the California
Statute.
2.3 Delivery of Deferred Amount.
(a) Within five Business Days after the earlier to occur of (i) the
date on which the integration results described on Schedule II attached hereto
are attained and (ii) the date that is 120 days after the Closing Date
(regardless of whether the above-referenced integration has been completed),
Parent shall pay the Sellers in the aggregate an amount equal to the Deferred
Payment in accordance with Section 2.1(b), rounded to the nearest $.0001.
(b) Subject to the further provisions of this Section 2.3, the
Indemnifying Sellers hereby instruct Parent to pay the accrued Bonus Amount to
Matthew Carden, and, within two Business Days after the Effective Time, Parent
shall pay the Accrued Bonus Amount in accordance with such instructions;
provided, however, that Parent shall deduct from such payment the applicable
amount of withholding for income and employment Tax purposes (which amounts
shall be paid to the Company to be applied to such Taxes for the benefit of the
employees receiving such payments). The payment of the Accrued Bonus Amount by
the Parent pursuant to the foregoing sentence shall be treated as (i) a payment
on behalf of the Sellers to the Company and (ii) a payment by the Company of
bonuses payable.
2.4 Escrow; Merger Share Reserved Shares.
(a) Prior to the Closing, Parent and Acquisition Sub shall appoint
an entity reasonably acceptable to the Sellers' Representative to act as escrow
agent (the "Escrow Agent") pursuant to the Escrow Agreement in connection with
the Merger and the other transactions contemplated hereby. At the Closing,
Parent will deliver to the Escrow Agent a certificate or certificates
representing the Merger Share Reserved Shares.
(b) The Escrow Agreement shall provide that the Escrow Agent will
deliver certificates representing the Merger Share Reserved Shares to Parent or
the Sellers' Representative (on behalf of the Indemnifying Sellers) in
accordance with the terms and conditions set forth therein, provided that, any
Indemnifying Seller entitled to receive fractional shares shall, upon
distribution of the Merger Share Reserved Shares at the Escrow Release Date,
receive cash in lieu thereof pursuant to the provisions of Section 2.6.
2.5 Additional Shares.
(a) On the Escrow Release Date, Parent shall deliver to the Sellers'
Representative (i) certificates registered in the names of the Nonconsenting
Sellers as set forth on Schedule I in accordance with their respective
Percentage Interests, representing in the aggregate the Nonconsenting Share
Additional Shares and (ii) pursuant to the provisions of Section 2.6,
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cash in lieu of fractional shares which each such Nonconsenting Seller would
otherwise have the right to receive.
(b) On the Escrow Release Date, Parent shall also deliver to the
Sellers' Representative (i) certificates registered in the names of the
Indemnifying Sellers as set forth on Schedule I in accordance with their
respective Proportionate Percentages, representing in the aggregate the Merger
Share Additional Shares remaining after deduction of any Merger Share Additional
Shares (and/or shares of Parent Common Stock derived from or issued in respect
of the Merger Share Additional Shares) that have been forfeited pursuant to
Section 10.4 and (ii) pursuant to the provisions of Section 2.6, cash in lieu of
fractional shares which each such Indemnifying Seller would otherwise have the
right to receive.
(c) The Sellers' Representative shall deliver the foregoing
consideration to the Sellers in accordance with the terms of this Agreement.
2.6 Fractional Shares.
Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued to any Seller and such fractional shares shall not entitle the
owner thereof to vote or to any other rights of a holder of Parent Common Stock.
A holder of Company Common Stock who would otherwise have been entitled to a
fractional share of Parent Common Stock shall be entitled to receive a cash
payment in lieu of such fractional share in an amount equal to the product of
such fraction multiplied by the Parent Initial Share Price or the Parent
Additional Share Price, as applicable.
2.7 No Further Ownership.
(a) Until surrendered as contemplated by Section 2.2, each
certificate representing shares of Company Common Stock and each Option and
Warrant shall be deemed, at and after the Effective Time, to represent only the
right to receive upon such surrender cash and Parent Common Stock as
contemplated by this Article II, the Certificate of Merger and the California
Statute.
(b) No dividends or other distributions declared or made after the
Effective Time with respect to shares of Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to such shares and no cash payment in lieu of
fractional shares shall be paid to any such holder until the holder of record of
such Certificate shall surrender such Certificate. Subject to the effect of
unclaimed property, escheat and other applicable Laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to shares of
Parent Common Stock issued to the holder on the Closing Date; and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment
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date subsequent to surrender payable with respect to such whole shares of Parent
Common Stock held by the holder as of the applicable record date.
(c) The Merger Consideration paid in respect of the surrender of
Options, Warrants and certificates representing shares of Company Common Stock
in accordance with the provisions of this Article II and the Certificate of
Merger shall be deemed to have been paid in full satisfaction of all rights
pertaining to such Options, Warrants and shares of Company Common Stock. From
and after the Effective Time the stock transfer books of the Company shall be
closed and no transfer of any capital stock thereof shall thereafter be made.
If, after the Effective Time, Warrants or certificates for the Company Common
Stock are presented to the Company, they shall be canceled and exchanged for
certificates representing the appropriate number of Shares of Parent Common
Stock as provided herein.
(d) Parent shall not be liable to any person for such shares or
funds delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE INDEMNIFYING SELLERS
As a material inducement to Parent and Acquisition Sub to enter into
and perform their obligations under this Agreement, the Company and the
Indemnifying Sellers jointly and severally, represent and warrant, to Parent and
Acquisition Sub as follows:
3.1 Organization; Good Standing; Qualification and Power.
The Company is duly organized, validly existing and in good standing under
the Laws of its jurisdiction of formation, has all requisite power to own, lease
and operate its Assets and to carry on its business as presently being
conducted, and is qualified to do business and is in good standing in every
jurisdiction in which the failure to so qualify or be in good standing has had
or could reasonably be expected to have a Material Adverse Effect on the
Company. The Company has delivered to Parent true and complete copies of the
Fundamental Documents of the Company as in effect on the date hereof.
3.2 Authorization.
(a) The Company has all requisite power and authority to execute and
deliver this Agreement and each Related Document to which it is a party and any
and all instruments necessary or appropriate in order to effectuate fully the
terms and conditions of this Agreement and each such Related Document and all
related transactions and to perform its obligations hereunder and thereunder.
This Agreement and each Related Document to which the Company is a party (i) has
been duly authorized by all necessary action (corporate or otherwise) on the
part of the Company and its shareholders; (ii) has been duly executed and
delivered by the Company; and (iii) constitutes the valid and legally binding
obligation of the Company, as the case may be, enforceable in accordance with
its terms and conditions, except as enforceability thereof may be
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limited by any applicable bankruptcy, reorganization, insolvency or other Laws
affecting creditors' rights generally or by general principles of equity.
(b) The Merger has been duly authorized by all requisite action of
the Company's Board and shareholders. As of the Closing, the Company Common
Stock will be validly issued and outstanding, will be fully paid and
nonassessable, with no personal liability attaching to the ownership thereof,
free and clear of any Liens whatsoever and with no restrictions on the voting
rights thereof and other incidents of record and beneficial ownership pertaining
thereto, in each case other than pursuant to this Agreement or the Related
Documents.
3.3 Non-contravention.
Except as set forth on Schedule 3.3, the execution, delivery and
performance by the Company of this Agreement and the Related Documents to which
it is a party, the consummation of the transactions contemplated hereby and
thereby and compliance with the provisions hereof and thereof, including the
Merger, do not and will not, (a) violate any Law to which the Company or any of
its Assets is subject; (b) violate any provision of the Fundamental Documents of
the Company; (c) conflict with, result in a breach of, constitute a default
under (with or without notice or lapse of time, or both), result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any contract to which the Company is a
party or by which any of the Assets of the Company is bound; or (d) result in
the imposition of any Lien upon any of the Assets of the Company. Other than
state "blue sky" securities filings, the Company has not been and is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Governmental Entity or any other
Person for the valid authorization, issuance and delivery of the Company Common
Stock, this Agreement or any Related Document.
3.4 Capitalization of the Company.
(a) Immediately prior to the Effective Time, the authorized capital
stock of the Company consists of 20,000,000 shares of the Company's Common
Stock, of which 7,958,227 shares are issued and outstanding, fully paid and
nonassessable. The Company does not have any treasury shares.
(b) Except as contemplated hereby or by the Related Documents or as
otherwise set forth on Schedule 3.4, there are, and immediately after
consummation of the Closing there will be, no (i) outstanding warrants, options,
agreements, convertible securities or other commitments or instruments pursuant
to which the Company is or may become obligated to issue or sell any shares of
its capital stock or other securities or (ii) preemptive or similar rights to
purchase or otherwise acquire shares of the capital stock or other securities of
the Company pursuant to any provision of Law, the Company's Fundamental
Documents or any contract to which the Company, or to the best Knowledge of the
Company, any shareholder thereof is a party; and, except as contemplated by this
Agreement or the Related Documents or as otherwise set forth on Schedule 3.4,
there is, and, immediately after the consummation of the Closing there will be,
no Lien with respect to the sale or voting of shares of capital stock or
securities of the Company (whether outstanding or issuable).
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(c) Schedule 3.4 sets forth a complete list of all holders of the
Company Common Stock, the Options and the Warrants, the names of such holders,
the number of shares of Company Common Stock owned by such holders or issuable
under such Option or Warrant and the exercise price thereof.
(d) All shares of the capital stock and other securities issued by
the Company have been issued in transactions in accordance with applicable Laws
governing the sale and purchase of securities.
3.5 Equity Investments.
The Company does not have any Subsidiaries. Except as set forth on
Schedule 3.5, the Company does not own, directly or indirectly, any capital
stock, partnership interest or joint venture interest in, or any security issued
by, any other Person. Schedule 3.5 sets forth the amount and description of any
capital stock, partnership interest or joint venture interest held by the
Company.
3.6 Bankruptcy, Etc.
The Company is not involved in any Proceeding by or against the Company as
a debtor before any Governmental Entity under Title 11 of the United States Code
or any other insolvency or debtors' relief act, whether state or Federal, or for
the appointment of a trustee, receiver, liquidation, assignee, sequestrator or
other similar official for any part of the property of the Company.
3.7 Financial Statements.
(a) Schedule 3.7 contains the following financial statements
(collectively, the "Financial Statements"):
(i) the unaudited balance sheet of the Company as of November
30, 1999 (the "Interim Balance Sheet") and the related unaudited statement
of income for the 11-month period then ended (collectively, the "Interim
Financial Statements"); and
(ii) the unaudited balance sheet of the Company as of December
31, 1998 (the "Latest Balance Sheet"), including the related statement of
income for the calendar year then ended.
(b) Except as set forth on Schedule 3.7, each of the Financial
Statements (i) has been prepared in accordance with the books and records of the
Company (which are true and complete in all material respects); (ii) fairly
presents the financial condition and results of operations which it purports to
present as of the dates thereof and for the periods indicated thereon (except,
with respect to the Interim Financial Statements, for the lack of footnotes and
for year end adjustments which will not be material individually or in the
aggregate); and (iii) has been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, subject, in the case of the
Interim Financial Statements, to the lack of footnotes and
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other presentation items. Since the date of the Latest Balance Sheet, except as
required by applicable Law or GAAP, there has been no change in any accounting
principle, procedure or practice followed by the Company or in the method of
applying any such principle, procedure or practice. Except as set forth on
Schedule 3.7, the Company has no outstanding Funded Indebtedness.
3.8 Events Subsequent to the Balance Sheet.
Since the date of the Interim Balance Sheet, the Company has operated its
business in the ordinary course consistent with past practice, and the Company
has not suffered any Material Adverse Change. Since that date, except as set
forth on Schedule 3.8:
(a) the Company has not sold, leased, transferred or assigned any
Asset, other than inventory in the ordinary course of business, consistent with
past practice;
(b) no Person has accelerated, terminated, modified or canceled any
contract (or series of related contracts) involving more than $25,000 to which
the Company is a party or by which the Company is bound and, to the best
Knowledge of the Company, no Person has notified the Company that it intends to
take any such action;
(c) the Company has not experienced any material damage, destruction
or loss (whether or not covered by insurance) to any of its respective material
Assets;
(d) the Company has not paid any dividends, made any redemptions of
or distributions in respect of the capital stock of the Company;
(e) the Company has not paid any fee, interest, dividend, royalty or
any other payment of any kind to any Affiliate thereof, other than the payment
to the officers and directors of the Company of their current salaries (if any);
(f) the Company has not increased the compensation of any employee,
officer or director of the Company or made any contributions to any Plan other
than in the ordinary course of business;
(g) the Company has not incurred any indebtedness or any increase in
the amount payable by the Company under any credit or loan agreement to which
the Company is a party;
(h) no Person has accelerated any Funded Indebtedness and no party
has made any payment in respect of Funded Indebtedness prior to the date such
payment is due and payable;
(i) the Company has not incurred any single capital expenditure in
excess of $10,000 and the Company has not incurred capital expenditures in the
aggregate in excess of $50,000; and
(j) the Company has not committed to do any of the foregoing.
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3.9 Liabilities.
The Company does not have any liability or obligation, absolute or
contingent (individually or in the aggregate), including, without limitation,
any Tax liability due and payable, which is not reflected on the Interim Balance
Sheets, other than liabilities and obligations incurred after the date of the
Interim Balance Sheets that would not be required to be reflected on financial
statements prepared in accordance with GAAP. There were no "loss contingencies"
(as such term is used in Statement of Financial Accounting Standards No. 5
issued by the Financial Accounting Standards Board in March 1975) that were not
adequately provided for on the Interim Balance Sheets.
3.10 Legal Compliance.
Except as set forth on Schedule 3.10, the Company has complied with, and
the business of the Company is being conducted in material compliance with, all
applicable Laws, Orders and Permits, and no Proceeding is pending or, to the
best Knowledge of the Company, threatened, against the Company alleging any
failure to so comply. Schedule 3.10 sets forth a list of all Permits under which
the Company is operating or bound. The Company has furnished to Parent true and
complete copies of such Permits. Such Permits (a) constitute all Permits used or
required in the conduct of the business of the Company as presently conducted;
(b) are in full force and effect; (c) have not been violated in any material
respect; and (d) are not subject to any pending or, to the best Knowledge of the
Company, threatened Proceeding seeking their revocation or limitation.
3.11 Title to Properties.
(a) Except as set forth on Schedule 3.11, (i) the Company owns good
and marketable title, free and clear of all Liens (other than Permitted Liens),
to all of the Assets owned by it; and (ii) the Company is not obligated under
any contract, or subject to any restriction, that presently has, has had, or
reasonably could be expected to have a Material Adverse Effect on the Company.
Except as set forth on Schedule 3.11, the Company owns or leases under valid
leases all facilities, machinery, equipment and other Assets necessary for the
conduct of its business as conducted as of the date hereof and as of the date of
the Interim Balance Sheet which Assets are set forth on Schedule 3.11.
(b) Schedule 3.11 contains a list and brief description of all of
the owned real property of the Company (the "Owned Property") and all real
property leased by the Company pursuant to one or more leases (the "Leased
Property"), and sets forth the names of the lessor and the lessee and the basic
terms thereof. The Owned Property and the Leased Property (together, the "Real
Property") constitute all real property used or occupied by the Company in
connection with the business of the Company.
(c) With respect to the Real Property, except as set forth on
Schedule 3.11: (i) no portion thereof is subject to any pending condemnation,
fire, health, safety, building, environmental, hazardous substances, pollution
control, zoning or other land use regulatory Proceedings or Proceeding by any
public or quasi-public authority and, to the Knowledge of the
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Company, there is no threatened condemnation or Proceeding with respect thereto;
(ii) the physical condition thereof is sufficient to permit the continued
conduct of the business as presently conducted subject to the provision of usual
and customary maintenance and repair performed in the ordinary course with
respect to similar properties of like age and construction; (iii) there are no
contracts, written or oral, to which the Company or any of its Affiliates is a
party, granting to any party or parties except the Company the right of use or
occupancy of any portion of the parcels of the Real Property; (iv) there are no
parties in possession of the Real Property except the Company; and (v) no notice
of any increase in the assessed valuation of the Real Property and no notice of
any contemplated special assessment has been received by the Company and, to the
Knowledge of the Company, there is no threatened increase in assessed valuation
or threatened special assessment pertaining to any of the Real Property nor has
the Company received any written notice of a violation or claimed violation of
any Law.
(d) All components of all buildings, structures and other
improvements included within the properties listed on Schedule 3.11
(collectively, the "Company Properties"), including but not limited to the roofs
and structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water, storm water, paving and
parking equipment, systems and facility included therein, and other material
items of tangible property and assets included in the Company Properties are in
good operating condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform in all
material respects to all applicable building, subdivision, zoning, environmental
and other Laws relating to their construction, use and operation.
(e) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any applicable law or by the
current use and operation of the Real Property are installed to the property
lines of the Real Property, are connected pursuant to valid permits to municipal
or public utility services or proper drainage facilities, are fully operable and
are adequate to service the Real Property as currently used.
(f) All licenses, permits, certificates, easements and rights of
way, including proof of dedication, required from all Governmental Entities
having jurisdiction over the Real Property for the use and operation of the Real
Property as currently used and to ensure vehicular and pedestrian ingress to and
egress from the Real Property have been obtained.
(g) No portion of the Real Property has suffered any material damage
by fire or other casualty which has not heretofore been repaired.
(h) There are (i) no material physical or mechanical defects in any
of the Real Property, including, without limitation, the structural portions of
the Real Property and the plumbing, heating, air conditioning, electrical,
mechanical, life safety and other systems therein, and all such items are in
good operating condition and repair, reasonable wear and tear excepted; (ii) no
unsatisfied requests for any repairs, restorations or improvements to the Real
Property from any Person, including, without limitation, any Governmental
Entity; and (iii) no ongoing material repairs to the Real Property being made by
or on behalf of the Company, except as set forth in Schedule 3.11.
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3.12 Tax Matters.
(a) Except as specifically set forth on Schedule 3.12(a), the
Company and each other corporation included in any consolidated, combined,
unitary or otherwise affiliated group for the purpose of filing tax returns or
reports (each, a "Tax Return"), within the meaning of Section 1504 of the Code
or similar provision of state, local or foreign law, of which the Company is or
ever has been a member, (i) has timely paid all Taxes required to be paid by it
through the date hereof (including any Taxes shown due on any Tax Return); and
(ii) has timely filed or caused to be filed in a timely manner (within any
applicable extension periods) all Tax Returns required to be filed by it with
the appropriate Governmental Entities in all jurisdictions in which such Tax
Returns are required to be filed, and all such Tax Returns are true and complete
in all material respects.
(b) Except as set forth in Schedule 3.12(b),
(i) no Liens (other than Permitted Liens) have been filed and
the Company has not been notified by the Internal Revenue Service or any
other taxing authority that any issues have been raised (and are currently
pending) by the Internal Revenue Service or any other taxing authority in
connection with any Tax Return of the Company, and no waivers of statutes
of limitations have been given or requested with respect to the Company;
(ii) there are no pending Tax audits of any Tax Returns of the
Company;
(iii) no unresolved deficiencies or additions to Taxes have
been proposed, asserted or assessed against the Company or any member of
any consolidated, combined unitary or otherwise affiliated group of which
the Company ever was or is a member;
(iv) the Company has made full and adequate provision on the
Latest Balance Sheet and the Interim Financial Statements for all material
Taxes payable by it for all periods prior to the date of the Latest
Balance Sheet and the Interim Financial Statements, respectively;
(v) there is no audit, examination, deficiency, or refund
litigation pending with respect to any Taxes and, during the past three
years, no Government Authority has given written notice of the
commencement of any audit, examination or deficiency litigation, with
respect to any Taxes;
(vi) (A) no person has made with respect to the Company, or
with respect to any property held by any of the Company, any consent under
Section 341 of the Code, (B) no material amount of property of the Company
is "tax exempt property" within the meaning of Section 168(h) of the Code,
(C) no material amount of assets of the Company are subject to a lease
under Section 7701(h) of the Code, and (D) the Company is not a party to
any material lease made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect prior to the date of
enactment of the Tax Equity and Fiscal Responsibility Act of 1982;
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(vii) immediately following the Merger, the Company will not
have any material amount of income or gain that has been deferred under
Treasury Regulation Section 1.1502-13, or any material excess loss account
in another Retained Company under Treasury Regulation Section 1.1502-19;
and
(viii) the Company has complied in all material respects with
all applicable Laws relating to the collection or withholding of Taxes
(such as sales Taxes or withholding of Taxes from the wages of employees)
and the Company has not been and is not liable for any Taxes for failure
to comply with such Laws;
(ix) the Company is not and has not been a party to any Tax
sharing, Tax indemnity or similar agreement;
(x) the Company has not incurred any obligation to make (or,
possibly make) any payments that (A) will be non-deductible under, or
would otherwise constitute a "parachute payment" within the meaning of,
Section 280G of the Code (or any corresponding provision of state, local
or foreign income Tax law); or (B) are or may be subject to the imposition
of an excise tax under Section 4999 of the Code; and
(xi) the Company has not agreed to and is not required to make
any adjustments or changes to its accounting methods pursuant to Section
481 of the Code, and the Internal Revenue Service has not proposed any
such adjustments or changes in the accounting methods of the Company.
3.13 Intellectual Property.
(a) Schedule 3.13(a) identifies (i) all Intellectual Property used
by the Company in connection with the business of the Company; (ii) each
license, agreement or other permission which the Company has granted to any
Person with respect to any Intellectual Property used by the Company in
connection with their respective businesses; and (iii) each item of Intellectual
Property that any Person owns and that the Company uses in connection with its
business pursuant to license, sublicense, agreement or permission ("Licensed
Intellectual Property").
(b) Except as specifically set forth on Schedule 3.13(b), as of the
date hereof and as of the Closing:
(i) the Company has not infringed upon or misappropriated any
Intellectual Property rights of third parties, and the Company has not
received any charge, complaint, claim, demand or notice alleging any such
infringement or misappropriation;
(ii) the Company has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of,
and, where necessary, has made timely and proper application for the
registration and patenting of all Intellectual Property (other than the
Licensed Intellectual Property) necessary or required for the conduct of
their business as currently conducted and as proposed to be conducted and
such rights to use,
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sell, license, dispose of and bring actions are exclusive with respect to
such Intellectual Property;
(iii) the Company has the right to use all Licensed
Intellectual Property necessary or required for the conduct of its
business as currently conducted and proposed to be conducted;
(iv) there are no royalties, honoraria, fees or other payments
payable by the Company to any Person by reason of the ownership, use,
license, sale or disposition of the Intellectual Property, other than in
connection with Licensed Intellectual Property;
(v) no activity, service or procedure currently conducted or
proposed to be conducted by the Company violates or will violate any
agreement governing the use of Licensed Intellectual Property;
(vi) the Company has taken reasonable and practicable steps
(including, without limitation, entering into confidentiality and
nondisclosure agreements with all officers, directors and employees of and
consultants to the Company with access to or Knowledge of the Intellectual
Property) designed to safeguard and maintain the secrecy and
confidentiality of, and its proprietary rights in, all Intellectual
Property; and
(vii) the Company has not sent to any third party or otherwise
communicated to another Person in the past five years any charge,
complaint, claim, demand or notice asserting infringement or
misappropriation of, or other conflict with, any Intellectual Property
right of the Company by such other Person or any acts of unfair
competition by such other Person, nor to the best Knowledge of the Company
is any such infringement, misappropriation, conflict or act of unfair
competition occurring or threatened.
(c) Schedule 3.13(c) contains a true and complete list of all
applications and filings made or taken pursuant to Federal, state, local and
foreign Laws by the Company to perfect or protect its interest in the
Intellectual Property, including, without limitation, all patents, patent
applications, trademarks, trademark applications, service marks and servicemark
applications.
3.14 Contracts and Commitments.
(a) Except as set forth on Schedule 3.14(a), the Company is not a
party to any written or oral:
(i) contract for the employment of any officer, individual
employee, or other Person on a full-time, part-time, consulting or other
basis;
(ii) contract relating to Funded Indebtedness or to the
mortgaging, pledging or otherwise placing a Lien on any Asset or group of
Assets of the Company;
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(iii) contract involving the sale of the accounts receivable
of the Company to any other Person at a discount;
(iv) Guaranty;
(v) contract with respect to the lending or investing of
funds;
(vi) contract under which the Company is the lessee of or the
holder or operator of any real or personal property owned by any other
Person;
(vii) contract under which the Company is the lessor of or
permits any third Person to hold or operate any real or personal property
owned or controlled by the Company;
(viii) assignment, license, indemnification or agreement with
respect to any form of intangible property, including, without limitation,
any Intellectual Property or confidential information;
(ix) contract or group of related contracts with the same
Person for the sale of assets or services which generate in excess of
$100,000 in revenues in any 12-month period;
(x) contract which prohibits the Company from freely engaging
in business anywhere in the world;
(xi) contract relating to the purchase, distribution,
marketing or sales of the Company's or any other Person's products (other
than purchase and sales orders entered into in the ordinary course of
business consistent with past practices and the performance of which by
the parties thereto is reasonably expected to be substantially completed
within 30 days of the execution thereof);
(xii) contract with any Affiliate; or
(xiii) other contract material to the business of the Company.
(b) Except as specifically disclosed in Schedule 3.14(b), the
Company has performed in all material respects all obligations required to be
performed by it and is not in default under or in breach of nor in receipt of
any claim of default or breach under any such contract to which it is a party or
by which any of its Assets may be bound; and to the Company's Knowledge no event
has occurred which with the passage of time or the giving of notice or both
would result in such a default or breach under any such contract. To the
Company's Knowledge, no other party to any contract to which the Company is a
party or by which its Assets may be bound is in default under or in breach of
such contract and no event has occurred which with the passage of time or giving
of notice or both would result in a default or breach under any such contract.
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(c) There has been made available to Parent (i) a true and complete
copy of each of the contracts listed on Schedule 3.14(a), together with all
amendments, waivers or other changes thereto; and (ii) a complete description of
all oral contracts to which the Company is a party or by which any of their
Assets may be bound.
3.15 Insurance.
(a) Schedule 3.15(a) contains a true and complete list of all
policies of liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and other forms of insurance held by the Company and/or
known by the Company to be held by any Seller for the benefit of the Company
(specifying the insurer, amount of coverage, type of insurance, policy number
and any pending claims thereunder). The Company has maintained such insurance
coverage at all times during the course of the operation of the business, and
such insurance coverage has been maintained on an occurrence basis. The Company
is insured against all risks usually insured against by Persons conducting
similar businesses and operating similar properties in the localities where the
business is conducted and the properties of the Company are located, under
policies of such types and in such amounts as are customarily carried by such
Persons.
(b) Except as set forth on Schedule 3.15(b), with respect to each
policy of insurance listed on Schedule 3.15(a), (i) all premiums with respect
thereto are currently paid and are not subject to adjustment, and no Person is
in default in any respect with respect to its obligations under such policy, and
no basis exists that would give any insurer under any such policy the right to
cancel or unilaterally reduce or limit the stated coverages contained in such
policy; (ii) there are no outstanding claims currently pending under such policy
that could be expected to cause an increase in the insurance rates of the
Company, and no facts or circumstances exist that might reasonably be expected
to relieve the insurer under such policy of its obligations to satisfy in full
any claim thereunder; and (iii) the Company has not received any notice that
such policy has been or shall be canceled or terminated or will not be renewed
on substantially the same terms as are now in effect or the premium on such
policy shall be materially increased on the renewal thereof.
3.16 Litigation.
Except as set forth on Schedule 3.16, (i) there is no Proceeding pending
or, to the best Knowledge of the Company, threatened by or against, or affecting
the Assets of, the Company (or any of its predecessors); and (ii) the Company is
not bound by any Order. Schedule 3.16 sets forth all Proceedings involving the
Company.
3.17 Employees.
(a) Except as set forth on Schedule 3.17, the Company has complied in all
respects with all Laws relating to the hiring of employees, the retention of
independent contractors and the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other Taxes. The Company does not have
Knowledge of any labor relations problems being experienced by it
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(including, without limitation, any union organization activities, threatened or
actual strikes or work stoppages or material grievances).
(b) Except as set forth on Schedule 3.17, (i) the Company is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to date or amounts required to be reimbursed to such employees and upon any
termination of the employment of any such employees; (ii) there is no unfair
labor practice complaint against the Company or pending before the National
Labor Relations Board or any other Governmental Entity; (iii) there is no labor
strike, material dispute, slowdown or stoppage actually pending or, to the best
Knowledge of the Company, threatened against or involving the Company; (iv) no
labor union currently represents the employees of the Company; and (v) to the
best Knowledge of the Company, no labor union has taken any action with respect
to organizing the employees of the Company. The Company is not a party to or
bound by any collective bargaining agreement or union contract.
3.18 Employee Benefits.
(a) Schedule 3.18 contains a true, complete and correct list of all
Employee Benefit Plans (collectively, the "Plans") (i) that cover any employees,
contract employees or former employees of the Company or any spouses, family
members or beneficiaries thereof (A) that are maintained, sponsored or
contributed to by the Company; or (B) with respect to which the Company is
obligated to contribute or has any actual or potential Liability; or (ii) with
respect to which the Company has any actual or potential Liability or obligation
on account of the maintenance or sponsorship thereof or contribution thereto by
any present or former ERISA Affiliate of the Company.
(b) Administration and Compliance. Except as set forth on Schedule
3.18, with respect to each Employee Plan (to the extent applicable):
(i) such Employee Plan has been established, maintained,
operated and administered in accordance with its terms and in compliance
in all material respects with ERISA, the Code, and other applicable Laws
(including with respect to reporting and disclosure);
(ii) all required, declared or discretionary (in accordance
with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the
date hereof have been made or properly accrued on the Latest Balance
Sheet, or with respect to accruals properly made after the date of the
Latest Balance Sheet, on the books and records of the Company and all
amounts withheld from employees have been timely deposited into the
appropriate trust or account;
(iii) there is no unfunded actual or potential Liability
relating to such Employee Plan which is not reflected on the Latest
Balance Sheet, or with respect to accruals properly made after the date of
the Latest Balance Sheet, on the books and records of the Company;
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(iv) Neither the Company nor any of its respective ERISA
Affiliates or any other "disqualified person" or "party in interest" (as
such terms are defined in Section 4975 of the Code and Section 3(14) of
ERISA, respectively) with respect to such Plan, have breached the
fiduciary rules of ERISA or engaged in a prohibited transaction that could
subject any of the foregoing Persons to any tax or penalty imposed under
Section 4975 of the Code of Section 502(i), (j) or (l) of ERISA;
(v) no Proceedings (other than routine claims for benefits)
are pending or, to the Knowledge of the Company, threatened against or
relating to any Plan or any fiduciary thereof, and there is, to the
Knowledge of the Company, no basis for any such Proceeding against any
Plan;
(vi) such Plan, if intended to be "qualified," within the
meaning of Section 401(a) of the Code, has been determined by the Internal
Revenue Service to be so qualified and the related trusts are exempt from
Tax under Section 501(a) of the Code, and nothing has occurred that has or
could reasonably be expected to adversely affect such qualification or
exemption;
(vii) except as may be required under Laws of general
application, such Plan does not obligate the Company to provide any
employee or former employee, or their spouses, family members or
beneficiaries, any post-employment or post-retirement health or life
insurance, accident or other "welfare-type" benefits;
(viii) if such Plan is a "group health plan" within the
meaning of Section 5000 of the Code, such Plan has been maintained in
compliance with Section 4980B of the Code and Title I, Subtitle B, Part 6
of ERISA and no tax payable on account of Section 4980B of the Code has
been or is expected to be incurred;
(ix) the Company has never maintained or been obligated to
contribute to a Multi-employer Plan (as defined in Section 3(37) of
ERISA), a Multiple Employer Plan (as defined in Section 413 of the Code)
or a Defined Benefit Pension Plan (as defined in Section 3(35) of ERISA);
(x) all reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied with respect to each Plan; and
(xi) no benefit payable or which becomes payable by the
Company or any ERISA Affiliate thereof pursuant to any Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an
excise tax under Section 4999 of the Code or which would not be deductible
by reason of Section 280G of the Code.
(c) Parent has been provided with true and complete copies, to the
extent applicable, of all documents pursuant to which such Plan is maintained
and administered, the two most recent annual reports (Form 5500 and attachments)
and financial statements therefor, all governmental rulings, determinations, and
opinions (and pending requests therefor), and, if such
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Plan provides post-employment or post-retirement health and life insurance,
accident or other "welfare-type" benefits, the most recent valuation of the
present and future obligations under such Plan; and the foregoing documents
accurately reflect all of the terms of such Plan (including, without limitation,
any agreement or provision which would limit the ability of the Company to make
any prospective amendments or terminate such Plan).
3.19 Environment and Safety.
The Company has complied in all respects with, and is in compliance with,
all Environmental and Safety Requirements, and there are no Proceedings pending
or, to the best Knowledge of the Company, threatened against the Company
alleging any failure to so comply or involving any of its past operations or any
real property currently used by the Company. The Company has not received any
written or oral notice or report with respect to it or its facilities regarding
any (i) actual or alleged violation of Environmental and Safety Requirements; or
(ii) actual or potential Liability arising under Environmental Safety
Requirements, including, without limitation, any investigatory, remedial or
corrective obligation. The Company has not expressly assumed or undertaken any
Liability of any other Person under any Environmental and Safety Requirements.
The Company has not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled or released any substance, or owned or
operated any real property in a manner that has given rise to Liabilities
pursuant CERCLA, SWDA or any other Environmental and Safety Requirement,
including any Liability for response costs, corrective action costs, personal
injury, property damage, natural resources damage or attorney fees, or any
investigative, corrective or remedial obligations.
3.20 Related Party Transactions.
Except as set forth on Schedule 3.20, and except for compensation to
regular employees of the Company, no current or former Affiliate of the Company,
is now, or has been during the last five fiscal years, (i) a party to any
transaction or contract with the Company; (ii) indebted to the Company; or (iii)
the direct or indirect owner of an interest in any Person which is a present or
potential competitor, supplier or customer of the Company (other than
non-affiliated holdings in publicly held companies), nor does any such Person
receive income from any source other than the Company which should properly
accrue to the Company. Except as set forth on Schedule 3.20, no current or
former Affiliate of the Company or any Associate thereof is a guarantor or
otherwise liable for any Liability (including indebtedness) of the Company.
3.21 Directors and Officers.
Schedule 3.21 lists all of the current directors and officers of the
Company, their accrued 1999 compensation through the date hereof, their current
compensation levels and the dates on which they assumed their respective
offices.
3.22 Offering Exemption.
The offering, sale and issuance of the Merger Shares was exempt from
registration under the Securities Act and under applicable state securities and
"blue sky" laws. The Company has
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made all requisite filings and has taken or will take all action necessary to be
taken to comply with such state securities or "blue sky" laws.
3.23 Accounts and Notes Receivable.
All the accounts receivable and notes receivable owing to the Company as
of the date hereof constitute, and as of the Closing shall constitute, valid and
enforceable claims arising from bona fide transactions in the ordinary course of
business, and there are no known or asserted claims, refusals to pay or other
rights of set-off against any thereof. Except as set forth on Schedule 3.23, (i)
all accounts and notes receivable are good and collectible in the ordinary
course of business consistent with past practice at the aggregate recorded
amounts thereof; (ii) no account debtor or note debtor is delinquent for
payments in excess of $20,000 and for more than 90 days; and (iii) no account
debtor or note debtor has refused or, to the Knowledge of the Company,
threatened to refuse to pay its obligations to the Company for any reason, or
has otherwise made a claim of set-off or similar claim; and (iv) no account
debtor or note debtor is insolvent or bankrupt.
3.24 Brokers.
Schedule 3.24 sets forth a true and complete list of each agent, broker,
investment banker, Person or firm who or which has acted on behalf, or under the
authority, of the Company (or its predecessors) or any of its shareholders or
will be entitled to any fee or commission directly or indirectly from the
Company or any of its shareholders. Parent will not have and from and after the
Closing, the Company will not have any Liability or obligation to any such
agents, brokers, investment bankers Persons or Firms in connection with any of
the transactions contemplated hereby.
3.25 Disclosure.
Neither this Agreement nor any of the Schedules or Exhibits, any of the
Related Documents nor any other written material, when viewed separately or
together, delivered to Parent or any of its directors, officers, partners,
employees, representatives or agents contains any untrue statement of a material
fact or omits a material fact necessary to make the statements contained herein
or therein, in light of the circumstances in which they were made, not
misleading as of the date hereof.
3.26 Year 2000.
All of the products, devices and programs developed and, to the best
knowledge of the Company, used by the Company are designed to be used prior to,
during and after the calendar year 2000 A.D., and such products, devices and
programs will operate during each such time period without error relating to
date data and date-dependent data, specifically including any error relating to,
or the program of, date data which represents or references different centuries
or more than one century, other than such errors which have not had nor could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Other than any of the following which has not had
nor could reasonably be expected to have a
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Material Adverse Effect, individually or in the aggregate, on the Company,
without limiting the generality of the foregoing:
(a) each such product, device or program will not abnormally end or
provide invalid or incorrect results as a result of date data, specifically
including date data which represents or references different centuries or more
than one century; and
(b) each such product, device or program has been designed to ensure
Year 2000 compatibility, including, but not limited to, date data century
recognition, calculations which accommodate same century and multi-century
formulas and date values and date data interface values that reflect the
century.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INDEMNIFYING SELLERS
As a material inducement to Parent and Acquisition Sub to enter into
and perform their obligations under this Agreement, each Indemnifying Seller,
severally (as to himself only), represents and warrants to Parent and
Acquisition Sub as follows:
4.1 Title to the Merger Shares.
Such Indemnifying Seller is the lawful owner, of record and beneficially,
of those shares of Company Common Stock set forth opposite its name on Annex II
and has good and marketable title to such shares, free and clear of any Liens
whatsoever and with no restriction on the voting rights and other incidents of
record and beneficial ownership pertaining thereto. Except for this Agreement or
as set forth on Schedule 3.4, there are no agreements or understandings between
such Indemnifying Seller and any other Seller or any other Person with respect
to the acquisition, disposition or voting of or any other matters pertaining to
any of the capital stock of the Company. Such Indemnifying Seller acquired his
or its shares of capital stock of the Company in one or more transactions exempt
from registration under the Securities Act, and in compliance with applicable
state securities laws. Except as set forth on Schedule 3.4, such Indemnifying
Seller has no right whatsoever to receive or acquire any additional shares of
capital stock of the Company.
4.2 Authority; Noncontravention.
(a) If such Indemnifying Seller is a natural Person, such
Indemnifying Seller has full and absolute legal right, capacity, power and
authority to enter into this Agreement and the this Agreement and the Related
Documents to which he is a party.
(b) If such Indemnifying Seller is not a natural Person, such
Indemnifying Seller is duly organized, validly existing and in good standing
under the Laws of the state of its formation and has all requisite power and
authority (whether corporate or otherwise) to own, lease and operate its
properties and assets and to carry on its business as now being conducted. Such
Indemnifying Seller has all requisite power and authority (whether corporate or
otherwise) to enter into this Agreement and the Related Documents to which it is
a party, to perform its
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obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Such Indemnifying Seller has not conducted its
business under any fictitious or other names. Parent has been furnished with
true, complete and correct copies of such Seller's Fundamental Documents, in
each case as amended to and in effect on the date hereof.
(c) This Agreement and the Related Documents to which such
Indemnifying Seller is a party are the valid and binding obligations of such
Indemnifying Seller, enforceable against such Indemnifying Seller in accordance
with their respective terms, subject to (i) applicable bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally; and
(ii) general principles of equity, including without limitation, the doctrines
of good faith, fair dealing, unconscionability, reasonableness and materiality
and the discretion of courts in granting equitable remedies, including, without
limitation, specific performance.
(d) Neither the execution, delivery and performance of this
Agreement or the Related Documents to which such Indemnifying Seller is a party
nor the consummation of the transactions contemplated hereby and thereby nor
compliance by such Indemnifying Seller with any of the provisions hereof or
thereof will (i) conflict with or result in a breach of the certificate or
articles of incorporation, the by-laws or similar organizational documents of
such Indemnifying Seller (if any); (ii) conflict with, or result in any
violations of, or cause a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligations contained in or the loss of any material benefit
under, any term, condition or provision of any contract to which such
Indemnifying Seller is a party, or by which such Indemnifying Seller or any of
its properties may be bound; or (iii) violate any Law applicable to such
Indemnifying Seller or any of its properties, which conflict or violation would
prevent the consummation of the transactions contemplated by this Agreement or
any of the Related Documents to which such Indemnifying Seller is a party or
result in an Encumbrance on or against any assets, rights or properties of the
Company or on or against any capital stock of the Company or give rise to any
claim against such Indemnifying Seller, the Company, Parent, Acquisition Sub or
any their respective Affiliates.
4.3 Legal Compliance.
No consent, approval, Permit, Order, notification or authorization of, or
any exemption from or registration, declaration or filing with, any Governmental
Entity or any third Person is required in connection with the execution,
delivery and performance by such Indemnifying Seller of this Agreement or any
Related Document to which he or it is or will be a party or the consummation by
such Indemnifying Seller of the transactions contemplated hereby or thereby.
4.4 Brokers.
After the Closing, neither Parent nor the Company will be required to pay
any fee or commission to any agent, broker, investment banker, or other Person
as a result of the transactions contemplated hereby.
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4.5 Registration Rights.
Immediately following the Closing, except as contemplated by the Related
Documents, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities (including debt
securities) of the Company owned by such Indemnifying Seller.
4.6 No Security Interests.
Except as contemplated by this Agreement or the Related Documents, there
are, and immediately after consummation of the Closing there will be, no
outstanding warrants, options, agreements, convertible securities or other
commitments or instruments pursuant to which such Indemnifying Seller is or may
become obligated to sell any shares of Company Common Stock or any Parent Common
Stock. There is, and, immediately after the consummation of the Closing there
will be, no Lien or any right of first refusal, right of first offer, proxy,
voting trust, voting agreement or other arrangement or agreement with respect to
the sale or voting of or otherwise relating to any share of Company Common Stock
or Parent Common Stock (whether outstanding or issuable).
4.7 Compliance with Applicable Laws
All shares of the capital stock and other securities being transferred by
such Indemnifying Seller have been issued in transactions in accordance with
applicable Laws governing the sale and purchase of securities.
4.8 Experience.
(a) Such Indemnifying Seller understands that none of the shares of
Parent Common Stock transferred in the Merger will be registered or qualified
under the Securities Act, or any applicable state securities laws. Such shares
must be held indefinitely unless a subsequent disposition thereof is registered
or qualified under the Securities Act or is exempt from such registration or
qualification. Such Indemnifying Seller understands that there is no public
market for the Parent Common Stock and that the transferability thereof is
restricted.
(b) Such Indemnifying Seller (i) has been furnished with or has had
access to the information that such Indemnifying Seller has requested from
Parent; (ii) has had an opportunity to discuss with management of Parent the
intended business and financial affairs of Parent; and (iii) has generally such
knowledge and experience in business and financial matters so as to enable such
Indemnifying Seller to understand and evaluate the risks of and form an
investment decision with respect to the matters set forth in this Agreement.
Without limiting the foregoing, such Indemnifying Seller has reviewed and
understands this Agreement and the Related Documents.
(c) Such Indemnifying Seller does not need liquidity in its
investment in the Parent Common Stock and is able to bear the economic risk of
its investment and the complete loss of all of such investment. Such
Indemnifying Seller recognizes that an investment in Parent
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involves certain risks, and has taken full cognizance of, and understands all
of, the risk factors related to its execution and delivery of this Agreement.
4.9 Investment.
Such Indemnifying Seller is acquiring the shares of Parent Common Stock
for investment for his or its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution of any part
thereof. Such Indemnifying Seller understands that the shares of Parent Common
Stock to be acquired have not been registered under the Securities Act or
applicable state and other securities laws by reason of a specific exemption
from the registration provisions of the Securities Act and applicable state and
other securities laws, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of
Indemnifying Sellers' representations as expressed herein.
4.10 Rule 144.
Such Indemnifying Seller acknowledges and understands that he or it must
bear the economic risk of the ownership of the Parent Common Stock for an
indefinite period of time because the shares of Parent Common Stock must be held
indefinitely unless subsequently registered under the Securities Act and
applicable state and other securities laws or unless an exemption from such
registration is available. Such Indemnifying Seller also understands that there
are contractual restrictions contained in this Agreement and the Related
Documents which affect the transferability of the Parent Common Stock. Such
Indemnifying Seller understands that any transfer agent of Parent will issue
stop-transfer instructions with respect to the Parent Common Stock unless any
transfer thereof is subsequently registered under the Securities Act and
applicable state and other securities laws or unless an exemption from such
registration is available.
4.11 No Public Market.
Such Indemnifying Seller understands that no public market now exists for
the Parent Common Stock and that there is no assurance that a public market will
ever exist for such stock.
4.12 Legend on Stock Certificates.
Such Indemnifying Seller understands that each certificate representing
shares of Parent Common Stock shall bear a legend containing the following words
(in addition to any other legend required by law or applicable agreement):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE RESOLD UNLESS REGISTERED PURSUANT THERETO OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
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THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF
DECEMBER 24, 1998, AS AMENDED, AMONG OPUS360 CORPORATION AND
CERTAIN HOLDERS OF THE OUTSTANDING CAPITAL STOCK OF SUCH
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF SUCH CORPORATION."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB
As a material inducement to the Company to enter into and perform
its obligations under this Agreement, Parent and Acquisition Sub represent and
warrant to the Sellers as of the date hereof, as follows:
5.1 Organization; Good Standing; Qualification and Power.
Parent and Acquisition Sub are duly organized, validly existing and in
good standing under the Laws of their jurisdiction of formation, have all
requisite power to own, lease and operate their Assets and to carry on their
business as presently being conducted, and are qualified to do business and are
in good standing in every jurisdiction in which the failure to so qualify or be
in good standing would have a Material Adverse Effect. Parent and Acquisition
Sub have made available to the Company true and complete copies of their
Fundamental Documents as in effect on the date hereof.
5.2 Authorization.
(a) Parent and Acquisition Sub have all requisite power and
authority to execute and deliver this Agreement, each Related Document to which
they are a party and any and all instruments necessary or appropriate in order
to effectuate fully the terms and conditions of this Agreement and each such
Related Document and all related transactions and to perform their obligations
under this Agreement and each such Related Document. This Agreement and each
Related Document to which Parent or Acquisition Sub is a party has been duly
authorized by all necessary action (corporate or otherwise) on the part of
Parent or Acquisition Sub, and this Agreement and each Related Document to which
Parent or Acquisition Sub is a party has been duly executed and delivered by
Parent or Acquisition Sub, and constitutes the valid and legally binding
obligation of Parent or Acquisition Sub enforceable in accordance with its terms
and conditions, except as enforceability thereof may be limited by any
applicable bankruptcy, reorganization, insolvency or other Laws affecting
creditors' rights generally or by general principles of equity.
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(b) The authorization, issuance, sale and delivery of the Closing
Shares, the Reserved Shares and the Additional Shares and the Merger have been
duly authorized by all requisite action of the Board of Directors of Parent and
Acquisition Sub. As of the Closing, the Closing Shares and the Reserved Shares
will be, and upon issuance in accordance with the terms of this Agreement the
Additional Shares will be, validly issued and outstanding, fully paid and
nonassessable, with no personal liability attaching to the ownership thereof,
free and clear of any Liens whatsoever and with no restrictions on the voting
rights thereof and other incidents of record and beneficial ownership pertaining
thereto, in each case other than pursuant to this Agreement and the Related
Documents.
5.3 Non-contravention.
Except as set forth on Schedule 5.3, the execution, delivery and
performance by Parent and Acquisition Sub of this Agreement and the Related
Documents to which they are a party, the consummation of the transactions
contemplated hereby thereby and compliance with the provisions hereof thereof,
including the issuance, sale and delivery of the Stock Consideration do not and
will not, (a) violate any Law to which Parent or Acquisition Sub or any of their
respective Assets is subject; (b) violate any provision of the Fundamental
Documents of Parent or Acquisition Sub; (c) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under any contract to which Parent or Acquisition Sub is a party or by
which any of the Assets of Parent or Acquisition Sub are bound; or (d) result in
the imposition of any Lien upon any of the Assets of Parent or Acquisition Sub.
Other than state blue sky securities filings, neither Parent nor Acquisition Sub
has been or is required to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Governmental Entity or any other
Person for the valid authorization, issuance and delivery of this Agreement or
the Related Documents.
5.4 Capitalization of Parent.
(a) Immediately prior to consummation of the Closing, the total
number of shares of all classes of stock which Parent has authority to issue is
70,000,000 consisting of:
(i) 45,000,000 shares of Common Stock, par value $.001 per
share, (A) 8,082,417 of which are issued and outstanding, fully paid and
nonassessable; (B) 8,284,000 of which are reserved for issuance upon
conversion of the Series A Convertible Preferred Stock; (C) 8,676,790 of
which are reserved for issuance upon conversion of the Series B
Convertible Preferred Stock; (D) 4,100,000 of which are reserved for
issuance pursuant to Parent's 1998 Stock Option Plan, and (E) 370,365 of
which are reserved for issuance pursuant to outstanding warrants.
(ii) 25,000,000 shares of Preferred Stock, par value $.001 per
share, consisting of (A) 8,400,000 shares of Series A Convertible
Preferred Stock, of which 8,284,000 are issued and outstanding, fully paid
and nonassessable; (B) 8,7000,000 shares of Series B Convertible Preferred
Stock, of which 8,676,790 shares are issued and outstanding, fully paid
and nonassesable; and (C) 7,900,000 shares of Preferred Stock are
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reserved for issuance in the discretion of the Board of Directors of
Parent, none of which are issued and outstanding.
(b) Except as contemplated by this Agreement and the Related
Documents or otherwise set forth on Schedule 5.4, there are no (i) outstanding
warrants, options, agreements, convertible securities or other commitments or
instruments pursuant to which Parent is or may become obligated to issue or sell
any shares of its capital stock or other securities (other than shares which are
reserved for issuance as set forth in Section 5.4(a); or (ii) preemptive or
similar rights to purchase or otherwise acquire shares of the capital stock or
other securities of Parent pursuant to any provision of Law, such Person's
Fundamental Documents or any contract to which such Person, or to the best
Knowledge of Parent, any shareholder thereof is a party; and, except as
contemplated by this Agreement and the Related Documents or as otherwise set
forth on Schedule 5.4, there is no Lien with respect to the sale or voting of
shares of capital stock or securities of Parent (whether outstanding or
issuable).
(c) All shares of the capital stock and other securities issued by
Parent have been issued in transactions in accordance with applicable Laws
governing the sale and purchase of securities.
5.5 Capitalization of Acquisition Sub.
(a) Immediately upon consummation of the Closing the total number of
shares of all classes of stock which Acquisition Sub has authority to issue is
1,000 shares of common stock, par value $.01 per share, 100 of which are issued
and outstanding, fully paid and nonassessable.
(b) Except as contemplated by this Agreement and the Related
Documents, immediately after consummation of the Closing there will be, no (i)
outstanding warrants, options, agreements, convertible securities or other
commitments or instruments pursuant to which Acquisition Sub is or may become
obligated to issue or sell any shares of its capital stock or other securities;
or (ii) preemptive or similar rights to purchase or otherwise acquire shares of
the capital stock or other securities of Acquisition Sub pursuant to any
provision of Law, such Person's Fundamental Documents or any contract to which
such Person, or to the best Knowledge of Acquisition Sub, any shareholder
thereof is a party; except as contemplated by this Agreement and the Related
Documents, there is, and, immediately after the consummation of the Closing
there will be, no Lien with respect to the sale or voting of shares of capital
or securities of Acquisition Sub (whether outstanding or issuable).
(c) All shares of the capital stock and other securities issued by
Acquisition Sub have been issued in transactions in accordance with applicable
Laws governing the sale and purchase of securities.
5.6 Subsidiaries.
Except for Acquisition Sub and as set forth on Schedule 5.6, Parent does
not have any Subsidiaries. Acquisition Sub does not have any Subsidiaries.
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5.7 Financial Statements.
(a) Schedule 5.7 contains the unaudited consolidated balance sheet
of Parent as of September 30, 1999 (the "Parent Balance Sheet"), and the related
unaudited consolidated statements of income and cash flow for the nine-month
period then ended (collectively, the "Parent Financial Statements").
(b) Each of the Parent Financial Statements (i) has been prepared in
accordance with the books and records of Parent (which are true and complete in
all material respects); (ii) fairly presents the financial condition and results
of operations which it purports to present as of the dates thereof and for the
periods indicated thereon (except, for the lack of footnotes and for year end
adjustments); and (iii) has been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, subject to the lack of footnotes
and other presentation items. Since the date of the Parent Balance Sheet, except
as required by applicable Law or GAAP, as of the date hereof, there has been no
change in any accounting principle, procedure or practice followed by Parent or
in the method of applying any such principle, procedure or practice.
5.8 Events Subsequent to the Balance Sheet.
Since the date of the Parent Balance Sheet, Parent has operated its
business in the ordinary course consistent with past practice, and, as of the
date hereof, Parent has not suffered any Material Adverse Change.
5.9 Offering Exemption.
Based in part upon and assuming the accuracy of the representations of the
Sellers in Article IV, the offering, sale and issuance of the Stock
Consideration has been, is, and will be, exempt from registration under the
Securities Act, and such offering, sale and issuance is also exempt from
registration under applicable state securities and "blue sky" laws. Parent has
made all requisite filings and has taken or will take all action necessary to be
taken to comply with such state securities or "blue sky" laws.
5.10 Brokers.
Schedule 5.10 sets forth a true and complete list of each agent, broker,
investment banker, Person or firm who or which has acted on behalf, or under the
authority, of Parent (or its predecessors) or any of its shareholders or will be
entitled to any fee or commission directly or indirectly from the Company or any
of its shareholders or Parent in connection with any of the transactions
contemplated hereby.
5.11 Litigation.
Except as set forth on Schedule 5.11, (i) there is no Proceeding pending
or, to the best Knowledge of the Parent, threatened by or against, or affecting
the Assets of, the Parent or any of its Subsidiaries; and (ii) the Parent is not
bound by any Order.
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ARTICLE VI
COVENANTS
6.1 Conduct Pending Closing.
From and after the date hereof until the Closing or the earlier
termination of this Agreement pursuant to Article VIII, except as otherwise
consented to in writing by Parent and Acquisition Sub, the Company shall, and
the Indemnifying Sellers shall cause the Company to:
(a) conduct its business substantially as presently conducted and
only in the ordinary course consistent with past practice;
(b) not form any Subsidiary;
(c) not sell, lease, license or otherwise dispose of any material
assets, except sales of inventories or other assets in the ordinary course of
business;
(d) use commercially reasonable efforts to (i) maintain its
business, assets, relations with present employees, customers, suppliers,
partners, licensees and operations as an ongoing business and preserve its
goodwill, in accordance with past custom and practice; and (ii) to satisfy each
of the closing conditions set forth in Article VII;
(e) not issue or sell any capital stock or issue or sell any
securities convertible into, exercisable or exchangeable for or options or
warrants to purchase or rights to subscribe for, any capital stock;
(f) not declare or pay a distribution on any capital stock, not
change the number of authorized shares of its capital stock or reclassify,
combine, split, subdivide or redeem or otherwise repurchase any of its capital
stock, or issue, deliver, pledge or encumber any additional capital stock or
other securities equivalent to or exchangeable for capital stock or enter into
any contract or arrangement to do any of the foregoing;
(g) not incur any Funded Indebtedness or issue any securities
evidencing any Funded Indebtedness;
(h) not enter into, or amend, alter, modify, supplement, restate or
waive any material terms or conditions of, any material contract, agreement or
arrangement;
(i) not enter into any employment or termination agreement or effect
any increase in the rate or terms of compensation payable or to become payable
to directors, officers, employees, partners and Persons having business
relations with the Company, or increase the rate or terms of any bonus, pension
or other Employee Plan covering any Person;
(j) not knowingly create or suffer to exist any Encumbrance on any
of its assets or properties;
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(k) not change its accounting principles or policies;
(l) not make any Tax election or compromise or settle any Tax
Liability;
(m) not delay or postpone the payment of accounts payable and other
obligations and liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with historical and
customary practice;
(n) not amend any of its Fundamental Documents;
(o) not enter into any transaction other than in the ordinary course
of business, or any transaction which is not at arms-length with unaffiliated
third Persons;
(p) not take or omit to take any action which would result in the
representations and warranties contained in this Agreement and the Related
Documents being untrue on the Closing Date, other than such action as shall have
been previously agreed to in writing by the parties hereto;
(q) maintain in good standing all Permits held by it on a timely
basis;
(r) continue the historic and customary maintenance capital
expenditure levels of the Company;
(s) not make any capital expenditures for improvements or upgrades;
and
(t) not agree or otherwise commit to take any of the actions set
forth above.
6.2 Efforts to Consummate.
Subject to the terms and conditions of this Agreement, each party shall
use commercially reasonable efforts to take or cause to be taken all actions and
do or cause to be done all things required under all applicable Laws, in order
to consummate the transactions contemplated hereby.
6.3 Exclusivity.
(a) From and after the date hereof until the earlier of the Closing
or the termination of this Agreement pursuant to Article VIII, no Indemnifying
Seller shall, and the Indemnifying Sellers shall cause the Company not to,
directly or indirectly; (i) take any action to solicit or initiate any
Acquisition Proposal; (ii) continue, initiate or engage in negotiations or
discussions relating to an Acquisition Proposal with, or disclose or provide any
non-public information or Confidential Information to, any Person other than
Parent and Acquisition Sub and their respective representatives; or (iii) enter
into any written or oral agreement or understanding with any Person (other than
Parent or Acquisition Sub) regarding an Acquisition Proposal. If any
Indemnifying Seller or the Company receives any unsolicited offer or proposal to
enter into negotiations relating to any Acquisition Proposal, the Sellers'
Representative shall
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promptly notify Parent and Acquisition Sub of such offer or proposal and the
general economic terms of such offer or proposal and shall furnish a copy of any
written offer or proposal thereto.
(b) The parties recognize and acknowledge that a breach of this
Section 6.3 will cause irreparable and material loss and damage to the
non-breaching party as to which it will not have an adequate remedy at law or in
equity. Accordingly, each party acknowledges and agrees that the issuance of an
injunction or other equitable remedy is an appropriate remedy for any such
breach.
6.4 Notice of Prospective Breach.
Each party shall immediately notify the other parties in writing upon the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause any representation or warranty of such
party that is contained in this Agreement or any Related Document to be untrue
or inaccurate in any material respect at any time from the date of this
Agreement to the Closing as if such representation and warranty were made at
such time.
6.5 Access to Records and Properties of the Acquired Companies.
Subject to the terms of the Nondisclosure Agreement dated as of March 8,
1999 (the "Nondisclosure Agreement"), between Parent and the Company, from and
after the date hereof until the earlier of the Closing or the termination of
this Agreement pursuant to Article VIII, the Company shall, and the Indemnifying
Sellers shall cause the Company to, afford, (a) to Parent, Acquisition Sub and
their prospective sources of financing and Affiliates and each of their
respective authorized representatives, including accountants, consultants and
attorneys, free and full access at all reasonable times to the assets, business,
facilities, properties, books, records (including tax returns filed and in
preparation), customers, consultants, and key employees of or relating to the
Company in order that Parent shall have the full opportunity to make such
investigation as it shall reasonably desire to make of the affairs of the
Company, and the Indemnifying Sellers shall cause the Company to cooperate fully
in connection therewith; and (b) to the respective independent certified public
accountants of Parent, free and full access at all reasonable times to the
records of the accountants of the Company. The investigation contemplated by
this Section 6.5 shall not affect or otherwise diminish or obviate in any
respect any of the representations and warranties or the indemnification rights
of the Parent Indemnified Persons contained in this Agreement. The parties
hereto agree to use their reasonable efforts to minimize any disruption to any
other party's business in connection with the conduct of the due diligence
process contemplated herein.
1.6 Release by Sellers.
Upon receipt by each Indemnifying Seller of the consideration to be
received by such Indemnifying Seller pursuant to Section 2.2, each such
Indemnifying Seller hereby agrees that (without any further action on the part
of such Indemnifying Seller) the Company (for the benefit of the Surviving
Corporation, the Parent and their respective Subsidiaries, Affiliates, divisions
and predecessors and each of their respective successors and assigns
(collectively, the "Released Persons")) shall be irrevocably released and
forever discharged of and from all manner of
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actions, causes of action, suits, debts, sums of money, controversies,
omissions, promises, damages, liabilities, judgments, claims and demands
whatsoever, in law or in equity which against the Released Persons such
Indemnifying Seller ever had, now has or which such Indemnifying Seller
hereafter can, shall or may have in such Indemnifying Seller's capacity as a
shareholder or former shareholder of the Company(the "Released Claims"), whether
known or unknown, for, upon or by reason of any matter or cause arising at any
time on or prior to the Closing Date; provided, however, that the Released
Claims shall exclude, and the foregoing release shall be inapplicable with
respect to, any matter arising under this Agreement, the Related Documents or
the transactions contemplated hereby or thereby. Each Indemnifying Seller
specifically represents and warrants to the Released Persons that such
Indemnifying Seller has not assigned any such Released Claim.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party to effect the Merger and the
related transactions herein are subject to the satisfaction prior to or at the
Closing Date of the following conditions unless waived (to the extent such
conditions can be waived) by the Company and the Sellers' Representative, on the
one hand, and Parent and Acquisition Sub, on the other hand.
(a) Approvals. The authorizations, consents, Orders or approvals of,
or declarations or filings with, or expiration of waiting periods of any
Governmental Entity required to consummate the transactions contemplated hereby
shall have been obtained or made.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
(c) Actions and Statutes. No Proceeding shall have been taken or
threatened, and no Law or Order shall have been enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement or the
Related Documents by any Governmental Entity that would (i) make the
consummation of the transactions contemplated hereby or thereby illegal or
substantially delay the consummation of any material aspect of the transactions
contemplated hereby or thereby; (ii) compel the Company, the Surviving
Corporation or Parent to dispose of or hold separate all or a material portion
of the business of the Company or Parent as a result of the consummation of the
transactions contemplated hereby or thereby; or (iii) render any party unable to
consummate the transactions contemplated hereby or thereby.
7.2 Conditions to Obligations of Parent and Acquisition Sub.
The obligations of Parent and Acquisition Sub to consummate the Merger and
the related transactions herein are subject to the satisfaction prior to or at
the Closing of the following
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conditions unless waived (to the extent such conditions can be waived) by Parent
and Acquisition Sub:
(a) Accuracy of Representations and Warranties. All representations
and warranties made by the Company and the Sellers in this Agreement and the
Related Documents shall be true and correct in all material respects (except for
such representations and warranties which are qualified by their terms by a
reference to materiality, which representations and warranties as so qualified
shall be true in all respects) at and as of the Effective Time with the same
effect as if such representations and warranties had been made at and as of the
Effective Time.
(b) Performance of Obligations of the Company and the Sellers. The
Company and the Indemnifying Sellers shall have performed in all material
respects all obligations and covenants required to have been performed by them
under this Agreement and the Related Documents prior to or as of the Effective
Time.
(c) Opinion of Counsel for the Company and the Sellers. Parent and
Acquisition Sub shall have received an opinion of Fenwick & West, counsel for
the Company and the Sellers, dated the Closing Date, in substantially the form
of Exhibit B attached hereto.
(d) Consents and Approvals. Parent and Acquisition Sub shall have
received duly executed copies of all consents and approvals required for or in
connection with the execution and delivery by the Company and the Indemnifying
Sellers of this Agreement and each of the Related Documents to which any of them
may be a party, and the consummation of the transactions contemplated hereby and
thereby, and the continued conduct of the business as previously conducted, in
form and substance reasonably satisfactory to Parent and Acquisition Sub and
their counsel.
(e) Absence of Material Adverse Change. Since the Latest Balance
Sheet Date, there shall have been no Material Adverse Change with respect to the
Company.
(f) Related Documents. Each of the following documents (each, a
"Related Document") shall have been executed and delivered by the parties
thereto and the transactions contemplated thereby to be completed at or prior to
the Closing substantially consummated or effected, as the case may be, in
accordance with the terms thereof:
(i) Escrow Agreement. The Escrow Agreement shall have been
executed and delivered by the Indemnifying Sellers, the Sellers'
Representative and the Escrow Agent;
(ii) Employment Agreements. Each of George Constable, III,
Jeremy Epstein, William Herndon and Matthew Carden shall have executed and
delivered an employment agreement (each, an "Employment Agreement"), in
substantially the form attached hereto as Exhibit D;
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(iii) FIRPTA Certificate. Parent shall have been furnished
with a true and accurate certificate from the Company based on Treasury
Regulation Section 1.1445-2(c), certifying that the Company Common Stock
is not a U.S. real property interest (within the meaning of Section 897 of
the Code).
(g) Closing Certificates. Each of the following certificates shall
have been executed and/or delivered, as the case may be, by the Person who or
which is the subject thereof:
(i) a certificate of the President or Secretary of the
Company, dated as of the Closing Date, certifying (A) that true and
complete copies of the Fundamental Documents of the Company as in effect
on the Closing Date are attached thereto; (B) as to the incumbency and
genuineness of the signatures of each Person executing this Agreement and
the Related Documents on behalf of the Company; (C) the genuineness of the
resolutions (attached thereto) of the board of directors or similar
governing body of the Company authorizing the execution, delivery and
performance of this Agreement and the Related Documents and the
consummation of the transactions contemplated hereby and thereby and of
the Sellers approving the Merger;
(ii) certificates of the secretaries of state of the states
(or other applicable office) in which the Company is organized and
qualified to do business, dated no more than five days prior to the
Closing Date, certifying as to the good standing and non-delinquent
franchise tax status of the Company;
(iii) a certificate signed by the President of the Company,
dated as of the Closing Date, certifying as to (A) the accuracy of the
representations and warranties of the Company contained herein, as
contemplated by Section 7.2(a); (B) the performance of the covenants of
the Company contained herein, as contemplated by Section 7.2(b); and (C)
that there has been no material adverse change with respect to the
Company, as contemplated by Section 7.2(e); and
(iv) a certificate signed by the Sellers' Representative,
dated as of the Closing Date, certifying to the best of his knowledge on
behalf of each Indemnifying Seller, as to (A) the accuracy of the
representations and warranties of the Indemnifying Sellers contained
herein, as contemplated by Section 7.2(a); and (B) the performance of the
covenants of the Indemnifying Sellers contained herein, as contemplated by
Section 7.2(b).
(h) Parent and Acquisition Sub shall have received evidence of the
Company's submission of the Statement by Domestic Stock Corporation for filing
with the Secretary of State of California.
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7.3 Conditions to Obligations of the Company and the Sellers.
The obligations of the Company to consummate the Closing and the related
transactions herein are subject to the satisfaction of the following additional
conditions unless waived (to the extent such conditions can be waived) by the
Company and the Sellers' Representative:
(a) Accuracy of Representations and Warranties. All representations
and warranties made by Parent and Acquisition Sub in this Agreement and the
Related Documents shall be true and correct in all material respects (except for
such representations and warranties which are qualified by their terms by a
reference to materiality, which representations and warranties as so qualified
shall be true in all respects) at and as of the Effective Time with the same
effect as if such representations and warranties had been made at and as of the
Effective Time.
(b) Performance of Obligations of Parent and Acquisition Sub. Parent
and Acquisition Sub shall each have performed in all material respects all
obligations and covenants required to have been performed by them under this
Agreement and the Related Documents prior to or as of the Effective Time.
(c) Consents and Approvals. The Sellers' Representative shall have
received duly executed copies of all consents and approvals required for or in
connection with the execution and delivery by Parent and Acquisition Sub of this
Agreement and each of the Related Documents to which either of them may be a
party and the consummation of the transactions contemplated hereby and thereby,
in form and substance reasonably satisfactory to the Sellers' Representative and
its counsel.
(d) Related Documents. Each of the Related Documents shall have been
executed and/or delivered by the parties thereto (other than the Indemnifying
Sellers and the Company) and the transactions contemplated thereby to be
completed at or prior to the Effective Time shall have been substantially
consummated or effected, as the case may be, in accordance with the terms
thereof.
(e) Closing Certificates. Each of the following certificates shall
have been executed and/or delivered to the Sellers' Representative, as the case
may be, by the Person who or which is the subject thereof:
(i) a certificate of the President or Secretary of Parent and
Acquisition Sub, dated as of the Closing Date, certifying (A) that true
and complete copies of the Fundamental Documents of Parent and Acquisition
Sub as in effect on the Closing Date are attached thereto; (B) as to the
incumbency and genuineness of the signatures of each officer of such
Person executing this Agreement and the Related Documents on behalf of
Parent and Acquisition Sub; and (C) the genuineness of the resolutions
(attached thereto) of the board of directors or similar governing body of
Parent and Acquisition Sub authorizing the execution, delivery and
performance of this Agreement and the Related Documents to which Parent
and Acquisition Sub are a party and the consummation of the
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transactions contemplated hereby and thereby and of Parent, as sole
shareholder of Acquisition Sub, approving the Merger;
(ii) certificates dated no more than five days prior to the
Closing Date of the secretaries of state of the states in which Parent and
Acquisition Sub are organized, certifying as to the good standing and
non-delinquent franchise tax status of Parent and Acquisition Sub; and
(iii) a certificate signed by a principal executive officer of
Parent and Acquisition Sub, dated as of the Closing Date, certifying as to
(A) the accuracy of the representations and warranties of Parent and
Acquisition Sub contained herein, as contemplated by Section 7.3(a); and
(B) the performance of the covenants of Parent and Acquisition Sub
contained herein, as contemplated in Section 7.3(b).
ARTICLE VIII
TERMINATION; EFFECT OF TERMINATION
8.1 Termination.
This Agreement may be terminated at any time prior to the consummation of
the Closing by:
(a) the mutual written consent of Parent and the Sellers'
Representative; or
(b) Parent in the event of a breach by the Company or any
Indemnifying Seller of any representation, warranty, covenant or other agreement
contained in this Agreement which is material; or
(c) the Sellers' Representative, in the event of a breach by Parent
or Acquisition Sub of any representation, warranty, covenant or other agreement
contained in this Agreement which is material; or
(d) Parent or the Sellers' Representative, if the conditions set
forth in Section 7.1 shall not have been (or cannot be) satisfied or waived by
January 31, 2000;
(e) Parent or Acquisition Sub, if the conditions set forth in
Section 7.2 shall not have been (or cannot be) satisfied or waived by January
31, 2000; or
(f) the Sellers' Representative, if the conditions set forth in
Section 7.3 shall not have been (or cannot be) satisfied or waived by January
31, 2000; or
(g) Parent, Acquisition Sub, the Company or the Sellers'
Representative, if any permanent injunction or other Order of a court or other
competent authority preventing the Closing shall have become final and
nonappealable;
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provided, however, that none of the Company, the Sellers' Representative, Parent
nor Acquisition Sub shall be entitled to terminate this Agreement pursuant to
Section 8.1(d), (e) or (f) if such party's intentional breach (or, with respect
to the Sellers' Representative, any Seller's intentional breach) of this
Agreement has prevented the satisfaction of a condition. Any termination
pursuant to the foregoing provisions of this Section 8.1 (other than a
termination pursuant to Section 8.1(a)) shall be effected by written notice from
the party or parties so terminating to the other parties hereto, which notice
shall specify the subsection of this Section 8.1 pursuant to which this
Agreement is being terminated.
8.2 Effect of Termination.
In the event of the termination of this Agreement as provided in Section
8.1, this Agreement shall be of no further force or effect, except for Sections
9.1, 9.6, Article XI and this Section 8.2, each of which shall survive the
termination of this Agreement; provided, however, that if this Agreement is
terminated other than pursuant to Section 8.1(a), the Liability of any party for
any intentional, willful or knowing breach by such party of the representations,
warranties, covenants or agreements of such party contained herein occurring
prior to the termination of this Agreement shall survive the termination of this
Agreement and, in addition, in the event of any action for breach of contract in
the event of a termination of this Agreement, the prevailing party shall be
reimbursed by the other party to the action for reasonable attorneys' fees and
expenses relating to such action.
ARTICLE IX
ADDITIONAL AGREEMENTS OF THE INDEMNIFYING SELLERS
9.1 Sellers' Representative.
The Indemnifying Sellers agree among themselves (without prejudice to or
affecting in any way the rights provided in this Agreement or otherwise to
Parent or Acquisition Sub) as follows:
(a) Appointment. The Indemnifying Sellers, for themselves and their
personal representatives and other successors, hereby constitute and appoint
George Constable, III, as their agent (the "Sellers' Representative"), with full
power and authority, except as otherwise expressly provided in this Agreement,
in the name of and for and on behalf of the Sellers, to take all action required
or permitted under this Agreement and the Escrow Agreement (including, without
limitation, (i) to give and receive all accounting, reports, notices, waivers
and consents, (ii) to terminate this Agreement as provided in Article VIII,
(iii) to receive notices of any claims relating to the indemnification in
Article X, (iv) to elect and, if elected, to assume control of the defense of
any such claims (including the retention of counsel) and to reach an agreement
with respect to or settle any proceeding relating to such claims, (v) to
authorize the Escrow Agent to deliver to Parent any certificates representing
shares of Parent Common Stock required to be forfeited by the Indemnifying
Sellers in payment or settlement of claims pursuant to Article X hereof in
accordance with the terms of the Escrow Agreement (including endorsing such
stock certificate or executing stock powers to effect such forfeiture), and (vi)
to take any and all actions on behalf of the Indemnifying Sellers from time to
time as the Sellers' Representative
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may deem necessary or desirable to fulfill the interests and purposes of this
Section 9.1) and to act for such Indemnifying Seller and in such Indemnifying
Seller's name, place and stead as fully to all intents and purposes as such
Indemnifying Seller could do in person. Each of the Indemnifying Sellers further
acknowledges and agrees that upon execution of this Agreement, any delivery by
the Sellers' Representative of any waiver, amendment, agreement, opinion,
certificate or any other document executed by the Sellers' Representative
pursuant to this Section 9.1, such Indemnifying Seller shall be bound by such
document as fully as if such Indemnifying Seller had executed and delivered such
document. In the event of the death, physical or mental incapacity or
resignation of the Sellers' Representative appointed on the date hereof or any
successor Sellers' Representative, the Indemnifying Sellers shall promptly
appoint a substitute or substitutes and shall advise Parent thereof. The
authority conferred under this Section 9.1 is an agency coupled with an interest
and all authority conferred hereby is irrevocable and not subject to termination
by the Indemnifying Sellers or by operation of Law, whether by the death or
incapacity of any Indemnifying Seller, the termination of any trust or estate or
the occurrence of any other event. If any Indemnifying Seller should die or
become incapacitated, if any trust or estate should terminate or if any other
such event should occur, any action taken by the Sellers' Representative
pursuant to this Section 9.1 shall be as valid as if such death or incapacity,
termination or other event had not occurred, regardless of whether or not the
Sellers' Representative, the Company, Parent or Acquisition Sub shall have
received notice of such death, incapacity, termination or other event.
(b) Reliance by Sellers' Representative. The Sellers' Representative
shall be entitled to rely, and shall be fully protected in relying, upon any
statements furnished to it by any Indemnifying Seller or the Company, or any
other evidence deemed by the Sellers' Representative to be reliable, and the
Sellers' Representative shall be entitled to act on the advice of counsel
selected by it. The Sellers' Representative shall be fully justified in failing
or refusing to take any action under this Agreement unless it shall have
received such advice or concurrence of the Indemnifying Sellers as it deems
appropriate or it shall have been expressly indemnified to its satisfaction by
the Indemnifying Sellers severally according to their respective Proportionate
Percentages against any and all Liability and expense that the Sellers'
Representative may incur by reason of taking or continuing to take any such
action. The Sellers' Representative shall in all cases be fully protected in
acting, or refraining from acting, under this Agreement in accordance with a
request of Indemnifying Sellers whose aggregate Proportionate Percentages equal
or exceed 51%, and such request, and any action taken or failure to act pursuant
thereto, shall be binding upon all of the Indemnifying Sellers.
(c) Expenses of Sellers' Representative. The Sellers' Representative
shall be entitled to retain counsel and to incur such expenses (including
litigation expenses) as the Sellers' Representative deems to be necessary or
appropriate in connection with its performance of its obligations under this
Agreement, and all such fees and expenses (including reasonable attorneys' fees)
incurred by the Sellers' Representative shall be borne by the Indemnifying
Sellers severally according to their respective Proportionate Percentages.
(d) Indemnification. The Indemnifying Sellers hereby agree severally
to indemnify the Sellers' Representative (in his capacity as such) ratably
according to their
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respective Proportionate Percentages against, and to hold the Sellers'
Representative (in his capacity as such) harmless from, any and all Liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of whatever kind which may at any time be imposed
upon, incurred by or asserted against the Sellers' Representative in such
capacity in any way relating to or arising out of his action or failure to take
action pursuant to this Agreement or in connection herewith or therewith in such
capacity; provided, however, that no Indemnifying Seller shall be liable for the
payment of any portion of such Liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence or willful misconduct of the Sellers'
Representative. The agreements in this Section 9.1(d) shall survive termination
of this Agreement.
9.2 Lock-Up Agreement.
If Parent at any time shall register shares of Parent Common Stock under
the Securities Act for sale to the public, the Indemnifying Sellers shall not
sell publicly, make any short sale of, grant any option for the purchase of, or
otherwise dispose publicly of, any capital stock of Parent (other than those
shares of Common Stock included in such registration) without the prior written
consent of Parent, for a period designated by Parent in writing to the
Indemnifying Sellers, which period shall begin not more than 10 days prior to
the effectiveness of the registration statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the effective
date of such registration statement.
9.3 Stockholders' Agreement.
Each Indemnifying Seller by his or its execution of this Agreement agrees
that as of the Effective Time such Indemnifying Seller shall be bound by and
comply with the terms and provisions of the Stockholders' Agreement, as an
Outside Shareholder (as such term is defined therein), as if such Seller were a
signatory thereto.
9.4 Non-Competition; Non-Solicitation.
(a) Each of the Indemnifying Sellers acknowledges (i) the
competitive nature of the Company's business, (ii) that, in the course of such
Indemnifying Seller's service as a director, officer and employee of the
Company, such Indemnifying Seller has become familiar with the Company's trade
secrets and other confidential information of the Company and/or its business
and (iii) that such Indemnifying Seller's services to the Company have been of a
special, unique and extraordinary value to the Company. Accordingly, in
consideration of the promises contained herein and the consideration received by
the Indemnifying Sellers in connection with the consummation of the transactions
contemplated hereby, and in order to induce Parent and Acquisition Sub to enter
into this Agreement, each Indemnifying Seller hereby agrees that during the
period beginning on the Closing Date and ending on the third anniversary thereof
(the "Non-Compete Period"), such Indemnifying Seller shall not in any manner,
directly or indirectly, as an employee, employer, consultant, agent, principal,
partner, manager, stockholder, officer, director, or in any other individual or
representative capacity, engage in, promote or become financially interested in
any business that develops software products or operates an internet site that
(i)
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assists third-party companies with procurement and management of human resources
within such companies' organizations, (ii) creates a person-to-person or
business-to-business marketplace for procurement of human resources, or (iii)
provides content, back-end services and job-bidding functionality targeted for
use by and among independent professionals, including consultants and expert
advisors (i.e. a bidding system, reputation system and directory or buyer/seller
matching system), in those places where the Company, Parent or any of its
subsidiaries are doing business as of the Closing Date or Parent, the Company
and/or any of such subsidiaries has invested substantial expense in anticipation
of conducting (or commencing to conduct) any portion of its business in such
area. Notwithstanding the foregoing, in the event that Matthew Carden's
employment with Parent or any subsidiary of Parent is terminated prior to the
second anniversary of the Closing Date, then the Non-Compete Period with respect
to Matthew Carden shall terminate on the first anniversary of such termination.
Anything to the contrary contained herein notwithstanding, any Indemnifying
Seller may own, in the aggregate, less than 1% of the issued and outstanding
capital stock of any publicly traded company.
(b) Each of the Indemnifying Sellers agrees that, for a period of
three years following the Closing Date, such Indemnifying Seller will not
directly or indirectly through another Person (i) solicit any of the employees
of Parent or the Surviving Corporation to leave their employ; (ii) hire any
individual who was an employee of Parent or the Surviving Corporation or any of
their Affiliates until six months after such individual's employment
relationship has been terminated; or (iii) induce any customer, supplier or
licensee with a business relationship with Parent or the Surviving Corporation
to cease doing business with Parent or the Surviving Corporation, as the case
may be.
(c) If, at the time of enforcement of this Section 9.4, a court
holds that the restrictions stated herein are unreasonable under the
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area. Because each Indemnifying
Seller's services are unique and because each Indemnifying Seller has access to
confidential information and work product, the parties hereto agree that money
damages would be an inadequate remedy for any breach of this Section 9.4.
Therefore, in the event of a breach or threatened breach of this Section 9.4,
the Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions of this Section 9.4 (without
posting a bond or other security). Each of the several covenants and agreements
in this Section 9.4 are severable, separate and distinct, and the invalidity or
unenforceability of any one covenant or agreement shall not in any way limit or
adversely affect the enforceability of any of the other covenants or agreements
contained herein.
9.5 Confidentiality.
(a) At any time after the date hereof, none of the Indemnifying
Sellers will disclose or use at any time, any Confidential Information of which
such Indemnifying Seller is or becomes aware, whether or not such information is
developed by such Indemnifying Seller,
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except to the extent that such disclosure or use is related to and required by
such Indemnifying Seller (i) in the performance in good faith of duties assigned
to such Indemnifying Seller by Parent; (ii) in the performance of duties or the
exercise of rights in good faith as an employee, officer, director or
shareholder of Parent or any Affiliate; or (iii) in the performance of duties or
exercise of rights under any agreement with Parent or any Affiliate. Each of the
Indemnifying Sellers will take all appropriate steps to safeguard Confidential
Information and to protect it against disclosure, misuse, espionage, loss and
theft.
(b) As used in this Agreement, the term "Confidential Information"
means information that is not generally known or available to the public and
that is used, developed or obtained by Parent in connection with its business,
including but not limited to (i) information, observations and data obtained by
any Indemnifying Seller while employed by Parent (including those obtained prior
to the date of this Agreement) concerning the business or affairs of Parent;
(ii) products or services; (iii) fees, costs and pricing structures; (iv)
designs; (v) analyses; (vi) drawings, photographs and reports; (vii) computer
software, including operating systems, applications and program listings; (viii)
flow charts, manuals and documentation; (ix) data bases; (x) accounting and
business methods; (xi) inventions, devices, new developments, methods and
processes, whether patentable or unpatentable and whether or not reduced to
practice; (xii) customers and clients and customer or client lists; (xiii) other
copyrightable works; (xiv) all production methods, processes, technology and
trade secrets; and (xv) all similar and related information in whatever form.
(c) Notwithstanding the provisions of this Agreement to the
contrary, the Indemnifying Sellers shall have no liability to Parent for
disclosure of Confidential Information if the Confidential Information:
(i) is known to the receiving party at the time of disclosure
of such Confidential Information other than as the result of a breach of
this Section by any Indemnifying Seller;
(ii) becomes publicly known or is disclosed by Parent other
than as the result of a breach of this Section by any Indemnifying Seller;
(iii) is received by any Indemnifying Seller after the date of
this Agreement from a third party that is not under an obligation of
confidentiality to Parent; or
(iv) is required to be disclosed by law, court order, or
similar compulsion or in connection with any legal proceeding, provided
that such disclosure shall be limited to the extent so required and,
except to the extent prohibited by law, such Indemnifying Seller shall
give Parent notice of its intent to so disclose such Confidential
Information and shall reasonably cooperate with Parent in seeking suitable
confidentiality protections.
9.6 Public Announcements.
Parent and the Indemnifying Sellers agree that, except (a) as otherwise
required by Law or Order; and (b) for disclosure to its respective directors,
officers, employees, financial advisors,
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potential financing sources, legal counsel, independent certified public
accountants or other agents, advisors or representatives on a need-to-know basis
and with whom such party has a confidential relationship, they will not issue
any reports, statements or releases, in each case pertaining to this Agreement
or any Related Document to which any of them is a party or the transactions
contemplated hereby or thereby, without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld or delayed.
9.7 Cooperation Regarding Tax Filings.
After the Closing, Parent, the Company and the Sellers' Representative (on
behalf of the Indemnifying Sellers) shall act in good faith and cooperate with
one another for the purpose of filing all Tax Returns and reports required to be
filed by any of them.
9.8 Customer Relations.
The Indemnifying Sellers will devote their reasonable best efforts to
assist Parent and the Company in maintaining the customer relationships of the
Company.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification Generally; Etc.
(a) Subject to the further terms of this Article X, the Seller
Indemnifying Persons shall jointly and severally (with the right to seek
contribution (including without limitation attorneys fees and legal costs) from
the other Seller Indemnifying Persons in accordance with their respective
Proportionate Percentages) indemnify the Parent Indemnified Persons for, and
hold them harmless from and against, any and all Parent Losses arising from or
in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of the Company and/or any Indemnifying Seller contained in
Article III or in any certificate delivered by the Company, the Sellers'
Representative or any Seller delivered in connection herewith at or before
the Effective Time (or any facts or circumstances constituting any such
untruth, inaccuracy or breach); or
(ii) the breach of any agreement or covenant of the Company
contained in this Agreement or the Escrow Agreement; or
(iii) any claim against any Parent Indemnified Person by any
of the Sellers (other than the Indemnifying Sellers) regarding the action
or inaction of the Indemnifying Sellers in connection with the approval of
the Merger by the Indemnifying Sellers or asserting any rights as a
shareholder or former shareholder of the Company or the Surviving
Corporation (other than the rights expressly provided in this Agreement);
or
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(iv) the failure of the Company to obtain a permit to do
business in the City of San Francisco; or
(v) the failure of the Company to pay on a timely basis wages
and salaries due to its employees and consultants; or
(vi) the failure of the Company to obtain workers'
compensation insurance; or
(vii) any Pre-Closing Taxes.
(b) Subject to the further terms of this Article X, the Seller
Indemnifying Persons agree, severally only, to indemnify the Parent Indemnified
Persons for, and hold them harmless from and against, any and all Parent Losses
arising from or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of such Indemnifying Seller contained in Article IV ; or
(ii) the breach of any agreement or covenant of such
Indemnifying Seller contained in this Agreement or the Escrow Agreement.
(c) The Seller Indemnifying Persons shall not be required to
indemnify the Parent Indemnified Persons, and shall not have any liability:
(i) under Section 10.1(a)(i) or (ii) unless the aggregate
amount of all Parent Losses for which the Seller Indemnifying Persons
would, but for this clause (i), be liable exceeds on a cumulative basis an
amount equal to $50,000, provided that once such amount is surpassed, the
Seller Indemnifying Persons shall be liable for the full amount of such
Parent Losses;
(ii) under Section 10.1(a) and (b) in excess of $7,500,000.
(d) Subject to the further terms of this Article X, the Parent
Indemnifying Persons agree, jointly and severally, to indemnify the Seller
Indemnified Persons for, and hold them harmless from and against, any and all
Seller Losses arising from or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of Parent and Acquisition Sub contained in Article V or any
certificate delivered by Parent and Acquisition Sub in connection herewith
at or before the Effective Time (or any facts or circumstances
constituting any such untruth, inaccuracy or breach); or
(ii) the breach of any agreement or covenant of Parent and
Acquisition Sub contained in this Agreement or the Escrow Agreement.
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(e) No Indemnifying Seller shall be required to indemnify any Parent
Indemnified Person, and shall not have any liability under Sections 10.1(a) and
(b) in excess of the aggregate value (as determined in this Agreement) of the
shares of Parent Common Stock received by such Indemnifying Seller under this
Agreement. In furtherance of the foregoing, in the event that any shares of
Parent Common Stock held by an Indemnifying Seller are repurchased by Parent or
its designee pursuant to the Employment Agreement between Parent and such
Indemnifying Seller, then the number of shares of Parent Common Stock so
repurchased shall be deemed to reduce the aggregate number of shares of Parent
Common Stock received by such Indemnifying Seller under this Agreement, and such
Indemnifying Seller shall only be liable for indemnification to the extent of
the remaining shares held by him.
(f) Each of Parent, the Surviving Corporation and Acquisition Sub
acknowledges that its sole and exclusive remedy with respect to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Article X, provided that nothing contained herein shall limit any
claim based on fraud. Notwithstanding the foregoing, nothing contained in this
Section 10.1 shall prevent any party hereto from seeking and obtaining, as and
to the extent permitted by applicable law, specific performance by any other
party hereto of any of such party's obligations under this Agreement or
injunctive relief against such other party's activities in breach of this
Agreement (including, without limitation, the obligations set forth in Section
9.4 hereof).
10.2 Assertion of Claims Tax Claims.
(a) No claim (other than a claim relating to Taxes, which shall be
governed by the provisions of Section 10.2(b)) shall be brought under Section
10.1 unless the Indemnified Persons, or any of them, at any time prior to the
applicable Survival Date (as defined in Section 10.5), give the Indemnifying
Persons (a) written notice of the existence of any such claim, specifying the
nature and basis of such claim and the amount thereof, to the extent known; and
(b) written notice pursuant to Section 10.3 of any Third Party Claim (as defined
below), the existence of which might give rise to such a claim. Upon the giving
of such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal proceedings subsequent to the respective
Survival Date for the enforcement of such Persons' rights under Section 10.1.
(b) (i) If a claim relating to Taxes shall be made by any Government
Entity, which, if successful, might result in an indemnity payment to any of the
Parent Indemnified Persons, pursuant to Section 10.110.1(a), Parent shall
reasonably promptly notify the Sellers' Representative of such claim (a "Tax
Claim"); provided, however, that the failure to give such notice shall not
effect the indemnification provided hereunder except to the extent the
Indemnifying Seller has actually been prejudiced as a result of such failure.
(ii) With respect to any Tax Claim relating to taxes based on
net or gross income ("Income Taxes") and relating to a taxable period
ending on or prior to the Closing Date or to any other taxable period in
which the Company filed any federal income Tax Return or a combined,
consolidated or unitary Tax Return for state, local or
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foreign purposes, or any Tax Claim relating to any Tax (other than an
Income Tax) that is a Tax for the taxable period prior to the Effective
Time, the Sellers' Representative shall control all proceedings and may
make all decisions in connection with such Tax Claim (including selection
of counsel) and, without limiting the foregoing, may in its sole
discretion pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with any Government Entity with
respect thereto, and may, in its sole discretion, either pay the Tax
claimed and sue for a refund where applicable law permits such refund
suits or contest the Tax Claim in any permissible manner. Notwithstanding
the foregoing, the Sellers' Representative shall not settle any Tax Claim
without the prior written consent of Parent, which consent shall not be
unreasonably withheld. Furthermore, Parent, and counsel of its own
choosing, shall have the right to participate fully in all aspects of the
prosecution or defense of such Tax Claim, and the Sellers' Representative
shall inform Parent, reasonably promptly in advance, of the date, time and
place of all administrative or judicial meetings conferences, hearings and
other proceedings relating to such Tax Claim and shall provide to Parent
all information document requests and responses, proposed notices of
deficiency, notices of deficiencies revenue agents' reports, protests,
petitions and any other documents relating to such Tax Claim promptly upon
receipt from, or in advance of submission to (as the case may be), the
relevant Government Entity. Parent shall be entitled to have its
representatives attend and participate in any such administrative or
judicial meeting, conference, hearing or other proceeding. Before taking
any action with respect to the conduct of any such Tax Claim (including,
but not limited to, the submission of any protects, petitions or responses
to information document requests), the Sellers' Representative shall first
consult with Parent in good faith about such action.
(iii) Except as otherwise provided in the preceding paragraph,
Parent shall control all proceedings with respect to any Tax Claim
relating to Taxes of the Company.
(iv) Parent, on the one hand, and the Indemnifying Sellers, on
the other hand, shall cooperate in contesting any Tax Claim, which
cooperation shall include the retention and (upon request) the provision
to the requesting party of records and information which are reasonably
relevant to such Tax Claim, and making employees available on a mutually
convenient basis to provide additional information or explanation of any
material provided hereunder or to testify at proceedings relating to such
Tax Claim.
10.3 Notice and Defense of Third Party Claims.
The obligations and liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of liability by third parties (other than a
claim relating to Taxes, which shall be governed by the provisions of Section
10.2(b)) (each, a "Third Party Claim") shall be subject to the following terms
and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third Party Claim which might give rise to any
Loss by the
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Indemnified Persons, stating the nature and basis of such Third Party Claim, and
the amount thereof to the extent known; provided, however, that no delay on the
part of the Indemnified Persons in notifying any Indemnifying Persons shall
relieve the Indemnifying Persons from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Person thereby is
prejudiced by the delay. Such notice shall be accompanied by copies of all
relevant documentation with respect to such Third Party Claim, including any
summons, complaint or other pleading which may have been served, any written
demand or any other document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that such Third Party Claim is properly
subject to their indemnification obligations hereunder, then the Indemnifying
Persons shall have the right to assume the defense of any Third Party Claim at
their own expense and by their own counsel, which counsel shall be reasonably
satisfactory to the Indemnified Persons; provided, however, that the
Indemnifying Persons shall not have the right to assume the defense of any Third
Party Claim, notwithstanding the giving of such written acknowledgment, if (i)
the Indemnified Persons shall have been advised by counsel that there are one or
more legal or equitable defenses available to them which are different from or
in addition to those available to the Indemnifying Persons, and, in the
reasonable opinion of the Indemnified Persons, counsel for the Indemnifying
Persons could not adequately represent the interests of the Indemnified Persons
because such interests could be in conflict with those of the Indemnifying
Persons; (ii) such action or proceeding involves, or could have a material
effect on, any material matter beyond the scope of the indemnification
obligation of the Indemnifying Persons; or (iii) the Indemnifying Persons shall
not have assumed the defense of the Third Party Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim (under circumstances in which the proviso to the first sentence of
Section 10.3(b) is not applicable), the Indemnifying Persons shall not be
responsible for any legal or other defense costs subsequently incurred by the
Indemnified Persons in connection with the defense thereof. If the Indemnifying
Persons do not exercise their right to assume the defense of a Third Party Claim
by giving the written acknowledgment referred to in Section 10.3(b), or are
otherwise restricted from so assuming by the proviso to the first sentence of
Section 10.3(b), the Indemnifying Persons shall nevertheless be entitled to
participate in such defense with their own counsel and at their own expense; and
in any such case, the Indemnified Persons may assume the defense of the Third
Party Claim, with counsel which shall be reasonably satisfactory to the
Indemnifying Persons, and shall act reasonably and in accordance with their good
faith business judgment and shall not effect any settlement without the consent
of the Indemnifying Persons, which consent shall not be unreasonably withheld or
delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim, (i) the Indemnified Persons shall be entitled to
participate in such defense with their own counsel at their own expense; and
(ii) the Indemnifying Persons shall not make any settlement of any claims
without the written consent of the Indemnified Persons, which consent shall not
be unreasonably withheld or delayed.
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10.4 Forfeiture of Shares.
(a) Any payment in respect of Parent Losses that are subject to
indemnification pursuant to this Article X shall be paid first by releasing to
Parent, without any consideration being paid therefor, from the escrow that
number of Merger Share Reserved Shares having a value equal to the quotient
obtained by dividing (i) the aggregate amount of such Parent Losses by (ii) the
Parent Initial Share Price; provided that such Merger Share Reserved Shares
shall be released from the escrow in accordance with each Indemnifying Seller's
Proportionate Percentage; and provided further that to the extent that there are
no Merger Share Reserved Shares or an insufficient number of Merger Share
Reserved Shares, the Seller Indemnifying Persons shall forfeit, without any
consideration being paid therefor, a number of Merger Share Additional Shares
equal to the quotient obtained by dividing (x) the aggregate amount of the
Parent Losses remaining to be paid by the Seller Indemnifying Persons pursuant
to this Article X (after giving effect to the foregoing) by (y) the Parent
Additional Share Price. Notwithstanding the foregoing, in the event that any
payment in respect of Parent Losses becomes due after all of the Merger Share
Reserved Shares and Merger Share Additional Shares have been delivered to the
Indemnifying Sellers pursuant to the terms of this Agreement and the Escrow
Agreement, the Seller Indemnifying Persons shall forfeit and return to Parent,
without any consideration being paid therefor, that number of shares of Parent
Common Stock (which shares may, in the discretion of any Seller Indemnifying
Person, be unvested as of such time) having an aggregate value equal to the
quotient obtained by dividing (i) the aggregate amount of such Parent Losses by
(ii) the Parent Additional Share Price; provided, however, that, at the election
of any Seller Indemnifying Person, such Seller Indemnifying Person may, in lieu
of forfeiting shares of Parent Common Stock that have vested pursuant to Section
7(a) of the Employment Agreement between such Seller Indemnifying Person and
Parent, pay the amount of his Proportionate Percentage of such Parent Losses in
cash. For purposes of this Section 10.4(a), the number of Merger Share Reserved
Shares and Merger Share Additional Shares shall include all shares of Parent
Common Stock that have been derived from or issued in respect of the Merger
Share Reserved Shares or the Merger Share Additional Shares, as the case may be,
and the Parent Initial Share Price or the Parent Additional Share Price, as
applicable, shall be decreased in proportion to any adjustment of the Merger
Share Reserved Shares or Merger Share Additional Shares pursuant to Parent's
Formation Documents.
(b) Upon the forfeiture of any shares pursuant to the terms of this
Section 10.4, the Sellers' Representative shall cause the Escrow Agent to, or
the Seller Indemnifying Persons shall, deliver to Parent all certificates
representing shares of Parent Common Stock held by the Escrow Agent or the
Seller Indemnifying Persons, as the case may be, and Parent shall thereafter
deliver to the Escrow Agent or the Seller Indemnifying Persons, as applicable, a
new certificate or certificates evidencing the shares represented by such
certificates which are not forfeited, if any. Parent shall have the right,
without further action by any other party, to cancel such forfeited shares on
the books of Parent.
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10.5 Survival of Certain Indemnification Claims.
(a) Subject to the further provisions of this Section 10.5, the
representations and warranties contained in this Agreement or in any certificate
or other writing delivered in connection with this Agreement shall survive the
Closing until the Escrow Release Date (the "General Survival Date"); provided,
however, that (i) the representations and warranties contained in Sections 3.1,
3.2, 3.4, 4.1, 4.2, 4.8, 4.9, 4.10 and 4.11 shall survive indefinitely (the
"Subject Reps"); and (ii) the representations and warranties contained in
Sections, 3.12, 3.18, and 3.19 shall survive the Closing Date until the later of
the General Survival Date and the date that is 60 days following expiration of
the respective statutes of limitations for Third Party Claims applicable to the
matters covered thereby. The covenants and other agreements of the parties
contained in this Agreement shall survive the Closing Date until they are
otherwise terminated by their terms.
(b) For convenience of reference, the date upon which any
representation or warranty contained herein shall terminate, if any, is referred
to herein as the "Survival Date."
(c) From and after the Closing, the Sellers shall have no recourse
to the Company for any breach of any representation, warranty, covenant or
agreement of the Company, Parent or Acquisition Sub set forth in this Agreement
or in any certificate or other writing delivered in connection with this
Agreement.
10.6 Losses Net of Insurance, etc.
The amount of Losses or Taxes for which indemnification is provided
under this Section 10 shall be (i) increased to take account of any net Tax cost
incurred by the indemnified party arising from the receipt or accrual of
indemnity payments hereunder (grossed up for such increase) and (ii) reduced to
take account of any net Tax benefit actually realized by the indemnified party
arising from the deductibility of any such Loss or Tax. In computing the amount
of any such Tax cost or Tax benefit, the indemnified party shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt or accrual of any indemnity
payment hereunder or the deductibility of any indemnified Loss. Any
indemnification payment hereunder shall initially be made without regard to this
paragraph and shall be increased or reduced to reflect any such net Tax cost
(including gross-up) or net Tax benefit only after the indemnified party has
actually realized such cost or benefit. For purposes of this Agreement, an
indemnified party shall be deemed to have "actually realized" a net Tax cost or
a net Tax benefit to the extent that, and at such time as, the amount of Taxes
payable by such indemnified party is increased above or reduced below, as the
case may be, the amount of Taxes that such indemnified party would have been
required to pay but for the receipt or accrual of the indemnity payment or the
deductibility of such Loss, as the case may be and such Tax cost or Tax benefit
was realized in the year that such indemnity payment is to be made. The amount
of any increase or reduction hereunder shall be adjusted to reflect any final
determination (which shall include the execution of Form 870-AD or successor
form) with respect to the indemnified party's liability for Taxes and, if
necessary, the Sellers or Parent; as the case may be, shall make payments to the
other to reflect such adjustment. Any
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indemnity payment under this Agreement shall be treated as an adjustment to the
Merger Consideration paid to the Sellers for Tax purposes, unless a final
determination (which shall include the execution of a Form 870-AD or successor
form) with respect to the indemnified party or any of its Affiliate causes any
such payment not to be treated as an adjustment to such consideration for
federal Income Tax purposes.
10.7 Taxable Periods.
(a) In the case of any taxable period that includes but does not end
on the Closing Date (a "Straddle Period"):
(i) real, personal and intangible property Taxes ("Property
Taxes") for the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for such entire Straddle Period multiplied by a
fraction, the numerator of which is the number of days during the Straddle
Period that were in the Pre-Closing Tax Period and the denominator of
which is the number of days in the Straddle Period; and
(ii) all Taxes (other than Property Taxes) for the Pre-Closing
Tax Period shall be computed based on an actual closing of the books as if
such taxable period ended as of the close of business on the Closing Date
and, in the case of any Taxes attributable to the ownership of any equity
interest in any partnership or other "flow through" entity, based on an
actual closing of the books as if the taxable period of such partnership
or other "flow through" entity ended as of the close of business on the
Closing Date.
(b) In the case of any taxable period other than a Straddle Period,
all income, deductions, and other items shall be allocated between the
Pre-Closing Tax Period and the Post-Closing Tax Period based on an actual
closing of the books of the Company on the day before the Closing Date, and
shall be deemed to be a Pre-Closing Tax or a Post-Closing Tax, as applicable,
for all purposes of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Transaction Expenses and Taxes.
Each party shall bear its own expenses in connection with the
transactions contemplated by this Agreement and the Related Documents (it being
understood that the Indemnifying Sellers shall pay all fees and expenses of the
Company); provided, however, that Parent shall pay up to an aggregate of $30,000
of the expenses incurred by the Company and the Indemnifying Sellers.
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11.2 No Third Party Beneficiaries.
Except as expressly provided herein, this Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns, personal representatives, heirs and
estates, as the case may be.
11.3 Entire Agreement.
This Agreement and the Related Documents constitute the entire agreement
among the parties hereto and supersede any prior understandings, agreements or
representations by or among the parties, written or oral, that may have related
in any way to the subject matter of this Agreement or any Related Document,
including, without limitation, the Acquisition Term Sheet dated as of November
5, 1999 between Parent and the Company.
11.4 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other parties; provided,
however, that Parent or Acquisition Sub may assign any of its rights under any
of this Agreement or any Related Document to (i) any Affiliate of Parent or
Acquisition Sub; (ii) any Person who shall acquire substantially all of the
assets of such Parent or Acquisition Sub or a majority in voting power of the
capital stock of Acquisition Sub (whether pursuant to a merger, consolidation,
stock sale or otherwise); (iii) any lender of Parent or Acquisition Sub (or any
agent therefor) for security purposes and the assignment thereof by any such
lender or agent to any purchaser in connection with the exercise by any such
lender or agent of all of its rights and remedies as a secured creditor with
respect thereto; and (iv) any Person to whom Parent or Acquisition Sub shall
transfer any shares or Assets in accordance with the terms of this Agreement or
any Related Document.
11.5 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
11.6 Notices.
All notices, requests, demands, claims, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally, telecopied, sent by nationally recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
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If to the Sellers Representative or, prior to the Closing, the
Company, to:
Mr. George Constable, III
942 Hayes Street, Suite 33
San Francisco, California 94117
Telephone: (415) 775-2020
Telecopy: (415) 704-3180
with a copy to:
Fenwick & West LLP
275 Battery Street, Suite 1500
San Francisco, California 94111
Telephone: (415) 875-2300
Telecopy: (415) 281-1350
Attention: Kat McCabe, Esq.
If to Parent, Acquisition Sub or, after the Closing, the Company,
to:
Opus360 Corporation
733 Third Avenue, 17th Floor
New York, New York 10017
Telephone: (212) 301-2200
Telecopy: (212) 301-2201
Attention: Mr. Ari B. Horowitz
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telephone: (212) 408-2471
Telecopy: (212) 728-5950
Attention: John J. Suydam, Esq.
All such notices and other communications shall be deemed to have been given and
received (i) in the case of personal delivery, on the date of such delivery;
(ii) in the case of delivery by telecopy, on the date of such delivery; (iii) in
the case of delivery by nationally recognized overnight courier, on the third
Business Day following dispatch; and (iv) in the case of mailing, on the seventh
Business Day following such mailing.
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11.7 Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK, OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAW OF THE STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF
THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF
LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY.
11.8 Amendments and Waivers.
No amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by the Company, the Sellers' Representative
and Parent. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
11.9 Incorporation of Schedules and Exhibits.
The Schedules and Exhibits identified in this Agreement are incorporated
herein by reference and made a part hereof.
11.10 Construction.
Where specific language is used to clarify by example a general statement
contained herein, such specific language shall not be deemed to modify, limit or
restrict in any manner the construction of the general statement to which it
relates. The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any Party.
11.11 Interpretation.
Accounting terms used but not otherwise defined herein shall have the
meanings given to them under GAAP. As used in this Agreement (including all
Schedules, Exhibits and amendments hereto), the masculine, feminine and neuter
gender and the singular or plural number shall be deemed to include the others
whenever the context so requires. References to Articles and Sections refer to
articles and sections of this Agreement. Similarly, references to Schedules and
Exhibits refer to schedules and exhibits, respectively, attached to this
Agreement. Unless the content requires otherwise, words such as "hereby,"
"herein," "hereinafter," "hereof," "hereto," "hereunder" and words of like
import refer to this Agreement. The article and section
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headings contained in this Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.12 Independence of Covenants and Representations and Warranties.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder.
11.13 Remedies.
The parties shall each have and retain all other rights and remedies
existing in their favor at Law or equity, including, without limitation, any
actions for specific performance and/or injunctive or other equitable relief
(including, without limitation, the remedy of rescission) to enforce or prevent
any violations of the provisions of this Agreement.
11.14 Severability.
It is the desire and intent of the parties hereto that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
11.15 Waiver of Jury Trial.
EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER DOCUMENT.
* * * * *
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IN WITNESS WHEREOF, the undersigned have executed this Agreement and
Plan of Merger as of the date first above written.
OPUS360 CORPORATION
By: /s/ Rich McCann
--------------------------------------
Name: Rich McCann
Title: Sr. VP, CFO
ITHORITY ACQUISITION CORP.
By: /s/ Rich McCann
--------------------------------------
Name: Rich McCann
Title: Secretary and Treasurer
ITHORITY CORPORATION
By: /s/ Jeremy Epstein
--------------------------------------
Name: Jeremy Epstein
Title: Secretary
INDEMNIFYING SELLERS:
/s/ George W. Constable, III
------------------------------------------
George W. Constable, III
/s/ Jeremy Epstein
------------------------------------------
Jeremy Epstein
/s/ William Herndon
------------------------------------------
William Herndon
/s/ Matthew Carden
------------------------------------------
Matthew Carden
<PAGE>
ANNEX I
Definitions
Capitalized terms used but not defined in the Agreement and Plan of
Merger have the respective meanings assigned to such terms below.
"Acquisition Sub" has the meaning ascribed thereto in the caption.
"Accrued Bonus Amount" has the meaning ascribed thereto in Section
2.1(a).
"Acquisition Proposal" means any offer, proposal or indication of
interest in (i) the direct or indirect acquisition of all or any material part
of the Company; (ii) a merger, consolidation or other business combination
directly or indirectly involving the Company; or (iii) the direct or indirect
acquisition of any capital stock of the Company.
"Additional Shares" has the meaning ascribed thereto in Section
2.1(a).
"Affiliate" means, with respect to any Person, any of (i) a
shareholder holding 5% or more of the capital stock (on a fully diluted basis),
director or officer of such Person; (ii) a spouse, parent, sibling or descendant
of such Person (or a spouse, parent, sibling or descendant of any director or
officer of such Person); and (iii) any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, another Person. The term "control" includes, without
limitation, the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" has the meaning ascribed thereto in the preamble.
"Assets" means, with respect to any Person, all of the assets,
rights, interests and other properties, real, personal and mixed, tangible and
intangible, owned by such Person.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which banking institutions in New York, New York are not required to be
open.
"California Statute" has the meaning ascribed thereto in the
preamble.
"Cash Consideration" has the meaning ascribed thereto in Section
2.1(a).
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, and the rules and regulations
promulgated thereunder.
"Certificate of Merger" has the meaning ascribed thereto in the
preamble.
"Closing" has the meaning ascribed thereto in Section 1.8.
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"Closing Amount" has the meaning ascribed thereto in Section 2.1(a).
"Closing Date" has the meaning ascribed thereto in Section 1.8.
"Closing Shares" has the meaning ascribed thereto in Section 2.1(a).
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning ascribed thereto in the caption.
"Company Properties" has the meaning ascribed thereto in Section
3.11(d).
"Confidential Information" has the meaning ascribed thereto in
Section 9.5(b).
"Constituent Corporations" has the meaning ascribed thereto in
Section 1.1.
"Corporate Rights" has the meaning ascribed thereto in Section 1.3.
"Deferred Amount" has the meaning ascribed thereto in Section
2.1(a).
"Deferred Payment" has the meaning ascribed thereto in Section
2.1(a).
"Defined Benefit Pension Plan" has the meaning set forth in Section
3(35) of ERISA.
"Effective Time" has the meaning ascribed thereto in Section 1.2.
"Employee Benefit Plan" means any (i) qualified or non-qualified
Employee Pension Benefit Plan (including any Multiple Employer Plans or
Multi-Employer Plans); (ii) Employee Welfare Benefit Plan; or (iii) employee
benefit, fringe benefit, compensation, incentive, bonus or other plan, program
or arrangement, whether or not subject to ERISA and whether or not funded.
"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA.
"Employment Agreement" has the meaning ascribed thereto in Section
7.2(f)(ii).
"Environmental and Safety Requirements" means all Laws, Orders,
contractual obligations and all common law concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including, without limitation, all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, including, but not limited to, the SWDA,
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the Clean Air Act, as amended, 42 U.S.C.ss.ss.7401 et seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C.ss.ss.1251 et seq., the Emergency
Planning and Community Right-to-Know Act, as amended, 42 U.S.C.ss.ss.11001 et
seq., CERCLA, the Hazardous Materials Transportation Uniform Safety Act, as
amended, 49 U.S.C.ss.ss.5101 et seq., the Occupational Safety and Health Act of
1970, as amended, and the rules and regulations promulgated thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliates" means, with respect to any Person, any other
Person that is a member of a "controlled group of corporations" with, or is
under "common control" with, or is a member of the same "affiliated service
group" with such Person as defined in Section 14(b), or 414(c), or 414(m) or
414(o) of the Code.
"Escrow Agent" has the meaning ascribed thereto in Section 2.4.
"Escrow Agreement" means the Escrow and Pledge Agreement being
entered into among Parent, the Sellers' Representative and the Indemnifying
Sellers, in substantially the form attached hereto as Exhibit C.
"Escrow Release Date" means the first anniversary of the Closing
Date or if such day is not a Business Day, the Business Day immediately
following such date.
"Financial Statements" has the meaning ascribed thereto in Section
3.7(a).
"Fully Diluted Basis" means that all convertible securities that
have been converted or exchanged and all options, warrants and other rights to
purchase shares of Parent Common Stock have been exercised.
"Fundamental Documents" means the documents by which any Person
(other than an individual) establishes its legal existence or which govern its
internal affairs. For example, the "Fundamental Documents" of a corporation
would be its charter and by-laws.
"Funded Indebtedness" means the aggregate amount (including the
current portions thereof) of all (i) indebtedness for money borrowed from others
and purchase money indebtedness (other than accounts payable in the ordinary
course); (ii) indebtedness of the type described in clause (i) above guaranteed,
directly or indirectly, in any manner through, or in effect guaranteed, directly
or indirectly, in any manner through an agreement, contingent or otherwise, to
supply funds to, or in any other manner invest in, the debtor, or to purchase
indebtedness, or to purchase and pay for property if not delivered or pay for
services if not performed, primarily for the purpose of enabling the debtor to
make payment of the indebtedness or to assure the owners of the indebtedness
against loss, but excluding endorsements of checks and other instruments in the
ordinary course; (iii) indebtedness of the type described in clause (i) above
secured by the Person upon property owned by a Person, even though a Lien has
not in any manner become liable for the payment of such indebtedness; (iv)
obligations of a Person
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under any lease of any property (whether real, personal or mixed) by such Person
which would, in accordance with GAAP, be required to be accounted for as a
capital lease on the balance sheet of such Person; (v) interest expense accrued
but unpaid, and all prepayment premiums, on or relating to any of such
indebtedness; and (vi) any indebtedness of a Person to any Affiliate thereof.
"GAAP" means United States Generally Accepted Accounting Principles,
consistently applied.
"General Survival Date" has the meaning ascribed thereto in Section
10.5(a).
"Governmental Entity" means any court, administrative agency,
tribunal, department, bureau or commission or other governmental authority or
instrumentality, domestic or foreign, Federal, state or local or any arbitral
body.
"Guaranty" means any obligation, contingent or otherwise, of any
Person guaranteeing or having the economic effect of guaranteeing any Funded
Indebtedness or other obligation of any other Person in any manner, whether
directly or indirectly, including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Funded Indebtedness or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Funded Indebtedness or other obligation; (ii) to purchase property,
securities or services for the purpose of assuring the owner of such Funded
Indebtedness or other obligation of the payment hereof; (iii) to purchase or
otherwise pay for merchandise, materials, supplies, services or other property
under an arrangement which provides that payment for such merchandise,
materials, supplies, services or other property shall be made regardless of
whether delivery of such merchandise, materials, supplies, services or other
property is ever made or tendered; or (iv) to maintain the working capital,
equity capital or other financial statement condition of any primary obligor.
"Income Taxes" has the meaning ascribed thereto in Section 10.2(b)
"Indemnified Persons" means and includes the Parent Indemnified
Persons and/or the Seller Indemnified Persons, as the case may be.
"Indemnifying Persons" means and includes the Parent Indemnifying
Persons and/or the Seller Indemnifying Persons, as the case may be.
"Indemnifying Seller" and "Indemnifying Sellers" has the meaning
ascribed thereto in the caption.
"Intellectual Property" means all industrial and intellectual
property, including, without limitation, (i) patents, patent applications,
patent rights, trademarks, trademark applications, copyrights, copyright
applications, know-how, certificates of public convenience and necessity,
franchises, licenses, proprietary processes and formulae, layouts, processes,
inventions and (ii) all proprietary rights pertaining to any product or service
manufactured,
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sold, distributed or marketed, or used, employed or exploited in the
development, manufacture, license, sale, distribution, marketing or maintenance
thereof, and all documentation and media constituting, describing or relating to
the foregoing.
"Interim Balance Sheet" has the meaning ascribed thereto in Section
3.7(a).
"Interim Financial Statements" has the meaning ascribed thereto in
Section 3.7(a).
"Knowledge" of any Person means (i) the actual knowledge of such
Person and (ii) that knowledge which should have been acquired by such Person
after making such due inquiry and exercising such due diligence as a prudent
businessperson would have made or exercised in the management of his or her
business affairs, including due inquiry of those officers, directors, key
employees and professional advisers (including attorneys, accountants and
consultants) of the Person who could reasonably be expected to have actual
knowledge of the matters in question. When used in the case of a Seller, the
term "Knowledge" shall also include the Knowledge of the Seller and the Company.
"Latest Balance Sheet" has the meaning ascribed thereto in Section
3.7(a).
"Law" means any constitution, law, statute, treaty, rule, directive,
requirement or regulation or Order of any Governmental Entity.
"Leased Property" has the meaning ascribed thereto in Section
3.11(b).
"Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Licensed Intellectual Property" has the meaning ascribed thereto in
Section 3.13(a).
"Losses" means and includes any and all losses, Liabilities, claims,
damages, actions, suits, Proceedings, demands, assessments, judgments, costs or
expenses (including reasonable attorneys', accountants' and other professionals'
fees and expenses), assessments, and Taxes.
"Lien" means any security interest, pledge, bailment (in the nature
of a pledge or for purposes of security), mortgage, deed of trust, the grant of
a power to confess judgment, conditional sale or title retention agreement
(including any lease in the nature thereof), charge, encumbrance, easement,
reservation, restriction, cloud, right of first refusal or first offer, option,
or other similar arrangement or interest in real or personal property.
"Material Adverse Change" means, with respect to any Person, any
material adverse change in the business, operations, assets, condition
(financial or otherwise), operating results, liabilities, or prospects of such
Person or its Subsidiaries, if any, or any material casualty loss or damage to
the assets of such Person, whether or not covered by insurance.
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"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the business, operations, assets, condition
(financial or otherwise), operating results, liabilities or prospects of such
Person and its Subsidiaries, if any, taken as a whole.
"Merger" has the meaning ascribed thereto in the preamble.
"Merger Consideration" has the meaning ascribed thereto in Section
2.1(a).
"Merger Share Additional Shares" has the meaning ascribed thereto in
Section 2.1(a).
"Merger Share Number" has the meaning ascribed thereto in Section
2.1(a).
"Merger Share Reserved Shares" has the meaning ascribed thereto in
Section 2.1(a).
"Merger Shares" has the meaning ascribed thereto in Section 2.1(a).
"Multi-Employer Plan" has the meaning set forth in Section 3(37) of
ERISA.
"Multiple Employer Plan" has the meaning set forth in Section 413 of
the Code.
"Non-Compete Period" has the meaning ascribed thereto in Section
9.4(a).
"Nonconsenting Seller" has the meaning ascribed thereto in Section
2.1(a).
"Nonconsenting Share Additional Shares" has the meaning ascribed
thereto in Section 2.1(a).
"Nonconsenting Share Number" has the meaning ascribed thereto in
Section 2.1(a).
"Nonconsenting Share Reserved Shares" has the meaning ascribed
thereto in Section 2.1(a).
"Nonconsenting Shares" has the meaning ascribed thereto in Section
2.1(a).
"Nondisclosure Agreement" has the meaning ascribed thereto in
Section 6.5.
"Orders" means judgments, writs, decrees, injunctions, orders,
compliance agreements or settlement agreements of or with any Governmental
Entity or arbitrator.
"Options" has the meaning ascribed thereto in Section 2.1(a).
"Owned Property" has the meaning ascribed thereto in Section
3.11(b).
"Parent" " has the meaning ascribed thereto in the caption.
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"Parent Additional Share Price" has the meaning ascribed thereto in
Section 2.1(a).
"Parent Balance Sheet" has the meaning ascribed thereto in Section
5.7(a).
"Parent Common Stock" means the common stock, $.001 par value, of
Parent.
"Parent Financial Statements" has the meaning ascribed thereto in
Section 5.7(a).
"Parent Indemnified Persons" means and includes (i) before the
Closing, Parent, Acquisition Sub and their respective Affiliates, successors and
assigns, and the respective officers and directors of each of the foregoing and
(ii) after the Closing, Parent, the Company and their respective Affiliates,
successors and assigns, and the respective officers and directors of each of the
foregoing; provided, however, that, after the Closing, any such Person who was,
prior to the Closing, an officer, director, employee, Affiliate, successor or
assign of any of the Company or the Sellers shall not in such capacity, be a
Seller Indemnified Person with respect to a breach of this Agreement or any
Related Document based on facts or circumstances occurring, or actions taken by
such person or entity, at or prior to the Closing.
"Parent Indemnifying Persons" means and includes (i) before the
Closing, Parent and Acquisition Sub and (ii) after the Closing, the Company.
"Parent Initial Share Price" has the meaning ascribed thereto in
Section 2.1(a).
"Parent Losses" means any and all Losses sustained, suffered or
incurred by any Parent Indemnified Person arising from or in connection with any
matter which is the subject of indemnification under Section 10.1(a) or (b).
"Per Merger Share Additional Shares" has the meaning ascribed
thereto in Section 2.1(a).
"Per Merger Share Reserved Shares" has the meaning ascribed thereto
in Section 2.1(a).
"Per Nonconsenting Share Additional Shares" has the meaning ascribed
thereto in Section 2.1(a).
"Per Nonconsenting Share Reserved Shares" has the meaning ascribed
thereto in Section 2.1(a).
"Per Share Closing Amount" has the meaning ascribed thereto in
Section 2.1(a).
"Per Share Closing Shares" has the meaning ascribed thereto in
Section 2.1(a).
"Percentage Interest" means, with respect to any Seller, an amount
(represented by a percentage) determined by taking the number of shares of
Company Common Stock (on a
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Fully Diluted Basis) sold by such Seller and dividing by the total number of
shares of Company Common Stock (on a Fully Diluted Basis) sold by all of the
Sellers.
"Permits" means all permits, licenses, authorizations,
registrations, franchises, approvals, consents, certificates, variances and
similar rights obtained, or required to be obtained, from Governmental Entities.
"Permitted Liens" means (i) Liens for Taxes not yet due and payable
or being contested in good faith by appropriate proceedings and for which there
are adequate reserves on the books of such Person; (ii) workers or unemployment
compensation liens arising in the ordinary course of business; (iii) mechanic's,
materialman's, supplier's, vendor's or similar liens arising in the ordinary
course of business securing amounts that are not delinquent or past due; and
(iv) zoning ordinances, easements and other restrictions of legal record
affecting real property which would be revealed by a survey and would not,
individually or in the aggregate, materially interfere with the value or
usefulness of such real property to the business.
"Person" shall be construed broadly and shall include an individual,
a partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a Governmental Entity (or any department, agency, or political subdivision
thereof).
"Plans" has the meaning ascribed thereto in Section 3.18(a).
"Post-Closing Tax Period" means all taxable periods beginning after
the Closing Date and the portion beginning on the day after the Closing Date of
any taxable period that includes (but does not begin on) such day.
"Post-Closing Taxes" means all Taxes, including Taxes relating to or
arising under any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice in effect, with respect to the Company
attributable to the Post-Closing Tax Period, including all Taxes accruing under
the principles of Section 10.7 hereof during the Post-Closing Tax Period.
"Pre-Closing Tax Period" means all taxable periods ending on or
before the Closing Date and the portion ending on the Closing Date of any
taxable period that includes (but does not end on) such day.
"Pre-Closing Taxes" means all taxes, including Taxes relating to or
arising under any tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice in effect, with respect to the Company
attributable to the Pre-Closing Tax Period, including all Taxes accruing under
the principles of Section 10.7 hereof during the Pre-Closing Tax Period.
"Proceeding" means any action, suit, proceeding, complaint, charge,
hearing, inquiry or investigation before or by a Governmental Entity or an
arbitrator.
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"Proportionate Percentage" means, as to any Indemnifying Seller, the
fraction (expressed as a percentage), the numerator of which is equal to the
number of shares of Company Common Stock (on a Fully Diluted Basis) sold by such
Indemnifying Seller and the denominator of which is the total number of shares
of Company Common Stock (on a Fully Diluted Basis) sold by all of the
Indemnifying Sellers.
"Property Taxes" has the meaning ascribed thereto in Section
10.7(a).
"Real Property" has the meaning ascribed thereto in Section 3.11(b).
"Related Documents" has the meaning ascribed thereto in Section
7.2(f).
"Released Claims" has the meaning ascribed thereto in Section 6.7.
"Released Persons" has the meaning ascribed thereto in Section 6.7.
"Reserved Shares" has the meaning ascribed thereto in Section
2.1(a).
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Seller" and "Sellers" means, individually and collectively, the
Persons listed on Schedule I attached hereto.
"Seller Indemnified Persons" means and includes the Indemnifying
Sellers and their respective Affiliates, successors and assigns, heirs and
estates.
"Seller Indemnifying Persons" means and includes the Indemnifying
Sellers and their respective Affiliates, successors and assigns, heirs and
estates.
"Seller Losses" means any and all Losses sustained, suffered or
incurred by any Seller Indemnified Person arising from or in connection with any
matter which is the subject of indemnification under Section 10.1(d).
"Seller Materials" has the meaning ascribed thereto in Section 1.5.
"Sellers' Representative" has the meaning ascribed thereto in
Section 9.1(a).
"Share Number" has the meaning ascribed thereto in Section 2.1(a).
"Shares" has the meaning ascribed thereto in Section 2.1(a).
"Stock Consideration" has the meaning ascribed thereto in Section
2.1(a).
"Stockholders' Agreement" means the Stockholders' Agreement dated as
of December 24, 1998, as amended, among the Company, Parent and the other
parties thereto.
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"Straddle Period" has the meaning ascribed thereto in Section
10.7(a).
"Subject Reps" has the meaning ascribed thereto in Section 10.3(a).
"Subsidiary" of a Person means any corporation, partnership, limited
liability company or other business entity, with respect to which such Person
(or any Subsidiary thereof) has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Survival Date" has the meaning ascribed thereto in Section 10.3(b).
"Surviving Corporation" has the meaning ascribed thereto in Section
1.1.
"SWDA" means the Solid Waste Disposal Act, as amended, and the rules
and regulations promulgated thereunder.
"Tax" as used in this Agreement, means any of the Taxes, and "Taxes"
means, with respect to any Person, (i) all income taxes (including any tax 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 and
other taxes, fees, assessments or charges of any kind whatsoever, together with
all interest and penalties, additions to tax and other additional amounts
imposed by any taxing authority (domestic or foreign) on such Person (if any)
and (ii) any liability for the payment of any amount of the type described in
clause (i) above as a result of (A) being a "transferee" (within the meaning of
Section 6901 of the Code or any other applicable Law) of another entity or a
member of an affiliated or combined group, combined, or consolidated group (by
reason of Treasury Regulation ss.1.1.504-6 (or similar provision of state, local
or foreign Law) or (B) a contractual arrangement or otherwise.
"Tax Claim" has the meaning ascribed thereto in Section 10.2(b).
"Tax Return" has the meaning ascribed thereto in Section 3.12(a).
"Third Party Claim" has the meaning ascribed thereto in Section
10.3.
"Warrants" has the meaning ascribed thereto in Section 2.1(a).
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SCHEDULE I
Schedule of Company Common Stock and
Consideration to be Exchanged
<TABLE>
<CAPTION>
Percentage
Interest of
Nonconsenting
Name and Address of Number of Number of Share Additional
Seller Number of Shares Closing Amount Deferred Amount Closing Shares Reserved Shares Shares
------ ---------------- -------------- --------------- -------------- --------------- ------
<S> <C> <C> <C> <C> <C> <C>
George W. Constable, III 2,625,000 $ 78,708.00 $ 58,170.00 47,775.0000 35,831.2500 ----
Jeremy Epstein 2,625,000 78,708.00 58,170 47,775.0000 35,831.2500 ----
William Herndon 2,625,000 78,708.00 58,170 47,775.0000 35,831.2500 ----
Matthew Carden 802,170 16,030.57 17,776.09 14,599.4940 10,949.6205 ----
Venture Law Group 18,753 562.29 415.57 341.3046 255.9785 7.768%
Joshua Pickus 8,036 240.95 178.08 146.2552 109.6914 3.329%
George Constable, Jr. 28,219 (1,153.60) 625.33 513.5858 385.1894 11.688%
Kathryn Tresness 28,219 (1,153.60) 625.33 513.5858 385.1894 11.688%
Douglas Merritt 15,000 299.76 332.40 273.0000 204.7500 6.213%
Paul Resnick 15,000 (300.24) 332.40 273.0000 204.7500 6.213%
Joseph Beninato 100,500 (2,011.61) 2,227.08 1,829.1000 1371.8250 41.627%
Perry Arnold 7,700 (539.12) 170.63 140.1400 105.10500 3.189%
Teresa Kersten 20,000 (1,400.32) 443.20 364.0000 273.0000 8.284%
<CAPTION>
Proportionate
Percentage of
Merger Share
Name and Address of Additional
Seller Shares
------ ------
<S> <C>
George W. Constable, III 30.252%
Jeremy Epstein 30.252%
William Herndon 30.252%
Matthew Carden 9.2450%
Venture Law Group ----
Joshua Pickus ----
George Constable, Jr. ----
Kathryn Tresness ----
Douglas Merritt ----
Paul Resnick ----
Joseph Beninato ----
Perry Arnold ----
Teresa Kersten ----
</TABLE>
<PAGE>
SCHEDULE II
Integration Requirements
1. e*Portfolio: Freeagent.com members will have a single profile within the
system. e*Portfolio will also integrate to Ithority's reputation system
data so users can properly qualify each other. Ithority's reputation
system will be one component of the overall FreeAgent.com
reputation/certification system.
2. Authorization system will be merged. Freeagent.com members will have a
single username/password for logging into the system and accessing the
Ithority functionality.
3. Billing system: Ithority will pass Freeagent.com billing events for
completed transactions, which will be processed by Freeagent.com. Ithority
needs to be able to support FreeAgent.com's multiple billing scenarios (up
front listing payment, subscription, invoicing, credit card, and account
balance). Account management information will be consolidated into one
single display across all services for FreeAgent.com users.
4. The systems will appear as one system through unified design.
5. The Ithority functionality will be accessible through the same overall
Xchange interface, "questions" or "expert advice" should be a type
accessible, browseable, searchable, in the vein of all of the other
Xchange opportunities.
<PAGE>
Exhibit 10.17
ASSET PURCHASE AGREEMENT
by and between
BRAINSTORM INTERACTIVE, INC.
and
OPUS360 CORPORATION
and
DAVID RONICK AND LEE NEWMAN
(as to Article V, Section 7.1, Section 7.2, Section 7.3,
Section 7.5, Section 7.6 and Section 7.8 only)
Dated as of January 12, 2000
- --------------------------------------------------------------------------------
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of January 12,
2000, by and among Brainstorm Interactive, Inc., a Delaware corporation
("Seller"), Opus 360 Corporation, a Delaware corporation ("Buyer") and David
Ronick and Lee Newman (each a "Stockholder" and collectively, the
"Stockholders") as to Article V, Section 7.1, Section 7.2, Section 7.3, Section
7.5, Section 7.6 and Section 7.8 only.
W I T N E S S E T H
WHEREAS, Seller operates a vertical portal under the Uniform Resource
Locator "IndustryInsite.com" which includes a graphical user interface and
proprietary software that assists young professionals to develop skills, make
contacts and learn about the latest developments across a wide range of
industries (the "Business");
WHEREAS, Seller holds all of the right, title and interest in and to or
has the right to license the assets and rights both tangible and intangible
currently existing which collectively constitute the Business;
WHEREAS, pursuant to the terms and subject to the conditions set forth in
this Agreement, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the assets and rights of the Business (other
than those specifically excluded as described in this Agreement); and
WHEREAS, the Stockholders collectively own 69% of the issued and
outstanding capital stock of Seller.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth and the schedules, certificates, exhibits and documents attached
hereto or referenced herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
I.
1.
<PAGE>
ARTICLE DEFINITIONS ARTICLE
DEFINITIONS
I.
II.
For the purposes of this Agreement, the following terms shall have the
following respective meanings:
III.
"Acquired Assets" has the meaning set forth in Section 2.1(b) hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules
and Regulations promulgated under the Securities Exchange Act of 1934, as
amended.
"Agreement" has the meaning set forth in the preamble hereof.
"Allocation" has the meaning set forth in Section 7.1 hereof.
"Assumed Liabilities" has the meaning set forth in Section 2.2 hereof.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use such Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions (i) that would result in a materially
adverse change in the benefits to such Person under this Agreement and the
Related Agreements and the transactions contemplated hereby and thereby or (ii)
that would require a substantial expenditure which was disproportionate to the
benefit to be obtained.
"Bill of Sale" means the duly executed bill of sale and assignment and
assumption agreement, by and between Seller and Buyer, that each shall deliver
effecting the sale, assignment, transfer, conveyance and delivery of the
Acquired Assets.
"Business" has the meaning set forth in the preamble hereof.
"Buyer" has the meaning set forth in the preamble hereof.
"Buyer Indemnified Parties" has the meaning set forth in Section 9.2
hereof.
"Cash Consideration" has the meaning set forth in Section 2.4 hereof.
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<PAGE>
"Closing" means the closing of the transactions contemplated by this
Agreement set forth in Section 2.5 hereof.
"Closing Date" has the meaning set forth in Section 2.5 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Business" has the meaning set forth in Section 7.2 hereof.
"Confidentiality Agreement" has the meaning set forth in Section 7.3
hereof.
"Contracts" has the meaning set forth in Section 2.1(b)(i) hereof.
"Co-President's Certificate" has the meaning set forth in Section 2.6(c)
hereof.
"DGCL" means the Delaware General Corporation Law, as amended.
"Domain Names" include the Uniform Resource Locators "IndustryInsite.com",
"BranchOut.com" and "OnTheJob.com".
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" has the meaning set forth in Section 2.1(d) hereof.
"Excluded Liabilities" has the meaning set forth in Section 2.3 hereof.
"Globix Agreements" means (i) the Co-Location Service Agreement executed
on June 10, 1999, by and between Globix Corporation and Seller and (ii) the
Master Rental Agreement executed on June 17, 1999, by and between Globix
Corporation and Seller.
"Governmental Entity" has the meaning set forth in Section 4.3 hereof.
"Indemnified Party" has the meaning set forth in Section 9.5 hereof.
"Indemnifying Party" has the meaning set forth in Section 9.5 hereof.
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<PAGE>
"Intellectual Property" has the meaning set forth in Section 2.1(b)(vii)
hereof.
"Legal Requirement" means all applicable laws, statutes, ordinances,
judgments, orders, rules, regulations or requirements.
"Lien" means any mortgage, pledge, hypothecation, assignment for security
purposes, deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including without
limitation any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Losses" has the meaning set forth in Section 9.2 hereof.
"Member Networks" has the meaning set forth in Section 2.1(b)(v) hereof.
"Member Profiles" has the meaning set forth in Section 2.1(b)(ii) hereof.
"Permits" has the meaning set forth in Section 2.1(b)(x) hereof.
"Person" means and includes any natural person, firm, individual,
partnership, joint venture, company, limited liability company, corporation,
business trust, trust, association, unincorporated organization or a
Governmental Entity.
"Plan" means each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement,
sponsored, maintained or contributed to or required to be contributed to by
either Seller or any ERISA Affiliate for the benefit of any employee or
terminated employee of either Seller or any ERISA Affiliate, whether formal or
informal.
"Promissory Note" has the meaning set forth in Section 2.4 hereof.
"Proprietary Software" has the meaning set forth in Section 2.1(b)(iv)
hereof.
"Purchase Price" has the meaning set forth in Section 2.4 hereof.
4
<PAGE>
"Records" has the meaning set forth in Section 3.1(b) hereof.
"Related Agreements" means the Bill of Sale and the following duly
executed, and where appropriate, notarized, good and sufficient agreements and
instruments required to be executed or delivered pursuant to this Agreement (i)
the Sublease Agreement, (ii) the Instrument of Domain Names Assignment, dated as
of the date hereof, by and between Buyer and Seller, (iii) the Trademarks
Assignment, dated as of the date hereof, by and between Buyer and Seller, (iv)
the Network Solutions, Inc. Registrant Name Change Agreements, dated as of the
date hereof, executed by Seller and acknowledged by Buyer, (v) each of the
Contracts assignments executed by Seller and acknowledged by the other party to
the contract and (vi) the Website Terms of Service Assignment.
"Restraints" has the meaning set forth in Section 8.1(b) hereof.
"Seller" has the meaning set forth in the preamble hereof.
"Seller Disclosure Schedule" means the disclosure schedule delivered by
Seller to Buyer at the Closing.
"Seller Indemnified Parties" has the meaning set forth in Section 9.3
hereof.
"Stockholder" has the meaning set forth in the preamble hereof.
"Stockholder Approval" has the meaning set forth in Section 2.6(c) hereof.
"Sublease Agreement" means the Sublease and Assumption Agreement, dated as
of the date hereof, by and between Buyer and Seller.
"Subsidiary" means with respect to any Person, any corporation or other
legal entity of which such Person owns, directly or indirectly, more than 50% of
the outstanding stock or other equity interests, the holders of which are
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
"Survival Period" has the meaning set forth in Section 9.1 hereof.
"Taxes" means all taxes, levies or other like assessments, charges or fees
(including estimated taxes, charges and fees), including, without limitation,
income,
5
<PAGE>
corporation, advance corporation, gross receipts, transfer, excise, property,
sales, use, value-added, license, payroll, pay as you earn, withholding, social
security and franchise or other governmental taxes or charges, including customs
duties, fees, penalties or charges, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof; and such
term shall include any interest, penalties or additions to tax attributable to
such taxes.
"Tax Return" has the meaning set forth in Section 4.10 hereof.
"Trademarks" include "IndustryInsite", "JobFlash" and "BranchOut".
"Transitional Services Period" has the meaning set forth in Section 7.5
hereof.
"Website Terms of Service Assignment" means the Website Terms of Service
Assignment, dated as of the date hereof, by and between Buyer and Seller.
1 ARTICLE
PURCHASE AND SALE OF ACQUIRED ASSETS
1.1 SECTION Purchase and Sale .
(a) Assets. In reliance on the representations, warranties, covenants and
agreements set forth in this Agreement and subject to paragraphs (d) and (e) of
this Section 2.1 and to the other terms and conditions of this Agreement and the
Related Agreements, Seller shall sell, assign, transfer, convey and deliver to
Buyer, and Buyer shall purchase, acquire and accept from Seller, in each case
free and clear of all Liens, all of Seller's right, title and interest in and to
all of the Acquired Assets.
(b)
(c) Subject to Section 2.1(d), the term "Acquired Assets" means all of Sellers
right, title and interest in and to all of the properties, contracts, rights and
other assets (of every kind, nature, character and description, whether tangible
or intangible, whether accrued, contingent or otherwise, wherever situated and
currently existing) that are exclusively related to the Business as described in
this Section 2.1(b) and as set forth on each of the Seller Disclosure Schedules
that collectively constitute Schedule 2.1(b) of the Seller Disclosure Schedule:
6
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(d)
(i) all rights and incidents of ownership of Seller in, to and under the
contracts, agreements, arrangements (whether set forth in a written instrument
or pursuant to an oral understanding), licenses and sublicenses exclusively
related to the Intellectual Property and the Business (collectively, the
"Contracts") set forth on Schedule 2.1(b)(i) of the Seller Disclosure Schedule;
(ii)
(iii) all member profiles of persons who have registered to become members of
IndustryInsite.com (providing information that may include e-mail address, name,
primary industry, primary job function, years of working experience and metro
area, current company, past companies, titles, employment dates, job
responsibilities, college name and year of graduation, program of study and
personal interests) (collectively, the "Member Profiles"), subject to any
privacy policy posted on IndustryInsite.com at the time such Member Profile was
first collected by Seller or the privacy rights, if any, of such registered
member under current applicable law;
(iv)
(v) the graphical user interface of the pages contained at the Uniform Resource
Locator "IndustryInsite.com";
(vi)
(vii) all proprietary software used in the functioning of the IndustryInsite.com
Website owned by Seller (including software that enables the member search tools
feature, common-bond mapping feature, private e-mailing feature, members online
feature, mentorship services feature, contact lists feature, e-mail newsletters
feature, member newsletters feature, data e-mails feature, personalized,
industry specific news feature, career research feature, job placement services
feature and administrative tools feature) (collectively, the "Proprietary
Software") including the Proprietary Software set forth on Schedule 2.1(b)(iv)
of the Seller Disclosure Schedule;
(viii)
(ix) member networks (including networks based on industries, job functions,
current and past companies, colleges, graduate schools, high schools,
fraternities/sororities and military experience) (collectively, the "Member
Networks");
(x)
(xi) all prepaid expenses relating exclusively to the Business;
(xii)
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(xiii) any and all of the following and all statutory and/or common law rights
throughout the world in, arising out of, or associated therewith: (a) set forth
on Schedule 2.1(b)(vii)(a) of the Seller Disclosure Schedule is a list of all
patents and applications therefor, including docketed patent disclosures
awaiting filing, reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (b) all inventions (whether
patentable or not), inventions disclosures and improvements, all trade secrets,
confidential business information (including ideas, research and development,
know how, compositions, designs, specifications, pricing and cost information
and business and market plans and proposals), proprietary information,
manufacturing, engineering and technical drawings and specifications, processes,
designs and technology; (c) all works of authorship, "moral rights", copyrights
(including derivative works thereof), mask works, copyright and mask work
registrations and applications therefor; (d) all trade names, trade dress,
logos, product names, collective marks, collective membership marks, trademarks
certification marks and service marks, trademark and service mark registrations
and applications together with the good will of the business symbolized by the
names and the marks (including the "Trademarks"); (e) all rights to use computer
software including all source code (including custom, hard copy and soft copy,
as well as all data and related documents, object code, databases, passwords,
encryption technology, firmware, development tools, files, records and data, and
all media on which any of the foregoing is recorded; (f) all e-mail, Uniform
Resource Locators, World Wide Website addresses and Domain Names related to the
business; (g) any similar, corresponding or equivalent rights to any of the
foregoing; (h) all documentation related to any of the foregoing; and (i) all
goodwill associated with any of the foregoing ((a) through (g) above,
collectively, the "Intellectual Property"), in each case, owned, used or
licensed by Seller that are exclusively related to the Business, including the
Intellectual Property set forth on Schedule 2.1(b)(vii) of the Seller Disclosure
Schedule;
(xiv)
(xv) all works in progress relating to Intellectual Property in development, in
each case, owned, used or licensed by Seller or being developed by or on behalf
of Seller that are exclusively related to the Business;
(xvi)
(xvii) all works in progress relating to Proprietary Software in development
owned by Seller that are exclusively related to the Business;
(xviii)
(xix) all of Seller's permits, licenses, approvals, consents and authorizations
by any Governmental Entity (collectively, "Permits"), that are primarily used or
held for use in the Business or related to the Acquired Assets;
<PAGE>
(xx)
(xxi) subject to Section 3.1 hereof, all of Seller's books, records and other
documents and information relating exclusively to the Business or the Acquired
Assets, including all passwords, resets, encryption technology, archives, log
files, quality records, engineering designs, software agreements and software
configurations;
(xxii)
(xxiii) subject to Section 3.1 hereof, all of Seller's files, indices, market
research studies, surveys, reports, analyses, compilations, forecasts,
projections, complaint logs, presentations, Website terms and conditions of use
and privacy policies and similar information relating exclusively to the
Business or the Acquired Assets;
(xxiv)
(xxv) the goodwill of the Business in or arising from the Acquired Assets;
(xxvi)
(xxvii) all sales data, brochures, catalogues, literature, forms, mailing lists,
art work, photographs and advertising material, in whatever form or media
relating exclusively to the Business or the Acquired Assets; and
(xxviii)
(xxix) all claims, causes of action, choses in action, rights of recovery and
rights of set-off of any kind in favor of Seller and relating exclusively to,
arising exclusively out of, or resulting exclusively from the Business, the
Acquired Assets or the Assumed Liabilities; provided, however, Seller shall have
such rights as they relate exclusively to, arise exclusively out of or result
exclusively from the Excluded Assets or the Excluded Liabilities.
(xxx)
(e) Instruments of Transfer. The sale, assignment, transfer, conveyance and
delivery of the Acquired Assets shall be effected by the execution and delivery
by Seller and Buyer of the Bill of Sale substantially in the form attached as
Exhibit A hereto.
(f)
(i) Excluded Assets. Notwithstanding anything contained in paragraph (b) of this
Section 2.1 to the contrary, the Acquired Assets shall not include any of the
following (the "Excluded Assets"): all rights that accrue or will accrue to
Seller under this Agreement or the Related Agreements; (ii) all cash and cash
equivalents; (iii) Seller's accounting systems and non-proprietary software;
(iv) Seller's accounts receivable; (v) Seller's machinery, equipment, tooling,
furniture, fixtures, vehicles and office supplies; (vi) Seller's corporate
charter, qualifications to
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conduct business as a foreign corporation, arrangements with registered agents,
taxpayer and other identification numbers, seals, minute books, stock transfer
books, blank stock certificates, and other documents relating to the
organization, maintenance and existence of Seller as a corporation; (vii)
Seller's computer hardware; (viii) all contracts and other assets set forth on
Schedule 2.1(d) of the Seller Disclosure Schedule; (ix) the intellectual
property and other assets relating exclusively to Seller's product named
"ReviewMe"; and (x) the trademark "Brainstorm Interactive".
(ii)
(g) Nonassignability. Anything contained in this Agreement or any Related
Agreement to the contrary notwithstanding, unless otherwise waived in a written
instrument by an authorized representative of Buyer neither this Agreement nor
any Related Agreement shall constitute an assignment, transfer, sublicense or
sublease of, or an agreement to assign, transfer, sublicense or sublease, any
right, title or interest in, to or under any, contract, agreement, arrangement
(whether set forth in a written instrument or pursuant to an oral
understanding), license or sublicense, or any claim or right to any benefit
arising thereunder or resulting therefrom, if an attempted assignment, transfer,
sublicense or sublease thereof, without the consent or waiver of a third party
thereto including a Governmental Entity, would constitute a breach thereof or a
violation of any Legal Requirement, or in any way adversely affect the rights of
Buyer or Seller hereunder or thereunder, unless and until such consent or waiver
has been duly obtained and delivered to Buyer or such assignment, transfer,
sublicense or sublease has otherwise become lawful.
(h)
1.2 SECTION Assumed Liabilities . In reliance on the representations,
warranties, covenants and agreements set forth in this Agreement and subject to
the terms of this Agreement, at the Closing, and concurrently with the purchase
described in Section 2.1 hereof, Buyer shall assume and be responsible for, and
hereby agrees to pay, honor, discharge or perform in due course and upon
presentment, the following liabilities and obligations of Seller in connection
with the Business (the "Assumed Liabilities"):
1.3
(a) All liabilities and obligations of Seller arising after the Closing Date
under any Contracts assigned to Buyer pursuant to Section 2.1(b)(i) that are
specifically set forth in Schedule 2.1(b)(i) of the Seller Disclosure Schedule
and not excluded by Seller on Schedule 2.1(d) of the Seller Disclosure Schedule;
(b)
(c) All liabilities and obligations of Seller after the Closing Date under the
Sublease Agreement, including the requirement to pay any Fees (as such term is
defined in the Sublease Agreement) required to be paid pursuant to the terms
<PAGE>
of the Sublease Agreement, only for the term of the Sublease Agreement and any
extension or renewal thereof; and
(d)
(e) All liabilities and obligations relating exclusively to the Business after
the Closing Date relating exclusively to, arising exclusively out of or
resulting exclusively from the ownership, operation and management by Buyer,
subject to Section 7.5 hereof and Section 7.7 hereof, of the Business and/or the
Acquired Assets during the period after the Closing Date.
(f)
1.4 SECTION Excluded Liabilities . Notwithstanding anything in this Agreement to
the contrary, Buyer shall not assume and shall be deemed not to have assumed and
be responsible for, and Seller shall be solely and exclusively liable and
responsible for all debts, obligations, contracts or liabilities which are not
Assumed Liabilities (the "Excluded Liabilities"), including the following
illustrative examples:
1.5
(a) All liabilities and obligations incurred in connection with or related to
the Excluded Assets;
(b)
(c) All liabilities and obligations for Taxes of Seller and Seller's
Stockholders;
(d)
(e) All liabilities and obligations whatsoever to any current or former
employee, consultant, independent contractor or temporary worker, of Seller,
including without limitation, any liability or obligation that arises under any
Plan, or any other employee benefit arrangement or policy, or under applicable
law;
(f)
(g) All attorneys', accountants', brokers' or finder's fees or other costs or
expenses of Seller incurred in connection with this Agreement and any Related
Agreement or the transactions contemplated hereby or thereby;
(h)
(i) All liabilities, obligations and costs arising out of or relating to any
product liability claim, action, demand, suit or proceeding against Seller or
any of its Affiliates relating to, arising out of, or resulting from the
ownership, operation or management of, or services performed by or on behalf of
Seller relating exclusively to, arising exclusively out of, or resulting
exclusively from the Business, in each case, on or prior to the Closing Date,
whether a claim therefor is asserted before, on or after the Closing Date, and
whether or not the claim is an indemnification claim by a licensor or other
party to a contract against Buyer or its Affiliates as as-
<PAGE>
signee of Seller under a Contract, including liabilities, obligations and costs
arising out of or relating to any misappropriation of membership information,
violation of the IndustryInsite.com Website terms and conditions of use and
privacy policies or infringement claims relating to Intellectual Property or
Proprietary Software;
(j) All liabilities accrued on or prior to the Closing Date and current (up and
until the day after the Closing Date) liabilities and accounts payable of the
Business, in each case, even if payable after the Closing Date; and
(k)
(l) All liabilities and obligations of Seller arising on or before the Closing
Date and required to be performed on or prior to the Closing Date even if such
liabilities and obligations are payable after the Closing Date under any
Contracts (including, without limitation, all shared revenue payment obligations
of Seller accrued under any Contracts on or prior to the Closing Date even if
payable after the Closing Date).
(m)
1.6 SECTION Purchase Price . The purchase price (the "Purchase Price") for the
Acquired Assets shall consist of an aggregate of $1,000,000, as follows: (a)
$650,000 (the "Cash Consideration") payable to Seller on the Closing Date by
certified check or wire transfer in immediately available funds pursuant to
written instructions provided by an authorized representative of Seller at least
one (1) business day prior to Closing and (b) issuing, executing and delivering
to Seller on the Closing Date a promissory note in the principal amount of
$350,000 having the terms and subject to the conditions contained therein,
substantially in the form of Exhibit B hereto (the "Promissory Note").
1.7
1.8 SECTION Closing . Subject to the terms and conditions of this Agreement,
including the satisfaction or waiver of all conditions as set forth in Article
VIII the "Closing" of the purchase and sale of the Acquired Assets shall take
place at a mutually agreed upon time, date and location for the Closing;
provided that the parties may elect to have the Closing be conducted through a
facsimile exchange of documents and signature pages. The date and time of such
Closing shall be referred to herein as the "Closing Date."
1.9
1.10 SECTION Deliveries by Seller . At the Closing, Seller shall deliver or
cause to be delivered to Buyer (unless delivered previously) the following:
1.11
(a) an executed copy of this Agreement and the Related Agreements and the Seller
Disclosure Schedules;
(b)
<PAGE>
(c) a certificate executed by the Co-President of Seller, dated the Closing
Date, in form and substance reasonably satisfactory to Buyer, certifying to the
fulfillment of the conditions set forth in Sections 8.1 and 8.2 hereof,
substantially in the form attached as Exhibit C hereto;
(d) a copy of the action by written consent of the stockholders of Seller
pursuant to Section 228(a) of the DGCL authorizing and approving (i) the sale,
assignment, transfer, conveyance and delivery of the Acquired Assets to Buyer in
compliance with Section 271 of the DGCL and (ii) the execution and delivery of
this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby (the "Stockholder Approval"),
certified as true, complete and correct on the Closing Date in a written
instrument executed by the Co-President of Seller, substantially in the form of
Exhibit D hereto (the "Co-President's Certificate");
(e)
(f) a copy of the unanimous written consent of the Board of Directors of Seller
pursuant to Section 141(f) of the DGCL authorizing and approving (i) the sale,
assignment, transfer, conveyance and delivery of the Acquired Assets to Buyer in
compliance with Section 271 of the DGCL and (ii) the execution and delivery of
this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby, certified as true, complete and
correct on the Closing Date under the Co-President's Certificate;
(g)
(h) a copy of the Certificate of Incorporation of Seller dated as of a date
within three (3) business days of the Closing Date, certified under the
Co-President's Certificate as not having been amended, and no document with
respect to an amendment to it having been filed in the office of the Secretary
of State of the State of Delaware since the respective date thereof and no
action having been taken by Seller in contemplation of any such amendment or the
dissolution, merger or consolidation of Seller other than the transactions
contemplated by this Agreement and the Related Agreements;
(i)
(j) a copy of the Long-Form Good Standing Certificate of Seller dated as of the
business day immediately prior to the Closing Date from the Secretary of State
of the State of Delaware accompanied by a Bring-Down Good Standing Certificate
of Seller dated as of the Closing Date from the Secretary of State of the State
of Delaware, in each case, certified as true, complete and correct on the date
set forth thereon under the Co-President's Certificate;
(k)
<PAGE>
(l) an executed acknowledgment of the sublease of the Globix Agreements;
(m)
(n) IndustryInsite Manual for the stored procedures and IndustryInsite
ER/schema/data dictionary diagrams for the database; and
(o) all other documents, instruments and writings necessary to consummate the
transactions contemplated hereby or expressly required to be delivered by Seller
at or prior to the Closing pursuant to this Agreement and the Related
Agreements.
(p)
1.12 SECTION Deliveries by Buyer . At the Closing, Buyer shall deliver or cause
to be delivered to Seller (unless delivered previously) the following:
1.13
(a) the Cash Consideration;
(b)
(c) the executed and acknowledged Promissory Note;
(d)
(e) an executed copy of this Agreement and the Related Agreements (as
applicable);
(f)
(g) a certificate executed by the Chief Executive Officer or the Chief Financial
Officer of Buyer, dated the Closing Date, in form and substance reasonably
satisfactory to Seller, certifying to the fulfillment of the conditions set
forth in Sections 8.1(b) and 8.3 hereof, substantially in the form attached as
Exhibit E hereto;
(h)
(i) an executed copy of the Globix Corporation Acceptable Use Policy; and
(j)
(k) all other documents, instruments and writings necessary to consummate the
transactions contemplated hereby or expressly required to be delivered by Buyer
at or prior to the Closing pursuant to this Agreement and the Related
Agreements.
(l)
<PAGE>
1 ARTICLE RELATED MATTERS ARTICLE
1 RELATED MATTERS
1.1 SECTION Books and Records of the Business .
(a) Seller agrees to deliver to Buyer or make available to Buyer, at or as soon
as practicable after the Closing, as requested by Buyer, (i) all books and
records of Seller to the extent such books and records relate exclusively to the
Business and (ii) a copy of that portion of all other books and records that
relate exclusively to the Business (in the case of each of (i) and (ii) above,
including correspondence, memoranda and the like). Notwithstanding the foregoing
and except as otherwise provided in Section 2.1(b) hereof, Seller shall not be
obligated to provide (i) any books and records that relate exclusively to, or
(ii) any distinct portion of any books and records that relate exclusively to,
Seller as a whole or any businesses, divisions or Subsidiaries of Seller other
than the Business.
(b)
(c) For a period of three (3) years following the Closing Date, or for such
longer period as may be required to satisfy applicable laws, regulations or
agreements, (i) Seller shall retain all books and records relating to the
Business that are integrated or non-separable from the books and records related
to any businesses, divisions or Subsidiaries of Seller other than the Business
and (ii) Buyer shall retain all other books and records of the Business,
including all other such books and records of the Business required to be
retained pursuant to obligations imposed by any contract, statute, rule or
regulation (such books and records of the Business collectively, the "Records").
(d)
(e) For a period of three (3) years following the Closing Date, or for such
longer periods as may be required to satisfy applicable laws, regulations or
agreements, or record retention requirements of Governmental Entities, (i) each
party hereto shall provide to duly authorized representatives of the other party
and their Affiliates who wish to review any Records for bona fide business
reasons reasonable access, during regular business hours, to (A) employees of
such party, if any, who are familiar with such Records and who can assist such
representatives of such other party, at such other party's own expense, in
locating, explaining or otherwise reviewing such Records and (B) use of such
party's copying facilities, clerical services and telephone in a reasonable
manner at such other party's own expense and
<PAGE>
(ii) neither Seller nor Buyer shall dispose of or destroy any Records within
such period without written permission of the other party.
(f)
(g)
2 ARTICLE REPRESENTATIONS AND WARRANTIES OF SELLER ARTICLE
1 REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer:
1.1 SECTION Organization and Standing of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on the
Business as it is now being conducted and proposed to be conducted and to own,
license, lease and operate all of the Acquired Assets owned, licensed, leased or
operated by it. Seller is duly qualified as a foreign corporation or licensed to
do business and is in good standing in each jurisdiction in which the Acquired
Assets owned, licensed, leased or operated by it or the nature of the Business
makes such qualification or licensing necessary. Seller is not a participant in
any joint venture or partnership with any other Person or party with respect to
any Acquired Assets.
1.2
1.3 SECTION Authorization and Enforcement . Seller has full power and authority
to execute and deliver this Agreement and the Related Agreements and to perform
its obligations hereunder and thereunder. This Agreement is, and each of the
Related Agreements to be executed and delivered by Seller pursuant hereto will
be, when executed and delivered by Seller (in each case assuming due
authorization, execution and delivery thereof by Buyer and each of the
Stockholders, as applicable), a valid and binding obligation of Seller,
enforceable against it in accordance with its terms, except as such enforcement
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and (b) the
availability of equitable remedies. The (i) the sale, assignment, transfer,
conveyance and delivery of the Acquired Assets to Buyer and (ii) the execution
and delivery of this Agreement and the Related Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized and approved by the Board of Directors of Seller. The (i) the sale,
assignment, transfer, conveyance and delivery of the Acquired Assets to Buyer
and (ii) the execution and delivery of this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized and approved by the stockholders
<PAGE>
of Seller pursuant to the Stockholder Approval. No other corporate or
stockholder action is necessary to authorize the execution, delivery or
performance of this Agreement and the Related Agreements.
1.1 SECTION No Violation or Conflict by Seller and Approvals.
1.2
(a) Neither the execution, delivery or performance of this Agreement or the
Related Agreements by Seller, nor the consummation of the transactions
contemplated hereby or thereby by Seller, will (i) violate any provisions of the
certificate of incorporation, by-laws or other governing documents of Seller,
(ii) result in (with or without the giving of notice or lapse of time or both) a
violation or breach of, conflict with, loss of a material benefit under or
result in the creation of a Lien upon, or constitute a default or give rise to
any right of termination, cancellation or acceleration under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
letter of credit, other evidence of indebtedness, guarantee, license, lease,
agreement or Contract or other instrument or obligation to which Seller is a
party or by which any of the Acquired Assets may be bound or affected or (iii)
violate any order, injunction, judgment, decree, statute, rule or regulation of
any foreign, United States, state or local governmental entity or municipality
or subdivision thereof or court, tribunal, commission, board, bureau, agency or
legislative, executive, governmental or regulatory authority or agency (a
"Governmental Entity") to which Seller is a party or by which any of the
Acquired Assets may be bound or affected.
(a) No filing or registration with, notification to, or authorization, consent
or approval of, any Governmental Entity is required in connection with the
execution, delivery and performance of this Agreement or the Related Agreements
by Seller.
1.1 SECTION Title; Properties and Acquired Assets Necessary for Conduct of
Business. The Acquired Assets used in the Business are set forth on each of the
Seller Disclosure Schedules that collectively constitute Schedule 2.1(b) of the
Seller Disclosure Schedule. Other than the Excluded Assets, the Acquired Assets
include all properties and assets necessary to permit the Business to be
conducted as currently conducted. Other than the Excluded Assets, all of the
assets used exclusively in the conduct of the Business are included in the
Acquired Assets. Seller owns, or otherwise has a valid interest providing
sufficient and legally enforceable rights to use, all of the Acquired Assets
free and clear of all Liens.
<PAGE>
1.1 SECTION Contracts. Schedule 2.1(b)(i) of the Seller Disclosure Schedule
includes a complete and correct list of all Contracts, including all amendments
thereto. True and complete copies of the Contracts and all written amendments
thereto have been provided to Buyer. Seller is not a party to or bound by any
oral Contracts. Except as set forth in any Contract listed, or as otherwise set
forth, in Schedule 2.1(b)(i) of the Seller Disclosure Schedule, each such
Contract is in full force and effect and enforceable against the parties to each
such Contract in accordance with their respective terms, and none of Seller, nor
any other party thereto, is in breach of, or default under, any such Contract,
and no event has occurred that with notice or passage of time or both would
constitute such a breach or default thereunder by Seller or any other party
thereto.
<PAGE>
1.1 SECTION Proprietary Software and Intellectual Property. Schedule 2.1(b)(iv),
Schedule 2.1(b)(vii)(a) and Schedule 2.1(b)(vii) of the Seller Disclosure
Schedule contain a complete and correct list of all Proprietary Software and
Intellectual Property. The foregoing, together with the rights of enforcement
for both known and unknown past infringement, and licenses thereof and thereto,
is a complete and correct list of all Proprietary Software and Intellectual
Property that is being used to conduct the Business as it is now conducted.
Seller owns, or is licensed or otherwise possesses legally enforceable rights to
use the Proprietary Software and Intellectual Property, including all required
computer software licenses. As of the date of this Agreement, there are no
oppositions, cancellations, invalidity proceedings, interferences or
re-examination proceedings presently pending by any Governmental Entity with
respect to the Proprietary Software and Intellectual Property. If applicable,
each item of Proprietary Software and Intellectual Property has been used with
the authorization of every other claimant thereto and to the knowledge of
Seller, the execution, delivery and performance of this Agreement or the Related
Agreements will not impair such use by Buyer. As of the date of this Agreement,
Seller has not to its knowledge interfered with, infringed upon, misappropriated
or otherwise come into conflict with any intellectual property rights of any
third party with respect to the Proprietary Software and Intellectual Property,
and Seller has not received any charge, complaint, claim, demand or notice of
any such interference, infringement, misappropriation or violation (including
any claim that Seller must refrain from using any intellectual property rights
of any third party) with respect to the Proprietary Software and Intellectual
Property. As of the date of this Agreement, to the knowledge of Seller after a
reasonable investigation, no third party has interfered with, infringed upon or
misappropriated or otherwise come into conflict with any Proprietary Software
and Intellectual Property rights of Seller. As of the date of this Agreement,
there are no pending claims, including litigation, arbitration, opposition
proceedings, petitions to cancel, interferences, administrative proceedings,
demand letters, cease and desist letters, or other demands, challenges or
disputes of any nature, challenging, impacting or involving the Proprietary
Software and Intellectual Property rights of Seller. The Proprietary Software
and Intellectual Property: (a) does not infringe, or constitute an infringement
or misappropriation of any person's or entity's patent right to the knowledge of
Seller (to the knowledge of Seller only refers to patent right), design right,
copyright, trademark, service mark (and any application or registration
respecting the foregoing), database right, trade secret, know-how and/or other
present or future intellectual property right of any type, wherever in the world
enjoyable or other similar rights of any third party; (b) is not libelous, an
invasion of privacy, obscene or does not otherwise violate any law or right of
any person or entity; or (c) will not with respect to Proprietary Software, due
<PAGE>
to the Year 2000 century date change: (i) have any operational impediments; (ii)
malfunction; (iii) cease to perform; (iv) generate incorrect or ambiguous data
or results with respect to leap years, same-century and multi-century formulas,
functions, and data; or (v) produce incorrect or ambiguous results with respect
to leap years, same-century and multi-century formulas, functions, data values
and date-data interfaces. Any Proprietary Software delivered to Buyer does not
contain any (i) back door, time bomb, drop dead device, or other software
routine designed to disable a computer program automatically, with the passage
of time or under the positive control of Seller or (ii) any virus, Trojan horse,
worm, or other software routine or hardware component designed to permit
unauthorized access, to disable, erase, modify or otherwise harm any software,
hardware or data or to perform any other such actions. As of January 7, 2000,
Seller represents that there were 63,009 Member Profiles of IndustryInsite.com.
1.1 SECTION Litigation. As of the date of this Agreement, there is no claim,
action or proceeding pending or to the knowledge of Seller, threatened by or
against Seller, that names Seller as a party, or, is otherwise by or before any
Governmental Entity with respect to the Acquired Assets or the Business or that
challenges the ability of Seller to perform its obligations under this Agreement
or under the Related Agreements or to convey to Buyer good, valid and marketable
title to the Acquired Assets. There is no outstanding order, judgment,
injunction, award or decree of any Governmental Entity or any settlement
agreement that names Seller as a party or is binding upon Seller with respect to
the Acquired Assets which affects the ownership, use or operation of the
Business or the Acquired Assets.
1.1 SECTION Compliance with Applicable Law. Seller is in compliance with all
applicable laws, ordinances, rules and regulations of any Governmental Entity
applicable to the Business or the Acquired Assets. All Permits required to
conduct the Business have been obtained, are in full force and effect and are
being complied with in all respects.
<PAGE>
1.1 SECTION Non-Competition. Seller is not a party to any non-competition
agreement or any other agreement, contract, arrangement or understanding that
restricts the ability of Seller to compete in any business or market (including,
without limitation, product, service and geographic markets).
(a) SECTION Taxes. Seller has duly and timely filed all returns, reports,
information returns or other documents (including any related or supporting
information) ("Tax Returns") required to be filed with any taxing authority with
respect to Taxes on or before the Closing Date, and all such Tax Returns are
true, complete and correct in all material respects and Seller has timely paid
any and all taxes, charges, fees, duties, levies, penalties or other assessments
imposed by any Governmental Entity, including Taxes for all periods ending on
the date hereof, regardless of whether due or claimed to be due from it by any
taxing authority, (b) there are no claims (including any claim as defined in the
Code or any similar encumbrances for Taxes) upon the Acquired Assets except for
statutory liens for current Taxes not yet due for which adequate reserves have
been established if required pursuant to United States generally accepted
accounting principles and (c) no federal, state, local or foreign audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Seller and no such audit or proceeding is
threatened.
1.1 SECTION Disclosure. This Agreement and the Related Agreements to be
furnished on the Closing Date to Buyer by or on behalf of Seller pursuant
hereto, do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein in light of the circumstances under which
they were made, not misleading.
1.1 SECTION Member Profiles . Seller has not collected any personally
identifiable information from any user, via IndustryInsite.com, which is
included in the Member Profiles, whom Seller knew or reasonably should have
known was, at the time of collection, under the age of thirteen.
<PAGE>
1.1 SECTION E-mail Messages . Seller has not in connection with
IndustryInsite.com: (i) sent e-mail messages not explicitly requested by the
recipient to individual e-mail accounts or copies of a single message to many
e-mail accounts, including, but not limited to, bulk commercial advertising or
informational announcements (i.e., mailbombing, other than to registered members
of IndustryInsite in compliance with the IndustryInsite.com Website terms and
conditions of use and privacy policies and the Globix Sublease), (ii) continued
to send e-mail messages to a recipient that has indicated that he/she does not
wish to receive them; or (iii) sent e-mail with forged TCP/IP packet header
information.
1.1 SECTION Certain Fees . Neither Seller nor any of its Affiliates has employed
any financial advisor or finder or incurred any liability for any financial
advisory or finders' fees in connection with this Agreement or the Related
Agreements or the transactions contemplated hereby or thereby.
1 ARTICLE
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder represents and warrants, jointly and severally, to Buyer as
follows: SECTION Individual Capacity . Each Stockholder has all requisite legal
capacity to enter into this Agreement and the Related Agreements and to perform
all of the obligations required to be performed by each Stockholder hereunder
and thereunder.
<PAGE>
1.1 SECTION No Violation or Conflict by Stockholders and Approvals .
1.2
(a) Neither the execution, delivery or performance of this Agreement or the
Related Agreements by any Stockholder in his capacity as such nor the compliance
by any Stockholder in his capacity as such with any of the provisions hereof or
thereof will (i) result in (with or without the giving of notice or lapse of
time or both) a violation or breach of, conflict with, loss of a material
benefit under or result in the creation of a Lien upon, or constitute a default
or give rise to any right of termination, cancellation or acceleration under any
of the terms, conditions or provisions of any Contract to which Seller is a
party or by which any of the Acquired Assets may be bound or affected or (ii)
violate any order, injunction, judgment, decree, statute, rule or regulation of
any Governmental Entity to which Seller is a party or by which any of the
Acquired Assets may be bound or affected.
(a) No filing or registration with, notification to, or authorization, consent
or approval of, any Governmental Entity is required in connection with the
execution, delivery and performance of this Agreement or the Related Agreements
by any Stockholder in his capacity as such.
1.1 SECTION Certain Fees . No Stockholder has employed any financial advisor or
incurred any liability for financial advisory or finders' fees in connection
with this Agreement or the Related Agreements or the transactions contemplated
hereby or thereby.
<PAGE>
1.1 SECTION Non-competition. Neither Stockholder is a party to any
non-competition agreement or any other agreement, contract, arrangement or
understanding that restricts the ability of Seller to compete in any business or
market (including, without limitation, product, service and geographic markets).
1.2
1 ARTICLE REPRESENTATIONS AND WARRANTIES OF BUYER ARTICLE
1 REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to Seller as follows:
1.1 SECTION Corporate Organization; Authority and Enforcement .
1.2
(a) Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation.
(a) The Buyer has all requisite corporate power and authority to execute and
deliver this Agreement, the Related Agreements and the Promissory Note and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement, the Related Agreements and the Promissory Note by Buyer and the
performance by Buyer of its respective obligations hereunder and thereunder have
been duly and validly authorized by the Board of Directors of Buyer and no other
corporate or stockholder action on the part of Buyer is necessary to authorize
the execution, delivery and performance of this Agreement, the Related
Agreements and the Promissory Note. This Agreement is, and each of the Related
Agreements and the Promissory Note to be executed and delivered by Buyer
pursuant hereto will be, when executed and delivered by Buyer (in each case
assuming due authorization, execution and delivery by Seller and each of the
Stockholders, as applicable) a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as such
enforcement may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights generally
and (b) the availability of equitable remedies.
<PAGE>
1.1 SECTION No Violation or Conflict by Buyer and Approvals.
1.2
(a) Neither the execution, delivery or performance of this Agreement, the
Related Agreements or the Promissory Note by Buyer, nor the consummation of the
transactions contemplated hereby or thereby by Buyer, will (i) violate any
provisions of the certificate of incorporation, by-laws or other governing
documents of Buyer, (ii) result in (with or without the giving of notice or
lapse of time or both) a violation or breach of, conflict with, loss of a
material benefit under or result in the creation of a Lien upon, or constitute a
default or give rise to any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, letter of credit, other evidence of indebtedness,
guarantee, license, lease, agreement or contract or other instrument or
obligation to which Buyer is a party or (iii) violate any order, injunction,
judgment, decree, statute, rule or regulation of any Governmental Entity to
which Buyer is a party.
(a) No filing or registration with, notification to, or authorization, consent
or approval of, any Governmental Entity is required in connection with the
execution, delivery and performance of this Agreement, the Related Agreements or
the Promissory Note by Buyer.
1.1 SECTION Litigation . As of the date of this Agreement, there is no claim,
action or proceeding pending or, to the knowledge of Buyer, threatened against
Buyer that challenges the validity of this Agreement, the Related Agreements or
the Promissory Note or the ability of Buyer to perform its obligations hereunder
or thereunder, by or before any Governmental Entity.
1.1 SECTION Certain Fees . Neither Buyer nor any of its Affiliates has employed
any financial advisor or finder or incurred any liability for any financial
advisory or finders' fees in connection with this Agreement or the Related
Agreements or the transactions contemplated hereby or thereby; except for
arrangements with Greenhill & Co. LLC which shall be satisfied by Buyer.
<PAGE>
1.1 SECTION Disclosure . This Agreement, the Related Agreements and the
Promissory Note to be furnished on the Closing Date to Seller by or on behalf of
Buyer pursuant hereto do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein in light of the
circumstances under which they were made, not misleading.
1 ARTICLE COVENANTS ARTICLE
1 COVENANTS
1.1 SECTION Allocation of Purchase Price . Buyer and Seller shall agree to the
allocation of the Purchase Price and the Assumed Liabilities (other than
contingent liabilities) among the Acquired Assets to be purchased hereunder (the
"Allocation"), which Allocation shall be mutually agreed upon by Buyer and
Seller as soon as practicable after the Closing Date. The Allocation shall be
made in accordance with Section 1060 of the Code and applicable Treasury
Regulations. Each of Seller and Buyer shall (a) be bound by the Allocation for
purposes of determining any Taxes, (b) prepare and file, and cause its
Affiliates to prepare and file, its Tax Returns on a basis consistent with the
Allocation and (c) take no position, and cause its Affiliates to take no
position, inconsistent with the Allocation on any applicable Tax Return, in any
proceeding before any taxing authority or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other party hereto in writing concerning
resolution of the dispute. For purposes of the Allocation, the Parties hereto
agree that $15,000 of the Purchase Price shall be allocated to the agreement not
to compete or solicit described below in Section 7.2 hereof, $7,500 of which
shall be paid to Seller in consideration for such agreement and $7,500 of which
shall be treated as paid to the Stockholders in consideration for such agreement
who in turn shall be treated as contributing such funds to Seller.
<PAGE>
1.1 SECTION Agreement Not to Compete or Solicit . In order to assure Buyer the
complete benefit of the ownership of the Acquired Assets and the Business,
Seller and each Stockholder, without further consideration or remuneration,
covenant that, for a period of three (3) full years after the Closing Date,
neither Seller any of its Affiliates, nor any Stockholder shall: (i) engage in a
business similar to that of the Business as of the date of this Agreement (a
"Competing Business"), anywhere in the world whether such engagement shall be as
owner, partner, agent, consultant, advisor or shareholder (except as the holder
of not more than 3% of the fully diluted shares of a corporation whose stock is
listed on any national or regional securities exchange or reported by the
National Association of Securities Dealers Automated Quotation System or any
successor thereto); (ii) solicit the employment of any person while such person
is in the employ of Buyer or its Affiliates; (iii) solicit any Person who is a
member of IndustryInsite.com at the Closing Date for purposes of offering to
such member any service that competes with any service offered by the Business
as of the Closing Date; (iv) induce or attempt to induce any individual,
business, corporation, firm, partnership or other business entity that is a
customer or supplier to Buyer or any distributor or seller of products of Buyer,
or that is otherwise a contracting party with Buyer, to terminate or otherwise
adversely change or cancel any written or oral agreement with Buyer; or (v)
propose, threaten or make public its or their intention to do any of the
foregoing. Seller and each Stockholder acknowledge that the periods of
restriction, the geographical areas of restriction and the restraints imposed by
the provisions of this Section 7.2 are fair and reasonably required for the
protection of Buyer. In the event that any of the provisions of this Section 7.2
relating to the geographic areas of restriction or the periods of restriction
shall be deemed to exceed the maximum area or period of time which a court of
competent jurisdiction would deem enforceable in a non-appealable final ruling,
the geographic areas and times shall, for the purposes of this Agreement, be
deemed to be the maximum areas or time periods which a court of competent
jurisdiction would deem valid and enforceable in any state in which such court
of competent jurisdiction shall be convened.
<PAGE>
1.1 SECTION Nondisclosure of Proprietary Data. Subject to the Confidentiality
Agreement, dated October 4, 1999, between Buyer and Seller (the "Confidentiality
Agreement"), the terms of which Confidentiality Agreement shall continue in full
force and effect after the Closing Date, Seller and each of the Stockholders
agree that they shall not, at any time, make use of, divulge or otherwise
disclose, directly or indirectly, any trade secret or other proprietary data
(including, without limitation, any Member Profile, list of registered members
of IndustryInsite, record or financial or other information constituting a trade
secret) concerning the Business that Seller and each of the Stockholders may
have learned as a stockholder, officer, director or employee of Seller, unless
such information has become generally available and known to the public other
than as a result of a prohibited disclosure by Seller or one of the Stockholders
or any disclosure of such information may be made by Seller or one of the
Stockholders as otherwise required by Legal Requirement in the opinion of
counsel; provided that Seller and/or the Stockholders agree to provide
reasonable written notice to Buyer in connection with a potential disclosure
pursuant to a Legal Requirement and agree to allow Buyer the opportunity to
contest such disclosure at Buyer's sole cost and expense and agree to reasonably
assist Buyer in such action.
<PAGE>
1.1 SECTION Bulk Transfer Laws . Buyer and Seller hereby waive compliance by
Seller with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Acquired Assets to Buyer.
<PAGE>
1.1 SECTION Seller and Stockholder Cooperation . In order to assure Buyer the
complete benefit of the Acquired Assets and the Business, the Seller and each of
the Stockholders, without further consideration or remuneration, (a) until the
earlier to occur of (i) ninety (90) days from the Closing Date, (ii) the date
that Buyer's technology personnel make substantial modifications or changes to
the layout or functionality of the IndustryInsite.com Website or (iii) the date
that Buyer substantially completes integration of the IndustryInsite.com Website
into its existing network (the "Transitional Services Period"), Seller and each
of the Stockholders covenant and agree to manage, operate and maintain the
IndustryInsite.com Website as it is currently being managed, operated and
maintained and agree to cooperate with the management of Buyer on an on-going
basis during such period including implementing any non-substantial
modifications or changes to the layout or functionality of the
IndustryInsite.com Website at the reasonable request of Buyer during such
period; the Seller and each of the Stockholders covenant and agree to provide
the same level of system administration as is currently being devoted to the
IndustryInsite.com Website; the Seller and each of the Stockholders covenant and
agree to use their Best Efforts to prevent any unauthorized access, or
modification to the IndustryInsite.com Website, database, Member Profiles or
Proprietary Software and in the case of any such event, agree to fully cooperate
with Buyer to alleviate or fix the situation; the Seller and each of the
Stockholders covenant and agree to provide up to five (5) days of orientation
and training to employees of or consultants to Buyer on the maintenance,
operation, management, updating or modifying of the IndustryInsite.com Website,
in among the following areas: (i) IT Staffing, including support of servers and
infrastructure; (ii) daily administration of the IndustryInsite.com Website;
(iii) technical programming; and (iv) support of registered members and users
and (b) for a period of thirty (30) days from the ending date of the
Transitional Services Period, Seller and each of the Stockholders covenant and
agree to promptly assist on an ongoing basis, not to exceed ten (10) hours per
week, employees of or consultants to Buyer in its integration of the Proprietary
Software into Buyer's network and the on-going maintenance of the Proprietary
Software subsequent to its integration into Buyer's network, such assistance
shall include, among other matters, consultation and advice either on Buyer's
premises or through telephone consultation relating to the integration and
functionality of the Proprietary Software; Buyer agrees to give reasonable
notice, when possible, to Seller's employees and each Stockholder, as the case
may be, when requesting such assistance.
<PAGE>
1.1 SECTION Prohibition on Distribution of a Portion of the Purchase Price to
Stockholders of Seller . Seller and each of the Stockholders covenant and agree
that during the Survival Period, Seller shall not distribute, loan, transfer,
dividend or effect any redemption or repurchase of capital stock of Seller or
set aside or put into escrow for distribution to stockholders of Seller, in one
or a series of transactions, $500,000 of the proceeds of the Purchase Price for
the stockholders of Seller, including in one or a series of transactions by
which goods, services (except for salary and other remuneration payable in the
ordinary course of business and consistent with past practice) or other assets
are purchased with any such portion of the proceeds of the Purchase Price and
such goods, services (except for salary and other remuneration payable in the
ordinary course of business and consistent with past practice) or other assets
are distributed to the stockholders of Seller; provided, however, that nothing
contained herein shall prevent Seller from using the proceeds of the Purchase
Price to fund its ongoing business operations and new product developments;
provided, further, that in the event there is a change of control transaction by
which an entity, not a stockholder of Seller as of the date hereof, acquires
subsequent to the Closing Date greater than 50% of Seller's outstanding capital
stock in one or a series of transactions, this provision shall terminate and be
of no further force or effect assuming that such entity has a net worth of at
least $2,500,000 at the time of such proposed transaction(s) and certified
financial statements evidencing such are delivered to Buyer prior to the
consummation of the transaction(s).
1.1 SECTION Removal of Content . Buyer acknowledges and agrees that Seller shall
within five (5) business days of the Closing Date remove only the following from
the IndustryInsite.com Website: (a) all content provided by WetFeet.com; (ii)
all advertisements provided by 24/7 Media, Inc.; (iii) all content provided by
CareerMoasic, a division of Bernard Hodes Advertising; and (iv) all content
provided by CareerCentral Corporation. Buyer acknowledges and agrees that Seller
shall within five (5) business days delete all references to "Brainstorm",
"Brainstorm Interactive", "Brainstorm Interactive, Inc." or any other
identifying mark, logo, or name, and at the same time replace such references
with "Opus 360 Corporation" or such other identifying mark of Buyer as Buyer's
management reasonably requests. Seller covenants and agrees to be for
responsible for the payment of all charges and revenue sharing payment
obligations accrued, if any, under such contracts even if payable after the
Closing Date until the content is removed from the IndustryInsite.com Website.
Buyer agrees to cooperate and assist Seller in the removal of the content
specified in clauses (i) through (iv) above.
<PAGE>
1.1 SECTION Transition Announcement . Seller and each Stockholder agree to
cooperate with the management of Buyer in the preparation, drafting and
dissemination of a transition announcement, which explains the ownership change;
each Stockholder agrees to provide a quotation for attribution which extols the
benefits to registered members and users of IndustryInsite.com of the
integration of IndustryInsite.com into Buyer's existing suite of technology
offerings and encouraging registered members and users of IndustryInsite.com to
become registered "Free Agents" on Buyer's FreeAgent.com Website; Seller and
each Stockholder acknowledge that this transition announcement may take the form
of both a written press release to be disseminated by Buyer and a posting on the
home page of IndustryInsite.com.
1 ARTICLE CONDITIONS PRECEDENT ARTICLE
1 CONDITIONS PRECEDENT
1.1 SECTION Effect the Closing. The respective obligation of each party to
effect the Closing is subject to the satisfaction or waiver on or prior to the
Closing of the following conditions:
(a) Stockholder Approval . The Stockholder Approval shall have been obtained.
(b)
(c) No Injunctions or Restraints . No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect
(i) preventing the consummation of the Closing or (ii) which otherwise is
reasonably likely to materially adversely affect the Seller, the Business, the
Acquired Assets or the transactions contemplated in this Agreement or the
Related Agreements, as applicable; provided, however, that each of the parties
shall have used all reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
<PAGE>
1.1 SECTION Conditions to Obligations of Buyer . The obligation of Buyer to
effect the Closing is further subject to satisfaction or waiver (in writing by
Buyer) of the following conditions:
(a) Representations and Warranties . The representations and warranties of
Seller and each Stockholder set forth herein shall be true and correct as of the
Closing Date.
(b)
(c) Performance of Obligations of Seller . Seller shall have performed and
complied with all of its obligations, agreements and covenants and satisfied all
the conditions on its part under this Agreement and the Related Agreements and
required to be performed or satisfied by it at or prior to the Closing Date.
(d)
(e) Assignments. Seller shall have completed and executed, and where applicable,
obtained notarization of all assignment instruments that may be required to
effect the sale, assignment, transfer, conveyance and delivery of the
Trademarks, the Domain Names and the Contracts and that may be required in
connection with the performance by Seller of its obligations under this
Agreement and the Related Agreements.
1.1 SECTION Conditions to Obligations of Seller . The obligation of Seller to
effect the Closing is further subject to satisfaction or waiver (in writing by
Seller) of the following conditions:
(a) Representations and Warranties . The representations and warranties of Buyer
set forth herein shall be true and correct as of the Closing Date.
(b)
(c) Performance of Obligations of Buyer . Buyer shall have performed and
complied with all of its obligations, agreements and covenants and satisfied all
the conditions on its part under this Agreement and the Related Agreements and
required to be performed or satisfied by it at or prior to the Closing Date.
1.1 SECTION Frustration of Closing Conditions . Neither Buyer nor Seller may
rely on the failure of any condition set forth in Section 8.1, 8.2 or 8.3
hereof, as the case may be, to be satisfied if such failure was caused by such
party's failure to use Best Efforts to consummate the Closing and the other
transactions contemplated by this Agreement.
<PAGE>
1 ARTICLE SURVIVAL; INDEMNIFICATION ARTICLE
SURVIVAL; INDEMNIFICATION
1
1.1 SECTION Survival. Each of the representations and warranties and covenants
and agreements made by the parties in this Agreement, including the Seller
Disclosure Schedules and Exhibits hereto and the certificates delivered in
accordance with Article II hereof (insofar as the Seller Disclosure Schedules,
Exhibits and such certificates relate to such representations and warranties and
covenants and agreements) and the Related Agreements shall survive the Closing
for a period of twelve (12) months (the "Survival Period"), except (a) that as
to any representation or warranty or covenant or agreement that references a
definitive or calculable period of time for its survival, then in such case the
time period so stated or calculable shall govern and (b) as to any
representation or warranty or covenant or agreement relating exclusively to
Excluded Liabilities in respect of Seller and relating exclusively to Assumed
Liabilities in respect of Buyer shall survive indefinitely. If notice of a claim
for indemnification pursuant to this Article IX is given prior to the expiration
of the Survival Period, such representations and warranties and covenants and
agreements shall survive indefinitively only for the purpose of such claim until
such claim is finally resolved.
1.1 SECTION Indemnification by Seller. From and after the Closing and subject to
the provisions of this Article IX, Seller shall indemnify, defend and hold
harmless Buyer, its directors, officers, employees, Affiliates, controlling
persons, agents and representatives and their successors and assigns (the "Buyer
Indemnified Parties") from and against any and all actions, proceedings, costs,
damages, claims and payments whatsoever, including reasonable attorneys' fees
(collectively, "Losses") which may be asserted against, resulting to, imposed
on, sustained, incurred or suffered by any of the Buyer Indemnified Parties
arising out of, relating to or on account of (a) the Excluded Liabilities, (b)
any breach of any representation or warranty of Seller made in this Agreement or
the Related Agreements, (c) any breach or failure to perform of any covenant or
agreement of Seller made in this Agreement or the Related Agreements and (d) any
liability of Buyer arising from the non-compliance with applicable bulk sales
laws or the Uniform Commercial Code.
<PAGE>
1.1 SECTION Indemnification By Buyer . From and after the Closing and subject to
the provisions of this Article IX, Buyer shall indemnify and hold harmless
Seller, its directors, officers, employees, Affiliates, controlling persons,
agents and representatives and their successors and assigns (the "Seller
Indemnified Parties") from and against any and all Losses which may be asserted
against, resulting to, imposed on, sustained, incurred or suffered by any of the
Seller Indemnified Parties arising out of, relating to or on account of (a) the
Assumed Liabilities, (b) any breach of any representation or warranty of Buyer
made in this Agreement or the Related Agreements and (c) any breach or failure
to perform of any covenant or agreement of Buyer made in this Agreement or the
Related Agreements.
1.1 SECTION Certain Limitations. Notwithstanding anything to the contrary
contained herein, no indemnification shall be available to Indemnified Parties
for Losses arising solely in respect of the subject matter of either Section
9.2(b) hereof or Section 9.3(b) hereof until the aggregate amount of such Losses
exceeds $50,000 and then to the full extent of such Losses; and in no event
shall an Indemnifying Party's indemnification obligations for Losses arising
solely in respect of the subject matter of either Section 9.2(b) hereof or
Section 9.3(b) hereof exceed $500,000; provided that a party who prevails in any
action or claim other than through this Article IX based on a claim arising
solely in respect of the subject matter of Section 9.2(b) hereof, Section 9.3(b)
hereof or Article V hereof agrees to be subject to the minimum and maximum
thresholds of this Section 9.4 as to any damages awarded in such action or claim
or any settlement in respect thereof. All indemnification payments made
hereunder shall be treated as an adjustment to the Purchase Price for all Tax
purposes.
SECTION 9.5. Claims Procedure . The following procedure shall govern any
claims which may be brought pursuant to the indemnification provisions of this
Agreement.
(a) The party seeking indemnification (the "Indemnified Party") shall promptly
give written notice to the party against whom indemnification is sought (the
"Indemnifying Party") of all claims, whether between the parties or raised by a
third party, that could constitute a claim for indemnification. The written
notice shall specify to the extent known by the Indemnified Party (a) the
factual basis for such claim and (b) the amount of or estimated amount of such
claim (which estimate shall not be conclusive of the final amount of such
claim); provided, however, that any such failure to give such written notice
will not waive any rights of the In-
<PAGE>
demnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced.
(b)
(c) With respect to claims between the parties, following receipt of notice from
the Indemnified Party of a claim, the Indemnifying Party shall have thirty (30)
days to make such investigation of the claim as the Indemnifying Party deems
necessary or desirable. For the purposes of such investigation, the Indemnified
Party agrees to make available to the Indemnifying Party and/or its authorized
representative(s) the information relied upon by the Indemnified Party to
substantiate the claim, as well as any other information bearing thereon
reasonably requested by the Indemnifying Party. If the Indemnified Party and the
Indemnifying Party agree at or prior to the expiration of the thirty-day period
to the validity and amount of such claim, the Indemnifying Party shall
immediately pay to the Indemnified Party the full amount of the claim in
immediately available funds.
(d)
(e) With respect to any claim by a third party as to which the Indemnified Party
is entitled to indemnification hereunder, the Indemnifying Party may, and upon
request of the Indemnified Party shall, retain counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in connection with such claim or demand and
shall promptly pay the fees and disbursements of such counsel with regard
thereto. In the event an Indemnifying Party shall retain such counsel, an
Indemnified Party shall have the right to retain its own counsel, but the fees
and disbursements of such counsel shall be at the expense of such Indemnified
Party unless (i) the Indemnifying Party and such Indemnified Party shall have
mutually agreed to the retention of such counsel or (ii) representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would in the
reasonable judgment of the Indemnified Party be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party shall be
liable to an Indemnified Party for any settlement of any action or claim without
the consent of the Indemnifying Party which consent shall not be unreasonably
withheld or delayed, subject to the next sentence. The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party, settle or
compromise any claim or consent to the entry of any judgment that does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a release from all liability in respect of
such claim.
<PAGE>
1 ARTICLE MISCELLANEOUS
ARTICLE 1 MISCELLANEOUS
1.1 SECTION Further Assurances. From time to time after the Closing Date, at the
request of any party hereto and at the expense of such party, the parties hereto
shall execute and deliver to such requesting party such documents and take such
other action as such requesting party may reasonably request in order to
consummate more effectively the transactions contemplated hereby and by the
Related Agreements. The parties understand that this Section 10.1 is in addition
to the obligations of the Seller and each of the Stockholders set forth in
Section 7.5 and not a substitute therefore.
1.1 SECTION Notices . All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery, (b) facsimile transmission or (c) overnight delivery service. Notices
shall be sent to the appropriate party at its address or facsimile number given
below (or at such other address or facsimile number for such party as shall be
specified by written notice given hereunder):
If to Buyer, to:
Opus360 Corporation
Attention: Ari Horowitz, Chief Executive Officer
733 Third Avenue, 17th Floor
New York, New York 10017
Fax: (212) 599-8481
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Attention: Thomas H. Kennedy, Esquire
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2000
<PAGE>
If to Seller, to:
Brainstorm Interactive, Inc.
Attention: David Ronick
150 Fifth Avenue
Suite 215
New York, New York 10011
Fax: (212) 202-5492
with a copy to:
Orrick, Herrington & Sutcliffe LLP
Attention: Elaine F. Stein, Esquire
666 Fifth Avenue
New York, New York 10103
Fax: (212) 506-5151
All such notices, requests, demands, waivers and other communications shall be
deemed received upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate address or (iii) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error.
1.1 SECTION Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated herein is not affected in any manner materially
adverse to any party hereto. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner.
<PAGE>
1.1 SECTION Assignment; Binding Effect . Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, directly or
indirectly, including, without limitation, by operation of law, by any party
hereto without the prior written consent of the other parties hereto, except
that Buyer may assign any or all of its rights hereunder to an Affiliate of
Buyer or to a Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement and all of the provisions hereof shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
1.1 SECTION Amendment; Waiver. Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by Buyer and Seller (and as to each Stockholder to the
extent such amendment addresses a provision of this Agreement that materially
affects such Stockholder), or in the case of a waiver, by the party against whom
the waiver is to be effective. No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
1.1 SECTION No Third Party Beneficiaries . This Agreement is solely for the
benefit of Seller and its successors and permitted assigns, with respect to the
obligations of Buyer under this Agreement, and for the benefit of Buyer, and its
successors and permitted assigns, with respect to the obligations of Seller,
under this Agreement, and this Agreement shall not be deemed to confer upon or
give to any other third party any remedy, claim, liability, reimbursement, cause
of action or other right.
1.1 SECTION Interpretation. When a reference is made in this Agreement to
Articles or Sections, such reference shall be to a Section or Article of this
Agreement unless otherwise indicated. Whenever the words "include," "includes"
or "including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." The Article and Section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
<PAGE>
1.1 SECTION Entire Agreement. This Agreement, together with the Seller
Disclosure Schedules and the Exhibits, certificates and other documents referred
to herein or delivered pursuant hereto that form a part hereof, the Related
Agreements and the Confidentiality Agreement, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
SECTION 10.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
1.1 SECTION Specific Performance . The parties acknowledge and agree that any
breach of the terms of this Agreement and the Related Agreements would give rise
to irreparable harm for which money damages would not be an adequate remedy and
accordingly the parties agree that, in addition to any other remedies, each
shall be entitled to enforce the terms of this Agreement and the Related
Agreements by a decree of specific performance without the necessity of proving
the inadequacy of money damages as a remedy.
1.1 SECTION Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
1.1 SECTION Publicity. Except as set forth below, no press release or
announcement concerning the existence of this Agreement or any of the Related
Agreements or the transactions contemplated hereby or thereby shall be issued by
any party without the prior written consent of the other party, except that in
the event Buyer shall deem such press release or announcement to be required by
law, rule or regulation (including applicable Federal and State securities laws,
rules and regulations and applicable stock exchange or Nasdaq rules).
<PAGE>
1.1 SECTION Submission to Jurisdiction . Each of the parties submits to the
exclusive jurisdiction of any State or Federal court sitting in the State of
Delaware in any action or proceeding arising out of or relating to this
Agreement, agrees that all claims in respect of the action or proceeding may be
heard and determined in any such court and agrees not to bring any action or
proceeding arising out of or relating to this Agreement and the related
Agreements in any other court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any party
with respect hereto.
1.1 SECTION Expenses. Each of the parties hereto shall pay its own cost and
expenses in connection with this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby.
1.1 SECTION No Strict Construction. The language used in this Agreement and the
Related Agreements shall be deemed to be the language chosen by Seller, each
Stockholder and Buyer to express their mutual intent, and no rules of strict
construction shall be applied against any party.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
OPUS360 CORPORATION
By: /s/ Rich McCann
-----------------------
Name: Rich McCann
Title: Sr. VP, CFO
BRAINSTORM INTERACTIVE, INC.
By: /s/ David Ronick
-----------------------
Name: David Ronick
Title:
IN WITNESS WHEREOF, each Stockholder accepts and agrees to the terms of
this Agreement as to Article V, Section 7.1, Section 7.2, Section 7.3, Section
7.5, Section 7.6 and Section 7.8 only and hereby executes the Agreement as of
the day and year first above written.
/s/ David Ronick
----------------------------
David Ronick
/s/ Lee Newman
----------------------------
Lee Newman
<PAGE>
Exhibit 10.19
EXECUTION COPY
================================================================================
ESCROW AND PLEDGE AGREEMENT
dated as of January 19, 2000
among
SUNTRUST BANK,
OPUS360 CORPORATION,
GEORGE CONSTABLE, III, individually
and as Sellers' Representative
and
THE OTHER PARTIES HERETO
================================================================================
<PAGE>
TABLE OF CONTENTS
Page No.
SECTION 1. APPOINTMENT OF ESCROW AGENT.......................................1
SECTION 2. DELIVERY OF RESERVED SHARES.......................................1
SECTION 3. PLEDGE............................................................1
SECTION 4. RIGHTS TO PLEDGED COLLATERAL......................................3
SECTION 5. CLAIMS............................................................4
SECTION 6. RELEASE OF PLEDGED COLLATERAL.....................................5
SECTION 7. TERMINATION.......................................................6
SECTION 8. ESCROW AGENT......................................................6
SECTION 9. INVESTMENTS.......................................................8
SECTION 10. DISPUTES..........................................................9
SECTION 11. NOTICES..........................................................10
SECTION 12. COUNTERPARTS.....................................................11
SECTION 13. GOVERNING LAW....................................................11
SECTION 14. BENEFITS OF AGREEMENT............................................11
SECTION 15. MODIFICATION.....................................................12
SECTION 16. DESCRIPTIVE HEADINGS.............................................12
SECTION 17. ENTIRE AGREEMENT.................................................12
-i-
<PAGE>
SCHEDULES AND EXHIBITS
Schedules
Schedule I - Names and Tax IDs of Indemnifying Sellers
Exhibits
Exhibit A - Instructions for Release of Pledged Collateral
Exhibit B - Notice of Certified Judgment
Exhibit C - Notice of Appeal
-ii-
<PAGE>
EXECUTION COPY
ESCROW AND PLEDGE AGREEMENT dated as of
January 19, 2000, among OPUS360 CORPORATION, a
Delaware Corporation ("Parent"), GEORGE CONSTABLE,
III, individually and in his capacity as the
Sellers' Representative (the "Sellers'
Representative"), SUNTRUST BANK, a Georgia banking
corporation (the "Escrow Agent"), and the other
parties named on the signature page hereto.
This Escrow and Pledge Agreement is being executed in accordance
with Section 2.4 of the Agreement and Plan of Merger dated as of January 19,
2000 (the "Merger Agreement"), among Parent, Ithority Corporation, a California
corporation ("Ithority"), certain stockholders of Ithority and the other parties
thereto. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed thereto in the Merger Agreement.
In consideration of the mutual covenants contained herein and in the
Merger Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Appointment of Escrow Agent.
The Escrow Agent is hereby appointed to act as escrow agent
hereunder, and the Escrow Agent agrees to act as such.
Section 2. Delivery of Merger Share Reserved Shares.
On the date hereof, Parent is delivering to the Escrow Agent
certificate(s) representing the Merger Share Reserved Shares, and the Escrow
Agent is accepting such property for deposit in escrow pursuant to the
provisions of this Agreement.
Section 3. Pledge.
(a) As general and continuing collateral security for the payment
and performance by the Indemnifying Sellers of all of their Secured Obligations
(as defined below), the Indemnifying Sellers hereby pledge, hypothecate, assign,
transfer, set over and deliver unto Parent, and grant to Parent a security
interest in, all of their respective right, title and interest in and to the
Merger Share Reserved Shares, any shares of Parent capital stock that have been
derived from or issued in respect of such Merger Share Reserved Shares
(collectively, the "Pledged Securities") and any cash or additional securities
or other property at any time and from time to time receivable or otherwise
distributable in respect of, in exchange for, or in substitution of, the Pledged
Securities and any and all products and proceeds therefrom, together with and
all other rights, titles, interests, powers, privileges and preferences
pertaining to said property (the "Pledged Collateral").
(b) The security interest created hereby is granted to Parent, to
secure the prompt performance and payment in full of the following
(collectively, the "Secured Obligations"): (i) all obligations of the
Indemnifying Sellers under the Merger Agreement, (ii) expenses
<PAGE>
incurred by Parent or Parent's counsel in connection with the realization of the
security provided under this Agreement, including, without limitation, any
reasonable costs or expenses of any proceedings to which this Agreement may give
rise, and reasonable fees, disbursements and other charges of its counsel and of
any experts or agents, and its fully allocated internal costs, that Parent may
incur in connection with (A) the exercise or enforcement of any of the rights of
Parent under this Agreement and (B) damages arising out of the failure of any
Indemnifying Seller to perform or observe any of the provisions hereof.
(c) Each Indemnifying Seller hereby represents and warrants to
Parent as follows:
(i) Such Seller, is, and will at all times continue to be, the
legal and beneficial owner of the Pledged Collateral. No financing
statement under the Uniform Commercial Code of any jurisdiction which
names such Indemnifying Seller as debtor or covers any of the Pledged
Collateral, or any other notice filed in the public records indicating the
existence of a Lien thereon, has been filed and is still effective in any
state or other jurisdiction, other than Uniform Commercial Code financing
statements filed in favor of Parent, and such Indemnifying Seller has not
signed any such financing statement or notice or any security agreement
authorizing the filing of any such financing statement or notice, other
than Uniform Commercial Code financing statements filed in favor of
Parent.
(ii) The social security number, or the Internal Revenue
Service taxpayer identification number, as applicable, of such
Indemnifying Seller is set forth on Schedule I attached hereto.
(iii) Such Indemnifying Seller (A) has the power and authority
to pledge the Pledged Collateral in the manner provided herein or as
contemplated hereby and (B) will defend his title thereto or interest
therein against any and all Liens of all Persons (other than the Liens
created by this Agreement).
(iv) No consent or approval of any Governmental Entity or any
securities exchange was or is necessary to the validity of the pledge
effected hereby.
(d) Each Indemnifying Seller hereby unconditionally covenants and
agrees as follows:
(i) Such Indemnifying Seller will not create, assume, incur or
permit or suffer to exist or to be created, assumed or incurred, any Lien
on any of the Pledged Collateral (or any interest therein) and will not,
sell, lease, assign, transfer or otherwise dispose of all or any portion
of the Pledged Collateral (or any interest therein).
(ii) Until this Agreement has terminated in accordance with
its terms, any certificates, instruments or other documents constituting
Pledged Collateral shall be delivered to the Escrow Agent and shall be
subject to the terms and conditions of this Agreement. The Indemnifying
Sellers shall take such further actions to vest Parent in the security
interest provided hereunder with respect to such additional Pledged
Collateral.
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<PAGE>
(e) Each Indemnifying Seller shall, at Parent's cost and expense,
take all actions that may be necessary or desirable in Parent's sole discretion,
so as at all times to maintain the validity, perfection, enforceability and
priority of Parent's security interest in the Pledged Collateral, or to enable
Parent to exercise or enforce its rights hereunder, including without limitation
(i) delivering to Parent, endorsed or accompanied by such instruments of
assignment as Parent may specify, any and all chattel paper, instruments,
letters of credit and all other advices of guaranty and documents evidencing or
forming a part of the Pledged Collateral and (ii) executing and delivering
financing statements, pledges, designations, notices and assignments, in each
case in form and substance satisfactory to Parent, relating to the creation,
validity, perfection, priority or continuation of the security interest granted
hereunder. Each Indemnifying Seller agrees to take, and authorizes Parent to
take on such Seller's behalf, any or all of the following actions with respect
to any Pledged Collateral as Parent shall deem necessary to perfect the security
interest and pledge created hereby or to enable Parent to enforce its rights and
remedies hereunder: (A) to register in the name of Parent any Pledged Collateral
in certificated or uncertificated form; (B) to endorse in the name of Parent any
Pledged Collateral issued in certificated form; and (C) by book entry or
otherwise, identify as belonging to Parent a quantity of securities that
constitutes all or part of the Pledged Collateral. Notwithstanding the
foregoing, each Indemnifying Seller agrees that Pledged Collateral which is not
in certificated form or is otherwise in book-entry form shall be held for the
account of Parent. Each Indemnifying Seller hereby authorizes Parent to execute
and file in all necessary and appropriate jurisdictions (as determined by
Parent) one or more financing or continuation statements (or any other document
or instrument referred to in the immediately preceding clause (B)) in the name
of such Indemnifying Seller and to sign such Seller's name thereto. Each
Indemnifying Seller authorizes Parent to file any such financing statement,
document or instrument without the signature of such Indemnifying Seller to the
extent permitted by applicable law. To the extent permitted by applicable law, a
carbon, photographic, xerographic or other reproduction of this Agreement or any
financing statement is sufficient as a financing statement. Any property
comprising part of the Pledged Collateral required to be delivered to Parent
pursuant to this Agreement shall be accompanied by proper instruments of
assignment duly executed by such Indemnifying Seller and by such other
instruments or documents as Parent may reasonably request.
(f) This Agreement shall create a continuing security interest in
the Pledged Collateral and shall remain in full force and effect until it
terminates in accordance with its terms. Each Indemnifying Seller and Parent
hereby agree that the security interest in the Pledged Collateral created by
this Section 3 shall not terminate and shall continue and remain in full force
and effect notwithstanding the transfer to Parent of a portion of the Pledged
Collateral.
(g) All rights of Parent hereunder, the grant of a security interest
in the Pledged Collateral and all obligations of the Indemnifying Sellers
hereunder, shall be absolute and unconditional irrespective of any lack of
validity or enforceability of the Merger Agreement or any other Related
Document, or instrument relating to any of the foregoing.
Section 4. Rights to Pledged Collateral.
(a) The Pledged Collateral shall be held for the exclusive benefit
of Parent and the Indemnifying Sellers and their respective successors, assigns,
heirs, administrators and estates,
3
<PAGE>
and no other Person shall have any right, title or interest therein. Any claim
of any Person to the Pledged Collateral, or any part thereof, shall be subject
and subordinate to the prior right thereto of Parent and Sellers.
(b) So long as no Claim (as hereinafter defined) shall have been
asserted by Parent (a "Demand"), the Sellers, after giving 2 days prior written
notice to Parent, shall be entitled to exercise any and all voting and/or
consensual rights and powers accruing to an owner of the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms and conditions
of this Agreement or any agreement giving rise to or otherwise relating to any
of the Secured Obligations; provided, however, that the Indemnifying Sellers
shall not exercise, or refrain from exercising, any such right or power if any
such action could have an adverse effect on the value of such Pledged Collateral
in the sole judgment of Parent. Upon the occurrence and during the continuance
of a Demand, all rights of the Indemnifying Sellers to exercise the voting
and/or consensual rights and powers which the Indemnifying Sellers are entitled
to exercise pursuant to this Section 4 shall cease, and all such rights
thereupon shall become immediately vested in Parent, which shall have, to the
extent permitted by law, the sole and exclusive right and authority to exercise
such voting and/or consensual rights and powers which the Indemnifying Sellers
shall otherwise be entitled to exercise pursuant to this Section 4. During the
term of this Agreement, the Indemnifying Sellers shall not be entitled to retain
in their possession or control or use any cash dividends paid on the Pledged
Collateral, including any stock and/or liquidating dividends, other
distributions in property, return of capital or other distributions made on or
in respect of Pledged Securities, whether resulting from a subdivision,
combination or reclassification of outstanding securities which are pledged
hereunder or received in exchange for Pledged Collateral or any part thereof or
as a result of any merger, consolidation, acquisition or other exchange of
assets or on the liquidation, whether voluntary or involuntary, of Parent, or
otherwise, such property being Pledged Collateral hereunder. If any Indemnifying
Seller shall receive any dividends or other property which he is not entitled to
receive under this Agreement, such Indemnifying Seller shall hold the same in
trust for Parent, without commingling the same with other funds or property of
or held by such Seller, and shall promptly deliver the same to the Escrow Agent
upon receipt by him in the identical form received, together with any necessary
endorsements.
Section 5. Claims.
(a) In the event Parent asserts a claim for indemnification under
the Merger Agreement, Parent shall execute and deliver to the Escrow Agent and
the Sellers' Representative a written notice to such effect (a "Parent Claim
Notice"; and the claim being asserted in a Parent Claim Notice being hereinafter
referred to as a "Claim") setting forth the nature and details of such Claim and
the amount thereof (or if not ascertainable, a reasonable maximum amount
thereof), and the basis of the Sellers' liability therefor under the Merger
Agreement, and instructing the Escrow Agent to deliver, in accordance with
Section 6 below, that portion of the Pledged Collateral having a value equal to
the amount of the Claim (or, if the amount of the Claim shall be greater than
the aggregate value of the Pledged Collateral, the balance of the Pledged
Collateral) to Parent. Parent shall deliver to the Sellers' Representative a
copy of each Parent Claim Notice on or prior to the date of the delivery thereof
to the Escrow Agent, and the Escrow Agent shall use reasonable efforts also to
deliver a copy thereof to the Sellers' Representative promptly after receipt
from the Parent (provided that the failure of the Escrow
4
<PAGE>
Agent to make such delivery to the Sellers' Representative shall not affect the
obligation of the Escrow Agent to release Pledged Collateral pursuant to Section
6(a)(ii) below).
(b) The Sellers' Representative may object to any Parent Claim
Notice by delivering to the Parent and the Escrow Agent, within 15 days after
receipt of the Parent Claim Notice, a written notice (an "Objection Notice")
stating that all or a portion of the amount specified in such Parent Claim
Notice should not be released to the Parent. The Sellers' Representative shall
deliver to the Parent a copy of each Objection Notice on or prior to the date of
the delivery thereof to the Escrow Agent, and the Escrow Agent shall use
reasonable efforts also to deliver a copy thereof to the Parent promptly after
receipt from the Sellers' Representative. The Sellers' Representative and Parent
shall use commercially reasonable efforts to resolve any dispute set forth in
any Objection Notice.
Section 6. Release of Pledged Collateral.
(a) The Escrow Agent shall release the Pledged Collateral as
follows:
(i) Promptly upon receipt of joint written instructions,
substantially in the form of Exhibit A hereto, signed by Parent and the
Sellers' Representative ("Joint Instructions") in accordance with and to
the Persons set forth in such Joint Instructions;
(ii) On the 16th day following the receipt of any Parent Claim
Notice which is received by the Escrow Agent prior to January __, 2001 and
which is not the subject of an Objection Notice, to the Parent in
accordance with the Parent Claim Notice;
(iii) On January __, 2001, the balance of the Pledged
Collateral, if any, which is not subject to an Unresolved Claim (as
defined below) (if any), in accordance with and to the Persons set forth
in written instructions provided by the Sellers' Representative.
As used herein, "Unresolved Claim" means the amount of a claim stated in a
Parent Claim Notice or, following delivery of an Objection Notice, the disputed
portion thereof, which amount shall be deemed outstanding from the date such
Parent Claim Notice or Objection Notice, as applicable, is given until the date
such claim is resolved in accordance with the terms of Section 6(b) below.
(b) In the event that the Escrow Agent receives an Objection Notice
from the Sellers' Representative, that portion of the Pledged Collateral having
a value equal to the Unresolved Claim (as set forth in such Objection Notice)
shall be held by the Escrow Agent until the occurrence of one of the following
events:
(i) Receipt by the Escrow Agent of Joint Instructions
instructing the Escrow Agent to release the disputed portion of the
Pledged Collateral to such party or parties and in such amount or amounts
as is specified in such Joint Instructions; or
(ii) Receipt by the Escrow Agent of a written notice (a
"Certified Judgment Notice"), substantially in the form of Exhibit B
hereto, from Parent or the Sellers' Representative certifying that a
final, nonappealable court judgment or settlement with
5
<PAGE>
respect to the claim covered by the Parent Claim Notice is attached to
such Certified Judgment Notice, in which case the Escrow Agent shall
distribute the disputed portion of the Pledged Collateral in accordance
with such judgment on the 10th day following the receipt of any Certified
Judgment Notice, unless prior to such date the Escrow Agent receives a
written notice (an "Appeal Notice"), substantially in the form of Exhibit
C hereto, from the party not submitting such Certified Judgment Notice,
stating that the judgment has or can and will be appealed. A party
delivering a Certified Judgment Notice or an Appeal Notice shall deliver
to the other party hereto a copy thereof on or prior to the date of
delivery thereof to the Escrow Agent, and the Escrow Agent shall use
reasonable efforts also to deliver a copy of each Certified Judgment
Notice or Appeal Notice to the party which did not deliver the same
promptly after the Escrow Agent's receipt thereof (provided that the
failure of the Escrow Agent to make such delivery shall not affect the
obligation of the Escrow Agent to release funds pursuant to this Section
6(b)). If the judgment is appealed, no release of the disputed portion of
the Escrow Fund will be made until delivery of a subsequent Certified
Judgment Notice to the Escrow Agent, which notice is not the subject of a
subsequent Appeal Notice delivered in accordance with this Section
6(b)(ii).
(c) Any release of the Pledged Collateral to Parent pursuant to this
Section 6 shall be accompanied by a stock power in respect of all securities to
be forfeited, duly endorsed for transfer to Parent.
Section 7. Termination.
This Agreement shall terminate upon the release by the Escrow Agent
of all of the Pledged Collateral in accordance with the terms of this Agreement.
Section 8. Escrow Agent.
(a) Obligations.
(i) The sole obligations of the Escrow Agent are those
specifically provided in this Agreement and the Escrow Agent shall have no
liability under, or duty to inquire into, the terms and provisions of any
agreement between the parties hereto, including but not limited to the
Merger Agreement. The duties of the Escrow Agent are purely ministerial in
nature and the Escrow Agent shall not incur any liability whatsoever,
except for its own willful misconduct or gross negligence.
(ii) The Escrow Agent shall not have any responsibility for
the genuineness or validity of any document or other item deposited with
it or of any signature thereon reasonably believed by the Escrow Agent to
be signed by the proper parties and shall not have any liability for
acting in accordance with any written instructions or certificates given
to it hereunder and reasonably believed by it to be signed by the proper
parties.
(b) Resignation and Removal. The Escrow Agent may resign and be
discharged from its duties hereunder at any time by giving at least 30 days
notice of such resignation to Parent and the Sellers' Representative, specifying
a date upon which such resignation shall take effect; provided, however, that
the Escrow Agent shall continue to serve until its successor
6
<PAGE>
accepts the Pledged Collateral and assumes all responsibilities as escrow agent
hereunder. Upon receipt of such notice, a successor Escrow Agent shall be
jointly appointed by Parent and the Sellers' Representative, such successor
escrow agent to become the Escrow Agent hereunder on the resignation date
specified in such notice. If an instrument of acceptance by a successor escrow
agent shall not have been delivered to the resigning Escrow Agent within 40 days
after the giving of such notice of resignation, the resigning Escrow Agent may
tender into the registry or custody of any court of competent jurisdiction any
part or all of the Pledged Collateral and thereafter be relieved of its duties
and obligations hereunder. Parent and the Sellers' Representative may at any
time substitute a new Escrow Agent by giving 10 days written notice thereof to
the existing Escrow Agent and paying all fees and expenses of such Escrow Agent
incurred to the date of the substitution.
(c) Indemnification. The Indemnifying Sellers shall hold the Escrow
Agent harmless from, and shall indemnify the Escrow Agent against, any loss,
liability, expense (including attorney's fees and expenses), claim or demand (a
"Loss") arising out of or in connection with the performance of its obligations
in accordance with the provisions of this Agreement or which are attributable to
any act or omission of the Indemnifying Sellers or the Sellers' Representative,
except for any of the foregoing arising out of the gross negligence or willful
misconduct of the Escrow Agent. Parent shall hold the Escrow Agent harmless
from, and indemnify the Escrow Agent against, any Loss arising out of or in
connection with the performance of its obligations in accordance with the
provisions of this Agreement and which are attributable to any act or omission
of Parent or any affiliate of Parent, except for any of the foregoing arising
out of the gross negligence or willful misconduct of the Escrow Agent. Parent
and the Indemnifying Sellers shall hold the Escrow Agent harmless from, and
indemnify (with one-half to be borne by Parent and one-half to be borne by the
Sellers) the Escrow Agent against, any Loss arising out of or in connection with
the performance of its obligations in accordance with the provisions of this
Agreement and which are not attributable to any act or omission of Parent, any
of the Indemnifying Sellers or the Sellers' Representative, except for any of
the foregoing arising out of the gross negligence or willful misconduct of the
Escrow Agent. The foregoing indemnities in this paragraph shall survive the
resignation or substitution of the Escrow Agent or the termination of this
Agreement.
(d) Fees and Expenses of Escrow Agent. For its services hereunder,
the Escrow Agent shall be entitled to a fee of $2,500 per annum, pro rated for
any shorter period for which the Escrow Agent shall act hereunder, payable in
advance. No increase in the rate of any fee charged by the Escrow Agent shall be
valid hereunder unless previously approved in writing by Parent. Such fees shall
be paid by Parent. In addition, the Escrow Agent shall be reimbursed for all
reasonable out-of-pocket expenses, disbursements and advances (including, but
not limited to postage, courier, overnight mail insurance, money wire transfer,
long distance telephone charges, facsimile, stationery and travel expenses), and
including reasonable attorneys' fees and reasonable accounting fees, incurred by
the Escrow Agent not in the ordinary course of business. The amount of such
reimbursement shall be paid by Parent. These fees described in this paragraph
(d) do not include extraordinary services which will be priced according to the
required time and scope of duties and shall be previously approved in writing by
Parent. The fees described in this paragraph (d) shall be deemed earned in full
upon receipt by the Escrow Agent, and no portion shall be refundable for any
reason, including without limitation, termination of the Agreement.
7
<PAGE>
(e) Reliance on Counsel. The Escrow Agent may from time to time
consult with legal counsel of its own choosing in the event of any disagreement,
controversy, question or doubt as to the construction of any of the provisions
hereof or its duties hereunder, and it shall incur no liability and shall be
fully protected in acting in good faith in accordance with the opinion or
instructions of such counsel. Any such fees and expenses of such legal counsel
shall be considered part of the fees and expenses of the Escrow Agent described
herein.
Section 9. Investments.
(a) Initially the Escrow Agent will invest all cash included in the
Pledged Collateral in commercial paper with maturities not to exceed 90 days
given on the date of such investment a credit rating of at least P-1 by Moody's
Investors Service, Inc. or A-1 by the Standard & Poor's Corporation. The Escrow
Agent will invest the cash included in the Pledged Collateral in such other
Permitted Investments as directed by Parent from time to time pursuant to
written instructions signed by Parent and referencing the desired Permitted
Investments and the maturity date thereof. As used in this Agreement, "Permitted
Investments" means any of the following:
(i) direct obligations of, or obligations fully guaranteed by,
the United States of America or any agency thereof;
(ii) bonds, debentures, notes or other evidence of
indebtedness issued by any of the following agencies: Federal Farm Credit
System; Federal Home Loan Bank System; Export-Import Bank of the United
States; Federal National Mortgage Association; Government National
Mortgage Association; Federal Financing Bank; or any agency or
instrumentality of the Federal government which shall be established for
the purpose of acquiring the obligations of any of the foregoing or
otherwise providing financing therefor;
(iii) direct and general obligations of, or obligations
unconditionally guaranteed by, any state of the United States or political
subdivision of such state, but only if (A) such obligations or guarantees
are entitled to the full faith and credit of such state or political
subdivision of such state, respectively, and such obligations provide that
the state or political subdivision has the obligation to repay, in full
and on a timely basis, such obligations, and (B) at the time of their
purchase under this Agreement, such obligations are rated in any of the
two highest rating categories by a nationally recognized bond rating
service;
(iv) certificates of deposit, whether negotiable or
non-negotiable, of any bank, trust company or national banking
association, provided that such certificates of deposit shall be (A)
issued by a bank, trust company or national banking association having
capital stock and surplus of more than $500,000,000, (B) fully insured by
the Federal Deposit Insurance Corporation or (C) fully and continuously
secured by direct obligations of, or obligations unconditionally
guaranteed by, the United States of America, which (1) shall have a market
value (exclusive of accrued interest) at all times at least equal to the
principal amount of such certificates of deposit, (2) shall be lodged with
the Escrow Agent (or any correspondent bank or trust company designated by
the
8
<PAGE>
Escrow Agent), as custodian, by the bank, trust company or national
banking association issuing such certificate of deposit and (3) the bank,
trust company or national banking association issuing each certificate of
deposit required to be so secured shall furnish the Escrow Agent with an
undertaking that the aggregate market value of such obligations securing
each such certificate of deposit will at all times be an amount equal to
the principal amount of each such certificate of deposit (and the Escrow
Agent shall be entitled to rely on each such undertaking);
(v) a readily redeemable interest bearing "money market
account" sponsored by a bank described in clause (iv)(A) above and having
on the date of such investment total assets of at least $1,000,000,000;
(vi) any repurchase agreement with any bank or trust company
organized under the laws of any state of the United States or any national
banking association or any government securities dealer which is listed as
reporting to the market statistics division of the Federal Reserve Bank of
New York secured by any one or more of the securities described in clauses
(i) or (ii) above;
(vii) readily marketable commercial paper of corporations
doing business in and incorporated under the laws of the United States of
America or any state thereof or of any corporation that is the holding
company for a bank described in clause (iv)(A) above given on the date of
such investment a credit rating of at least P-1 by Moody's Investors
Service, Inc. or A-1 by Standard & Poor's Corporation, in each case due
within 90 days after the date of the making of the investment; and
(viii) a readily redeemable "money market mutual fund"
sponsored by a bank described in clause (iv) (A) above, or a registered
broker or dealer described in clause (vi) above, that has and maintains an
investment policy limiting its investments primarily to instruments of the
types described in clauses (i) through (vii) above and having on the date
of such investment total assets of at least $1,000,000,000.
(b) Maturities or unexpired terms of maturities of instruments in
which the cash included in the Pledged Collateral shall be invested shall not
exceed 90 days. The Escrow Agent is authorized to sell such investments as may
be required to make any payment under this Agreement (except the Pledged
Securities), and the Escrow Agent shall not be liable for any loss due to early
redemption. In the event that no such written instructions are given by Parent
as to any uninvested portion of the cash included in the Pledged Collateral,
such portion shall be invested by the Escrow Agent in commercial paper for a
30-day period given on the date of such investment a credit rating of at least
P-1 by Moody's Investors Service, Inc. or A-1 by the Standard & Poor's
Corporation; provided, however, that if such period is not available, such
portion shall be invested for the closest period of shorter duration.
Section 10. Disputes.
If any dispute should arise with respect to the payment or ownership
or right of possession of the Pledged Collateral, the Escrow Agent is authorized
and directed to retain in its possession, without liability to anyone, all or
any part of the Pledged Collateral until such dispute
9
<PAGE>
shall have been settled either by mutual agreement of the parties concerned or
by the final order, decree or judgment of a court of competent jurisdiction in
the United States of America (the time for appeal having expired with no appeal
having been taken) in a proceeding to which Parent and the Indemnifying Sellers
or the Sellers' Representative are parties, but the Escrow Agent shall be under
no duty whatsoever to institute or defend any such proceedings. Promptly after
receipt of any such final order, decree or judgment, Parent and the Sellers'
Representative shall deliver a copy thereof to the Escrow Agent, together with
instructions as to the release of the Pledge Collateral as a result thereof.
Section 11. Notices.
All notices and other communications required hereunder or in
connection herewith 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 facsimile, or by registered or certified mail, return receipt
requested and postage prepaid, addressed as follows:
if to the Sellers' Representative, to:
George Constable, III
942 Hayes Street, Suite 33
San Francisco, California 94117
Telephone: (415) 775-2020
Facsimile: (415) 704-3180
with a copy to:
Fenwick & West LLP
275 Battery Street, Suite 1500
San Francisco, California 94111
Telephone: (415) 875-2300
Facsimile: (415) 281-1350
Attention: Kat McCabe, Esq.
if to Parent, to:
OPUS360 Corporation
733 Third Avenue, 17th Floor
New York, New York 10017
Telephone: (212) 301-2200
Facsimile (212) 301-2201
Attention: Ari Horowitz
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
10
<PAGE>
Telephone: (212) 408-2400
Facsimile: (212) 728-5950
Attention: John Suydam, Esq.
if to the Escrow Agent, to:
SunTrust Bank
Corporate Trust Division
25 Park Place, 24th Floor
Atlanta, Georgia 30303-2900
Telephone: (404) 588-7262
Facsimile: (404) 588-7335
Attention: Rebecca Fischer;
or to such other address as the parties hereto to whom notice is to be given may
have furnished in writing to the other parties hereto. 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 facsimile transmission, when received, 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 12. 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 13. Governing Law.
This agreement will be governed by and construed in accordance with
the domestic laws of the State of New York, without giving effect to any choice
of law or conflicting provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the laws of any jurisdiction other than the
State of New York to be applied. In furtherance of the foregoing, the internal
law of the State of New York will control the interpretation and construction of
this agreement, even if under such jurisdiction's choice of law or conflict of
law analysis, the substantive law of some other jurisdiction would ordinarily
apply. It is the intention of the parties hereto that the situs of the Pledged
Collateral is and shall be administered in the state in which the principal
office of the Escrow Agent from time to time acting hereunder is located.
Section 14. Benefits of Agreement.
All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Anything contained herein to the contrary notwithstanding, this
Agreement shall not be assignable by any party
11
<PAGE>
hereto without the prior written consent of Parent, the Sellers' Representative
and the Escrow Agent.
Section 15. Modification.
This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by the Escrow Agent, Parent and the
Sellers' Representative.
Section 16. Descriptive Headings.
The descriptive headings in this Agreement are for convenience only
and shall not control or affect the meaning or construction of any provision
hereof.
Section 17. Entire Agreement.
This Agreement, the Merger Agreement, the Related Documents and the
other agreements and documents referenced herein contain the entire agreement
among the parties with respect to the transactions contemplated hereby and
supersede all prior agreements and understandings among the parties with respect
thereto.
* * * * *
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow and
Pledge Agreement to be executed and delivered on the date first above written.
OPUS360 CORPORATION
By: /s/ Rich McCann
-------------------------------
Name: Rich McCann
Title: Sr. VP, CFO
SUNTRUST BANK
By: /s/ Rebecca Fischer
-------------------------------
Name: Rebecca Fischer
Title: Trust Officer
INDEMNIFYING SELLERS:
/s/ George W. Constable
----------------------------------
George Constable III, individually and as
Sellers' Representative
/s/ Jeremy Epstein
----------------------------------
Jeremy Epstein
/s/ William Herndon
----------------------------------
William Herndon
/s/ Matthew Carden
----------------------------------
Matthew Carden
<PAGE>
SCHEDULE I
Social Security/Taxpayer Identification Numbers
Seller Social Security/Taxpayer Identification Number
------ ----------------------------------------------
George Constable, III ###-##-####
Jeremy Epstein ###-##-####
William Herndon ###-##-####
Matthew Carden ###-##-####
<PAGE>
EXHIBIT A
[Date]
SunTrust Bank
Corporate Trust Division
25 Park Place, 24th Floor
Atlanta, Georgia 30303-2900
Attention: Rebecca Fischer
Instructions for Release of Pledged Collateral
Ladies and Gentlemen:
Reference is made to the Escrow and Pledge Agreement dated as of
January __, 2000 (the "Escrow Agreement"), among Opus360 Corporation, the
Sellers' Representative, you and the other parties thereto. Capitalized terms
used herein but not otherwise defined shall have the meanings ascribed to them
in the Escrow Agreement.
In accordance with Section 6(a)(i) of the Escrow Agreement, the
undersigned hereby instructs you to disburse from the Pledged Collateral to the
following Persons the items set forth opposite their respective names:
Name Items
- --------------------------- ---------------------------
- --------------------------- ---------------------------
OPUS360 CORPORATION
By:
----------------------------------
Name:
Title:
-------------------------------------
George W. Constable, III, as Sellers'
Representative
<PAGE>
EXHIBIT B
[Date]
SunTrust Bank
Corporate Trust Division
25 Park Place, 24th Floor
Atlanta, Georgia 30303-2900
Attention: Rebecca Fischer
Notice of Certified Judgment
Gentlemen:
Reference is made to the Escrow and Pledge Agreement dated as of
January __, 2000 (the "Escrow Agreement"), among Opus360 Corporation, the
Sellers' Representative, you and the other parties thereto. Capitalized terms
used herein but not otherwise defined shall have the meanings ascribed to them
in the Escrow Agreement.
In accordance with Section 6(b)(ii) of the Escrow Agreement, the
undersigned hereby instructs you to disburse from the Escrow Fund to the persons
named in the final court judgment (a certified copy of which is attached hereto)
the amounts set forth therein.
OPUS360 CORPORATION
By:
----------------------------------
Name:
Title:
-or-
-------------------------------------
George W. Constable, III, as Sellers'
Representative
<PAGE>
EXHIBIT C
[Date]
SunTrust Bank
Corporate Trust Division
25 Park Place, 24th Floor
Atlanta, Georgia 30303-2900
Attention: Rebecca Fischer
Notice of Appeal
Gentlemen:
Reference is made to the Escrow and Pledge Agreement dated as of
January __, 2000 (the "Escrow Agreement"), among Opus360 Corporation, the
Sellers' Representative, you and the other parties thereto. Capitalized terms
used herein but not otherwise defined shall have the meanings ascribed to them
in the Escrow Agreement.
In accordance with Section 6(b)(ii) of the Escrow Agreement, the
undersigned hereby instructs you not to disburse from the Escrow Fund to the
persons named in the court judgment certified to you as final pursuant to a
notice dated ______________, _____ . This judgment has or can and will be
appealed.
OPUS360 CORPORATION
By:
----------------------------------
Name:
Title:
-or-
-------------------------------------
George W. Constable, III, as Sellers'
Representative
<PAGE>
Exhibit 10.20
EXECUTION COPY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of February 2,
2000, between OPUS360 CORPORATION, a Delaware corporation (the "Company"), and
RICHARD S. MILLER (the "Employee").
WHEREAS, the Company and the Employee are parties to an existing
employment agreement, dated January 21, 2000 (the "Existing Employment
Agreement"), pursuant to which the Company agreed to employ the Employee as of
the Start Date (as defined below) and to grant to the Employee an option to
purchase shares of the Company's common stock. The parties hereto desire to
amend and restate the Existing Employment Agreement to provide for, among other
things, (i) the amendment of the number of Options (as defined below) granted to
the Employee and (ii) the modification and amendment of certain other terms and
conditions of the Existing Employment Agreement. The Company and the Employee
desire and have agreed to amend and restate the Existing Employment Agreement in
its entirety as and pursuant to this Agreement.
WHEREAS, the Company desires to employ the Employee as the President
and Chief Operating Officer of the Company; and
WHEREAS, the Employee desires to accept such employment by the
Company, on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Employee hereby agree as follows:
Section 1. Employment.
The Company hereby employs the Employee, and the Employee hereby
accepts employment by the Company, upon the terms and subject to the conditions
hereinafter set forth.
Section 2. Term of Employment.
The Employee's employment hereunder shall be for the period
commencing on February 1, 2000 (the "Start Date") and ending on the day
immediately prior to the third anniversary of the Start Date (the "Base Term");
<PAGE>
provided, however, unless earlier terminated pursuant to the provisions of
Sections 6, 7, 8 or 9 hereof, the Base Term shall be automatically renewed and
extended for successive one-year terms without further act of the parties (each,
a "Renewal Term" and together with the Base Term, collectively, the "Employment
Period"), unless either the Company or the Employee gives the other party hereto
at least 45 days prior written notice before the end of the Employment Period of
such party's intent not to renew this Agreement (each, a "Right Not To Extend").
Section 3. Duties.
The Employee shall be employed as the President and Chief Operating
Officer of the Company or in such other position as the Company and the Employee
shall agree in writing. The Employee shall report to the Chairman of the Board
of Directors of the Company (the "Board"). The Chief Executive Officer of the
Company, pursuant to the authority granted to the Chief Executive Officer of the
Company in Section 7(iii) of the Stockholders' Agreement, dated as of December
24, 1998, as amended and extended, shall use his best efforts to appoint the
Employee as a Tranche 3 Director of the Company prior to a Qualified Offering
(as such term is defined in the Company's Second Amended and Restated
Certificate of Incorporation). The Employee shall perform such duties and
services as are appropriate and commensurate with the Employee's position as
President and Chief Operating Officer of the Company and as are otherwise
consistent in stature and prestige with the position of President and Chief
Operating Officer of a corporation with similar operations as the Company, and
shall perform such additional duties and services which are similarly consistent
with such position as may reasonably be assigned to him from time to time by the
Board. The Employee shall be based in the New York City metropolitan area.
Section 4. Time to be Devoted to Employment.
(a) Except for three weeks vacation during each 12-month period
worked (in addition to public holidays), absences due to temporary illness and
time spent as a director in respect of a directorship held by the Employee on or
prior to the Start Date, the Employee shall devote substantially all of his
business time, attention and energies to the business and affairs of the Company
during the Employment Period.
(b) During the Employment Period, the Employee shall not engage in
any other business activity which conflicts with the duties of the Employee
hereunder, whether or not such activity is pursued for gain, profit or other
pecuniary advantage; provided, however, to the extent not in conflict with this
Section 4, the
2
<PAGE>
Employee shall not be prohibited from (i) serving as an officer, director,
trustee or otherwise participating in purely educational, welfare, social,
charitable, religious and civic organizations, or (ii) managing personal and
family investments, in each case to the extent such activities (A) do not
interfere or conflict in any material respect with the performance of his duties
and responsibilities hereunder and (B) are conducted in accordance with the
limitations of Section 11. Except with the prior written approval of the Board
(excluding the Employee if he should be a member of the Board at the time of
such determination), which the Board may grant or withhold in its sole and
absolute discretion, the Employee, during the Employment Period, will not serve
on the board of directors or similar body of any business entity other than the
Company or any subsidiary thereof (other than with respect to any directorship
held by the Employee on or prior to the Start Date, which directorships, if any,
have been disclosed in writing by the Employee to the Company).
Section 5. Compensation; Reimbursement.
(a) During the Employment Period, the Company (or at the Company's
option, any subsidiary or affiliate thereof) shall pay to the Employee an annual
salary (the "Base Salary") of not less than $250,000, payable semi-monthly. Such
Base Salary will be reviewed at least annually and may be increased by the Board
or the Board's designee (excluding the Employee if he should be a member of the
Board at the time of such determination) in its sole discretion. Effective as of
any such increase, the Base Salary as so increased shall be considered the new
Base Salary for all purposes of this Agreement and may not thereafter be
reduced.
(b) The Employee shall be eligible to receive an annual bonus of no
less than one hundred thousand dollars ($100,000) during each calendar year of
the Employment Period (pro-rated for partial calendar years of employment by the
Company for calendar years after 2000) based upon his achievement of performance
criteria mutually agreed upon by the Employee and the Company. The performance
criteria for the first year of the Employment Period shall be satisfied in the
event that the Company achieves gross revenue of $15 million for calendar year
2000. With respect to subsequent calendar years, it is expected that the
performance criteria will be based on increasing gross revenue targets to be
agreed upon within thirty (30) days after each anniversary of this Employment
Agreement and that such targets shall be consistent with and no higher than the
performance targets established for the Chief Executive Officer of the Company
for such calendar year.
3
<PAGE>
(c) During the Employment Period and to the extent available to
senior executive officers of the Company, the Employee shall be entitled to
participate in all of the Company's benefit plans, pension and retirement plans,
life insurance, hospitalization and surgical and major medical coverages, sick
leave, vacation and holiday policies, long-term disability coverage and such
other fringe benefits enjoyed by other senior executive officers of the Company.
Notwithstanding anything to the contrary contained in this Section 5(c), at no
time during the Employment Period shall the long-term disability coverage and
life insurance benefits that the Company provides to the Employee be reduced to
a level below that being provided to the Employee as of the Start Date.
(d) The Company shall reimburse the Employee, in accordance with the
practice from time to time for other senior executive officers of the Company,
for all reasonable and necessary traveling expenses, disbursements and other
reasonable and necessary incidental expenses incurred by him for or on behalf of
the Company in the performance of his duties hereunder upon presentation by the
Employee to the Company of appropriate vouchers.
(e) The Company shall grant the Employee, on the date of grant, (i)
an option (the "ISO") to purchase up to 21,945 shares (as adjusted pursuant to
the Stock Option Agreements (as defined below)) of common stock of the Company
(the "Common Stock") pursuant to the terms and conditions of a written option
agreement between the Company and the Employee, the form of which is attached
hereto as Exhibit A (the "ISO Agreement"), which shall contain all of the terms
and conditions of the ISO, and (ii) an option (the "NSO" and together with the
ISO, "Options") to purchase up to 983,055 shares (as adjusted pursuant to the
Stock Option Agreements) of Common Stock pursuant to the terms and conditions of
a written option agreement between the Company and the Employee, the form of
which is attached hereto as Exhibit B (the "NSO Agreement" and together with the
ISO Agreement, the "Stock Option Agreements"), which shall contain all of the
terms and conditions of the NSO. 200,000 of Options shall vest on the date of
grant and the remaining 805,000 of Options shall vest over three years, 6/36 of
such amount shall vest on the six month anniversary of the date of grant and
1/36 of such amount shall vest each month thereafter. The Company shall at least
once each year commencing in 2001 consider the Employee for future annual or
other grants of stock options and other equity awards on at least the same basis
as such options and equity awards are granted to other senior executive
officers.
4
<PAGE>
(f) The Employee authorizes the Company to deduct from any amounts
payable to him hereunder such sums as may be required to be deducted or withheld
under the provisions of any federal, state or local law or regulation now in
effect or hereafter put into effect during the term of this Agreement,
including, without limitation, social security and income withholding taxes.
Section 6. Involuntary Termination.
(a) If the Employee is incapacitated or disabled by accident,
sickness or other cause so as to render him mentally or physically incapable of
performing the services required to be performed by him under this Agreement for
a period of 120 consecutive days or longer, or 150 days or longer during any 200
day period (such condition being herein referred to as a "Disability"), prior to
the Employee resuming the performance of his duties as contemplated herein, the
Company may terminate the employment of the Employee under this Agreement (an
"Involuntary Termination"). Until the Company or the Employee shall have
terminated the Employee's employment hereunder, the Employee shall be entitled
to receive his compensation and other benefits as set forth in this Agreement
notwithstanding any such Disability.
(b) Any determination as to whether the Employee is subject to a
physical or mental incapacity shall first be made by the Board (excluding the
Employee if he should be a member of the Board at the time of such
determination) in its good faith judgment; provided, however, if any such
determination is disputed by the Employee, the matter shall be referred to a
licensed physician practicing within New York, New York or a 50-mile radius
thereof and selected by the Board and the Employee, and the determination of
Disability made by such physician shall be final and binding on both the
Employee and the Company. The Employee represents and warrants to the Company
that, to the best of his knowledge, he does not have a Disability as of the date
hereof.
(c) If the Employee dies during the Employment Period, his
employment hereunder shall be deemed to cease as of the date of his death, and
the termination of his employment occasioned thereby shall be deemed an
Involuntary Termination.
Section 7. Termination for Cause or Without Cause.
5
<PAGE>
(a) The Company may terminate the Employee's employment hereunder at
any time during the Employment Period for "Cause" (a "Termination for Cause").
Prior to, and in connection with, any Termination for Cause, (1) the Chief
Executive Officer of the Company or his designee shall give written notice to
the Employee of the specific circumstances which may constitute the basis for a
Termination for Cause, (2) the Employee shall be provided with ten (10) days to
cure the basis for a Termination with Cause (but only if such basis is capable
of cure), and (3) the Board shall have determined, in its sole discretion (so
long as not arbitrary or capricious), by a vote of not less three-fourths (3/4)
of the Board (excluding the Employee if he should be a member of the Board at
the time of such determination) at a meeting called and held for such purpose,
after reasonable notice to the Employee and an opportunity for the Employee,
together with his counsel, to be heard before the Board, that the Company has
Cause to terminate the Employee's employment. For purposes of this Agreement,
"Cause" shall be limited to:
(i) the gross negligence or willful refusal or failure by the
Employee to attempt to substantially perform the duties described in
Section 3 (other than any failure resulting from an illness or other
similar incapacity or disability);
(ii) the Employee's conviction of, or plea of nolo contendere
to, misappropriation of funds, properties or assets of the Company, or any
other act of fraud, theft or financial dishonesty involving the Company or
its subsidiaries, or slander or libel concerning the Company or a material
tort relating to his office or employment with the Company that has a
material adverse effect on the Company;
(iii) the material breach by the Employee of the provisions of
this Agreement including, without limitation, the covenants set forth in
Sections 11 and 12 hereof;
(iv) the Employee's conviction of, or plea of nolo contendere
to, a crime constituting a felony (other than a traffic violation) or any
criminal act involving moral turpitude; or
(v) the Employee's inability to perform his duties as a result
of alcohol or drug abuse, chronic alcoholism or drug addiction.
6
<PAGE>
(b) The Company may terminate the Employee's employment hereunder at
any time during the Employment Period without "Cause" by providing written
notice of such termination to the Employee (a "Termination Without Cause") at
least five days prior to such Termination Without Cause or pay in lieu of such
notice.
Section 8. Termination for Poor or Incompetent Performance.
The Company may not terminate the Employee's employment hereunder at
any time during the first year of the Base Term for the Employee's poor or
incompetent performance of his duties or responsibilities hereunder. Thereafter,
the Company may terminate the Employee's employment hereunder at any time for
poor or incompetent performance ("Termination for Poor or Incompetent
Performance"); provided that the Board shall have determined, in its sole
discretion (so long as not arbitrary or capricious), by a vote of not less
three-fourths (3/4) of the Board (excluding the Employee if he should be a
member of the Board at the time of such determination) at a meeting called and
held for such purpose, after reasonable notice to the Employee and an
opportunity for the Employee, together with his counsel, to be heard before the
Board, that the Employee's performance hereunder has been poor or incompetent.
Section 9. Termination for Good Reason or by Resignation.
(a) The Employee may terminate his employment hereunder at any time
during the Employment Period for "Good Reason."
(b) For purposes of this Agreement:
(i) "Good Reason" means (A) a reduction in the title or any
material reduction in the authority, duties, responsibilities,
compensation, benefits or reporting line of the Employee from those on the
Start Date, where such reduction or material reduction is not cured within
10 days after written notice thereof by the Employee to the Company, (B) a
Change of Control, if (1) within one (1) year of such Change of Control
the employment of the Employee is terminated by the Company for any
reason, or (2) during the 30-day period commencing 6 months after a Change
of Control the Employee terminates his employment for any or no reason,
(C) a material breach
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by the Company of this Agreement, which breach is incurable or otherwise
not cured within 10 days after written notice thereof by the Employee to
the Company, (D) the failure of the Employee to be elected as a member of
the Board or the removal of the Employee as a member of the Board (other
than in connection with a Termination for Cause), (E) the failure of the
Company to grant the Employee the Options pursuant to the Stock Option
Agreements provided for in Section 5(e) of this Agreement, or (F) the
failure of the Company to obtain a satisfactory agreement from any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company to assume and agree to perform this Agreement to the same
extent that the Company is required to perform it, in each case without
the prior written consent or waiver of the Employee.
(ii) the Employee's continued employment shall not constitute
consent to or a waiver of rights with respect to, any circumstances
constituting Good Reason hereunder.
(iii) "Change in Control" of the Company shall be deemed to
have occurred if:
(A) there shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of Common Stock would be
converted into cash, securities or other property, other than a merger of
the Company in which the holders of Common Stock immediately prior to the
merger own a majority of the common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company;
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(B) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company; or
(C) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than Ari B. Horowitz, shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of 50% or
more of the outstanding Common Stock.
(c) The Employee may terminate his employment hereunder at any time
during the Employment Period without "Good Reason" by providing written notice
of such termination to the Company (a "Resignation") at least five days prior to
such Resignation.
Section 10. Effect of Termination of Employment.
(a) Termination For Cause or by Resignation. Upon the termination of
the Employee's employment hereunder pursuant to a Termination For Cause or a
Resignation, neither the Employee nor his beneficiary or estate shall have any
further rights or claims against the Company under this Agreement except to
receive:
(i) any unpaid portion of the Base Salary provided for in
Section 5(a), computed on a pro rata basis to the date of termination;
(ii) cash compensation equal to the product of (A) the number
of days of accrued vacation, if any, accumulated by the Employee to the
date of termination divided by 365 multiplied by (B) the Base Salary;
(iii) reimbursement for any expenses for which the Employee
shall not have theretofore been reimbursed as provided in Section 5(d);
(iv) any bonus from the prior calendar year which has been
earned but not yet paid; and
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(v) all vested benefits under any compensation or employee
benefit plan maintained by the Company, whether funded or unfunded,
accrued through the date of termination.
(b) Involuntary Termination. Upon the termination of the Employee's
employment hereunder pursuant to an Involuntary Termination, neither the
Employee nor his beneficiary or estate shall have any further rights or claims
against the Company under this Agreement except the right:
(i) to receive the payments and benefits, if any, equal to
those provided for in Section 10(a) hereof;
<PAGE>
(ii) to receive monthly cash severance payments in an amount
equal to one-twelfth of the cash compensation (including Base Salary and
bonus) received by the Employee during the 12-month period immediately
prior to the date of termination under this subsection; provided, however,
that if such termination occurs prior to the date of payment of any bonus
for calendar year 2000, the bonus amount for such calculation shall be
deemed to be $100,000 (such monthly payments, "Monthly Severance"), for a
period of twelve (12) months;
(iii) to be credited with one additional year of employment
for purposes of calculating the Employee's vested interest in the Options
and any other stock options and equity awards granted to the Employee
during the Employment Period, which Options and other options shall vest
according to their original schedule as if the Employee's employment
hereunder had continued for twelve (12) months from the date of
Involuntary Termination, and all such Options and other options shall be
exercisable by the Employee for their full remaining term; and
(iv) in the case of termination due to a Disability, to
receive all benefits pursuant to Section 5(c) above for a period of twelve
(12) months following the date of such termination.
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(c) Termination Without Cause or With Good Reason. Upon the
termination of the Employee's employment hereunder pursuant to a Termination
Without Cause or With Good Reason, neither the Employee nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Agreement except the right:
(i) to receive the payments and benefits, if any, equal to
those provided for in Section 10(a) hereof;
(ii) to receive Monthly Severance, for a period lasting the
longer of (A) twelve (12) months, or (B) the remainder of the Base Term;
provided, however, that the Employee will not be entitled to any such
payments in the event that the Employee becomes employed by another entity
during the period that such payments would otherwise be due;
(iii) to become fully vested in all of the Options and any
other stock options and equity awards granted to the Employee during the
Employment Period, which Options and other options shall vest according to
their original schedule as if the Employee's employment hereunder had
continued until all such Options and other options had fully vested, and
all such Options and other options shall be exercisable by the Employee
for their full remaining term; and
(iv) to receive all benefits pursuant to Section 5(c) above
for a period lasting the longer of (A) twelve (12) months from the date of
Termination Without Cause or With Good Reason, or (B) the remainder of the
Base Term; provided, however, that the Employee will not be entitled to
any such benefits in the event that the Employee becomes employed by
another entity during the period that such benefits would otherwise be
due.
(d) Termination for Poor or Incompetent Performance. Upon
termination of the Employee's employment hereunder pursuant to a Termination for
Incompetence or Non-Performance, neither the Employee nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Agreement except the right:
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<PAGE>
(i) to receive payments and benefits, if any, equal to those
provided for in Section 10(a) hereof;
(ii) to receive Monthly Severance, for a period of twelve (12)
months; provided, however, that the Employee will not be entitled to any
such payments in the event that the Employee becomes employed by another
entity during the period that such payments would otherwise be due; and
(iii) to be credited with twelve (12) additional months of
employment for purposes of calculating the Employee's vested interests in
the Options and any other stock options and equity awards granted to the
Employee during the Employment Period, which options shall vest according
to their original schedule as if the Employee's employment hereunder had
continued for twelve (12) months from the date of the Termination for Poor
or Incompetent Performance, and all such Options and other options shall
be exercisable by the Employee for their full remaining term.
(iv) to receive all benefits pursuant to Section 5(c) above
for a period of twelve (12) months following the date of such Termination
for Poor or Incompetent Performance; provided, however, that the Employee
will not be entitled to any such benefits in the event that the Employee
becomes employed by another entity during the period that such benefits
would otherwise be due.
(e) Termination Based on the Employee's Right Not To Extend. Upon
the termination of the Employee's employment hereunder pursuant to the
Employee's Right Not To Extend, neither the Employee nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Agreement except the right to receive the payments and benefits, if any, equal
to those provided for in Section 10(a) hereof.
(f) Termination Based on the Company's Right Not To Extend. Upon the
termination of the Employee's employment hereunder pursuant to the Company's
Right Not To Extend, neither the Employee nor his beneficiary or estate shall
have any further rights or claims against the Company under this Agreement
except the right:
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(i) to receive the payments and benefits, if any, equal to
those provided for in Section 10(a) hereof;
(ii) to receive Monthly Severance, for a period of twelve (12)
months; provided, however, that the Employee will not be entitled to any
such payments in the event that the Employee becomes employed by another
entity during the period that such payments would otherwise be due;
(iii) to become fully vested in all of the Options and any
other stock options and equity awards granted to the Employee during the
Employment Period, which Options and other options shall vest according to
their original schedule for twelve (12) months from the date of
Termination Based on the Company's Right Not To Extend, and all such
Options and other options shall be exercisable by the Employee for their
full remaining term; and
(iv) to receive all benefits pursuant to Section 5(c) above
for a period of twelve (12) months following the date of the termination
of the Employee's employment hereunder pursuant to the Company's Right Not
To Extend; provided, however, that the Employee will not be entitled to
any such benefits in the event that the Employee becomes employed by
another entity during the period that such benefits would otherwise be
due.
(g) If the Employee's employment with the Company hereunder is
terminated pursuant to Sections 2, 6, 7, 8 or 9, the Employee shall not have the
obligation to mitigate his damages as a result of such termination.
(h) Any obligations of the Company to provide payments and benefits
to the Employee under this Section 10 are expressly conditioned on the
Employee's compliance with Sections 11 and 12 of this Employment Agreement.
(i) Except to the extent requested by the Board, upon the date of
termination, the Employee shall immediately resign all positions and
directorships with the Company and each subsidiary thereof.
Section 11. Non-Competition; Non-Solicitation.
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(a) In consideration of the compensation and other benefits to be
provided to the Employee hereunder, the Employee shall not, directly or
indirectly, for any reason whatsoever, during the Employment period and for a
period of one year following the Employee's Termination for any reason,
including without limitation Termination for Cause, Termination for Poor or
Incompetent Performance, Termination without Cause, Termination by Employee with
Good Reason, or Employee's Resignation:
(i) engage, become involved or acquire an interest in any
Competitive Business (as hereinafter defined), whether such engagement,
interest or involvement shall be as an employee, employer, manager,
material investor, owner, consultant, lender, partner or other participant
in any Competitive Business;
(ii) assist others in engaging in any Competitive Business in
the manner described in the foregoing clause (i);
(iii) solicit or induce, or attempt to solicit or induce,
employees of, consultants to, or independent contractors of, the Company
or its subsidiaries to terminate their employment, engagement or
affiliation with the Company or in any way interfere with the relationship
between the Company or any of its subsidiaries, on the one hand, and any
such employee of, consultant to, or independent contractor of the Company
or any of its subsidiaries, on the other hand; or
(iv) knowingly employ or retain any such employee of,
consultant to, or independent contractor of the Company or any of its
subsidiaries during his or her employment, engagement or affiliation with
the Company or any of its subsidiaries for a period of three months after
the termination of such employee's, consultant's or independent
contractor's employment, engagement or affiliation with the Company or any
of its subsidiaries unless such retainer is not competitive, and does not
interfere with, the simultaneous retention of such consultant or
independent contractor by the Company.
(v) induce customers or vendors of the Company; or any
independent knowledge workers or other information technology
professionals, or end user organizations that have a business
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relationship with the Company, to alter or terminate their business
relationship with the Company or any of its subsidiaries; provided,
however, that nothing contained in this Section 11 shall be deemed to
prohibit the Employee from acquiring, directly or indirectly, solely as a
passive investment, securities of any Competitive Business traded on any
national securities exchange if the Employee is not a controlling person
of, nor a member of a group which controls such person and does not,
directly or indirectly, own 5% or more of any class of securities of such
person. As used herein, the term "Competitive Business" shall mean any
business which competes with the Company in the business of primarily
providing labor resource management services or products relating to
information technology professionals by means of business-to-business
electronic commerce or any business or activity that is substantially the
same as any business or activity conducted by the Company at any time
during the Employee's employment with the Company within the geographic
area that the Company is engaged in such business or activity as of the
Start Date or upon such date that the Employee ceases to receive salary or
severance payments from the Company (including, without limitation, any
subsidiary thereof).
(b) Notwithstanding any other provision of this Agreement to the
contrary, any business activities engaged in by the Employee on behalf of, or in
connection with the Employee's employment by, or service as a director or
consultant to, any subsidiary or affiliate of the Company or in connection with
a directorship held by the Employee on or prior to the Start Date, shall not be
deemed to violate the provisions of this Agreement.
(c) The Employee is aware that the services performed by him for the
Company are of a special, unique and intellectual character and understands that
the foregoing restrictions may limit his ability to earn a livelihood in a
Competitive Business, but he nevertheless believes that he has received and will
receive sufficient consideration and other benefits in connection with his
employment to clearly justify such restrictions which, in any event, the
Employee does not believe would prevent him from earning a living. Nothing
herein contained shall prohibit the Employee from engaging in a business that is
not a Competitive Business.
Section 12. Non-Disclosure of Information.
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The Employee understands that he will have access to Confidential
Information relating to the Company and agrees that he will not, at any time
during or after the Employment Period, disclose to any person, firm, corporation
or other entity, except as required by law, any Confidential Information
concerning the business, clients or affairs of the Company or any subsidiary or
affiliate thereof, or of any person which the Company or any of its subsidiaries
is under an obligation to keep secret or confidential, for any reason or purpose
whatsoever other than in furtherance of the Employee's good faith performance of
his duties as an employee of the Company, nor shall the Employee make use of any
of such Confidential Information for his own purpose or for the benefit of any
person, firm, corporation or other business entity except the Company or any
subsidiary or affiliate thereof. For purposes of this Agreement, "Confidential
Information" shall include, without limitation, products or services, fees,
costs, pricing schedules, designs, analyses, drawings, photographs, reports,
computer software and hardware (including operating systems, applications and
program listings), customers and clients, customer and client lists, marketing
plans and related information, sales plans and related information, operating
policies and manuals, business plans, financial records or practice management
methods, inventions, devices, new developments, methods and processes,
technology or trade secrets, know-how or techniques, whether patentable or
unpatentatable and whether or not reduced to practice, and all similar and
related information in whatever form.
Section 13. Company Right to Inventions and Business Opportunities.
(a) The Employee shall promptly disclose, grant and assign to the
Company for its sole use and benefit any and all (i) discoveries, developments,
designs, improvements, inventions, formulae, processes, techniques, computer
programs, strategies, know-how and data, whether or not patentable or
registerable under patent, copyright, trademark or similar statutes, together
with all patent applications, patents, copyrights, copyright applications,
trademarks, trademark applications and any reissues thereof that may at any time
be granted for or upon any such inventions (the "Inventions") or (ii) business
opportunities relating to the actual or anticipated business of the Company or
any of its subsidiaries ("Business Opportunity"), presented to or learned by the
Employee during the period of the Employee's employment with the Company prior
to any termination of employment (whether or not during usual working hours).
(b) The Employee shall promptly, without charge and at the expense
of the Company, at all times hereafter execute and deliver such applications,
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<PAGE>
assignments, descriptions and other instruments as may be reasonably necessary
or proper in the reasonable opinion of the Company to (i) vest title to and
enforce patents, copyrights, trademarks, improvements, technical information and
methods and other rights and protections relating to the Inventions and (ii) to
assign or otherwise establish such ownership of the Company in all rights in or
to such Business Opportunities, and to enable the Company to obtain and maintain
the entire right and title thereto in any and all countries; and
(c) The Employee shall render to the Company at its expense
(including a reasonable payment for the time involved in case he is not then in
its employ) all such assistance as it may reasonably require at times and
locations agreed to by the Company and the Employer in the (i) prosecution of
applications for the Inventions, in the prosecution or defense or interferences
which may be declared involving the Inventions and in any litigation in which
the Company may be involved relating to the Inventions, each including, without
limitation, the execution of assignments, consents, powers of attorney,
applications and other instruments and the giving of testimony in support
thereof or (ii) confirmation and protection of such ownership of the Company in
all rights in or to any Business Opportunities, provided, however, that such
assistance shall not interfere with the Employee's employment or business
activities.
(d) The Employee shall deliver to the Company at the termination of
the Employment Period, or upon the request of the Company, at any time, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Inventions, Business Opportunities or the business of the Company
or any of its subsidiaries, which he may then possess or have under his control,
regardless of the location or form of such material and, if requested by the
Company, shall provide the Company with written confirmation that all such
materials have been delivered to the Company.
Section 14. Enforcement.
It is the desire and intent of the parties hereto that the
provisions of this Agreement shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such amendment to apply
17
<PAGE>
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made; provided, however, that if any
one or more of the provisions contained in this Agreement shall be adjudicated
to be invalid or unenforceable because such provision is held to be excessively
broad as to duration, geographical scope, activity or subject, such provision
shall be deemed amended by limiting and reducing it so as to be valid and
enforceable to the maximum extent compatible with the applicable laws of such
jurisdiction, such amendment to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made.
Section 15. Excise Taxes.
To the extent that any of the payments and benefits provided for in
this Agreement or otherwise payable to the Employee constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and, but for this Section 15, would be subject to
the excise tax imposed by Section 4999 of the Code, then the Employee's benefits
under this Agreement shall be payable either (i) in full or (ii) to such lesser
amount as would result in no portion of severance payments being subject to
excise tax under Section 4999 of the Code, which ever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and
excise tax imposed by Section 4999, results in the receipt by the Employee on an
after tax basis of the greatest amount of severance benefits provided pursuant
to this Agreement, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Unless the Company and
the Employee otherwise agree in writing, any determination required under this
Section shall be made in writing by an independent public accounting firm
selected by the Employee and reasonably acceptable to the Company other than
that used by the Company (the Accountants), whose determination shall be
conclusive and binding upon the Employee and the Company for all purposes. For
purposes of making the calculations required by this Section 15, the Accountants
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Section 280G and 4999 of the Code. The Company and the Employee
shall furnish to the Accountants such information as the Accountants may
reasonably request in order to make a determination under this Section 15 The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 15.
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Section 16. Remedies; Survival.
(a) The Employee acknowledges and understands that the provisions of
this Agreement are of a special and unique nature, the loss of which cannot be
accurately compensated for in damages by an action at law, and that the breach
of the provisions of this Agreement would cause the Company irreparable harm. In
the event of a breach by the Employee of the provisions of Section 11, 12, or 13
hereof, the Company shall be entitled to an injunction restraining him from such
breach; provided, however, nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available for any
breach of this Agreement.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the provisions of Sections 9 through 18, including this Section 16,
shall survive the expiration or other termination of this Agreement until, by
their terms, such provisions are no longer operative.
(c) It is understood and agreed that the provisions of Sections 11,
12 and 13 of this Agreement are separate and distinct from any other agreement
between the parties hereto. Accordingly, in the event of a breach of such
provisions, the breaching party shall only be held responsible for damages
arising under such provisions and not for any damages which may be claimed to
arise under or with respect to any other agreement that is not separately
breached.
Section 17. Notices.
All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given or made when (i) delivered
personally to the recipient, (ii) transmitted by facsimile or electronic mail
(with hard copy sent to the recipient by reputable overnight courier service
(charges prepaid) that same day and, in the latter case, with receipt
acknowledged by the recipient by return electronic mail) if faxed or e-mailed
before 5:00 p.m. (New York City time) on a Business Day, and otherwise on the
next Business Day (as hereinafter defined), (iii) two Business Days after being
sent to the recipient by reputable overnight courier service (charges prepaid),
or (iv) five Business Days after being sent to the recipient by registered or
certified mail (postage prepaid and return receipt requested). The term
"Business Day" shall mean any day, other than a Saturday, Sunday or other day on
which
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banking institutions in the State of New York are authorized or obligated by law
or executive order to close. Such notices, demands and other communications
shall be sent to the address for such recipient as set forth below (or to such
other address or to the attention of such other person as the recipient party
has specified by like notice):
(i) if to the Company, to:
Opus360 Corporation
733 3rd Avenue, 17th Floor
New York, New York 10017
Attention: Ari B. Horowitz
Telephone: (212) 301-2280
Facsimile: (212) 599-8481
E-Mail: [email protected]
with a copy (which shall not constitute notice) to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10012
Attention: John J. Suydam
Telephone: (212) 408-2471
Facsimile: (212) 728-5950
E-Mail: [email protected]
(ii) and, if to the Employee, to:
Richard S. Miller
5 Croydon Road
Morristown, NJ 07960
Telephone: (973) 267-8448
Facsimile: (973) 267-8397
E-Mail: [email protected]
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with a copy to:
Walter, Conston, Alexander & Green, P.C.
90 Park Avenue
New York, New York 10016
Attention: Saul Ben-Meyer
Telephone: (212) 210-9545
Facsimile: (212) 210-9444
E-Mail: [email protected]
Section 18. General Provisions.
(a) Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees and devisees. If the
Employee should die while any amount would still be payable to him hereunder if
he had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the beneficiary
designated by the Employee in a writing delivered to the Company, or if there be
no such designated beneficiary, to his estate.
(b) Governing Law and Choice of Jurisdiction and Venue. THE
PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS ENTERED INTO AND
FULLY PERFORMED WITHIN THE STATE OF NEW YORK BY RESIDENTS OF THE STATE OF NEW
YORK. WITH RESPECT TO ANY LAWSUIT OR PROCEEDING BROUGHT WITH RESPECT TO THIS
AGREEMENT, EACH OF THE PARTIES HERETO IRREVOCABLY (I) SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR FEDERAL COURT OF THE
UNITED STATES OF AMERICA SITTING IN NEW YORK, (II) WAIVES ANY OBJECTION IT MAY
HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH
COURT, (III) WAIVES ANY CLAIM THAT SUCH PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, AND (IV) FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO
SUCH PROCEEDINGS, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY.
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(c) Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party must be in writing and shall not
operate or be construed as a waiver of any subsequent breach by such other
party.
(d) Complete Agreement; Amendments; Prior Agreements. This Agreement
amends and restates the Existing Employment Agreement in its entirety and this
Agreement, together with the Stock Option Agreements and the other agreements
referred to herein contain the entire agreement between the parties with respect
to the subject matter contained herein and supersede all prior agreements or
understandings written or oral between the parties with respect thereto. The
parties hereto hereby forever release any and all rights under the Existing
Employment Agreement. This Agreement may not be amended, supplemented, canceled
or discharged except by written instrument executed by both parties hereto.
(e) Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
(f) Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is not a Business Day, the time period
for giving notice or taking action shall be automatically extended to the
immediately following Business Day.
(g) Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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(i) Assignment. With respect to the Employee, this Agreement is
personal in its nature and the Employee shall not assign or transfer this
Agreement or any rights or obligations hereunder. The Company may in its sole
discretion assign or otherwise transfer this Agreement and the provisions hereof
(including, without limitation, Sections 11, 12 and 13) shall inure to the
benefit of, and be binding upon, each successor of the Company, whether by
merger, consolidation, transfer of all or substantially all assets, or
otherwise.
(j) Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa.
(k) Construction. Where specific language (such as the word
"including") is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement shall be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of strict
construction shall be applied against any party hereto. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
(l) Delivery by Facsimile. This Agreement, the agreements referred
to herein, and each other agreement or instrument entered into in connection
herewith or therewith or contemplated hereby or thereby, and any amendments or
supplements hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a
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defense to the formation or enforceability of a contract and each such party
forever waives any such defense.
(m) Indemnification. The Company shall indemnify the Employee to the
fullest extent permitted by applicable law and its certificate of incorporation
and by-laws against all costs, charges and expenses incurred or sustained by the
Employee in connection with his employment with the Company, other than as a
result of actions taken by him in bad faith or due to his gross negligence. This
indemnification obligation shall survive termination of this Agreement. In
addition, during the Employment Period, the Company shall continue to maintain,
and shall cover the Employee under, its Directors and Officers Liability
Insurance and Errors and Omissions Insurance at coverage levels which are no
less than those currently in effect.
(n) Costs And Expenses of Agreement. All reasonable costs and
expenses (including fees and disbursements of counsel) incurred by the Employee
in negotiating the terms and conditions of this Agreement or any agreements
ancillary to this Agreement shall be promptly reimbursed to the Employee by the
Company together with a tax gross-up payment to cover all taxes due on such
payment upon submission of an invoice therefor.
(o) Arbitration. Prior to the commencement of any legal action to
enforce any provision of this Agreement or to resolve any dispute arising under
this Agreement, the Company and the Employee agree to notify the other for the
purpose of determining whether the parties will agree to submit any such dispute
to mediation or arbitration on mutually agreeable terms; provided, however, that
the Company does not need to notify the Employee of its intent to file a legal
action for a breach of Sections 12 or 13 hereof, nor must the Company seek to
mediate or arbitrate any such dispute. Nothing in this Section 18(o) shall
require the parties to mediate or arbitrate any disputes arising under this
Employment Agreement.
* * *
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IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date first above written.
OPUS360 CORPORATION
By: /s/ Ari B. Horowitz
---------------------------
Name: Ari B. Horowitz
Title:
/s/ Richard S. Miller
------------------------------
RICHARD S. MILLER
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EXHIBIT A
ISO AGREEMENT
[TO COME]
26
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EXHIBIT B
NSO AGREEMENT
[TO COME]
27
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Exhibit 10.23
STRATEGIC PARTNER
REGISTRATION RIGHTS AGREEMENT dated as
of February 7, 2000, between OPUS360
CORPORATION, a Delaware corporation (the
"Corporation"). and LUCENT TECHNOLOGIES
INC., a Delaware corporation ("Lucent").
Lucent owns or has the right to purchase or otherwise acquire shares
of the Corporation's Common Stock (as defined below). The Corporation and Lucent
deem it to be in their respective best interests to enter into this Agreement to
set forth the rights of Lucent in connection with public offerings and sales of
the Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the parties hereto agree as
follows:
1. Definitions.
As used herein, the following terms shall have the following
respective meanings:
"Additional Registrable Shares" means, at any time with respect to
any Additional Securityholder, the Registrable Shares held by such Additional
Securityholder (but only if such Additional Securityholder is entitled (but not
pursuant to this Agreement) to the registration of such Registrable Shares by
the Corporation under the Securities Act for sale to the public).
"Additional Securityholder" means any holder of Restricted
Securities who or which is entitled (but not pursuant to this Agreement) to the
registration of such Restricted Securities by the Corporation under the
Securities Act for sale to the public.
"Agreement" means this Strategic Partner Registration Rights
Agreement.
"Business Day" means any day, other than a Saturday, Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Corporation (and such other class of common stock of the Corporation, or any
successor thereto, into which the Common Stock may be converted or reclassified,
and all references herein to the Common Stock shall mean such other class of
common stock, if applicable).
"Conversion Shares" means the Series A Conversion Shares and the
Series B Conversion Shares.
"Corporation" has the meaning assigned to such term in the caption
to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC promulgated thereunder, all as the same may from time to time be in effect.
<PAGE>
"Governmental Entity" means any government or political sub-division
or department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local or foreign.
"Initial Common Shares" means the Registrable Shares that are (i)
shares of Common Stock issued or issuable to Ari Horowitz, Carlos Cashman, Shawn
Kreloff, William Bahr, Brett Prager, Richard McCann, Alex Lapins, Anthony
Schmitz, Bruce Gilpin, Wayne Tsuchitani or USWeb/CKS Corporation, or (ii) shares
of Common Stock issued on or with respect to the shares of Common Stock referred
to in clause (i) above.
"Initial Warrants" means (i) the warrants dated May 19, 1999 and
August 17, 1999 issued by the Corporation to Silicon Valley Bank to purchase
shares of Common Stock, (ii) the warrants dated December 24, 1998 issued by the
Corporation to each of Gerald Cashman, G&R Partnership, LP, Leonard Horowitz,
Irwin Lieber and Barry Rubenstein to purchase shares of Common Stock, and (iii)
the warrants dated September 3, 1999 and January 15, 2000 issued by the
Corporation to Greenhill & Co., LLC
"Law" means any foreign, federal, state or local law, statute,
treaty, rule, directive, regulation, ordinances and similar provisions having
the force or effect of law or any Order.
"Lucent" has the meaning assigned to such term in the caption to
this Agreement.
"Lucent Securityholders" means, collectively, (i) Lucent, (ii) any
other Persons listed on Schedule I from time to time, and (iii) any purchaser,
assignee or other transferee of Restricted Securities held by any of the
foregoing in a purchase, assignment or other transfer permitted under Section 19
and in which such purchaser, assignee or other transferee has complied in full
with the joinder requirements set forth in Section 19. Upon the addition of each
new Lucent Securityholder as a party to this Agreement, the Corporation shall
amend Schedule I solely to reflect the name and address of such new Lucent
Securityholder, and the Corporation shall distribute to the Lucent
Securityholders such amended Schedule I.
"Majority of the Lucent Securityholders" means those Lucent
Securityholders who or which hold in the aggregate in excess of 50% of all of
the Registrable Shares.
"Material Transaction" shall mean any material transaction in which
the Corporation or any of its Subsidiaries proposes to engage or is engaged,
including a purchase or sale of assets or securities, financing, merger,
consolidation, tender offer or any other transaction or event that would require
disclosure pursuant to the Exchange Act if the Corporation were a reporting
company thereunder, and with respect to which the Board of Directors of the
Corporation reasonably has determined in good faith that compliance with this
Agreement may reasonably be expected to either materially interfere with the
Corporation's or such Subsidiary's ability to consummate such transaction in a
timely fashion or require the Corporation to disclose material, non-public
information prior to such time as it would otherwise be required to be
disclosed,
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"Orders" means any enforceable judgments, writs, decrees,
declarations, injunctions, orders, stipulations, compliance agreement or
settlement agreements issued or imposed by, or entered into with, a Governmental
Entity.
"Other Shares" means, at any time, those shares of Common Stock
which do not constitute Primary Shares, Registrable Shares or Additional
Registrable Shares.
"Person" shall be construed as broadly as possible and shall include
an individual, a corporation, a company, an association, a joint stock company,
a partnership (including a limited liability partnership), a limited liability
company, a joint venture, a trust or an unincorporated organization and a
Governmental Entity.
"Primary Shares" means, at any time, the authorized but unissued
shares of Common Stock or Common Stock held by the Corporation in its treasury.
"Prospectus" means the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Shares and, in
each case, by all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
"Public Offering" means a public offering of Common Stock pursuant
to a registration statement declared effective under the Securities Act, except
that a Public Offering shall not include an offering of securities to be issued
as consideration in connection with a business acquisition or an offering of
securities issuable pursuant to an employee benefit plan.
"Registering Lucent Securityholders" means, with respect to any
registration of Registrable Shares, those Lucent Securityholders who or which
hold the Registrable Shares included in such registration.
"Registrable Shares" means, at any time with respect to any Lucent
Securityholder or Additional Securityholder, the shares of Common Stock held by
such Lucent Securityholder or Additional Securityholder that constitute
Restricted Securities. For purposes of this definition, a Lucent Securityholder
or Additional Securityholder shall be deemed to be the holder of shares of
Common Stock whenever such Lucent Securityholder or Additional Securityholder
has the right acquire, directly or indirectly, such Common Stock upon the
conversion or exercise of Restricted Securities (but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"Registration Date" means the date upon which the registration
statement pursuant to which the Corporation shall have initially registered
shares of Common Stock under the Securities Act for sale to the public shall
have been declared effective.
"Registration Statement" means any registration statement of the
Corporation which covers any of the Registrable Shares, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the
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<PAGE>
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Restricted Securities" means, at any time, with respect to any
Person, the shares of Common Stock, the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock, the Initial Warrants and any other
securities which by their terms are directly or indirectly exercisable or
exchangeable for or convertible into any of the foregoing securities, and any
securities received on or with respect to any of the foregoing securities, in
each case which are held by such Person. As to particular securities
constituting Restricted Securities, such securities shall cease to be
Restricted Securities when (A) they have been registered under the Securities
Act, the Registration Statement in connection therewith has been declared
effective and such Restricted Securities have been disposed of pursuant to and
in the manner described in such effective Registration Statement, (B) they are
eligible to be sold or distributed by the holder thereof pursuant to Rule 144
within any consecutive three-month period (including, without Limitation, Rule
144(k)) without volume limitations, (C) they have been otherwise transferred and
new certificates or other evidences of ownership for them not bearing a
restrictive legend and not subject to any stop transfer order or other
restriction on transfer shall have been delivered by the Corporation or the
issuer of other securities issued in exchange for the Restricted Securities, or
(D) they have ceased to be outstanding.
"SEC" means the United States Securities and Exchange Commission.
"securities" means, with respect to any Person, such Person's
"securities," as defined in Section 2(l) of the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same may from time to time be in effect.
"Series A Conversion Shares" means the Registrable Shares that are
(i) shares of Common Stock issued or issuable upon the conversion of Series A
Preferred Stock, (ii) shares of Common Stock issued on or with respect to the
shares of Common Stock referred to in clause (i) above or (iii) shares of Common
Stock issued on or with respect to the Series A Preferred Stock.
"Series A Preferred Stock" means the Corporation's Series A
Convertible Preferred Stock, par value $.001 per share.
"Series B Conversion Shares" means the Registrable Shares that are
(i) shares of Common Stock issued or issuable upon the conversion of Series B
Preferred Stock, (ii) shares of Common Stock issued on or with respect to the
shares of Common Stock referred to in clause (i) above or (iii) shares of Common
Stock issued on or with respect to the Series B Preferred Stock.
"Series B Preferred Stock" means the Corporation's Series B
Convertible Preferred Stock, par value $.001 per share.
"Shares" means the Registrable Shares, the Additional Registrable
Shares, the SP Registrable Shares, the Initial Common Shares, the Conversion
Shares and the Warrant Shares.
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"SP Registrable Shares" means (i) any Additional Registrable Shares
issued by the Corporation to any Strategic Partner (other than Lucent) in
connection with such Strategic Partner's entry into a strategic arrangement with
the Corporation for the provision by either party to the other party of goods,
services, technology, expertise or other value and (ii) any other Additional
Registrable Shares issued on or with respect to the Additional Registrable
Shares referred to in clause (i) above.
"Stockholders' Agreement" means the Stockholders' Agreement dated as
of December 24, 1998, among the Company, Lucent and the other parties thereto,
as amended, supplemented, modified and in effect from time to time.
"Strategic Partner" means a Person who or which, at the time in
question, has entered into, or is simultaneously entering into or has agreed to
enter into, a strategic arrangement with the Corporation for the provision by
either party to the other party of goods, services, technology, expertise or
other value.
"Subsidiary" means, as to any Person, any other Person of which more
than 50% of the shares of the voting stock or other voting interests are owned
or controlled, or the ability to select or elect 50% or more of the directors or
similar managers is held, directly or indirectly, by such first Person or one or
more of its Subsidiaries.
"Warrant Shares" means the Registrable Shares that are (i) shares of
Common Stock issued or issuable upon the exercise of the Initial Warrants, (ii)
shares of Common Stock issued on or with respect to the shares of Common Stock
referred to in clause (i) above or (iii) shares of Common Stock issued on or
with respect to the Initial Warrants.
2. Form S-3 Registrations.
(a) If, at any time after the Registration Date the Corporation
shall be qualified for the use of Form S-3 promulgated under the Securities Act
(or any successor form thereto) for the sale to the public of Registrable Shares
held by the Lucent Securityholders, a Majority of the Lucent Securityholders
shall notify the Corporation in writing that such Lucent Securityholders desire
to sell Registrable Shares, with an anticipated aggregate gross offering price
(before underwriting discounts and commissions) of at least $3,000,000, in the
public securities market and request that the Corporation effect the
registration on Form S-3 (or any successor form thereto) of such Registrable
Shares, the Corporation shall:
(i) promptly give written notice of the proposed registration to all
other Lucent Securityholders, who or which shall have the right, subject
to the applicable terms of this Agreement, to include in such registration
Registrable Shares held by them (exercisable by delivering to the
Corporation a written notice specifying the number of Registrable Shares
requested to be included within 30 days after receipt of such notice of
such registration from the Corporation); and
(ii) file and then use its best efforts to have the registration on
Form S-3 (or any successor form thereto) of the Registrable Shares which
the Corporation has been so requested to register declared effective.
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<PAGE>
(b) Anything contained in Section 2(a) to the contrary
notwithstanding, the Corporation shall not be obligated to effect pursuant to
Section 2(a) any registration under the Securities Act except in accordance with
the following provisions:
(i) The Corporation shall not be obligated to use its best efforts
to file and cause to become effective (A) more than one Registration
Statement requested pursuant to Section 2(a) or (B) any Registration
Statement during any period in which any other registration statement
(other than on Form S-4 or Form S-8 promulgated under the Securities Act
or any successor forms thereto) pursuant to which Primary Shares are to be
or were sold has been filed and not withdrawn or has been declared
effective within the prior 90 days.
(ii) The Corporation may delay the filing or effectiveness of any
Registration Statement for a period of up to 90 days after the date of a
request for registration pursuant to Section 2(a) if at the time of such
request the Corporation (A) is engaged, or has fixed plans to engage
within 90 days of the time of such request, in a firm commitment,
underwritten public offering of Primary Shares in which the holders of
Registrable Shares may include Registrable Shares pursuant to Section 3 or
(B) is engaged in a Material Transaction.
(iii) In connection with any registration of Registrable Shares
pursuant to Section 2(a), the Corporation shall give notice of such
registration to the holders of all Additional Registrable Shares and Other
Shares which are entitled to registration rights and the Corporation may
include in such registration any Primary Shares, Additional Registrable
Shares or Other Shares; provided, however, that if the managing
underwriter advises the Corporation that the inclusion of all of the
Registrable Shares, Primary Shares, Additional Registrable Shares and/or
Other Shares proposed to be included in such registration would interfere
with the successful marketing (including pricing) of all of such
securities, then the number of Registrable Shares, Primary Shares,
Additional Registrable Shares and/or Other Shares proposed to be included
in such registration shall be included in the following order:
(A) first, the Registrable Shares requested by the Lucent
Securityholders to be included in such registration and the
Additional Registrable Shares constituting SP Registrable Shares
requested by the Additional Securityholders to be included in such
registration (or, if necessary, such Shares pro rata among all such
Persons based upon the aggregate number of Registrable Shares and SP
Registrable Shares held by each such Person at the time of
registration);
(B) second, the Additional Registrable Shares constituting
Initial Common Shares, Conversion Shares or Warrant Shares requested
by the Additional Securityholders to be included in such
registration (or, if necessary, such Shares allocated among all such
Additional Securityholders in accordance with the applicable
provisions of any agreements between the Corporation and such
Additional Securityholders, as amended, supplemented or otherwise
modified from time to time and in effect at the time of
registration, or, in the
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absence of any applicable provisions, pro rata among all such
Additional Securityholders based upon the number of Additional
Registrable Shares constituting Initial Common Shares, Conversion
Shares or Warrant Shares held by each such Additional Securityholder
at the time of registration);
(C) third, the Primary Shares
(D) fourth, the Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares
allocated among all such Additional Securityholders in accordance
with the applicable provisions of any agreements between the
Corporation and such Additional Securityholders, as amended,
supplemented or otherwise modified from time to time and in effect
at the time of registration, or, in the absence of any applicable
provisions, pro rata among all such Additional Securityholders based
upon the number of Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares held by each such Additional Securityholder at
the time of registration);
(E) fifth, the Registrable Shares requested by the Lucent
Securityholders to be included in such registration (or, if
necessary, such Shares pro rata among all such Persons based upon
the aggregate number of Registrable Shares held by each such Lucent
Securityholder at the time of registration); and
(F) sixth, the Other Shares.
(c) If the Majority of the Lucent Securityholders in a registration
requested pursuant to Section 2(a) intend to distribute the Registrable Shares
covered by their request by means of an underwriting, they shall so advise the
Corporation as a part of their request for registration pursuant to Section 2(a)
In such event, the Corporation shall select one or more nationally recognized
firms of investment bankers reasonably acceptable to the Majority of the Lucent
Securityholders to act as the lead managing underwriter or underwriters in
connection with such offering. The right of any Registering Lucent
Securityholder to registration pursuant to Section 2(a) shall be conditioned
upon such Registering Lucent Securityholder's participation in such underwriting
and the inclusion of such Registering Lucent Securityholder's Registrable Shares
in the underwriting (unless otherwise mutually agreed by the Corporation and
such Registering Lucent Securityholder) to the extent provided herein. The
Corporation and the Registering Lucent Securityholders proposing to distribute
their securities through such underwriting shall enter into an underwriting
agreement which is reasonable and in customary form with the underwriters of
such offering.
(d) A requested registration under Section 2(a) may be rescinded
prior to the related Registration Statement being declared effective by the SEC
by written notice to the Corporation from the Majority of the Lucent
Securityholders; provided, however, such registration shall not count as a
Registration Statement requested pursuant to Section 2(a) for purposes of clause
(A) of Section 2(b)(i) if the Corporation shall have been reimbursed for all
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out-of-pocket expenses incurred by the Corporation in connection with such
rescinded registration
3. Piggyback Registration
(a) if the Corporation proposes for any reason to register Primary
Shares, Additional Registrable Shares or Other Shares under the Securities Act
at any time after the closing of an initial Public Offering of Common Stock
(other than on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto), it shall give written notice to the Lucent
Securityholders of its intention to so register such Primary Shares, Additional
Registrable Shares or Other Shares at least 30 days before the initial filing of
the registration statement for such Primary Shares, Additional Registrable
Shares or Other Shares and, upon the written request, given within 20 days after
delivery of any such notice by the Corporation, of any Lucent Securityholder to
include in such registration Registrable Shares (which request shall specify the
number of Registrable Shares proposed to be included in such registration and
shall state the desire of such Lucent Securityholder to sell such Registrable
Shares in the public securities markets), the Corporation shall use its best
efforts to cause all such Registrable Shares to be included in such registration
on the same terms and conditions as the Primary Shares, Additional Registrable
Shares or Other Shares otherwise being sold in such registration; provided,
however, if the managing underwriter advises the Corporation that the inclusion
of all of the Registrable Shares. Primary Shares, Additional Registrable Shares
and/or Other Shares proposed to be included in such registration would interfere
with the successful marketing (including pricing) of all of such securities,
then the number of Registrable Shares, Primary Shares, Additional Registrable
Shares and/or Other Shares proposed to be included in such registration shall be
included in the following order:
(i) If such registration is initiated by the Corporation to register
Primary Shares. Other Shares or Additional Registrable Shares not
constituting Initial Common Shares, Conversion Shares; Warrant Shares or
SP Registrable Shares, or by any holder of the foregoing:
(A) first, the Primary Shares;
(B) second, the Registrable Shares requested by the Lucent
Securityholders to be included in such registration and the
Additional Registrable Shares constituting SP Registrable Shares,
Initial Common Shares, Conversion Shares or Warrant Shares requested
by the Additional Securityholders to be included in such registration
(or, if necessary, such Shares allocated between (x) the Lucent
Securityholders and the Additional Securityholders who or which have
requested the inclusion of Registrable Shares or SP Registrable
Shares in such registration on the one hand and (y) the other
Additional Securityholders who or which have requested the inclusion
of Additional Registrable Shares constituting Initial Common Shares,
Conversion Shares or Warrant Shares in such registration on the other
hand, in proportion to the aggregate number of Shares held by each
such group of Persons at the time of registration, with the aggregate
number of Shares allocated to the Additional Securityholders
described in clause (1) above further allocated among such Additional
Securityholders in accordance with the
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applicable provisions of any agreements between the Corporation and
such Additional Securityholders, as amended, supplemented or
otherwise modified from time to time and in effect at the time of
registration, or, in the absence of any applicable provisions. pro
rata among all such Additional Securityholders based upon the number
of Additional Registrable Shares constituting Initial Common Shares,
Conversion Shares or Warrant Shares held by each such Additional
Securityholder at the time of registration);
(C) third, the Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares
allocated among all such Additional Securityholders in accordance
with the applicable provisions of any agreements between the
Corporation and such Additional Securityholders as amended,
supplemented or otherwise modified from time to rime and in effect
at the time of registration, or, in the absence of any applicable
provisions, pro rata among all such Additional Securityholders based
upon the number of Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares held by each such Additional Securityholder at
the tune of registration); and
(D) fourth, the Other Shares.
(iii) If such registration is initiated by Additional
Securityholders who or which request the inclusion of their Additional
Registrable Shares constituting SP Registrable Shares in such
registration:
(A) first, the Additional Registrable Shares constituting SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration and the Registrable Shares requested
by the Lucent Securityholders to be included in such registration
(or, if necessary, such Shares pro rata among all such Persons based
on the aggregate number of SP Registrable Shares and Registrable
Shares held by each such Person at the time of registration);
(B) second, the Additional Registrable Shares constituting
Initial Common Shares, Conversion Shares or Warrant Shares requested
by the Additional Securityholders to be included in such
registration (or, if necessary, such Shares allocated among all such
Additional Securityholders in accordance with the applicable
provisions of any agreements between the Corporation and such
Additional Securityholders, as amended, supplemented or otherwise
modified from time to time and in effect at the time of
registration, or, in the absence of any applicable provisions, pro
rata among all such Additional Securityholders based upon the number
of Additional Registrable Shares constituting Initial Common Shares,
Conversion Shares or Warrant Shares held by each such Additional
Securityholder at the (line of registration);
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(C) third, the Primary Shares;
(D) fourth, the Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares
allocated among all such Additional Securityholders in accordance
with the applicable provisions of any agreements between the
Corporation and such Additional Securityholders, as amended,
supplemented or otherwise modified from time to time and in effect
at the time of registration, or, in the absence of any applicable
provisions, pro rata among all such Additional Securityholders based
upon the number of Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares held by each such Additional Securityholder at
the time of registration); and
(E) fifth, the Other Shares.
(iii) If such registration is initiated by Additional
Securityholders who or which request the inclusion of Additional
Registrable Shares constituting Initial Common Shares, Conversion Shares
or Warrant Shares in such registration:
(A) first, the Additional Registrable Shares constituting
Initial Common Shares, Conversion Shares or Warrant Shares requested
by the Additional Securityholders to be included in such
registration (or, if necessary, such Shares allocated among all such
Additional Securityholders in accordance with the applicable
provisions of any agreements between the Corporation and such
Additional Securityholders, as amended, supplemented or otherwise
modified from time to time and in effect at the time of
registration, or, in the absence of any applicable provisions, pro
rata among all such Additional Securityholders based upon the number
of Additional Registrable Shares constituting Initial Common Shares,
Conversion Shares or Warrant Shares held by each such Additional
Securityholder at the time of registration);
(B) second, the Registrable Shares requested by the Lucent
Securityholders to be included in such registration and the
Additional Registrable Shares constituting SP Registrable Shares
requested by the Additional Securityholders to be included in such
registration (or, if necessary, such Shares pro rata among all such
Persons based on the aggregate number of Registrable Shares and SP
Registrable Shares held by each such Person at the time of
registration);
(C) third, the Primary Shares;
(D) fourth, the Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or. if necessary. such Shares
allocated among all such Additional Securityholders
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in accordance with the applicable provisions of any agreements
between the Corporation and such Additional Securityholders, as
amended, supplemented or otherwise modified from time to time and in
effect at the time of registration, or. in the absence of any
applicable provisions, pro rata among all such Additional
Securityholders based upon the number of Additional Registrable
Shares not constituting Initial Common Shares, Conversion Shares,
Warrant Shares or SP Registrable Shares held by each such Additional
Securityholder at the time of registration; and
(E) fifth, the Other Shares.
4. Holdback Agreement.
If the Corporation at any time shall register shares of Common Stock
under the Securities Act in an aggregate amount of at least $5,000,000
(including any registration pursuant to Section 2 or 3, but excluding any
registrations on Form S-4 or S-8) for sale to the public, no Lucent
Securityholder shall sell publicly, make any short sale of, grant any option for
the purchase of, or otherwise dispose publicly of, any capital stock of the
Corporation (other than those shares of Common Stock included in such
registration pursuant to Section 2 or 3) without the prior written consent of
the Corporation, for a period designated by the Corporation in writing to the
Lucent Securityholders, which period shall begin not more than 10 days prior to
the effectiveness of the registration statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the date on
which such registration statement became effective, whether or not such Lucent
Securityholder participates in such registration. Each Lucent Securityholder
agrees that the Corporation may instruct its transfer agent to place stop
transfer notations on its records to enforce this Section 4
5. Preparation and Filing.
If and whenever the Corporation is under an obligation pursuant to
the provisions of this Agreement to use its best efforts to effect the
registration of, and keep effective a Registration Statement, for any
Registrable Shares, the Corporation shall, as expeditiously as practicable:
(a) use its best efforts to cause a Registration Statement that
registers such Registrable Shares to become and remain effective for a period of
90 days or until all of such Registrable Shares have been disposed of (if
earlier);
(b) furnish, at (east five Business Days before filing a
Registration Statement that registers such Registrable Shares, a Prospectus
relating thereto and any amendments or supplements relating to such Registration
Statement or Prospectus, to one counsel selected by the Majority of the Lucent
Securityholders (the "Lucent Securityholders' Counsel"), copies of all such
documents proposed to be filed (it being understood that such five Business Day
period need not apply tO successive drafts of the same document proposed to be
filed so long as such successive drafts are supplied to the Lucent
Securityholders' Counsel in advance of the proposed filing by a period of time
that is customary and reasonable under the circumstances);
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(c) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective for at least a
period of 90 days or until all of such Registrable Shares have been disposed of
(if earlier) and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of such Registrable Shares:
(d) notify the Lucent Securityholders' Counsel promptly in writing
of (i) any comments by the SEC with respect to such Registration Statement or
Prospectus, or any request by the SEC for the amending or supplementing thereof
or for additional information with respect thereto, (ii) the issuance by the SEC
of any stop order suspending the effectiveness of such Registration Statement or
Prospectus or any amendment or supplement thereto or the initiation or
threatening of any proceedings for that purpose (and the Corporation shall use
its best efforts to prevent the issuance thereof or, if issued, to obtain its
withdrawal) and (iii) the receipt by the Corporation of any notification with
respect to the suspension of the qualification of such Registrable Shares for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purposes;
(e) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions as any
Registering Lucent Securityholder may reasonably request, to keep such
registrations or qualifications in effect for so long as such Registration
Statement covering such Registrable Shares remains in effect and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such Registering Lucent Securityholder to consummate the disposition in such
jurisdictions of the Registrable Shares owned by such Registering Lucent
Securityholder, provided, however, that the Corporation will not be required to
qualify generally to do business, to subject itself to general taxation or
consent to general service of process in any jurisdiction where it would not
otherwise be required to do so but for this Section 5(e) or to provide any
material undertaking or make any changes in its Bylaws or Certificate of
Incorporation which its Board of Directors determines to be contrary to the best
interests of the Corporation;
(f) furnish to each Registering Lucent Securityholder such number of
copies of a summary Prospectus, if any, or other Prospectus, including a
preliminary Prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Registering Lucent Securityholder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares held by Registering Lucent Securityholder;
(g) use its best efforts to cause such Registrable Shares to be
registered with or approved by such other Governmental Entities as may be
necessary by virtue of the business and operations of the Corporation to enable
the Registering Lucent Securityholders to consummate the disposition of such
Registrable Shares;
(h) notify on a timely basis each Registering Lucent Securityholder
at any time when a Prospectus relating to such Registrable Shares is required to
be delivered under the Securities Act within the appropriate period mentioned in
Section 5(a), of the happening of any event known to the Corporation as a result
of which the Prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to he stated therein or necessary to make the statements
therein not
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misleading in light of the circumstances then existing and, at the request of
such Registering Lucent Securityholder, prepare and furnish to such Registering
Lucent Securityholder 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 offerees of such Registrable Shares, such Prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(i) subject to the execution of confidentiality agreements in form
and substance satisfactory to the Corporation, make available, upon reasonable
notice and during normal business hours, for inspection by the Registering
Lucent Securityholders any underwriter participating in any disposition pursuant
to such Registration Statement and any attorney, accountant or other agent
retained by the Registering Lucent Securityholders or underwriter (collectively,
the "Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of the Corporation (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Corporation's officers, directors
and employees to supply all information (together with the Records, the
"Information") reasonably requested by any such Inspector in connection with
such Registration Statement (any of the Information which the Corporation
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, shall not be disclosed by the Inspectors, unless (i)
the disclosure of such Information is necessary to avoid or correct a
mistatement or omission in the Registration Statement, (ii) the release of such
Information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or, upon the written advice of counsel, is otherwise
required by law, or (iii) such Information has been made generally available to
the public, and each Registering Lucent Securityholder agrees that it will, upon
learning that disclosure of such information is sought in a court of competent
jurisdiction, give notice to the Corporation and allow the Corporation, at the
Corporation's expense, to undertake appropriate action to prevent disclosure of
the Information deemed confidential);
(j) use its best efforts to obtain from its independent certified
public accountants "cold comfort" letters in customary form and at customary
times and covering matters of the type customarily covered by cold comfort
letters;
(k) use its best efforts to obtain, from its counsel an opinion or
opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same
Person and which may be the Corporation) for such Registrable Shares;
(m) issue to any underwriter to which any Registrable Lucent
Securityholder may sell such Registrable Shares in such offering, certificates
evidencing such Registrable Shares;
(n) list such Registrable Shares on any national securities exchange
on which any shares of Common Stock are listed or, if Common Stock is not listed
on a national securities exchange, use its best efforts to qualify such
Registrable Shares for inclusion on the national automated quotation system of
the National Association of Securities Dealers, Inc. (the
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"NASD"), or such other national securities exchange as the holders of a majority
of such Registrable Shares shall reasonably request;
(o) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its securityholders, as
soon as reasonably practicable, earnings statements (which need not be audited)
covering a period of 12 months beginning within three months after the effective
date of the Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(p) subject to all of the other provisions of this Agreement, use
its best efforts to take all other steps necessary to effect the registration of
such Registrable Shares contemplated hereby.
Each Registering Lucent Securityholder, upon the receipt of any
notice from the Corporation of any event of the kind described in Section 5(h),
shall forthwith discontinue disposition of Registrable Shares pursuant to the
Registration Statement until such Registering Lucent Securityholder's receipt of
copies of the supplemented or amended Prospectus contemplated by Section 5(h),
and, if so directed by the Corporation, such Registering Lucent Securityholder
shall deliver to the Corporation all copies, other than permanent file copies
then in such Lucent Securityholders possession, of the Prospectus covering such
Registrable Shares at the time of receipt of such notice
6. Expenses.
All expenses incurred by the Corporation in complying with Section
5, including, without limitation, all registration and filing fees (including
all expenses incident to filing with the NASD), fees and expenses of complying
with securities and blue sky laws, printing expenses, fees and expenses of the
Corporation's counsel and accountants and fees and expenses of the Lucent
Securityholders' Counsel, shall be paid by the Corporation; provided, however,
that all underwriting discounts and selling commissions applicable to the
Registrable Shares shall not be borne by the Corporation arid shall be borne by
the Registering Lucent Securityholders selling such Registrable Securities, in
proportion to the number of Registrable Shares sold by each such Registering
Lucent Securityholder.
7. Indemnification.
(a) In connection with any registration of any Registrable Shares
under the Securities Act pursuant to this Agreement, the Corporation shall
indemnify and hold harmless each holder of such Registrable Shares, each
underwriter, banker or any other Person acting on behalf of any such holder and
each other Person, if any, who controls any of the foregoing Persons within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, (or actions in respect thereof) to which any of
the foregoing Persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims. damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary Prospectus or final Prospectus contained therein or otherwise filed
with the SEC. any amendment
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<PAGE>
or supplement thereto or any document incident to registration or qualification
of any Registrable Shares, or arise our of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or, with respect to
any Prospectus, necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any violation by the
Corporation of the Securities Act or state securities or blue sky laws
applicable to the Corporation and relating to action or inaction required of the
Corporation in connection with such registration or qualification under such
state securities or blue sky laws, and the Corporation shall promptly reimburse
each such holder) underwriter, broker or other Person acting on behalf of any
such holder and each such controlling Person for any legal or other expenses
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
Corporation shall not be liable to any such Person to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said Registration Statement, preliminary Prospectus, amendment, supplement or
document incident to registration or qualification of any Registrable Shares in
reliance upon and in conformity with information furnished to the Corporation,
or a Person duly acting on the Corporation's behalf, through an instrument duly
executed by such Person, or a Person duly acting on such Persons behalf,
specifically for use in connection with the preparation thereof; provided
further, however, that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any untrue statement, allegedly untrue
statement, omission or alleged omission made in any preliminary Prospectus but
eliminated or remedied in the final Prospectus (filed pursuant to Rule 424 of
the Securities Act), such indemnity agreement shall not inure to the benefit of
any indemnified party from whom the Person asserting any loss, claim, damage,
liability or expense purchased the Registrable Shares which are the subject
thereof, if a copy of such final Prospectus had been timely made available to
such indemnified Person and such final Prospectus was not delivered to such
Person with or prior to the written confirmation of the sale of such Registrable
Shares to such Person.
(b) In connection with any registration of Registrable Shares under
the Securities Act pursuant to this Agreement, each holder of Registrable Shares
shall, severally and not jointly, indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 7(a)) the Corporation,
each director of the Corporation, each officer of the Corporation who signs such
Registration Statement, each other holder of Registrable Shares, Additional
Registrable Shares or Other Shares included in such Registration Statement
(provided, that the holder shall be entitled to indemnification of a similar
nature from such other holder to at least the same extent as the indemnification
given by the holder pursuant to this Section 7(b)), each underwriter, broker or
any other Person acting on behalf of any such holder and each other Person, if
any, who controls any of the foregoing Persons within the meaning of the
Securities Act with respect to any statement or omission from such Registration
Statement, any preliminary Prospectus or final Prospectus contained therein or
otherwise filed with the SEC, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares, if
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Corporation or such underwriter through an
instrument duly executed by such holder, or a Person duly acting on such
holder's behalf, specifically for use in connection with the preparation of such
Registration Statement, preliminary Prospectus, final Prospectus, amendment,
supplement or document; provided, however, that the maximum amount
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<PAGE>
of liability in respect of such indemnification shall be limited, in the case of
each holder of Registrable Shares, to an amount equal to the net proceeds
actually received by such holder from the sale of Registrable Shares effected
pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 7(a) or
Section 7(b), such indemnified party will, if a claim in respect thereof is made
against an indemnifying party, give written notice to the matter of the
commencement of such action (provided that an indemnified party's failure to
give such notice in a timely manner shall only relieve the indemnification
obligations of an indemnifying party to the extent such indemnifying party is
prejudiced by such failure). In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
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 responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that if any indemnified party shall have
reasonably concluded that there may be one or more Legal or equitable defenses
available to such indemnified party which are in addition to or conflict with
those available to the indemnifying party, or that such claim or litigation
involves or could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 7, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
Person controlling such indemnified party for that portion of the fees and
expenses of any one lead counsel (plus appropriate special and local counsel)
retained by the indemnified party which are reasonably related to the matters
covered by the indemnity agreement provided in this Section 7. The indemnifying
party shall not be liable to indemnify any indemnified party for any settlement
of any claim or action effected without the consent of the indemnifying party.
The indemnifying party may not settle any claim or action brought against an
indemnified party unless such indemnified party is released from all and any
liability as part of such settlement.
(d) If the indemnification provided for in this Section 7 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other hand in
connection with the statements or omissions which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations; provided, however, that the maximum amount of Liability in
respect of such contribution shall be limited, in the case of each holder of
Registrable Shares, to an amount equal to the net proceeds actually received by
such holder from the sale of Registrable Shares effected pursuant to such
registration. 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
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statement or omission. The parties agree that it would not be just and equitable
if contribution pursuant hereto were determined by pro rata allocation or by any
other method or allocation which does not take account of the equitable
considerations referred to herein. No person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person.
(e) The indemnification and contribution provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and will survive the transfer of
securities.
8. Underwriting Agreement.
Notwithstanding the provisions of Sections 5 through 7, to the
extent that the Lucent Securityholders shall enter into an underwriting or
similar agreement, which agreement contains provisions covering one or more
issues addressed in such Sections, the provisions contained in such Sections
addressing such issue or issues shall be of no force or effect with respect to
such registration, but this provision shall not apply to the Corporation if the
Corporation is not a party to the underwriting or similar agreement.
9. Suspension.
Anything contained in this Agreement to the contrary
notwithstanding, the Corporation may (but not more than once with respect to
each Registration Statement), by notice in writing to each holder of Registrable
Shares to which a Prospectus relates, require such holder to suspend, for up to
90 days (the "Suspension Period"), the use of any Prospectus included in a
Registration Statement filed under Section 2 or 3 if a Material Transaction
exists that would require an amendment to such Registration Statement or
supplement to such Prospectus (including any such amendment or supplement made
through incorporation by reference to a report filed under Section 13 of the
Exchange Act). The period during which such Prospectus must remain effective
shall be extended by a period equal to the Suspension Period. The Corporation
may (but shall not be obligated to) withdraw the effectiveness of any
Registration Statement subject to this provision.
10. Information by Holder.
Each holder of Registrable Shares to be included in any such
registration shall furnish to the Corporation and the managing underwriter such
written information regarding such holder and the distribution proposed by such
holder as the Corporation or the managing underwriter may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
11. Exchange Act Compliance.
From the Registration Date or such earlier date as a registration
statement filed by the Corporation pursuant to the Exchange Act relating to any
class of the Corporation's securities shall have become effective, the
Corporation shall comply with all of the reporting requirements of the Exchange
Act applicable to it (whether or not it shall be required to do so, but
specifically excluding Section 14 of the Exchange Act if not then applicable to
the Corporation) and shall comply with all other public information reporting
requirements of the SEC which are conditions
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to the availability of Rule 144 for the sale of the Common Stock The Corporation
shall cooperate with the Lucent Securityholders in supplying such information as
may be necessary for the Lucent Securityholders to complete and file any
information reporting forms presently or hereafter required by the SEC as a
condition to the availability of Rule 144.
12. Legends on Certificates.
(a) Each certificate issued after the date hereof that represents
Restricted Securities shall (unless otherwise permitted by the provisions of
this Section 12) be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any other legend required by
law or applicable agreement):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED."
"THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE CONDITIONS
SPECIFIED IN A STRATEGIC PARTNER REGISTRATION RIGHTS AGREEMENT DATED
AS OF FEBRUARY 7, 2000, BETWEEN OPUS36O CORPORATION, A DELAWARE
CORPORATION (THE "ISSUER"), AND LUCENT TECHNOLOGIES INC., AS THE
SAME MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED AND IN
EFFECT FROM TIME TO TIME. A COPY OF SUCH AGREEMENT IS ON FILE AND
MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER."
The Corporation agrees to remove the legend set forth in this
Section 12(a) from a certificate representing securities issued by the
Corporation if such securities are sold pursuant to an effective registration
statement under the Securities Act or there is delivered to the Corporation an
opinion of counsel selected by the holder of such certificate (who may be an
employee of such holder) in form and substance reasonably satisfactory to the
Corporation that the securities represented thereby need no longer be subject to
restrictions on resale under the Securities Act.
(b) Each Lucent Securityholder consents to the Corporation making a
notation on its records and giving instructions to any transfer agent of such
Lucent Securityholder's Restricted Securities in order to implement the
restrictions on transfer established in this Section 12.
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13. Mergers, Etc.
The Corporation shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Corporation shall not be
the surviving corporation unless the surviving corporation shall, prior to such
merger, consolidation or reorganization, agree in writing to assume the
obligations of the Corporation under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to include the
shares of common stock if any, that holders of Registrable Shares would be
entitled to receive in exchange for Common Stock under any such merger,
consolidation or reorganization; provided, however, that, to the extent holders
of Registrable Shares receive securities that are by their terms convertible
into shares of common stock of the issuer thereof, then only such shares of
common stock as are issued or issuable upon conversion of said convertible
securities shall be included within the definition of "Registrable Shares."
14. Nominees for Beneficial Owners.
If Registrable Shares are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its option, be treated as the
holder of such Registrable Shares for purposes of any request or other action by
any holder or holders of Registrable Shares pursuant to this Agreement (or any
determination of any number of percentage of shares constituting Registrable
Shares held by any holder or holders of Registrable Shares contemplated by this
Agreement); provided, however, that the Corporation shall have received
assurances reasonably satisfactory to it of such beneficial ownership.
15. No Conflict of Rights; Future Rights.
The Corporation shall not, after the date hereof, grant any
registration rights which conflict with the registration rights granted to the
Lucent Securityholders hereby. If at any time following the date hereof, the
Corporation shall grant to any Strategic Partner rights to cause, or participate
in, a registration statement of the Corporation (but excluding any registration
on Form S-4 or S-8 to be filed with the SEC that includes Restricted Securities
of such Strategic Partner and such rights are superior (after taking into
account the mitigating effect of any commitments or obligations required of such
holders in connection with the Corporation's grant of such rights) to the
registration rights granted to the Lucent Securityholders hereby (as reasonably
determined in good faith by the Board by way of resolution), this Agreement
shall immediately be deemed amended to include rights in favor of the Lucent
Securityholders substantially identical to such superior rights granted to such
Strategic Partner: provided, however, any rights granted by the Corporation on
or after the date hereof to one or more Strategic Partners to cause registration
statements of the type described above to be filed with the SEC on one or more
occasions shall not constitute superior rights
16. Termination.
This Agreement shall terminate and be of no further force or effect
when there shall no longer be any Registrable Shares or Additional Registrable
Shares outstanding, provided, however, that Section 6 and Section 7 shall
survive the termination of this Agreement.
17. Successors and Assigns.
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This Agreement shall bind and inure to the benefit of the
Corporation and the Lucent Securityholders and, subject to Section 18, the
respective successors and assigns of the Corporation arid the Lucent
Securityholders.
18. Assignment.
Subject to the applicable limitations of the Stockholders'
Agreement, each Lucent Securityholder may sell, assign or otherwise transfer
its rights hereunder to any purchaser, assignee or other transferee of the
Registrable Shares of such Lucent Securityholder; provided, however, that any
such purchaser, assignee or other transferee, if not already a party to this
Agreement, shall, as a condition to the effectiveness of such sale, assignment
or other transfer, be required to execute a written joinder to this Agreement
agreeing to be treated as a Lucent Securityholder under this Agreement and to be
bound by and comply with all of the applicable terms and provisions hereof,
whereupon such purchaser, assignee or transferee shall have the benefits of, and
shall be subject to the restrictions contained in, this Agreement as if such
purchaser or transferee was originally a Lucent Securityholder and had
originally been a party hereto.
19. Notices.
All notices, requests, demands, claims, consents or other
communications that are given or made hereunder to any party hereto shall be in
writing and shall be given or made by physical delivery, U.S. mail (registered
or certified mail, postage prepaid, return receipt requested) or overnight
courier or by transmission by facsimile to such party at its, his or her address
(or facsimile number) set forth below, or such other address (or facsimile
number) as shall have been specified by like notice by such party:
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(i) If to the Corporation, to
Opus360 Corporation
733 Third Avenue, 17th Floor
New York, NY 10017
Attention: Richard McCann, Chief Financial Officer
Telephone: (212) 301 -2218
Facsimile: (212) 301-2842
with a copy (which shall not constitute notice) to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telephone: (212) 408-2400
Facsimile: (212) 728-5950
(ii) if to any Lucent Securityholder, to such Lucent
Securityholder at the address set forth on Schedule I
immediately below the name of such
Lucent Securityholder.
Each such notice, demand or other communication hereunder shall be
effective upon receipt in the case of physical delivery or overnight courier,
upon confirmation of receipt by or on behalf of the addressee in the case of
transmission by facsimile if received prior to 5:00 p.m. New York City time.
and, if received after 5:00 p.m., on the date after such confirmation, and three
(3) days after deposit in the U.S. mails in the case of mailing.
20. Entire Agreement.
This Agreement and the other writings referred to herein or
delivered pursuant hereto contain the sole and entire agreement among the
Corporation and the Lucent Securityholders with respect to the subject matter
hereof and thereof and shall supersede all prior or contemporaneous arrangements
or understandings with respect hereto or thereto.
21. Amendment.
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to a writing signed by
(1) the Corporation, and (ii) a Majority of the Lucent Securityholders:
provided, however, that no such written consent shall he required for the
amendment of Schedule I solely to reflect the name and address of any new Lucent
Securityholder who has become a party to this Agreement in accordance with the
terms and conditions hereof. No waiver by any party hereto of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. Each holder of any Restricted Securities outstanding at or after the
time of any modification or amendment of or waiver of any provisions of this
Agreement, shall be bound by
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any consent authorized by this Section 21, whether or not such Restricted
Securities shall have been marked to indicate such consent.
22. Severability.
It is the desire and intent of the parties hereto that the
provisions of this Agreement be enforced to the fullest extent permissible under
the Laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular provision of this Agreement shall be
adjudicated by a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing. if such provision could he more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction it shall,
as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
23. Counterparts; Facsimile Signatures.
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. This Agreement and
each other agreement or instrument entered into in connection herewith or
contemplated hereby, and any amendments hereto or thereto, to the extent signed
and delivered by means of a facsimile machine, shall be treated in all manner
and respects as an original agreement or instrument and shall be considered to
have the same binding legal effect as if it were the original signed version
thereof delivered in person. At the request of any party hereto or to any such
agreement or instrument, each other party hereto or thereto shall reexecute
original forms thereof and deliver them to all other parties.
24. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE Of NEW
YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
25. Interpretation; Construction.
The headings contained in this Agreement and in the table of
contents to this Agreement are for convenience of reference only and shall not
govern or affect in any way the meaning or interpretation of any of the terms or
provisions of this Agreement. Except when the context requires otherwise, any
reference in this Agreement to any Section, clause or Schedule shall be to the
Sections and clauses of, and Schedules to, this Agreement. The words "include,"
"includes" and "including" are deemed to be followed by the phrase "without
limitation." Any reference to the masculine, feminine or neuter gender shall
include such other genders and any reference to the singular or plural shall
include the other, in each case unless the context otherwise requires. Schedule
I annexed hereto are hereby incorporated in and made a part of this Agreement as
if set forth in full herein. Where specific language is used to clarify by
example a
22
<PAGE>
general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement has been
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
26. Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ITS, HIS OR HER
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE
SUJBECT MATTER HEREOF.
27. Attorney's Fees.
If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover such reasonable attorneys fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled, as may be ordered in connection with such proceeding.
* * * * *
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Strategic Partner Registration Rights Agreement as of the date first written
above.
OPUS360 CORPORATION
By:_____________________________________
Name:
Title:
LUCENT TECHNOLOGIES INC.
By:_____________________________________
Name:
Title:
<PAGE>
SCHEDULE I
Lucent Securityholders
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
Attention: Vice President, Corporate Strategy & Development
Tel: (908) 582-5575
Fax: (908) 582-8733
With a copy to:
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
Attention: Managing Corporate Counsel, M&A
Tel: (908) 582-8751
Fax: (908) 582-8048
26
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Exhibit 10-26
OPUS360 CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
1. Establishment of Plan.
Opus360 Corporation (the "Company") proposes to grant options for
purchase of the Company's Common Stock to eligible employees of the Company and
its Designated Subsidiaries pursuant to this 2000 Employee Stock Purchase Plan
(this "Plan"). For purposes of this Plan, the terms "Parent Corporation" and
"Subsidiary" shall have the same meanings as "parent corporation" and
"subsidiary corporation" in Sections 424(e) and 424(f), respectively, of the
Internal Revenue Code of 1986, as amended (the "Code"). The term "Designated
Subsidiaries" means Parent Corporations or Subsidiaries that the Board of
Directors of the Company (the "Board") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein. A
total of ________ shares of the Company's Common Stock is reserved for issuance
under this Plan. In addition, on each January 1, the aggregate number of shares
of the Company's Common Stock reserved for issuance under this Plan shall be
increased automatically by a number of shares equal to __% of the total number
of outstanding shares of the Company's Common Stock on the immediately preceding
December 31; provided, that the Board or the Committee (as defined in Section 3)
may in its sole discretion reduce the amount of the increase in any particular
year; and, provided, further, that the aggregate number of shares issued over
the term of this Plan shall not exceed _________ shares. Such number shall be
subject to adjustments effected in accordance with Section 14.
2. Purpose.
The purpose of this Plan is to provide eligible employees of the
Company and Designated Subsidiaries with a convenient means of acquiring an
equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and Designated
Subsidiaries, and to provide an incentive for continued employment.
3. Administration.
This Plan shall be administered by the Compensation Committee of the
Board (the "Committee"). Subject to the provisions of this Plan and the
limitations of Section 423 of the Code or any successor provision in the Code,
all questions of interpretation or application of this Plan shall be determined
by the Committee and its decisions shall be final and binding upon all
participants. Members of the Committee shall receive no compensation for their
services in connection with the administration of this Plan, other than standard
fees as established from time to time by the Board for services rendered by
Board members serving on Board committees. All
<PAGE>
expenses incurred in connection with the administration of this Plan shall be
paid by the Company.
4. Eligibility.
Any employee of the Company or the Designated Subsidiaries is
eligible to participate in an Offering Period (as defined in Section 5) under
this Plan except the following: (a) employees who are not employed by the
Company or a Designated Subsidiary prior to the beginning of such Offering
Period or prior to such other time period as specified by the Committee; (b)
employees who are customarily employed for twenty (20) hours or less per week;
(c) employees who are customarily employed for five (5) months or less in a
calendar year; (d) employees who, together with any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or any of its Designated Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Designated Subsidiaries; and (e) individuals who provide services to the
Company or any of its Designated Subsidiaries as independent contractors who are
reclassified as common law employees for any reason except for federal income
and employment tax purposes. Notwithstanding anything contained herein to the
contrary, an employee of the Company or the Designated Subsidiaries may not
participate in more than one Offering Period at a time.
5. Offering Dates.
The offering periods of this Plan (each, an "Offering Period") shall
be of twenty-four (24) months duration commencing on May 1 and November 1 of
each year and ending on April 30 and October 31 of each year; provided, however,
that the first such Offering Period shall commence on the first Business Day on
which price quotations for the Company's Common Stock are reported on the
national securities exchange or national market system on which the Company's
Common Stock shall first be listed, admitted to trading or traded (the "First
Offering Date") and shall end on April 30, 2002. Except for the first Offering
Period, each Offering Period shall consist of four (4) six month purchase
periods (individually, a "Purchase Period") during which payroll deductions of
the participants are accumulated under this Plan. The first Offering Period
shall consist of no more than five and no fewer than three Purchase Periods, any
of which may be greater or less than six months as determined by the Committee.
The first Business Day of each Offering Period is referred to as the "Offering
Date". The last Business Day of each Purchase Period is referred to as the
"Purchase Date". The Committee shall have the power to change the Offering
Dates, the Purchase Dates and the duration of Offering Periods or Purchase
Periods without stockholder approval if such change is announced prior to the
relevant Offering Period or prior to such other time period as specified by the
Committee. For purposes of this Plan, the term "Business Day" means any day,
other than a Saturday, Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.
2
<PAGE>
6. Participation in this Plan.
Eligible employees may become participants in an Offering Period
under this Plan on the Offering Date of such Offering Period, after satisfying
the eligibility requirements to participate in such Offering Period as set forth
in this Plan, by delivering a subscription agreement, substantially in the form
attached hereto as Exhibit A, to the Company prior to such Offering Date, or
such other time period as specified by the Committee. Notwithstanding the
foregoing, the Committee may set a later time for filing the subscription
agreement authorizing payroll deductions for all eligible employees with respect
to a given Offering Period. An eligible employee who does not deliver a
subscription agreement to the Company by such Offering Date after becoming
eligible to participate in such Offering Period shall not participate in that
Offering Period or any subsequent Offering Period unless such employee enrolls
in this Plan by filing a subscription agreement with the Company prior to such
Offering Date, or such other time period as specified by the Committee. Once an
employee becomes a participant in an Offering Period, such employee will
automatically participate in the Offering Period commencing immediately
following the last day of the prior Offering Period unless the employee
withdraws or is deemed to withdraw from this Plan or terminates further
participation in the Offering Period as set forth in Section 11. Such
participant is not required to file any additional subscription agreement in
order to continue participation in this Plan.
7. Grant of Option on Offering Date.
Enrollment by an eligible employee in this Plan with respect to an
Offering Period will constitute the grant (as of the Offering Date) by the
Company to such employee of an option to purchase on the Purchase Date up to
that number of shares of Common Stock of the Company determined by dividing (a)
the amount accumulated in such employee's payroll deduction account during such
Purchase Period by (b) the lesser of (i) eighty-five percent (85%) of the Fair
Market Value of a share of the Company's Common Stock on the Offering Date (but
in no event less than the par value of a share of the Company's Common Stock),
or (ii) eighty-five percent (85%) of the Fair Market Value of a share of the
Company's Common Stock on the Purchase Date (but in no event less than the par
value of a share of the Company's Common Stock); provided, however, that the
number of shares of the Company's Common Stock subject to any option granted
pursuant to this Plan shall not exceed the maximum number of shares set by the
Committee pursuant to Section 10(b) with respect to the applicable Purchase
Date. The Fair Market Value of a share of the Company's Common Stock shall be
determined as provided in Section 8.
8. Purchase Price.
The purchase price per share at which a share of Common Stock will
be sold in any Offering Period shall be eighty-five percent (85%) of the lesser
of (x) the Fair Market Value of a share of the Company's Common Stock on the
Offering Date (but in no event less than the par value of a share of the
Company's Common Stock) or (y) the Fair Market Value of a share of the Company's
Common Stock on the Purchase Date (but in no event less than the par value of a
share of the Company's Common Stock). For purposes of this Plan, the term "Fair
Market Value" means, on any date, for any security, (i) if such security is of a
class or series of securities then listed or admitted to trading on any national
securities exchange or traded on any national
3
<PAGE>
market system, the closing sale price on such date or, if no such sale takes
place on such date, the average of the closing bid and ask prices on such date,
in each case as officially reported on the principal national securities
exchange or national market system on which securities are then listed, admitted
to trading or traded, (ii) if such security is not of a class or series of
securities then listed or admitted to trading on any national securities
exchange or traded on any national market system, or else if no closing sale
price or closing bid and ask prices thereof are then so reported by any such
exchange or system, the average of the reported closing bid and ask prices for
such security in the over-the-counter market on such date as shown by the NASD
automated quotation system, or if such securities are not then quoted on such
system, as published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Company, and (iii) if such
security is not of a class or series of securities then listed or admitted to
trading on any national securities exchange or traded on any national market
system, or else if no closing sale price or closing bid and ask prices thereof
are then so reported by such exchange or system, or else if no closing bid and
ask prices thereof are then so quoted or published in the over-the-counter
market, the fair value of such security on such date, which shall be determined
in good faith by the Board; provided, however, that, the Fair Market Value of a
share of the Company's Common Stock on the First Offering Date shall be the
price per share at which shares of the Company's Common Stock are initially
offered for sale to the public by the Company's underwriters in the initial
public offering of the Company's Common Stock pursuant to a registration
statement on Form S-1 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act").
9. Payment of Purchase Price; Changes in Payroll Deductions; Issuance of
Shares.
(a) The purchase price of the shares of Common Stock which will be
sold upon the exercise of any option granted under this Plan shall be
accumulated by regular payroll deductions made during each Offering Period. The
deductions shall be made as a percentage of the participant's Compensation in
one percent (1%) increments not less than one percent (1%), nor greater than
fifteen percent (15%) or such lower limit set by the Committee; provided,
however, that no participant shall be entitled to deduct more than $10,000 in
any Purchase Period (or such other maximum amount as determined by the Committee
prior to or during any Purchase Period). The term "Compensation" shall mean all
W-2 cash compensation, including, but not limited to, base salary, wages,
commissions, overtime, shift premiums and bonuses, plus draws against
commissions, provided, however, that for purposes of determining a participant's
compensation, any election by such participant to reduce his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be treated as if the
participant did not make such election. Payroll deductions shall commence on the
first payday of the Offering Period and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing after the Company's receipt of
the authorization and shall continue for the remainder of the Offering Period
unless changed as described below. Such change in the rate of payroll deductions
may be made at any time during an Offering Period, but not more than one (1)
change may be made
4
<PAGE>
effective during any Purchase Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Company a new authorization for payroll deductions prior to the beginning of
such Offering Period, or such other time period as specified by the Committee.
(c) A participant may reduce his or her payroll deduction percentage
to zero during an Offering Period by filing with the Company a request for
cessation of payroll deductions. Such reduction shall be effective beginning
with the next payroll period after the Company's receipt of the request and no
further payroll deductions will be made for the duration of the Offering Period.
Payroll deductions credited to the participant's account prior to the effective
date of the request shall be used to purchase shares of Common Stock of the
Company in accordance with Section 9(e). A participant may not resume making
payroll deductions during the Offering Period in which he or she reduced his or
her payroll deductions to zero.
(d) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(e) On each Purchase Date, so long as this Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8.
Any cash remaining in a participant's account after such purchase of shares
shall be refunded to such participant in cash, without interest; provided,
however, that any amount remaining in such participant's account on a Purchase
Date which is less than the amount necessary to purchase a full share of Common
Stock of the Company shall be carried forward, without interest, into the next
Purchase Period or Offering Period, as the case may be. In the event that this
Plan has been oversubscribed, all funds not used to purchase shares on the
Purchase Date shall be returned to the participant, without interest. No Common
Stock shall be purchased on a Purchase Date on behalf of any employee whose
participation in this Plan has terminated prior to such Purchase Date.
(f) At the time any option granted under this Plan is exercised, in
whole or in part, or at the time some or all of the Common Stock sold upon the
exercise of any option granted under this Plan is disposed of, the participant
to whom such option was granted shall make adequate provision for the Company's
federal, state or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax
5
<PAGE>
deductions or benefits attributable to the sale or early disposition of Common
Stock by the participant.
(g) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon the exercise of his or her option.
(h) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised.
(i) No option granted pursuant to this Plan shall be exercisable
after the expiration of the term provided for in Section 423(b)(7) of the Code.
10. Limitations on Shares to be Purchased.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in Fair Market Value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. The Company shall automatically suspend
the payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.
(b) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. All
participants shall not be entitled to purchase more than ________ shares (or
such other maximum number of shares as determined by the Committee) of the
Company's Common Stock in the aggregate on any single Purchase Date. Prior to
the commencement of any Offering Period, or prior to such time period as
specified by the Committee, the Committee may, in its sole discretion, set a
maximum number of shares which may be purchased by any employee at any single
Purchase Date (the "Maximum Share Amount"). The Maximum Share Amount shall be
______ shares of the Company's Common Stock (or such other Maximum Share Amount
as determined by the Committee). If a new Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount prior to the
commencement of the next Offering Period. The Maximum Share Amount shall
continue to apply with respect to all succeeding Purchase Dates and Offering
Periods unless revised by the Committee as set forth above.
(c) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's option to each participant affected.
6
<PAGE>
(d) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Company a written notice to that effect,
which shall be substantially in the form attached hereto as Exhibit B. Such
withdrawal may be elected at any time prior to the end of an Offering Period, or
such other time period as specified by the Committee.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 for initial
participation in this Plan.
(c) If the Fair Market Value of a share of the Company's Common
Stock on any Purchase Date of an Offering Period is less than the Fair Market
Value of a share of the Company's Common Stock on the Offering Date for such
Offering Period, then every participant shall automatically (i) be withdrawn
from such Offering Period at the close of such Purchase Date and after the
purchase of shares of Common Stock on such Purchase Date pursuant to the options
granted hereunder, to the extent such options are exercisable on such Purchase
Date, and (ii) be enrolled in the Offering Period commencing on or immediately
after such Purchase Date.
12. Termination of Employment.
Termination of a participant's employment for any reason, including
retirement, death or the failure of a participant to remain an eligible employee
of the Company or of a Designated Subsidiary, immediately terminates his or her
participation in this Plan. In such event, the payroll deductions credited to
the participant's account will be returned to him or her or, in the case of his
or her death, to his or her legal representative, without interest. For purposes
of this Section 12, an employee will not be deemed to have terminated employment
or failed to remain in the continuous employ of the Company or of a Designated
Subsidiary in the case of sick leave, military leave, or any other leave of
absence approved by the Board; provided, that such leave is for a period of not
more than ninety (90) days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
13. Return of Payroll Deductions.
In the event a participant's interest in this Plan is terminated by
withdrawal, termination of employment or otherwise, or in the event this Plan is
terminated by the Board, the Company shall deliver to the participant all
payroll deductions credited to such participant's account. No interest shall
accrue on the payroll deductions of a participant in this Plan.
14. Capital Changes.
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<PAGE>
(a) Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each option under this
Plan which has not yet been exercised and the number of shares of Common Stock
which have been authorized for issuance under this Plan but have not yet been
placed under option (collectively, the "Reserves"), as well as the price per
share of Common Stock covered by each option under this Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued and outstanding shares of Common Stock of the Company
resulting from a stock split or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of issued and
outstanding shares of Common Stock effected without receipt of any consideration
by the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of any
consideration." Such adjustment shall be made by the Committee, whose
determination shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that this Plan shall terminate as of a date fixed by the
Committee and give each participant the right to purchase shares under this Plan
prior to such termination. In the event of (i) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the options under this Plan are assumed, converted or replaced by
the successor corporation, which assumption will be binding on all
participants), (ii) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iii) the sale of all or
substantially all of the assets of the Company or (iv) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction, this Plan will continue with regard to Offering
Periods that commenced prior to the closing of the proposed transaction and
shares will be purchased based on the Fair Market Value of the surviving
corporation's stock on each Purchase Date, unless otherwise provided by the
Committee.
(c) The Committee may, if it so determines in the exercise of its
sole discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the event
that the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. Nonassignability.
8
<PAGE>
Neither payroll deductions credited to a participant's account nor
any rights with regard to the exercise of an option or to receive shares under
this Plan may be assigned, transferred, pledged or otherwise disposed of in any
way (other than by will, the laws of descent and distribution or as provided in
Section 22) by the participant. Any such attempt at assignment, transfer, pledge
or other disposition shall be void and without effect.
16. Reports.
Individual accounts will be maintained for each participant in this
Plan. Each participant shall receive promptly after the end of each Purchase
Period a report of his or her account setting forth the total payroll deductions
accumulated, the number of shares purchased, the per share price thereof and the
remaining cash balance, if any, carried forward to the next Purchase Period or
Offering Period, as the case may be.
17. Notice of Disposition.
Each participant shall notify the Company in writing if the
participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "Notice Period"). The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. No Rights to Continued Employment.
Neither this Plan nor the grant of any option hereunder shall confer
any right on any employee to remain in the employ of the Company or any
Designated Subsidiary, or restrict the right of the Company or any Designated
Subsidiary to terminate such employee's employment.
19. Equal Rights and Privileges.
All eligible employees shall have equal rights and privileges with
respect to this Plan so that this Plan qualifies as an "employee stock purchase
plan" within the meaning of Section 423 or any successor provision of the Code
and the related regulations. Any provision of this Plan which is inconsistent
with Section 423 or any successor provision of the Code shall, without further
act or amendment by the Company, the Committee or the Board, be reformed to
comply with the requirements of Section 423. This Section 19 shall take
precedence over all other provisions in this Plan.
20. Notices.
All notices or other communications by a participant to the Company
under or in connection with this Plan shall be deemed to have been duly given
when received in the form
9
<PAGE>
specified by the Company at the location, or by the person, designated by the
Company for the receipt thereof.
21. Term; Stockholder Approval.
After this Plan is adopted by the Board, this Plan will become
effective on the First Offering Date (as defined in Section 5). This Plan shall
be approved by the stockholders of the Company, in any manner permitted by
applicable corporate law, within twelve (12) months before or after the date
this Plan is adopted by the Board. No purchase of shares pursuant to this Plan
shall occur prior to such stockholder approval. This Plan shall continue until
the earlier to occur of (a) termination of this Plan by the Board (which
termination may be effected by the Board at any time), (b) issuance of all of
the shares of Common Stock reserved for issuance under this Plan, or (c) ten
(10) years from the adoption of this Plan by the Board.
22. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the end
of an Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares.
Shares shall not be issued with respect to an option unless the
exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act, the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or automated quotation
system upon which the shares may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
24. Applicable Law.
This Plan will be governed by and construed in accordance with the
domestic laws of the State of New York, without giving effect to any choice of
law or conflicting provision or rule (whether of the State of New York, or any
other jurisdiction) that would cause the laws of any jurisdiction other than the
State of New York to be applied.
10
<PAGE>
25. Amendment or Termination of this Plan.
The Board may at any time amend, terminate or extend the term of
this Plan, except that any such termination cannot affect options previously
granted under this Plan, nor may any amendment make any change in an option
previously granted which would adversely affect the right of any participant,
nor may any amendment be made without approval of the stockholders of the
Company obtained in accordance with Section 21 within twelve (12) months of the
adoption of such amendment (or earlier if required by Section 21) if such
amendment would: (a) increase the number of shares that may be issued under this
Plan; or (b) change the designation of the employees (or class of employees)
eligible for participation in this Plan. Notwithstanding the foregoing, the
Board may make such amendments to this Plan as the Board determines to be
advisable, if the continuation of this Plan or any Offering Period would result
in financial accounting treatment for this Plan that is different from the
financial accounting treatment in effect on the date this Plan is adopted by the
Board.
26. Additional Restrictions of Rule 16b-3.
The terms and conditions of options granted hereunder to, and the
purchase of shares by, persons subject to Section 16 of the Exchange Act shall
comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed
to contain, and such options shall contain, and the shares issued upon exercise
thereof shall be subject to, such additional conditions and restrictions as may
be required by Rule 16b-3 to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
* * * * *
11
<PAGE>
EXHIBIT A
OPUS360 CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
____ Original Application Enrollment Date: _____
____ Change in Payroll Deduction Date
____ Change of Beneficiaries
1. ______________ hereby elects to participate in the 2000 Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan") of Opus360 Corporation (the
"Company"), commencing with the Offering Period beginning on _________ __, _____
(the "Initial Offering Period"), and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan. Capitalized terms used herein and not otherwise
defined herein have the meanings assigned to them in the Employee Stock Purchase
Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of __% of my Compensation on each payday (from 1% to 15%), commencing with the
Initial Offering Period, in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted).
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to its terms and conditions. I understand that my ability to
exercise the option under this Subscription Agreement is subject to stockholder
approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (employee or employee and spouse only):
_______________________________
_______________________________
<PAGE>
6. I understand that if I dispose of any shares received by me pursuant to
the Employee Stock Purchase Plan within 2 years after the Offering Date of the
Offering Period during which I purchased such shares or within 1 year after the
Purchase Date on which I purchased such shares, I will be treated for federal
income tax purposes as having received ordinary compensation income at the time
of such disposition in an amount equal to the excess of the fair market value of
the shares on the disposition date over the price which I paid for the shares.
If I dispose of such shares at any time after expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal income
tax purposes as having received ordinary income only to the extent of an amount
equal to the lesser of (i) the amount, if any, that the Fair Market Value of the
Common Stock on the Offering Date exceeds my purchase price, or (ii) the amount,
if any, by which the Common Stock's Fair Market Value at the time of disposition
exceeds the purchase price. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss. I
understand that this tax summary is only a summary and is subject to change. I
FURTHER UNDERSTAND THAT I SHOULD CONSULT A TAX ADVISOR CONCERNING THE TAX
IMPLICATIONS OF THE PURCHASE AND SALE OF STOCK UNDER THE EMPLOYEE STOCK PURCHASE
PLAN.
7. I hereby agree to notify the Company in writing within 30 days after
the date of any disposition of shares and I will make adequate provision for
federal, state or other tax withholding obligations, if any, which arise upon
the disposition of shares.
8. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding obligation,
including any withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of shares by
me.
9. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
(continued on next page)
<PAGE>
10. In the event of my death, I hereby designate the following as my
beneficiaries to receive all payments and shares due me under the Employee Stock
Purchase Plan:
NAME: (Please print) __________________________________________
(First) (Middle) (Last)
______________________________ __________________________________________
(Relationship) (Address)
Employee's Social
Security Number: __________________________________________
Employee's Address: __________________________________________
__________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ________________________ __________________________________________
Signature of Employee
__________________________________________
Signature of Spouse (necessary if
beneficiary is not spouse)
__________________________________________
(Print name)
<PAGE>
EXHIBIT B
OPUS360 CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned hereby elects to withdraw his or her participation
in the 2000 Employee Stock Purchase Plan (the "Plan") of Opus360 Corporation
(the "Company") for the Offering Period that began on ____________ ___, _______.
The undersigned hereby directs the Company to pay to him or her as promptly as
practicable all the payroll deductions credited to his or her account under the
Plan with respect to such Offering Period. The undersigned understands and
agrees that his or her option for such Offering Period shall be automatically
terminated. The undersigned also understands and agrees that no further payroll
deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods only by delivering to the Company a new Subscription Agreement,
subject to the further terms and conditions of the Plan.
Dated: ________________________ __________________________________________
Signature of Participant
Name and Address of Participant:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
Social Security Number of Participant
<PAGE>
Exhibit 10.27
REGISTRATION RIGHTS AGREEMENT dated
as of February __, 2000, between OPUS360
CORPORATION, a Delaware corporation (the
"Corporation"), and the PM SECURITYHOLDERS
(as defined herein).
The PM Securityholders have been issued shares of the Corporation's
Common Stock (as defined below) pursuant to that certain agreement and plan of
merger (the "Merger Agreement") dated as of January 30, 2000, among the
Corporation, Opus PM Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of the Corporation ("OpusPM"), PeopleMover, Inc., a Delaware
corporation ("PeopleMover"), the Stockholder Representative (as defined in
Section 8.5 of the Merger Agreement), and the PM Securityholders (as to Article
II, Section 4.2 and Article IX thereof, and as to certain PM Securityholders,
Article VIII thereof). The Corporation and the PM Securityholders deem it to be
in their respective best interests to enter into this Agreement to set forth the
rights of the PM Securityholders in connection with public offerings and sales
of the Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the parties hereto agree as
follows:
1. Definitions.
As used herein, the following terms shall have the following
respective meanings:
"Additional Registrable Shares" means, at any time with respect to
any Additional Securityholder, the Registrable Shares held by such Additional
Securityholder (but only if such Additional Securityholder is entitled (but not
pursuant to this Agreement) to the registration of such Registrable Shares by
the Corporation under the Securities Act for sale to the public).
"Additional Securityholder" means any holder of Restricted
Securities who or which is entitled (but not pursuant to this Agreement) to the
registration of such Restricted Securities by the Corporation under the
Securities Act for sale to the public.
"Agreement" means this Registration Rights Agreement, as amended,
supplemented or otherwise modified from time to time.
"Business Day" means any day, other than a Saturday, Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Common Stock" means the common stock, par value $.001 per share, of
the Corporation (and such other class of common stock of the Corporation, or any
successor thereto, into which the Common Stock may be converted or reclassified,
and all references herein to the Common Stock shall mean such other class of
common stock, if applicable).
"Conversion Shares" means the Series A Conversion Shares and the
Series B Conversion Shares.
<PAGE>
"Corporation" has the meaning assigned to such term in the caption
to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC promulgated thereunder, all as the same may from time to time be in effect.
"Governmental Entity" means any government or political subdivision
or department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local or foreign.
"Initial Common Shares" means the Registrable Shares that are (i)
shares of Common Stock issued or issuable to Ari Horowitz, Carlos Cashman, Shawn
Kreloff, William Bahr, Brett Prager, Richard McCann, Alex Lapins, Anthony
Schmitz, Bruce Gilpin, Wayne Tsuchitani or USWeb/CKS Corporation or (ii) shares
of Common Stock issued on or with respect to the shares of Common Stock referred
to in clause (i) above.
"Initial Warrants" means (i) the warrants dated May 19, 1999 and
August 17, 1999 issued by the Corporation to Silicon Valley Bank to purchase
shares of Common Stock, (ii) the warrants dated December 24, 1998 issued by the
Corporation to each of Gerald Cashman, G&R Partnership, LP, Leonard Horowitz,
Irwin Lieber and Barry Rubenstein to purchase shares of Common Stock, and (iii)
the warrants dated September 3, 1999 and January 15, 2000 issued by the
Corporation to Greenhill & Co., LLC.
"Law" means any foreign, federal, state or local law, statute,
treaty, rule, directive, regulation, ordinance or similar provision having the
force or effect of law or any Order.
"Majority of the PM Securityholders" means those PM Securityholders
who or which hold in the aggregate in excess of 50% of all of the PM Registrable
Shares.
"Material Transaction" shall mean any material transaction in which
the Corporation or any of its Subsidiaries proposes to engage or is engaged,
including a purchase or sale of assets or securities, financing, merger,
consolidation, tender offer or any other transaction or event that would require
disclosure pursuant to the Exchange Act if the Corporation were a reporting
company thereunder, and with respect to which the Board of Directors of the
Corporation reasonably has determined in good faith that compliance with this
Agreement may reasonably be expected to either materially interfere with the
Corporation's or such Subsidiary's ability to consummate such transaction in a
timely fashion or require the Corporation to disclose material, non-public
information prior to such time as it would otherwise be required to be
disclosed.
"Orders" means any enforceable judgments, writs, decrees,
declarations, injunctions, orders, stipulations, compliance agreement or
settlement agreements issued or imposed by, or entered into with, a Governmental
Entity.
2
<PAGE>
"Other Shares" means, at any time, those shares of Common Stock
which do not constitute Primary Shares, PM Registrable Shares or Additional
Registrable Shares.
"Person" shall be construed as broadly as possible and shall include
an individual, a corporation (including a not-for-profit corporation), a
company, an association, a joint stock company, a partnership (including a
limited liability partnership), a limited liability company, a joint venture, a
trust or an unincorporated organization and a Governmental Entity.
"PM Registrable Shares" means the Registrable Shares that are (i)
shares of Common Stock issued to the Persons listed on Schedule I on the date
hereof, but only to the extent of the number of such shares of Common Stock set
forth opposite their names on Schedule I (which aggregate number shall not
exceed ___________ shares of Common Stock) or (ii) shares of Common Stock issued
on or with respect to the shares of Common Stock referred to in clause (i)
above.
"PM Securityholders" means, collectively, (i) the Persons listed on
Schedule I on the date hereof, (ii) any other Persons listed on Schedule I from
time to time, and (iii) any purchaser, assignee or other transferee of
Restricted Securities held by any of the foregoing in a purchase, assignment or
other transfer permitted under Section 17 and in which such purchaser, assignee
or other transferee has complied in full with the joinder requirements set forth
in Section 17. Upon the addition of each new PM Securityholder as a party to
this Agreement, the Corporation shall amend Schedule I solely to reflect the
name and address of such new PM Securityholder, and the Corporation shall
distribute to the PM Securityholders such amended Schedule I.
"Primary Shares" means, at any time, the authorized but unissued
shares of Common Stock or Common Stock held by the Corporation in its treasury.
"Prospectus" means the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the PM Registrable Shares and, in
each case, by all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
"Public Offering" means a public offering of Common Stock pursuant
to a registration statement declared effective under the Securities Act, except
that a Public Offering shall not include an offering of securities to be issued
as consideration in connection with a business acquisition or an offering of
securities issuable pursuant to an employee benefit plan.
"Registering PM Securityholders" means, with respect to any
registration of PM Registrable Shares, those PM Securityholders who or which
hold the PM Registrable Shares included in such registration.
"Registrable Shares" means, at any time with respect to any PM
Securityholder or Additional Securityholder, the shares of Common Stock held by
such PM Securityholder or Additional Securityholder that constitute Restricted
Securities. For purposes of this definition, a
3
<PAGE>
PM Securityholder or Additional Securityholder shall be deemed to be the holder
of shares of Common Stock whenever such PM Securityholder or Additional
Securityholder has the right to acquire, directly or indirectly, such Common
Stock upon the conversion or exercise of Restricted Securities (but disregarding
any restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"Registration Date" means the date upon which the registration
statement pursuant to which the Corporation shall have initially registered
shares of Common Stock under the Securities Act for sale to the public shall
have been declared effective.
"Registration Statement" means any registration statement of the
Corporation which covers any of the PM Registrable Shares, and all amendments
and supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Restricted Securities" means, at any time, with respect to any
Person, the shares of Common Stock, the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock, the Initial Warrants and any other
securities which by their terms are directly or indirectly exercisable or
exchangeable for or convertible into any of the foregoing securities, and any
securities received on or with respect to any of the foregoing securities, in
each case which are held by such Person. As to particular securities
constituting Restricted Securities, such securities shall cease to be Restricted
Securities when (A) they have been registered under the Securities Act, the
Registration Statement in connection therewith has been declared effective and
such Restricted Securities have been disposed of pursuant to and in the manner
described in such effective Registration Statement, (B) they are eligible to be
sold or distributed by the holder thereof pursuant to Rule 144 of the Securities
Act within any consecutive three-month period (including, without limitation,
subsection (k) of Rule 144) without volume limitations, (C) they have been
otherwise transferred and new certificates or other evidences of ownership for
them not bearing a restrictive legend and not subject to any stop transfer order
or other restriction on transfer shall have been delivered by the Corporation or
the issuer of other securities issued in exchange for the Restricted Securities,
or (D) they have ceased to be outstanding.
"SEC" means the United States Securities and Exchange Commission.
"securities" means, with respect to any Person, such Person's
"securities," as defined in Section 2(1) of the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same may from time to time be in effect.
"Series A Conversion Shares" means the Registrable Shares that are
(i) shares of Common Stock issued or issuable upon the conversion of Series A
Preferred Stock, (ii) shares of Common Stock issued on or with respect to the
shares of Common Stock referred to in clause (i) above or (iii) shares of Common
Stock issued on or with respect to the Series A Preferred Stock.
4
<PAGE>
"Series A Preferred Stock" means the Corporation's Series A
Convertible Preferred Stock, par value $.001 per share.
"Series B Conversion Shares" means the Registrable Shares that are
(i) shares of Common Stock issued or issuable upon the conversion of Series B
Preferred Stock, (ii) shares of Common Stock issued on or with respect to the
shares of Common Stock referred to in clause (i) above or (iii) shares of Common
Stock issued on or with respect to the Series B Preferred Stock.
"Series B Preferred Stock" means the Corporation's Series B
Convertible Preferred Stock, par value $.001 per share.
"Shares" means the Registrable Shares, the PM Registrable Shares,
the Additional Registrable Shares, the SP Registrable Shares, the Initial Common
Shares, the Conversion Shares and the Warrant Shares.
"SP Registrable Shares" means (i) any Additional Registrable Shares
issued by the Corporation to any Strategic Partner in connection with such
Strategic Partner's entry into a strategic arrangement with the Corporation for
the provision by either party to the other party of goods, services, technology,
expertise or other value and (ii) any other Additional Registrable Shares issued
on or with respect to the Additional Registrable Shares referred to in clause
(i) above.
"Stockholders' Agreement" means the Stockholders' Agreement dated as
of December 24, 1998, among the Company and the other parties thereto, as
amended, supplemented, modified and in effect from time to time.
"Strategic Partner" means a Person who or which, at the time in
question, has entered into, or is simultaneously entering into or has agreed to
enter into, a strategic arrangement with the Corporation for the provision by
either party to the other party of goods, services, technology, expertise or
other value.
"Subsidiary" means, as to any Person, any other Person of which more
than 50% of the shares of the voting stock or other voting interests are owned
or controlled, or the ability to select or elect 50% or more of the directors or
similar managers is held, directly or indirectly, by such first Person or one or
more of its Subsidiaries.
"Warrant Shares" means the Registrable Shares that are (i) shares of
Common Stock issued or issuable upon the exercise of the Initial Warrants, (ii)
shares of Common Stock issued on or with respect to the shares of Common Stock
referred to in clause (i) above or (iii) shares of Common Stock issued on or
with respect to the Initial Warrants.
2. Piggyback Registration.
(a) If the Corporation proposes for any reason to register Primary
Shares, Additional Registrable Shares or Other Shares under the Securities Act
after the closing of an initial Public Offering of Common Stock (other than on
Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall give written notice to the PM
5
<PAGE>
Securityholders of its intention to so register such Primary Shares, Additional
Registrable Shares or Other Shares at least 20 days before the initial filing of
the registration statement for such Primary Shares, Additional Registrable
Shares or Other Shares and, upon the written request, delivered to the
Corporation within 10 days after delivery of any such written notice by the
Corporation, of any PM Securityholder to include in such registration PM
Registrable Shares (which written request shall specify the number of PM
Registrable Shares proposed to be included in such registration) and shall state
the request of such PM Securityholder to sell or dispose of such PM Registrable
Shares), the Corporation shall use its reasonable best efforts to cause all such
PM Registrable Shares to be included in such registration on the same terms and
conditions as the Primary Shares, Additional Registrable Shares or Other Shares
otherwise being sold or disposed of in such registration; provided, however, if
the managing underwriter(s) advise the Corporation that the inclusion of all or
any portion of the PM Registrable Shares, Primary Shares, Additional Registrable
Shares and/or Other Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of all or any
portion of such securities, then the number of PM Registrable Shares, Primary
Shares, Additional Registrable Shares and/or Other Shares proposed to be
included in such registration shall be included in the following order:
(i) If such registration is initiated by the Corporation to register
Primary Shares, Other Shares or Additional Registrable Shares not
constituting Initial Common Shares, Conversion Shares, Warrant Shares or
SP Registrable Shares, or by any holder of the foregoing:
(A) first, the Primary Shares;
(B) second, the Additional Registrable Shares constituting SP
Registrable Shares, Initial Common Shares, Conversion Shares or
Warrant Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares
allocated between (x) the Additional Securityholders who or which
have requested the inclusion of SP Registrable Shares in such
registration on the one hand and (y) the other Additional
Securityholders who or which have requested the inclusion of
Additional Registrable Shares constituting Initial Common Shares,
Conversion Shares or Warrant Shares in such registration on the
other hand, in proportion to the aggregate number of Shares held by
each such group of Additional Securityholders at the time of such
registration, with the aggregate number of Shares allocated to the
Additional Securityholders described in each of clauses (x) and (y)
above further allocated among such Additional Securityholders in
accordance with the applicable provisions of any agreements between
the Corporation and such Additional Securityholders, as amended,
supplemented or otherwise modified from time to time and in effect
at the time of such registration, or, in the absence of any
applicable provisions (i) with respect to the Additional
Securityholders described in clause (x) above, pro rata among all
such Additional Securityholders based upon the number of Additional
Registrable Shares constituting SP Registrable Shares held by each
such Additional Securityholder at the time of such registration, and
(ii) with respect to the Additional
6
<PAGE>
Securityholders described in clause (y) above, pro rata among all
such Additional Securityholders based upon the number of Additional
Registrable Shares constituting Initial Common Shares, Conversion
Shares or Warrant Shares held by each such Additional Securityholder
at the time of such registration);
(C) third, the PM Registrable Shares requested by the PM
Securityholders to be included in such registration (or, if
necessary, such Shares pro rata among all such PM Securityholders
based on the aggregate number of PM Registrable Shares held by each
such Person at the time of such registration);
(D) fourth, the Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares
allocated among all such Additional Securityholders in accordance
with the applicable provisions of any agreements between the
Corporation and such Additional Securityholders, as amended,
supplemented or otherwise modified from time to time and in effect
at the time of such registration, or, in the absence of any
applicable provisions, pro rata among all such Additional
Securityholders based upon the number of Additional Registrable
Shares not constituting Initial Common Shares, Conversion Shares,
Warrant Shares or SP Registrable Shares held by each such Additional
Securityholder at the time of such registration); and
(E) fifth, the Other Shares.
(ii) If such registration is initiated by Additional Securityholders
who or which request the inclusion of their Additional Registrable Shares
constituting SP Registrable Shares in such registration:
(A) first, the Additional Registrable Shares constituting SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares pro
rata among all such Additional Securityholders based on the
aggregate number of SP Registrable Shares held by each such Person
at the time of such registration);
(B) second, the Additional Registrable Shares constituting
Initial Common Shares, Conversion Shares or Warrant Shares requested
by the Additional Securityholders to be included in such
registration (or, if necessary, such Shares allocated among all such
Additional Securityholders in accordance with the applicable
provisions of any agreements between the Corporation and such
Additional Securityholders, as amended, supplemented or otherwise
modified from time to time and in effect at the time of such
registration, or, in the absence of any applicable provisions, pro
rata among all such Additional Securityholders based upon the number
of Additional Registrable Shares constituting Initial Common Shares,
Conversion Shares or Warrant Shares held by each such Additional
Securityholder at the time of such registration);
7
<PAGE>
(C) third, the Primary Shares;
(D) fourth, the PM Registrable Shares requested by the PM
Securityholders to be included in such registration (or, if
necessary, such Shares pro rata among all such PM Securityholders
based on the aggregate number of PM Registrable Shares held by each
such Person at the time of such registration);
(E) fifth, the Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares
allocated among all such Additional Securityholders in accordance
with the applicable provisions of any agreements between the
Corporation and such Additional Securityholders, as amended,
supplemented or otherwise modified from time to time and in effect
at the time of such registration, or, in the absence of any
applicable provisions, pro rata among all such Additional
Securityholders based upon the number of Additional Registrable
Shares not constituting Initial Common Shares, Conversion Shares,
Warrant Shares or SP Registrable Shares held by each such Additional
Securityholder at the time of such registration); and
(F) six, the Other Shares.
(iii) If such registration is initiated by Additional
Securityholders who or which request the inclusion of Additional
Registrable Shares constituting Initial Common Shares, Conversion Shares
or Warrant Shares in such registration:
(A) first, the Additional Registrable Shares constituting
Initial Common Shares, Conversion Shares or Warrant Shares requested
by the Additional Securityholders to be included in such
registration (or, if necessary, such Shares allocated among all such
Additional Securityholders in accordance with the applicable
provisions of any agreements between the Corporation and such
Additional Securityholders, as amended, supplemented or otherwise
modified from time to time and in effect at the time of such
registration, or, in the absence of any applicable provisions, pro
rata among all such Additional Securityholders based upon the number
of Additional Registrable Shares constituting Initial Common Shares,
Conversion Shares or Warrant Shares held by each such Additional
Securityholder at the time of such registration);
(B) second, the Additional Registrable Shares constituting SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares pro
rata among all such Additional Securityholders based on the
aggregate number of SP Registrable Shares held by each such
Additional Securityholder at the time of such registration);
(C) third, the Primary Shares;
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(D) fourth, the PM Registrable Shares requested by the PM
Securityholders to be included in such registration (or, if
necessary, such Shares pro rata among all such PM Securityholders
based on the aggregate number of PM Registrable Shares held by each
such PM Securityholder at the time of such registration);
(E) fifth, the Additional Registrable Shares not constituting
Initial Common Shares, Conversion Shares, Warrant Shares or SP
Registrable Shares requested by the Additional Securityholders to be
included in such registration (or, if necessary, such Shares
allocated among all such Additional Securityholders in accordance
with the applicable provisions of any agreements between the
Corporation and such Additional Securityholders, as amended,
supplemented or otherwise modified from time to time and in effect
at the time of such registration, or, in the absence of any
applicable provisions, pro rata among all such Additional
Securityholders based upon the number of Additional Registrable
Shares not constituting Initial Common Shares, Conversion Shares,
Warrant Shares or SP Registrable Shares held by each such Additional
Securityholder at the time of such registration); and
(F) six, the Other Shares.
(b) Anything contained in this Agreement to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to Section 2(a)
to include all or any portion of the PM Registrable Shares of the PM
Securityholders in more than one registration of Primary Shares, Additional
Registrable Shares and/or Other Shares under the Securities Act after the
closing of an initial Public Offering of Common Stock (with the participation of
the PM Securityholders in such registration being subject to the terms and
conditions of Section 2(a)). The Majority of the PM Securityholders in
compliance with this Section 2 shall determine the applicable registration
statement with respect to which a request for the registration of PM Registrable
Shares shall be submitted to the Corporation pursuant to Section 2(a). The PM
Securityholders requesting a registration of PM Registrable Shares pursuant to
Section 2(a) shall provide written notice to the Corporation of the satisfaction
of such requirement; provided, however, that in no event shall such one
registration request be fulfilled if such registration statement is withdrawn
for any reason prior to effectiveness; and provided, further, however, the
Corporation shall have fulfilled its obligations pursuant to Section 2(a) if at
least 25% of the aggregate number of PM Registrable Shares requested by PM
Securityholders to be registered on such registration statement are included in
such registration statement at the time of its initial effectiveness.
3. Holdback Agreement.
If the Corporation at any time shall register shares of Common Stock
under the Securities Act in an aggregate amount of at least $5,000,000
(excluding any registrations on Form S-4 or S-8) for sale to the public, no PM
Securityholder shall sell publicly, make any short sale of, grant any option for
the purchase of, or otherwise dispose publicly of, any capital stock of the
Corporation (other than those shares of Common Stock included in such
registration
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pursuant to Section 2(a)) without, in each such instance, the prior written
consent of the Corporation, for a period designated by the Corporation in
writing to the PM Securityholders, which period shall begin not more than 15
days prior to the expected date of the effectiveness of the registration
statement pursuant to which such public offering shall be made and shall not
last more than 180 days after the date on which such registration statement
became effective, whether or not such PM Securityholder participates in such
registration. Each PM Securityholder agrees that the Corporation may instruct
its transfer agent to place stop transfer notations on its records to enforce
this Section 3.
4. Preparation and Filing.
If the Corporation is obligated pursuant to Section 2 to use its
reasonable best efforts to cause any PM Registrable Shares to be included in a
registration of Primary Shares, Additional Registrable Shares or Other Shares
otherwise being sold in such registration, the Corporation shall, subject to,
and only to the extent not contrary to or inconsistent with, the terms and
conditions on which such Primary Shares, Additional Registrable Shares or Other
Shares otherwise being sold in such registration:
(a) use its reasonable best efforts to cause the Registration
Statement that registers such PM Registrable Shares to become and remain
effective until the earlier to occur of (i) 90 days from the date of the
effectiveness of such Registration Statement and (ii) such time as all of such
PM Registrable Shares have been disposed of;
(b) furnish, at least five Business Days before filing the
Registration Statement that registers such PM Registrable Shares, a Prospectus
relating thereto and any amendments or supplements relating to such Registration
Statement or Prospectus, to one counsel designated in writing by the Majority of
the PM Securityholders (the "PM Securityholders' Counsel"), copies of all such
documents proposed to be filed with the SEC (it being understood that such five
Business Day period need not apply to successive drafts of the same document
proposed to be filed so long as such successive drafts are supplied to the PM
Securityholders' Counsel in advance of the proposed filing by a period of time
that is customary and reasonable under the circumstances);
(c) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective until the earlier
to occur of (i) 90 days or (ii) such time as all of such PM Registrable Shares
have been disposed of, and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of such PM Registrable Shares;
(d) notify the PM Securityholders' Counsel promptly in writing of
(i) any comments by the SEC with respect to such Registration Statement or
Prospectus, or any request by the SEC for the amending or supplementing thereof
or for additional information with respect thereto, (ii) the issuance by the SEC
of any stop order suspending the effectiveness of such Registration Statement or
Prospectus or any amendment or supplement thereto or the initiation or
threatening of any proceedings for that purpose (and the Corporation shall use
its reasonable best efforts to prevent the issuance thereof or, if issued, to
obtain its withdrawal) and (iii) the receipt
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by the Corporation of any notification with respect to the suspension of the
qualification of such PM Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding(s) for such purposes;
(e) use its reasonable best efforts to register or qualify such PM
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any Registering PM Securityholder may reasonably request, to
keep such registrations or qualifications in effect for so long as such
Registration Statement covering such PM Registrable Shares remains in effect and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Registering PM Securityholder to consummate the sale or
disposition in such jurisdictions of the PM Registrable Shares owned by such
Registering PM Securityholder; provided, however, that the Corporation will not
be required to qualify generally to do business, to subject itself to general
taxation or consent to general service of process in any jurisdiction where it
would not otherwise be required to do so but for this Section 4(e) or to provide
any material undertaking or make any changes in its bylaws or certificate of
incorporation which its Board of Directors determines to be contrary to or not
in the best interests of the Corporation;
(f) furnish to each Registering PM Securityholder such number of
copies of a summary Prospectus, if any, or other Prospectus, including a
preliminary Prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Registering PM Securityholder may
reasonably request in order to facilitate the public sale or other disposition
of the PM Registrable Shares held by Registering PM Securityholder;
(g) notify on a timely basis each Registering PM Securityholder at
any time when a Prospectus relating to such PM Registrable Shares is required to
be delivered under the Securities Act within the appropriate period specified in
Section 4(a), of the happening of any event known to the Corporation as a result
of which the Prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and, at the
request of such Registering PM Securityholder, prepare and furnish to such
Registering PM Securityholder 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 offerees of such PM Registrable Shares, such Prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(h) subject to the execution of confidentiality or similar
agreements in form and substance satisfactory to the Corporation, make
available, upon reasonable notice and during normal business hours, for
inspection by the Registering PM Securityholders any underwriter participating
in any disposition pursuant to such Registration Statement and any attorney,
accountant or other agent retained by the Registering PM Securityholders or
underwriter (collectively, the "Inspectors"), all pertinent financial and other
records, pertinent corporate documents and properties of the Corporation
(collectively, the "Records"), as shall be reasonably necessary to enable such
Persons to exercise their due diligence responsibility, and cause the
Corporation's officers, directors and employees to supply all information
(together with the
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Records, the "Information") reasonably requested by any such Inspector in
connection with such Registration Statement (any of the Information which the
Corporation determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors, unless (i) the disclosure of such Information is necessary to avoid
or correct a misstatement or omission in the Registration Statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or, upon the written advice of counsel,
is otherwise required by law, or (iii) such Information has been made generally
available to the public; and each Registering PM Securityholder agrees that it
will, upon learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Corporation and allow the
Corporation, at the Corporation's expense, to undertake appropriate action to
prevent disclosure of the Information deemed confidential by the Corporation);
(i) use its reasonable best efforts to obtain from its independent
certified public accountants "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by cold
comfort letters;
(j) use its reasonable best efforts to obtain from its counsel an
opinion or opinions in customary form;
(k) provide a transfer agent and registrar (which may be the same
Person and which may be the Corporation) for such PM Registrable Shares;
(l) issue to any underwriter to which any Registrable PM
Securityholder may sell such PM Registrable Shares in such offering,
certificates evidencing such PM Registrable Shares;
(m) list such PM Registrable Shares on any national securities
exchange on which any shares of Common Stock are listed or, if Common Stock is
not listed on a national securities exchange, use its reasonable best efforts to
qualify such PM Registrable Shares for inclusion on the national automated
quotation system of the National Association of Securities Dealers, Inc. (the
"NASD"), or such other national securities exchange as the holders of a majority
of such PM Registrable Shares shall reasonably request in writing; and
(n) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC and make generally available to its
securityholders, as soon as reasonably practicable, earnings statements (in form
complying with Rule 158 under the Securities Act) covering a 12-month period
beginning not later than the first day of the Corporation's fiscal quarter next
following the effective date of the Registration Statement.
Each Registering PM Securityholder, upon the receipt of any notice
from the Corporation of any event of the kind described in Section 4(h), shall
forthwith discontinue disposition of PM Registrable Shares pursuant to the
Registration Statement until such Registering PM Securityholder's receipt of
copies of the supplemented or amended Prospectus contemplated by Section 4(h),
and, if so directed by the Corporation, such Registering PM Securityholder shall
deliver to the Corporation all copies, other than permanent file copies then in
such PM Securityholder's possession, of the Prospectus covering such PM
Registrable Shares
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at the time of receipt of such notice or, if so directed by the Corporation,
destroy all such copies and deliver to the Corporation a certificate of
destruction in respect thereof.
5. Expenses.
All expenses incurred by the Corporation in complying with Section
4, including, without limitation, all registration and filing fees (including
all expenses incident to filing with the NASD), fees and expenses of complying
with securities and blue sky laws, printing expenses, fees, expenses and
disbursements of the Corporation's counsel and accountants and fees, expenses
and disbursements (in an aggregate amount not to exceed $7,500) of the PM
Securityholders' Counsel shall be paid or satisfied by the Corporation;
provided, however, that all underwriting discounts and selling commissions
applicable to the PM Registrable Shares shall not be borne by the Corporation
and shall be borne by the Registering PM Securityholders selling such
Registrable Securities, in proportion to the number of PM Registrable Shares
sold by each such Registering PM Securityholder.
6. Indemnification.
(a) In connection with any registration of any PM Registrable Shares
under the Securities Act pursuant to this Agreement, the Corporation shall
indemnify and hold harmless each holder of such PM Registrable Shares, each
underwriter, broker or any other Person acting on behalf of any such holder and
each other Person, if any, who controls any of the foregoing Persons within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, (or actions in respect thereof) to which any of
the foregoing Persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary Prospectus or final Prospectus contained therein or otherwise filed
with the SEC, any amendment or supplement thereto or any document incident to
registration or qualification of any PM Registrable Shares, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any Prospectus, necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
or any violation by the Corporation of the Securities Act or state securities or
blue sky laws applicable to the Corporation and relating to action or inaction
required of the Corporation in connection with such registration or
qualification under such state securities or blue sky laws, and the Corporation
shall promptly reimburse each such holder, underwriter, broker or other Person
acting on behalf of any such holder and each such controlling Person for any
legal or other expenses incurred by any of them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Corporation shall not be liable (i) to any such Person to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in said Registration Statement, preliminary Prospectus, final
Prospectus, amendment, supplement or document incident to registration or
qualification of any PM Registrable Shares in reliance upon and in conformity
with information furnished to the Corporation or such underwriter by the PM
Securityholders, or a Person duly acting on the PM Securityholder's
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behalf, by written materials provided by the PM Securityholders, or a Person
duly acting on the PM Securityholder's behalf, specifically for use in
connection with the preparation thereof, and (ii) for any amounts paid in
settlement of any such loss, claim, damage or liability if such settlement is
effected without the prior written consent of the Corporation which consent
shall not be unreasonably withheld or delayed; provided further, however, that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any untrue statement, allegedly untrue statement, omission or
alleged omission made in any preliminary Prospectus but eliminated or remedied
in the Prospectus, as amended or supplemented (filed pursuant to Rule 424 of the
Securities Act), such indemnity agreement shall not inure to the benefit of any
indemnified party from whom the Person asserting any loss, claim, damage,
liability or expense purchased the PM Registrable Shares which are the subject
thereof, if a copy of such Prospectus, as amended or supplemented, had been
timely made available to such indemnified Person and such Prospectus, as amended
or supplemented, was not delivered to such Person with or prior to the written
confirmation of the sale of such PM Registrable Shares to such Person.
(b) In connection with any registration of PM Registrable Shares
under the Securities Act pursuant to this Agreement, each holder of PM
Registrable Shares shall, severally and not jointly, indemnify and hold harmless
(in the same manner and to the same extent as set forth in Section 6(a)) the
Corporation, each director of the Corporation who signs such Registration
Statement, each officer of the Corporation who signs such Registration
Statement, each other holder of PM Registrable Shares, Primary Shares,
Additional Registrable Shares or Other Shares included in such Registration
Statement, each underwriter, broker or any other Person acting on behalf of any
such holder and each other Person, if any, who controls any of the foregoing
Persons within the meaning of the Securities Act with respect to any statement
contained in or omission from such Registration Statement, any preliminary
Prospectus or final Prospectus contained therein or otherwise filed with the
SEC, any amendment or supplement thereto or any document incident to
registration or qualification of any PM Registrable Shares, if such statement or
omission was made in reliance upon and in conformity with information furnished
to the Corporation or such underwriter by written materials provided by such PM
Securityholder, or a Person duly acting on such PM Securityholder's behalf,
specifically for use in connection with the preparation thereof; provided,
however, that the maximum amount of liability in respect of such indemnification
shall be limited, in the case of each holder of PM Registrable Shares, to an
amount equal to the net proceeds actually received by such holder from the sale
of PM Registrable Shares effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of written notice
of the commencement of any action involving a claim referred to in Section 6(a)
or Section 6(b), such indemnified party will, if a claim in respect thereof is
made against an indemnifying party, promptly give written notice to the latter
of the commencement of such action (provided that an indemnified party's failure
to give such notice in a timely manner shall only relieve the indemnification
obligations of an indemnifying party to the extent such indemnifying party is
prejudiced by such failure). In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified in writing to the extent that it may wish, with counsel
reasonably 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
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indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
concluded based upon the advice of external counsel that there may be one or
more legal or equitable defenses available to such indemnified party which
conflict with those available to the indemnifying party, or that such claim or
litigation involves or could have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 6, the indemnifying party shall not
have the right to assume the defense of such action on behalf of such
indemnified party and such indemnifying party shall reimburse such indemnified
party and any Person controlling such indemnified party for that portion of the
reasonable fees, expenses and reasonable disbursements of any one counsel
satisfactory to the indemnifying party which is reasonably related to the
matters covered by the indemnity agreement provided in this Section 6. The
indemnifying party shall not be liable to indemnify any indemnified party for
any settlement of any claim or action effected without the written consent of
the indemnifying party. Unless otherwise agreed to in writing by the indemnified
party, the indemnifying party may not settle any claim or action brought against
an indemnified party unless such indemnified party is released from all and any
liability as part of such settlement.
(d) If the indemnification provided for in this Section 6 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other hand in
connection with the statements or omissions which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations; provided, however, that the maximum amount of liability in
respect of such contribution shall be limited, in the case of each holder of PM
Registrable Shares, to an amount equal to the net proceeds actually received by
such holder from the sale of PM Registrable Shares effected pursuant to such
registration. 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 omission to
state a material fact or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party or
their respective agents and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant hereto were determined by pro rata allocation or by any other method or
allocation which does not take account of the equitable considerations referred
to herein. No person guilty of fraudulent misrepresentation shall be entitled to
contribution from any Person.
(e) The indemnification and contribution provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and will survive the transfer of
securities.
7. Underwriting Agreement.
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Notwithstanding the provisions of Sections 4 through 6, to the
extent that the PM Securityholders shall enter into an underwriting or similar
agreement, which agreement contains provisions covering one or more matters
addressed in such Sections, the provisions contained in such Sections addressing
such matters shall be of no force or effect with respect to such registration,
but this provision shall not apply to the Corporation if the Corporation is not
a party to the underwriting or similar agreement as evidenced by a written
instrument.
8. Suspension.
Anything contained in this Agreement to the contrary
notwithstanding, the Corporation may (but not more than twice with respect to
each Registration Statement), by notice in writing to each holder of PM
Registrable Shares to which a Prospectus relates, require such holder to
suspend, for up to 90 days (the "Suspension Period"), the use of any Prospectus
included in the Registration Statement filed under Section 2 if a Material
Transaction exists that would require an amendment to such Registration
Statement or supplement to such Prospectus (including any such amendment or
supplement made through incorporation by reference to a report filed under
Section 13 of the Exchange Act). The period during which such Prospectus must
remain effective shall be extended by a period equal to the aggregate number of
days which equal the Suspension Period. The Corporation may (but shall not be
obligated to) withdraw the effectiveness of any Registration Statement subject
to this provision.
9. Information by Holder.
(a) Each holder of PM Registrable Shares to be included in any such
registration shall promptly furnish to the Corporation and the managing
underwriter such written information regarding such holder and the distribution
proposed by such holder as the Corporation or the managing underwriter may
reasonably request and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
(b) Each holder of PM Registrable Shares, by such holder's
acceptance of inclusion of all or a portion of its PM Registrable Shares in a
Registration Statement, agrees to cooperate with the Corporation as reasonably
requested by the Corporation in connection with the preparation and filing of
the Registration Statement.
(c) No holder of PM Registrable Shares to be included in an
underwritten Registration Statement may participate in such offering unless it:
(i) agrees to sell its PM Registrable Shares on the basis provided in any
underwriting arrangement in usual and customary form entered into by the
Corporation; (ii) completes and executes all questionnaires, lock-up agreements
and other documents required under the terms of such underwriting agreements and
(iii) agrees to pay its pro rata share of all underwriting discounts and
commissions and any expenses in excess of those payable by the Corporation in
Section 5.
10. Exchange Act Compliance.
From the Registration Date or such earlier date as a registration
statement filed by the Corporation pursuant to the Exchange Act relating to any
class of the Corporation's securities shall have become effective, the
Corporation shall comply with all of the reporting requirements
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of the Exchange Act applicable to it (whether or not it shall be required to do
so, but specifically excluding Section 14 of the Exchange Act if not then
applicable to the Corporation) and shall comply with all other public
information reporting requirements of the SEC applicable to it and which are
conditions to the availability of Rule 144 of the Securities Act for the sale of
Common Stock. The Corporation shall cooperate with the PM Securityholders in
supplying such information as may be necessary for the PM Securityholders to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of Rule 144 of the
Securities Act.
11. Legends on Certificates.
(a) Each certificate issued after the date hereof that represents
Restricted Securities shall (unless otherwise permitted by the provisions of
this Section 11) be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any other legend required by
law or applicable agreement):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO THE TERMS AND CONDITIONS OF A REGISTRATION RIGHTS
AGREEMENT DATED AS OF FEBRUARY __, 2000, BETWEEN OPUS360
CORPORATION AND THE PM SECURITYHOLDERS (AS DEFINED THEREIN),
AS THE SAME MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED
AND IN EFFECT FROM TIME TO TIME. COPIES OF SUCH AGREEMENT MAY
BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF SUCH COMPANY
AT ITS PRINCIPAL EXECUTIVE OFFICE."
The Corporation agrees to remove, or cause its transfer agent to
remove, the legend set forth in this Section 11(a) from a certificate
representing securities issued by the Corporation if such securities are sold
pursuant to an effective registration statement under the Securities Act or
there is delivered to the Corporation an opinion of counsel selected by the
holder of such certificate, which counsel and opinion shall each be reasonably
satisfactory to the Corporation, that the securities represented thereby need no
longer be subject to restrictions on resale under the Securities Act.
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(b) Each PM Securityholder consents to the Corporation making a
notation on its records and giving instructions to any transfer agent of such PM
Securityholder's Restricted Securities in order to implement the restrictions on
transfer as set forth in this Section 11.
12. Mergers, Etc.
The Corporation shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Corporation shall not be
the surviving corporation unless the surviving corporation shall, prior to such
merger, consolidation or reorganization, agree in writing to assume the
obligations of the Corporation under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to include the
shares of common stock, if any, that holders of Registrable Shares would be
entitled to receive in exchange for Common Stock under any such merger,
consolidation or reorganization; provided, however, that, to the extent holders
of Registrable Shares receive securities that are by their terms convertible
into shares of common stock of the issuer thereof, then only such shares of
common stock as are issued or issuable upon conversion of said convertible
securities shall be included within the definition of "Registrable Shares";
provided, however, nothing contained in this Section 12 shall enlarge or
otherwise modify the voting power in respect of the PM Registrable Shares as it
relates to the approval or consent of any such fundamental transaction.
13. Nominees for Beneficial Owners.
If Registrable Shares are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its option, be treated as the
holder of such Registrable Shares for purposes of any request or other action by
any holder or holders of Registrable Shares pursuant to this Agreement (or any
determination of any number of percentage of shares constituting Registrable
Shares held by any holder or holders of Registrable Shares contemplated by this
Agreement); provided, however, that the Corporation shall have received
assurances reasonably satisfactory to it of such beneficial ownership.
14. Termination.
This Agreement shall terminate and be of no further force or effect
when there shall no longer be any PM Registrable Shares or Additional
Registrable Shares outstanding, provided, however, that Section 5 and Section 6
shall survive the termination of this Agreement.
15. Successors and Assigns.
This Agreement shall bind and inure to the benefit of the
Corporation and the PM Securityholders and, subject to Section 16, the
respective successors and assigns of the Corporation and the PM Securityholders.
16. Assignment.
Subject to the applicable limitations and conditions contained in
the Stockholders' Agreement and each of the Investment Letter, the Escrow
Agreement, the Merger Agreement, the Restricted Stock Vesting Agreement, any
applicable employment agreements between
18
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employees of PeopleMover and the Surviving Corporation (as such term is defined
in Section 1.1 of the Merger Agreement) (each of the foregoing agreements as
entered into in connection with and contemplated by the Merger Agreement), each
PM Securityholder may sell, assign or otherwise transfer its rights hereunder to
any purchaser, assignee or other transferee of the PM Registrable Shares of such
PM Securityholder; provided, however, that any such purchaser, assignee or other
transferee, if not already a party to this Agreement, shall, as a condition to
the effectiveness of such sale, assignment or other transfer, be required to
execute a written joinder to this Agreement agreeing to be treated as a PM
Securityholder under this Agreement, and to be bound by and comply with all of
the applicable terms and provisions hereof (and, if necessary, any other
agreement or instrument requested by the Corporation), whereupon such purchaser,
assignee or transferee shall have the benefits of, and shall be subject to the
restrictions contained in, this Agreement as if such purchaser or transferee was
originally a PM Securityholder and had originally been a party hereto. Any
assignment in violation of the above provision shall be null and void.
17. Notices.
All notices, requests, demands, claims, consents or other
communications that are given or made hereunder to any party hereto shall be in
writing and shall be given or made by physical delivery, U.S. mail (registered
or certified mail, postage prepaid, return receipt requested) or overnight
courier or by transmission by facsimile or electronic mail to such party at its,
his or her address (or facsimile number or electronic mail address) set forth
below, or such other address (or facsimile number or electronic mail address) as
shall have been previously specified by like notice by such party:
19
<PAGE>
(i) if to the Corporation, to
Opus360 Corporation
733 Third Avenue, 17th Floor
New York, NY 10017
Attention: Richard McCann, Chief Financial Officer
Telephone: (212) 301-2218
Facsimile: (212) 301-2842
E-Mail: [email protected]
with a copy (which shall not constitute notice) to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telephone: (212) 408-2400
Facsimile: (212) 728-5950
E-Mail: [email protected]
(ii) if to any PM Securityholder, to such PM Securityholder
at the address set forth on Schedule I opposite the name
of such PM Securityholder.
Each such notice, demand or other communication hereunder shall be
effective upon receipt in the case of physical delivery or overnight courier,
upon confirmation of receipt by or on behalf of the addressee in the case of
transmission by facsimile or electronic mail if received prior to 5:00 p.m. New
York City time, and, if received after 5:00 p.m., on the date after such
confirmation, and three (3) days after deposit in the U.S. mails in the case of
mailing.
18. Entire Agreement; No Third Party Beneficiaries.
This Agreement and the other writings referred to herein or
delivered pursuant hereto contain the sole and entire agreement among the
Corporation and the PM Securityholders with respect to the subject matter hereof
and thereof and shall supersede all prior or contemporaneous arrangements or
understandings (whether written or oral) with respect hereto or thereto and,
except for the provisions of Section 6, are not intended to confer upon any
Persons other than the parties to this Agreement any rights or remedies
hereunder.
19. Amendment.
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to a writing signed by
(i) the Corporation, and (ii) a Majority of the PM Securityholders; provided,
however, that no such written consent shall be required for the amendment of
Schedule I solely to reflect the name and address of any new PM Securityholder
who has become a party to this Agreement in accordance with the terms and
conditions hereof. No waiver by any party hereto of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any
20
<PAGE>
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence. Each holder of any Restricted Securities
outstanding at or after the time of any modification or amendment of, or waiver
of any provisions of this Agreement, shall be bound by any consent authorized by
this Section 19, whether or not such Restricted Securities shall have been
marked to indicate such consent.
20. Severability.
It is the desire and intent of the parties hereto that the
provisions of this Agreement be enforced to the fullest extent permissible under
the Laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular provision of this Agreement shall be
adjudicated by a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
21. Counterparts; Facsimile Signatures.
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. This Agreement and
each other agreement or instrument entered into in connection herewith or
contemplated hereby, and any amendments hereto or thereto, to the extent signed
and delivered by means of a facsimile machine, shall be treated in all manner
and respects as an original agreement or instrument and shall be considered to
have the same binding legal effect as if it were the original signed version
thereof delivered in person. At the request of any party hereto or to any such
agreement or instrument, each other party hereto or thereto shall reexecute
original forms thereof and deliver them to all other parties.
22. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
23. Enforcement.
The parties hereto agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
21
<PAGE>
Agreement in any federal court located in the Borough of Manhattan, City of New
York or any New York state court located in the Borough of Manhattan, City of
New York, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
Borough of Manhattan, City of New York or any New York state court located in
the Borough of Manhattan, City of New York in the event any dispute arises out
of this Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of venue of any such suit, action or proceeding which is brought in any
such court or that any such suit, action or proceeding which is brought in any
such court has been brought in an inconvenient forum and (c) agrees that it will
not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court located
in the Borough of Manhattan, City of New York or any New York state court
located in the Borough of Manhattan, City of New York. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 17 shall be deemed effective service of process on such party.
24. Interpretation; Construction.
The headings contained in this Agreement and in the table of
contents to this Agreement are for convenience of reference only and shall not
govern or affect in any way the meaning or interpretation of any of the terms or
provisions of this Agreement. Except when the context requires otherwise, any
reference in this Agreement to any Section, clause or Schedule shall be to the
Sections and clauses of, and Schedules to, this Agreement. The words "include,"
"includes" and "including" are deemed to be followed by the phrase "without
limitation." Any reference to the masculine, feminine or neuter gender shall
include such other genders and any reference to the singular or plural shall
include the other, in each case unless the context otherwise requires. Schedule
I annexed hereto is hereby incorporated in and made a part of this Agreement as
if set forth in full herein. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement has
been chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
25. Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ITS, HIS OR HER
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE
SUJBECT MATTER HEREOF.
26. Attorney's Fees.
22
<PAGE>
If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover such reasonable attorneys fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled, as may be ordered in connection with such proceeding.
* * * * *
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Registration Rights Agreement as of the date first written above.
OPUS360 CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Registration Rights Agreement as of the date first written above.
[PM SECURITYHOLDER]
By:
-----------------------------
Name:
Title:
<PAGE>
SCHEDULE I
PM Securityholders
Number of Shares
Name Address of Common Stock
- ---- ------- ---------------
26
<PAGE>
Exhibit 21.1
Subsidiaries of the Company
<TABLE>
<CAPTION>
State of
Name % Ownership Incorporation
- ---- ----------- -------------
<S> <C> <C>
The Churchill Benefit Corporation........................... 100% Delaware
Ithority Corporation........................................ 100% Delaware
</TABLE>
<PAGE>
EXHIBIT 23.2
The Board of Directors of
Opus 360 Corporation:
When the stock split referred to in Note 10 of the Notes to Financial
Statements has been consummated, we will be in a position to issue the following
consent.
/s/ KPMG LLP
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of
Opus360 Corporation:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
New York, New York
February 9, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form S-1 of
our report dated January 14, 2000, except for subsequent event described in Note
10 as to which the date is January 30, 2000, relating to the financial
statements of PeopleMover, Inc, which appear in such Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Registration Statement.
Woodland Hills, California
February 9, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF OPUS360 CORPORATION AND
SUBSIDIARY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001099674
<NAME> OPUS360 CORPORATION
<S> <C> <C>
<PERIOD-TYPE> 4-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> AUG-17-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 5,817,926 3,549,505
<SECURITIES> 0 37,170,674
<RECEIVABLES> 12,000 1,625,114
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,832,358 43,986,395
<PP&E> 55,982 996,633
<DEPRECIATION> (1,555) (79,289)
<TOTAL-ASSETS> 5,886,785 46,846,702
<CURRENT-LIABILITIES> 632,887 6,384,990
<BONDS> 0 0
0 0
4,636 16,961
<COMMON> 6,332 6,963
<OTHER-SE> 5,242,930 39,212,788
<TOTAL-LIABILITY-AND-EQUITY> 5,886,785 46,846,702
<SALES> 0 0
<TOTAL-REVENUES> 0 241,269
<CGS> 0 0
<TOTAL-COSTS> 0 198,012
<OTHER-EXPENSES> 1,040,520 12,816,251
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,034,722) (12,495,025)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,034,722) (12,772,994)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,034,722) (12,495,025)
<EPS-BASIC> (.17) (1.89)
<EPS-DILUTED> (.17) (1.89)
</TABLE>
<PAGE>
Exhibit 99.1
[GRAPHIC OMITTED] Safeguard Scientifics, Inc.
SAFEGUARD SUBSCRIPTION PROGRAM FOR
OPUS360 CORPORATION
FOR RECORD HOLDERS OF
100 OR MORE SHARES OF
SAFEGUARD SCIENTIFICS, INC.
COMMON STOCK
ON DECEMBER 16, 1999
Record holders of fewer than 100 shares of Safeguard Scientifics, Inc. common
stock on December 16, 1999 are not eligible to participate in this program.
The Safeguard Subscription Program for Opus360 will expire at 6:00 p.m.
New York City time on the third business day after the offering price is set.
We urge you to read carefully this document and the enclosed
preliminary prospectus for a complete explanation of the offering
and for information about Opus360.
If you have any questions regarding the Safeguard Subscription Program, please
call Safeguard's automated investor relations line at (888) SFE-1200.
Please do not call Opus360 with any questions regarding this program.
Only Safeguard's automated investor relations line or a Safeguard
representative will be able to answer your questions.
<PAGE>
[Opus360 LOGO]
______, 2000
Dear Safeguard Stockholder:
As you may know, we are undertaking an initial public offering of the
common stock of Opus360. We are permitting Safeguard Scientifics to use the
Safeguard Subscription Program so that we may offer you the opportunity to buy
our common stock at our initial public offering price. We will be offering
________ shares under the program.
Set forth below is a detailed description of how the program will work in
connection with our offering. Please review this description and the attached
prospectus carefully in deciding whether or not you wish to invest.
Who can subscribe
Only record holders of 100 or more shares of Safeguard common stock as of
December 16, 1999 are eligible to purchase shares of our common stock in the
program. Holders of fewer than 100 Safeguard shares will not be eligible to
participate in this program.
You may not transfer your subscription offer
The offer to purchase shares in this program may only be transferred by
involuntary operation of law such as death or certain dissolutions.
Number of shares for which you may subscribe
To determine how many shares of our common stock you are eligible to
purchase, divide the number of shares of Safeguard common stock that you owned
of record as of December 16, 1999 by ___ and round up to the nearest whole
number. For example, if you held between _____ and 1,000 shares of Safeguard
common stock as of this date, you may subscribe for ___ shares of our common
stock. You would have to have had at least 1,001 shares of Safeguard common
stock to be eligible to subscribe for ___ shares of our common stock. You may
not subscribe for a fractional share of our common stock.
Minimum Subscription Size
The minimum subscription that we will accept for any account is for ____
shares of our common stock. Therefore, record holders of fewer than 100 shares
of Safeguard common stock as of December 16, 1999 will not be able to purchase
our shares under the program. This limit applies to each of your accounts, not
the aggregate of all of your accounts. If as of December 16, 1999 you held 50
shares of Safeguard common stock in one account and another 50 shares in a
different account, we will not consider you to be the owner of 100 shares of
Safeguard common stock. Since none of your accounts contained at least 100
shares of Safeguard common stock, you would not be eligible to subscribe.
You are under no obligation to subscribe, but if you subscribe for any
shares it must be for at least ____ shares in each account. For example, if you
held 500 shares of Safeguard common stock in a single account as of December 16,
1999 and you choose to purchase our shares under the program, you may purchase
between ___ and ____ shares.
1
<PAGE>
Subscription Price
The price per share under the program will be the same price that all
investors will pay in our initial public offering. The price per share in the
initial public offering will be determined by negotiations between us and the
underwriters of our offering. The factors that we expect to consider in these
negotiations are described in the attached prospectus under the heading
"Underwriting." We currently anticipate that the offering price will be between
$_______ and $______ per share. We will inform you of the initial public
offering price as described below under "How to Subscribe."
Stock Purchase Agreement with Safeguard Scientifics
We intend to enter into a Stock Purchase Agreement with Safeguard. This
agreement will provide that if all ________ of the shares offered by us under
the program are not purchased by Safeguard stockholders, then Safeguard will
purchase the remaining shares at our initial public offering price. Safeguard
will be able to transfer all or part of its obligation to purchase these
remaining shares to third parties.
How to Subscribe
TO PURCHASE SHARES UNDER THE PROGRAM, YOU MUST ADHERE TO THE FOLLOWING
PROCEDURES:
o Subscriptions and payments will only be accepted from Safeguard
shareholders after the SEC has declared our registration statement
effective and we have determined our initial public offering price.
Any subscriptions or payments received before then will be returned
to you. Once a subscription and payment have been received and
accepted, you may not revoke your subscription. We expect to
determine the initial public offering price in _________ 2000, but
various factors could hasten or delay us. We will close the initial
public offering and stop accepting subscriptions three business days
after we determine the initial public offering price.
o Time will not permit us to notify you directly of our initial public
offering price and closing date. Instead, Safeguard will take the
following actions:
o publicize the offering price and the closing date on its Web
site (www.safeguard.com) and through a press release;
o through its Web site, provide you with an opportunity to
request e-mail notification (either directly to you or your
designated representative);
o make every effort to notify each broker, bank, trust company
or other nominee that holds shares on behalf of Safeguard
stockholders of the offering price and closing date; and
o make available an automated investor relations line
(888-SFE-1200) on a 24-hour basis through which you can listen
to the text of the press release or request a faxed copy.
You will have to monitor these media to know when to place your
order and deliver payment.
Also, if you do not hold your Safeguard shares directly, you will
need to keep in close contact with your broker, bank, trust company
or other nominee that holds your Safeguard shares on your behalf
since they will need to process the subscription for our shares and
payment on your behalf.
2
<PAGE>
o We will stop accepting orders under the program at 6:00 p.m. New
York City time on the third business day after we determine the
initial public offering price. Subscriptions and payments that have
not been received by ChaseMellon Shareholder Services, L.L.C. by
this deadline will not be honored. For example, if we determine the
initial public offering price on a Thursday, ChaseMellon must
receive all orders and payments by 6:00 p.m. New York City time on
the following Tuesday. This deadline would be extended to the
following Wednesday if there was an intervening holiday on which the
Nasdaq National Market was closed.
o To place an order for our shares under this program, you will have
to take the following actions:
o If you hold your Safeguard shares in your own name (that is,
in certificate form rather than in a brokerage account)
You must complete and sign the subscription form included with
this prospectus and return it with full payment to
ChaseMellon. Your subscription form and payment must be
received by ChaseMellon before 6:00 p.m. New York City time on
the third business day after we determine the initial public
offering price. We will not honor any subscription form
received by ChaseMellon after that date.
We suggest, for your protection, that you deliver your
subscription form and payment to ChaseMellon by overnight or
express mail courier (or by facsimile transmission if you
intend to wire funds) as follows:
By Hand Delivery:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
120 Broadway - 13th Floor
New York, NY 10271
By Overnight or Express Mail Courier:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
85 Challenger Road
Mail Drop Reorg
Ridgefield Park, NJ 07660
By Facsimile Transmission and Wire Transfer:
ChaseMellon Shareholder Services, L.L.C.
Facsimile Transmission: (201) 296-4293
To confirm fax, call: (201) 296-4860
Wire instructions: Wire to: The Chase Manhattan Bank,
New York, NY
ABA #: 021000021
Attention: ChaseMellon Shareholder
Services
Account: Reorg Account 323-859577
For: Safeguard/Opus360
Reference: FBO [insert your name as it
appears on the front of
your subscription form]
You must pay the subscription price by valid check or money
order in U.S. dollars payable to "ChaseMellon Shareholder
Services, L.L.C." or by wire transfer. If you choose to pay
the subscription price by wire transfer, you must fax a copy
of your completed subscription form to the facsimile number
provided. We suggest, for your protection, that you also call
the number
3
<PAGE>
provided to confirm that ChaseMellon Shareholder Services
received your fax. Until this offering has closed, your
payment will be held in escrow by ChaseMellon Shareholder
Services, L.L.C.
ChaseMellon Shareholder Services will mail a copy of the final
prospectus to all direct Safeguard shareholders who subscribe
for shares in this program.
o If you hold your Safeguard shares through a broker, bank,
trust company or other nominee
We will provide to each broker, bank, trust company, and other
nominee who holds Safeguard shares for the account of other
persons copies of the preliminary and final prospectus. Each
of those entities will be responsible for providing you with a
copy of the preliminary and final prospectus. Subscription
forms will not be distributed to Safeguard shareholders who
hold their shares in a brokerage account since the
subscription offer will be distributed to your account
electronically.
After we determine the initial public offering price, you will
have to contact the broker, bank, trust company or other
nominee that holds your Safeguard shares if you wish to place
an order and arrange for payment. ChaseMellon Shareholder
Services will be unable to directly accept your subscription
and payment. All subscriptions and payments must be submitted
through the broker, bank, trust company or other nominee that
holds your Safeguard shares.
We caution you that brokers and other nominees will require
some time to process subscriptions from Safeguard
stockholders. Therefore, they most likely will stop accepting
subscriptions earlier than the third business day after we
determine the initial public offering price.
o Safeguard will decide all questions as to the validity, form and
eligibility (including times of receipt, beneficial ownership and
compliance with minimum exercise provisions). Safeguard also will
determine the acceptance of subscriptions and the aggregate price.
Alternative, conditional or contingent subscriptions will not be
accepted. Safeguard reserves the absolute right to reject any
subscriptions not properly submitted. In addition, Safeguard may
reject any subscription if the acceptance of the subscription would
be unlawful. Safeguard also may waive any irregularities or
conditions in the subscription for our shares, and Safeguard's
interpretation of the terms and conditions of the program will be
final and binding.
o We are not obligated to give you notification of defects in your
subscription. Neither we nor Safeguard will consider a subscription
to be made until all defects have been cured or waived. If your
subscription is rejected, your payment of the exercise price will be
promptly returned by ChaseMellon.
o Sales under the Safeguard Subscription Program will close on the
same business day as the closing of the sale of the other shares
offered to the public. If you purchase your shares through a broker,
bank, trust company or similar nominee, we expect that your purchase
will be reflected in your account with the nominee as soon as
practicable after the expiration of the Safeguard Subscription
Program. Otherwise, Opus360's transfer agent will mail a stock
certificate to you as soon as practicable after the expiration of
the Safeguard Subscription Program.
Cancellation of Initial Public Offering
We may cancel our initial public offering at any time up until the
closing. If the initial public offering is canceled, Safeguard will publicize
the cancellation on its Web site and through a press release. The program gives
you no rights to purchase shares of our common stock if we cancel our initial
public offering and any funds previously submitted by you will be returned
promptly. Safeguard and/or Opus360 also may cancel or modify, in whole or in
part, the Safeguard Subscription Program.
4
<PAGE>
Risk Factors
Investing in our common stock involves certain risks which are disclosed
on page ____ of the enclosed preliminary prospectus.
Certain Restrictions
In managing the program, we and Safeguard will take reasonable steps to
comply with the laws of the different countries in which Safeguard stockholders
live. If compliance is too burdensome in one or more countries, Safeguard
stockholders residing in those countries will not be offered the opportunity to
purchase our shares under the program.
* * *
If you have any questions regarding the Safeguard Subscription Program, please
call Safeguard's automated investor relations line at (888) SFE-1200.
Please do not call Opus360 with any questions regarding this program.
Only Safeguard's automated investor relations line or a Safeguard
representative will be able to answer your questions.
Sincerely,
Ari B. Horowitz
Chairman of the Board, Chief Executive
Officer and President
5
<PAGE>
Exhibit 99.2
[Opus360 LOGO]
_____, 2000
Dear Broker:
As you may know, we are undertaking an initial public offering of our shares of
common stock. We are permitting Safeguard Scientifics, Inc. to use the Safeguard
Subscription Program to offer Safeguard stockholders the opportunity to buy
shares of our common stock at the initial public offering price. The price per
share under this program will be the same price that all investors will pay in
our initial public offering.
The enclosed questions and answers will provide you with the key terms of the
Safeguard Subscription Program. Please note that the Safeguard Subscription
Program will expire at 6:00 p.m. New York City time on the third business day
after the offering price is set.
If you have any questions regarding the Safeguard Subscription Program, please
call Safeguard at (888) SFE-1200. Please do not call Opus360 regarding this
program. You also may find information about this program on Safeguard's web
site at www.safeguard.com.
Preliminary prospectuses for distribution to Safeguard stockholders are being
distributed through Corporate Investor Communications, Attention: Processing
Department, 111 Commerce Road, Carlstadt, NJ 07072-2586, telephone number (201)
896-1900. Please call Corporate Investor Communications if you do not receive a
sufficient number of prospectuses for distribution to Safeguard stockholders.
You should provide a copy of the preliminary prospectus to each Safeguard
stockholder on whose behalf you hold shares who is eligible to participate in
this program.
Sincerely,
Ari B. Horowitz
Chairman of the Board, Chief Executive
Officer and President
<PAGE>
SAFEGUARD SUBSCRIPTION PROGRAM
FOR OPUS360 CORPORATION
Q: Who is eligible to participate in the Safeguard Subscription Program for
Opus360 Corporation?
A: Only record holders of at least 100 shares of Safeguard stock on December
16, 1999.
Q: How was the opportunity to purchase IPO shares allocated to Safeguard
stockholders?
A: Safeguard stockholders received a subscription offer to purchase 1 share
of Opus360 for each ____ shares of Safeguard owned on December 16, 1999,
subject to the minimum purchase requirement.
If a Safeguard stockholder owned at least 100 shares of Safeguard common
stock but the number of shares was not evenly divisible by ___, Safeguard
will round up the subscription offer to the next whole number. Depository
Trust Clearing Corporation will notify its participants of the date by
which the roundup requests must be submitted.
The offer to purchase shares under the Safeguard Subscription Program is
nontransferable and cannot be combined among multiple accounts.
There will not be an oversubscription privilege under this program.
Q: Is there a minimum purchase requirement?
A: The minimum subscription that will be accepted is for ____ shares of
Opus360 common stock. Therefore, holders of fewer than 100 Safeguard
shares as of December 16, 1999 will be unable to purchase shares in the
Safeguard Subscription Program for Opus360.
Q: How will I know when the offering prices and what the expiration date for
the offering will be?
A: When the offering is declared effective by the SEC and the offering price
is set, Safeguard will
o issue a press release to the wire services
o send you an e-mail alert if you signed up for this on its Web site
at www.safeguard.com
o post this information on its Web site
o update its automated investor relations line (888) SFE-1200 through
which you will be able to listen to the text of the press release
announcing the price and the expiration date or request a faxed copy
of the release
o notify the New York Stock Exchange and request that they notify all
of their members
o notify Depository Trust Clearing Corporation, which will
electronically notify all of its participants
<PAGE>
Q: When can subscriptions and payment be submitted?
A: Subscriptions and payment will only be accepted by the offering agent
after the initial public offering price of the Opus360 common stock has
been determined. ChaseMellon Shareholder Services, L.L.C. is the offering
agent.
Once a subscription and payment have been received and accepted by the
offering agent, the subscription may not be revoked.
The offering agent will stop accepting subscriptions and payments at 6:00
p.m. New York City time on the third business day after the IPO price has
been set.
Depository Trust Clearing Corporation will handle subscriptions on behalf
of its participants. When you subscribe for shares of Opus360 through
DTCC's automated subscription system, you will be required to confirm that
you are subscribing only on behalf of holders that meet the minimum per
account purchase requirement of 5 shares.
Q: When will the Opus360 shares purchased in the Safeguard Subscription
Program be distributed?
A: Opus360's transfer agent is expected to distribute the shares to
Depository Trust Clearing Corporation approximately three business days
following the expiration of the Safeguard Subscription Program.
<PAGE>
Exhibit 99.3
- -----------------------------
Subscription Number
- ----------------------------- -------------------------- ------------------
Shares of Opus360 Corporation Share Subscription Offer Record Date Shares
Eligible to Subscribe
SAFEGUARD SUBSCRIPTION PROGRAM
================================================================================
Opus360 Corporation
SUBSCRIPTION FORM
The shareholder named above has the right to purchase, pursuant to the terms and
conditions of the Safeguard Subscription Program, the number of fully paid and
non-assessable shares of common stock, $.001 par value, of Opus360 Corporation
indicated above at a subscription price that will be determined as outlined
below. THE SAFEGUARD SUBSCRIPTION PROGRAM WILL EXPIRE AT 6:00 P.M. NEW YORK CITY
TIME ON THE THIRD BUSINESS DAY AFTER THE INITIAL PUBLIC OFFERING PRICE IS
DETERMINED. As described in the preliminary prospectus accompanying this
Subscription Form, each holder of at least 100 shares of Safeguard Scientifics,
Inc. common stock may subscribe for one share of Opus360 common stock for every
___ shares of Safeguard Scientifics common stock held as of December 16, 1999,
in any account, rounded upward. The minimum subscription that we will accept is
for ___ shares of Opus360 per any individual account. Therefore, holders with
accounts containing fewer than 100 shares of Safeguard common stock as of
December 16, 1999, will not be able to subscribe for shares of Opus360. The
right to participate in this program and purchase shares of Opus360 is
nontransferable except involuntarily by operation of law (e.g. death or certain
dissolutions). Should an involuntary transfer occur by operation of law, please
contact ChaseMellon Shareholder Services, L.L.C., the agent for the program, by
telephone at 800-777-3674 for appropriate instructions.
The subscription price per share under the program will be the same price that
all investors will pay in Opus360's initial public offering. The price per share
will be determined by negotiations between Opus360 and the underwriters of the
offering. The factors to be considered in these negotiations are described in
the preliminary prospectus accompanying this Subscription Form. Opus360
currently anticipates that its initial public offering price will be determined
in _______ 2000 but various factors could hasten or delay this determination.
Time will not permit Opus360 to notify you directly of the subscription price
and the expiration date for this offering, but Safeguard will take the actions
described in the accompanying preliminary prospectus to publicize this
information.
No offer to buy securities can be accepted, and no part of the subscription
price can be received, until the initial public offering price has been
determined and the registration statement, of which the preliminary prospectus
accompanying this Subscription Form is a part, has been declared effective. Any
Subscription Forms or payments received before then will be returned to you. All
persons electing to subscribe for shares of Opus360 must complete the Election
to Purchase on the reverse side of this Subscription Form and return the
Subscription Form, together with full payment of the subscription price, to
ChaseMellon at the addresses on the back of this Subscription Form. Safeguard
will decide all questions as to the validity, form, eligibility, and acceptance
of subscriptions, and Safeguard reserves the absolute right to reject any
subscriptions not properly submitted. Safeguard also may reject any subscription
if the acceptance of the subscription would be unlawful. Once the Subscription
Form and payment have been received and accepted, your subscription may not be
revoked by you. The Subscription Form and full payment of the subscription price
must be received by ChaseMellon no later than 6:00 p.m. New York City time on
the third business day after the initial public offering price is determined.
ChaseMellon will not honor any subscriptions received after that time and date.
If you do not wish to subscribe for shares, you do not need to return this
Subscription Form. Before completing and returning this Subscription Form, you
are urged to read carefully the preliminary prospectus mailed to you with this
Subscription Form for a more complete explanation of the offering and for
information about Opus360. If Opus360 cancels the initial public offering, you
will have no rights to purchase shares of Opus360 and any funds previously
submitted by you will be returned. Opus360 and/or Safeguard also may cancel or
modify, in whole or in part, the Safeguard Subscription Program.
<PAGE>
You should not return this Subscription Form or deliver any payment until after
Opus360 has determined its initial public offering price. Any subscription forms
or payment received before then will be returned to you. Once the initial public
offering price has been determined, Safeguard will take the actions described in
the preliminary prospectus to publicize the subscription price and the date by
which you must respond to the offer that has been made to you under this
program. If you wish to subscribe for shares at that time, you should complete
this Subscription Form and deliver payment of the subscription price to
ChaseMellon. ChaseMellon must receive the properly completed and signed
Subscription Form and full payment of the subscription price by 6:00 p.m. New
York City Time on the third business day after Opus360 determines its initial
public offering price. ChaseMellon will stop accepting Subscription Forms after
that time and date. Once the Subscription Form and payment have been received
and accepted, your subscription may not be revoked by you. We suggest, for your
protection, that you deliver the completed Subscription Form and payment of the
subscription price to ChaseMellon Shareholder Services, L.L.C. by overnight or
express mail courier, or by facsimile transmission and wire transfer. The
addresses for ChaseMellon are as follows:
By Hand Delivery:
ChaseMellon Shareholder Services, L.L.C.
Attn: Reorganization Dept.
120 Broadway, 13th Floor
New York, NY 10271
By Overnight Delivery/Express Mail Courier
ChaseMellon Shareholder Services, L.L.C.
Attn: Reorganization Dept.
85 Challenger Road, Mail Drop--Reorg
Ridgefield Park, NJ 07660
By Facsimile Transmission and Wire Transfer:
ChaseMellon Shareholder Services, L.L.C.
Facsimile Transmission: (201) 296-4293
To confirm fax, call: (201) 296-4860
Wire to: The Chase Manhattan Bank, New York, NY
ABA # 021000021
Attention: ChaseMellon Shareholder Services
Account: Reorg Account 323-859577
For: Safeguard/Opus360
Reference: FBO[insert your name as it appears on the reverse side of
this form]
- --------------------------------------------------------------------------------
SUBSCRIPTION FORM--ELECTION TO PURCHASE
Subject to the terms and conditions of the Safeguard Subscription Program
described in the preliminary prospectus, receipt of which is hereby
acknowledged, the undersigned hereby elects to purchase shares of common stock
of Opus360 Corporation as indicated below.
Number of shares purchased(1) _____________ (NOTE: ___ share minimum required
in each account)(2)
Per share subscription price $_____________
Payment submitted (payable to
ChaseMellon Shareholder
Services, L.L.C.)(3) $_____________
(1) You may only purchase up to the number of shares specified on the reverse
side of this form. If the amount submitted is not sufficient to pay the
subscription price for all shares that are stated to be purchased, or if
the number of shares being purchased is not specified, the number of
shares purchased will be assumed to be the maximum number that could be
purchased upon payment of such amount. Any remaining amount will be
returned to the purchaser.
(2) Any order for less than the minimum purchase requirement will be rejected.
(3) The subscription price must be paid by valid check or money order in U.S.
dollars payable to ChaseMellon Shareholder Services, L.L.C. or by wire
transfer as described above. The payment submitted should equal the total
shares purchased multiplied by the per share subscription price.
Shares of common stock of Opus360 Corporation will be issued promptly following
the expiration of the Safeguard Subscription Program. The shares will be
registered in the same manner set forth on the face of this Subscription Form.
If your shares are held in joint ownership, all joint owners must sign this
election to purchase. When signing as attorney, executor, administrator, trustee
or guardian, please give your full title as such. If signing for a corporation,
an authorized officer must sign and provide title. If signing for a partnership,
an authorized partner must sign and indicate title.
Please provide a telephone number at which you can be reached in the event that
we have questions regarding the information that you have supplied.
Daytime Telephone Number ( )_________________________
Evening Telephone Number ( )_________________________
(IF JOINTLY OWNED, BOTH MUST SIGN)
SIGNATURE(S):_______________________________
________________________________
Dated:_______________________, 2000
NOTE: The above signature(s) must correspond
with the name(s) as written upon the face of
this Subscription Form in every particular
without alteration.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-9
Department of the Treasury, Internal Revenue Service--Payer's Request for
Taxpayer Identification Number (TIN) Failure to complete this form may
subject you to 31% federal income tax withholding.
Part 1: PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION TIN ______________________
NUMBER IN THE SPACE PROVIDED AT RIGHT AND CERTIFY Social Security or
BY SIGNING AND DATING BELOW Employer Identification
Number
Part 2: Check the box if
you are awaiting a TIN | |
Part 3: CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) the number
shown on this form is my correct taxpayer identification number (or a TIN has
not issued to me but I have mailed or delivered an application to receive a TIN
or intend to do so in the near future), (2) I am not subject to backup
withholding either because I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends or the IRS has notified me that I am
no longer subject to backup withholding, and (3) all other information provided
on this form is true, correct and complete.
Dated:____________, 2000 SIGNATURE:__________________________________
You must cross out item (2) above if you have been notified by the IRS that you
are currently subject to backup withholding because of underreporting interest
or dividends on your tax return. However, if after being notified by the IRS
that you were subject to backup withholding, you received another notification
from the IRS that you are no longer subject to backup withholding, do not cross
out item (2).
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 99.4
STANDBY STOCK PURCHASE AGREEMENT
by and between
SAFEGUARD SCIENTIFICS, INC.
AND
OPUS360 CORPORATION
Dated February ________, 2000
<PAGE>
STANDBY STOCK PURCHASE AGREEMENT
THIS STANDBY STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into on this February _______, 2000 between SAFEGUARD SCIENTIFICS, INC.,
a Pennsylvania corporation ("Safeguard"), and OPUS360 CORPORATION, a Delaware
corporation (the "Company").
BACKGROUND
A. The Company is contemplating an initial public offering (the "Public
Offering") of its common stock, par value $.001 per share (the "Common Stock"),
through an underwritten public offering lead by Robertson Stephens as the
representative of the several underwriters (the "Underwriters").
B. In connection with the Public Offering, the Company will offer
___________ shares of its common stock (the "SSP Shares") directly to the
shareholders of Safeguard pursuant to a share subscription program (the "SSP").
C. If and to the extent any of the SSP Shares are not subscribed for or,
if subscribed for, are not purchased by the shareholders of Safeguard under the
SSP, Safeguard has agreed to purchase all such SSP Shares directly from the
Company for its own account for investment purposes only on the terms and
subject to the conditions set forth herein.
D. ChaseMellon Shareholder Services, L.L.C. ("Chase") will act as the
offering agent for the SSP. The offering agent will determine the record date
shareholders eligible to participate in the SSP and will collect subscriptions
and subscription payments from eligible Safeguard shareholders until 6:00 p.m.
on the third business day following the date the Company determines the initial
public offering price for the Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE 1
THE TRANSACTION
1.1. Purchase and Purchase Price.
(a) In the event that any of the SSP Shares are not subscribed for or,
if subscribed for, are not purchased by the shareholders of
Safeguard under the SSP, Safeguard
<PAGE>
shall, or shall cause its wholly owned subsidiary Safeguard
Delaware, Inc. to, purchase these remaining shares.
(b) The purchase price for the SSP Shares (the "Purchase Price") shall
be equal to the product of multiplying (i) the aggregate number of
SSP Shares, by (ii) the price per share of Common Stock sold
pursuant to the Public Offering (the "IPO Price").
(c) Safeguard shall transfer, or Safeguard shall cause Safeguard
Delaware, Inc. to transfer, or shall cause Chase to pay out of
subscription funds received on behalf of Safeguard's shareholders
participating in the SSP, to the Company, an amount equal to the
Purchase Price on the day of the closing of the Public Offering by
wire transfer.
1.2. Closing.
(a) Time and Place. The closing under this Agreement (the "Closing")
will take place at _________, EST time, at the time of the closing
of the Public Offering, at the offices of _____________, or at such
other time, date or place as the parties shall mutually agree. The
date on which the Closing occurs is sometimes referred to herein as
the "Closing Date."
Deliveries and Proceedings to Offering Agent. On the Closing Date,
the Company shall instruct Chase to accept instructions from Deirdre
Blackburn, or her designee at Safeguard, for delivery of the
subscription funds collected by the offering agent to the extent not
paid to the Company at the Closing.
(c) Deliveries and Proceedings to Transfer Agent. On the Closing Date,
the Company shall instruct Chase to accept instructions from Deirdre
Blackburn, or her designee at Safeguard, for:
(i) transmission to the Company's transfer agent, American Stock
Transfer and Trust Company, of instructions for delivery of
the SSP Shares purchased by Safeguard shareholders in the SSP;
and
(ii) delivery to Safeguard of the SSP Shares not purchased by
Safeguard shareholders.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Safeguard as follows:
2.1 Organization. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
<PAGE>
2.2. Power and Authority. The Company has full corporate power and authority to
make, execute, deliver and perform this Agreement and the transactions
contemplated hereby.
2.3. Authorization and Enforceability. The execution, delivery and performance
of this Agreement by the Company have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
ARTICLE 3
REPRESENTATION AND WARRANTIES OF SAFEGUARD
Safeguard represents and warrants to the Company as follows:
3.1 Organization. Safeguard is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania.
3.2. Power and Authority. Safeguard has full corporate power and authority to
make, execute, deliver and perform this Agreement and the transactions
contemplated hereby.
3.3 Authorization and Enforceability. The execution, delivery and performance
of this Agreement by Safeguard have been duly authorized by all necessary
corporate action on the part of Safeguard, and this Agreement constitutes
the legal, valid and binding obligation of Safeguard, enforceable against
Safeguard in accordance with its terms.
3.4 Authorization and Approvals. All consents, approvals, authorizations and
orders necessary for the execution and delivery of this Agreement have
been obtained; and Safeguard, or an affiliate have full rights, power and
authority to enter into this Agreement and to sell the shares of Safeguard
eMerge Stock as provided hereunder.
3.5 Investment Intent. Safeguard represents, warrants and covenants that it is
acquiring the SSP Shares for its own account, as a long-term investment,
and not with the view to resale or redistribution. To that end, Safeguard
agrees it will retain and not sell, pledge, hypothecate or otherwise
transfer, directly or indirectly, any interest (beneficial or otherwise)
in the SSP Shares for a period of one year from the date of the Closing.
ARTICLE 4
CONDITIONS TO CLOSING; TERMINATION
4.1 Conditions Precedent to Obligations of Safeguard. The obligations of
Safeguard to proceed with the Closing are subject to the fulfillment prior
to or at Closing of the following conditions (any one or more of which may
be waived in whole or in part by Safeguard at Safeguard's option):
<PAGE>
(a) Bringdown of Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true
and correct on and as of the time of Closing, with the same force
and effect as though such representations and warranties had been
made on, as of and with reference to such time, and Safeguard shall
have received a certificate, signed by an executive officer of the
Company, to such effect.
(b) Performance and Compliance. The Company shall have performed all of
the covenants and complied with all of the provisions required by
this Agreement to be performed or complied with by it on or before
the Closing, and Safeguard shall have received a certificate, signed
by any vice president of the Company, to such effect.
(c) Public Offering. The Closing of the Public Offering shall have
occurred.
4.2. Conditions Precedent to the Obligations of the Company. The obligations of
the Company to proceed with the Closing hereunder are subject to the
fulfillment prior to or at Closing of the following conditions (any one or
more of which may be waived in whole or in part by the Company at the
Company's option):
(a) Bringdown of Representations and Warranties. The representations and
warranties of Safeguard contained in this Agreement shall be true
and correct on and as of the time of Closing, with the same force
and effect as though such representations and warranties had been
made on, as of and with reference to such time, and Safeguard shall
have delivered to the Company a certificate, signed by an executive
officer of Safeguard, to such effect.
(b) Performance and Compliance. Safeguard shall have performed all of
the covenants and complied with all the provisions required by this
Agreement to be performed or complied with by it on or before the
Closing and Safeguard shall have delivered to the Company a
certificate, signed by any vice president of Safeguard, to such
effect.
(c) Public Offering. The closing of the Public Offering shall have
occurred.
4.3. Termination.
(a) When Agreement May Be Terminated. This Agreement may be terminated
at any time prior to Closing:
(i) by mutual consent of Safeguard and the Company; or
(ii) by Safeguard or the Company, if the Company shall have
withdrawn its Registration Statement on Form S-1 relating to
the Public Offering (Reg. No. 333-93185).
<PAGE>
(b) Effect of Termination. In the event of termination of this Agreement
by either Safeguard or the Company, as provided above, this
Agreement shall forthwith terminate and there shall be no liability
on the part of either Safeguard or the Company, except for
liabilities arising from a breach of this Agreement prior to such
termination; provided, however, that the obligations set forth in
Article 5 hereof shall survive such termination.
ARTICLE 5
CERTAIN ADDITIONAL COVENANTS
5.1 Indemnification.
(a) Safeguard hereby agrees to indemnify the Company and its
underwriters, affiliates, officers, employees, representatives and
directors (the "Indemnified Persons") against, and hold them
harmless from, any loss, liability, claim, damage or expense, joint
or several ("Losses"), arising directly or indirectly, out of or in
connection with, the SSP, including, without limitation, (i) costs
and expenses associated with the failure of any shareholders of
Safeguard to consummate purchases of SSP Shares for which they have
subscribed, (ii) any claims by shareholders of Safeguard or other
persons arising from the SSP, and (iii) other costs and expenses,
including printing costs and reasonable legal fees and expenses,
arising from the establishment, execution and performance of the
SSP. Notwithstanding the foregoing, Safeguard shall not indemnify
the Company against liabilities arising from any untrue or allegedly
untrue statement of a material fact, or omission or alleged omission
of a material fact required to be stated to make the statements not
misleading, in the prospectus contained in the Company's
Registration Statement on Form S-1 (Reg. No. 333-93185) (the
"Prospectus"), except for statements or omissions regarding the SSP
and except for any materials related to the SSP delivered to
Safeguard's shareholders and not to other recipients of the
Prospectus generally. Safeguard agrees to reimburse the Indemnified
Persons, as incurred, for any reasonable legal or other expenses
reasonably incurred by them in connection with investigating or
defending any Losses.
(b) Promptly after receipt by an Indemnified Person of notice of the
commencement of any action for which indemnification or contribution
may be sought hereunder, such Indemnified Person will notify
Safeguard in writing of the commencement thereof. The failure to so
notify Safeguard will not relieve Safeguard from liability under
Section 5.1(a) above unless and to the extent that Safeguard did not
otherwise learn of such action and such failure results in the
forfeiture of substantial rights and defenses. Safeguard shall be
entitled to appoint counsel at Safeguard's expense to represent the
Indemnified Person in any action for which indemnification is sought
(in which case Safeguard shall not thereafter be liable for the fees
and expenses of separate counsel retained by the Indemnified Person
<PAGE>
except as set forth below); provided, however, that such counsel
shall be reasonably satisfactory to the Indemnified Person.
Notwithstanding Safeguard's election to appoint counsel to represent
the Indemnified Person in an action, the Indemnified Person shall
have the right to employ separate counsel (including local counsel),
and Safeguard shall bear the reasonable fees, costs and expenses of
such counsel if (i) the use of counsel chosen by Safeguard to
represent the Indemnified Person would present such counsel with a
conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both Safeguard and the
Indemnified Person and the Indemnified Person shall have reasonably
concluded that there may be legal defenses available to it that are
different from or in addition to those available to Safeguard, (iii)
Safeguard shall not have employed counsel reasonably satisfactory to
the Indemnified Person within a reasonable time after notification
of the commencement of such action or (iv) Safeguard shall have
authorized the Indemnified Person to employ separate counsel at the
expense of Safeguard.
(c) Safeguard shall not, without the prior written consent of the
relevant Indemnified Person, settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder unless such
settlement, compromise or consent includes an unconditional release
of such Indemnified Person from all liability arising from such
claim, action, suit or proceeding. An Indemnified Person may not
settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may
be sought hereunder without the consent of Safeguard, such consent
not to be unreasonably withheld.
(d) In the event that the indemnity provided for in this Article 5 is
unavailable to or insufficient to hold harmless an Indemnified
Person for any reason, the Indemnified Persons and Safeguard shall
contribute to the Losses (including the legal and other expenses
attributable to investigating or defending same) to which the
Indemnified Person may be subject in such proportion as is
appropriate to reflect the relative fault of the Indemnified Person
and Safeguard in connection with the statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations, including that the Company performed the SSP as an
accommodation to Safeguard without any legal obligation to do so.
Relative fault shall be determined by reference to, among other
things, whether any untrue or allegedly untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information provided by the Indemnified
Person or Safeguard, the intent of the Indemnified Person and
Safeguard, and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contribution was determined by any method of allocation that does
not take into account the equitable considerations discussed above.
<PAGE>
ARTICLE 6
MISCELLANEOUS
6.1. Nature and Survival of Representations. The representations, warranties,
covenants and agreements of Safeguard and the Company contained in this
Agreement, and all statements contained in this Agreement or any exhibit
hereto or any certificate or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby,
shall be deemed to constitute representations, warranties, covenants and
agreements of the respective party delivering the same. All such
representations, warranties, covenants and agreements shall survive the
Closing.
6.2. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
personally delivered or, if mailed, when mailed by United States
first-class, certified or registered mail, postage prepaid, to the other
party at the following addresses (or at such other address as shall be
given in writing by any party to the other):
(a) If to Safeguard, to:
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Attention: James A. Ounsworth, Esq.
(b) If to the Company, to:
Opus360 Corporation
733 Third Avenue, 17th Floor
New York, NY 10017
Attention: Ari B. Horowitz
With a required copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
<PAGE>
6.3. Third Party Beneficiaries. Safeguard acknowledges that each of the
Underwriters of the Public Offering shall be a third party beneficiary
entitled to exercise the rights and remedies provided for herein directly
against Safeguard. The Company shall cooperate with and assist each of the
Underwriters of the Public Offering with respect to any action such
Underwriters take to exercise such rights and remedies directly against
Safeguard.
6.4. Successors and Assigns. This Agreement, and all rights and powers granted
hereby, will bind and inure to the benefit of the parties hereto and their
respective successors and permitted assigns but shall not be assignable or
delegable by any party without the prior written consent of the other
party.
6.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of Pennsylvania, without giving effect
to its principles of conflicts of laws or choice of forum.
6.6. Headings. The headings preceding the text of the sections and subsections
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Agreement, nor shall they affect its
meaning,construction or effect.
6.7. Counterparts. This Agreement may be executed in two counterparts, each of
which shall be deemed an original, but which together shall constitute one
and the same instrument. Each such copy shall be deemed an original and it
shall not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart.
6.8. Further Assurances. Each party shall cooperate and take such action as may
be reasonably requested by the other party in order to carry out the
provisions and purposes of this Agreement and the transactions
contemplated hereby.
6.9. Amendment and Waiver. The parties may by mutual agreement amend this
Agreement in any respect, and either party, as to such party, may (a)
extend the time for the performance of any of the obligations of the other
party, (b) waive any inaccuracies in representations by the other party,
(c) waive compliance by the other party with any of the agreements
contained herein and performance of any obligations by the other party,
and (d) waive the fulfillment of any condition that is precedent to the
performance by such party of any of its obligations under this Agreement.
To be effective, any such amendment or waiver must be in writing and be
signed by the party against whom enforcement of the same is sought.
6.10. Entire Agreement. This Agreement sets forth all of the promises,
covenants, agreements, conditions and undertakings between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written.
<PAGE>
6.11. Interpretations. No party to this Agreement shall be considered the
draftsman. This Agreement has been reviewed, negotiated and accepted by
all parties and their attorneys and shall be construed and interpreted
according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
SAFEGUARD SCIENTIFICS, INC.
By:
--------------------------------------
Name:
Title:
OPUS360 CORPORATION
By:
--------------------------------------
Name:
Title:
